Weekly Market Action Thursday 9 June 2011 to Thursday 16 June 2011

Transcription

1 Weekly Market Action Thursday 9 June 2011 to Thursday 16 June 2011 The Australian market fell 1.6% in the week to Thursday based on the S&P/ASX 200 Accumulation Index. The small companies underperformed the larger stocks, with the Small Ordinaries Accumulation Index finishing the period down 1.9%. Returns % (including distributions) Sector Weekly period Month Rolling Quarter Rolling Year Rolling Info Tech Telecoms Property Trusts Utilities Consumer Staples Financials Consumer Discretionary Industrials Financials ex-property Health Care Materials (incl resources) Energy Returns % (excluding distributions) Index Weekly period Month Rolling Quarter Rolling Year Rolling Small Ordinaries S&P/ASX S&P/ASX All Ordinaries Weekly period Returns % (including distributions) Month Quarter Rolling Rolling Year Rolling Accumulation Index Small Ordinaries Accum. Index ASX 200 Accum. Index All Ordinaries Accum. Index Source: IRESS The Energy sector was again the worst performing sector over the week, decreasing by 2.7%, with Paladin (PDN) fell by a further 13.0% The company made a clarifying statement to the ASX that denied market rumours relating to the status of the Langer Heinrich Stage 4 Expansion Feasibility Study, the company s financing arrangements, potential capital raising and sale of the 6.71% shareholding held in Paladin by Newmont Mining Corporation. The Info Tech sector was the best performer rising by 0.7% for the week to Thursday. SMS Management (SMX) was the best performing security in the sector rising by 2.2%. The Reserve Bank Governor, Glenn Stevens, addressed the Economic Society of Australia (Queensland) 2011 Business Luncheon. He noted that while not wishing to make light of any of the legitimate concerns that people have about the differing economic conditions actual and potential

2 across regions or industries the impact of the resources sector expansion does get spread around, in more ways than might immediately be apparent. Obviously mining employs only a small share of the workforce directly less than 2 per cent. But to produce a dollar of revenue, companies spend about 40 cents on acquiring non labour intermediate inputs, primarily from the domestic sector. Apart from the direct physical inputs, there are effects on utilities, transport, business services such as engineering, accounting, legal, exploration and other industries. It is noteworthy that a number of these areas are growing quickly at present. In the US, the Dow Jones Index fell to 11,962 from 12,124 the Thursday prior. Concerns regarding the outworking of the Greek sovereign debt resurged as the Prime Minister, George Papandreou, attempts to form a government that can address the issues at a time when opponents label austerity measures excessive. On the other side of the ledger there are suggestions that the bailout package will have to be much larger than conceded and Germany may be delaying the rescue until after the August holidays. Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Paladin Energy Limited's equity securities. ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group

3 AUSTRALIA Market and Sector EPS growth (%) Pro-rated to June FY10A FY11E FY12E All Companies Banks Property Trusts Resources Industrials (All Cos ex Res, LPTs, Banks) Source: Macquarie Research, June 2011 Market and sector PEs (x) Pro-rated to June FY10A FY11E FY12E All Companies Banks Property Trusts Resources Industrials (All Cos ex Res, LPTs, Banks) Source: Macquarie Research, June 2011 Market and sector DPS growth (%) Pro-rated to June FY10A FY11E FY12E All Companies Banks Property Trusts Resources Industrials (All cos ex Res, LPTs, Banks) Source: Macquarie Research, June 2011 Market and sector Dividend Yield (%) Pro-rated to June FY10A FY11E FY12E Current 1 yr fwd Current 1 yr fwd Current 1 yr fwd Current 1 yr fwd All Companies Banks Property Trusts Resources Industrials (All cos ex Res, LPTs, Banks) Source: Macquarie Research, June June 2011 Macquarie Securities (Australia) Limited Equity Strategy Earnings & dividends you can depend on Event We review earnings certainty, dividend reliability and the valuation of stocks in the context of the ongoing deterioration in the earnings outlook for much of the Australian listed market. Impact Equity market capital returns continue to be volatile and earnings delivery disappointing. With the domestic demand outlook remaining subdued and cost pressures for many intensifying, earnings delivery and/or dividend yield are increasingly key to underpinning share price (total) returns. In this environment, the risk of classic value traps is high. Stocks that can deliver earnings as promised, even if their PER is high, are still in our view likely to outperform, while high yielding stocks can also deliver meaningfully to a portfolio as long as that yield is supported by cashflow. Outlook As highlighted in our research note (Cashflow, the measure that matters see Essentials 10 June 2011), the operating environment, particularly in domestic Australia, remains challenging. As a result, the FY11 EPSg promised a year or so ago for many stocks has not materialised. However, many of these same stocks now have positive FY12 EPSg forecasts, similar to that seen for FY11 EPSg a year ago. Herein lies the investor s dilemma in that forward PERs again embed these positive EPS forecasts. There are, however, a surprisingly large number of stocks that have indeed held their FY11 EPS forecasts across the past year. Furthermore, a number of these stocks as well as offering earnings certainty, offer the added return from an above-market dividend yield. Stocks notable here include ANZ, WBC, DJS, MTS, WOW, TCL, GPT, CFX, ABC, CTX, CMJ, MND, & CRZ. Contrasting returns of stocks with earnings delivery vs. those without Index (Total Return) Jun-10 GPT ANZ WOW ABC Index Index (Total Return) (Total Return) Jun Source: IRESS, Macquarie Research, June Jun-10 QBE BBG QAN ALL Index (Total Return) Jun Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

4 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Equity Strategy All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 16 June

5 AUSTRALIA Macquarie Marquee Ideas (MMIs) represent our best alpha-generating ideas. MMIs represent a collection of Macquarie Research's best ideas derived from our coverage universe of ~300 stocks in Australia and New Zealand. The time frame for each idea is typically three months, with the list reviewed every two weeks. Stocks may be removed from the list earlier than the three month typical duration if the particular MMI has played out and expected outperformance of the idea has materialised. Similarly MMIs may remain on the list for longer than three months if significant alpha is still to be generated. The MMI list is supplementary to our Australian Strategy Portfolio. It is expected that at any one time there will be between three and twelve MMIs. Selection criteria reflect high levels of analyst conviction and near term catalysts The MMI list is selected by a group of Macquarie Research Senior Analysts, Strategists, the Quant Team and by Heads of Research. MMI's are typically in line with the analysts' fundamental view. However emphasis is on level of conviction and the existence of catalysts over the next quarter. In order for institutional investors to realistically consider MMIs, minimum stock turnover requirements have also been included. Macquarie Marquee Ideas Macquarie s high conviction calls We make no changes to Macquarie Marquee Ideas this week. MAp Airports (MAP), our latest addition to MMI, has outperformed the market by 9.8% since it was added 2 weeks ago. In news this week, Sky City Entertainment Group (SKC) was appointed the preferred partner by the NZ Government to build and operate the NZ$350m New Zealand International Convention Centre (NZICC). Key information regarding relaxation of gaming regulations in NZ, crucial to enable an adequate return for SKC, is yet to be finally negotiated or announced. We anticipate further news during August. The development could be worth 33-46cps to SKC. Macquarie Marquee Ideas - Performance Code/Stock Type Start Date Excess return since inception % Excess return over last week % CFX CFS Retail Buy 17/12/ SAI SAI Global Buy 03/03/ BPT Beach Energy Buy 03/03/ LLC Lend Lease Buy 03/03/ RIO Rio Tinto Buy 01/04/ BKN Bradken Buy 15/04/ SKC Sky City Ent Group Buy 13/05/ AGO Atlas Iron Buy 13/05/ MIN Mineral Resources Buy 13/05/ ORG Origin Energy Buy 13/05/ QRN QR National Buy 27/05/ MAP MAp Airports Buy 03/06/ Source: Macquarie Research, FactSet pricing, June 2011 Macquarie Marquee Ideas Rec Code/Stock Start Date Last price FY11 PER TP TSR % Analyst LEADERS O/P AGO Atlas Iron 13/05/ Martin Stulpner O/P MAP MAp Airports 03/06/ Ian Myles O/P ORG Origin Energy 13/05/ Adrian Wood O/P QRN QR National 27/05/ Ian Myles O/P RIO Rio Tinto 01/04/ Lee Bowers PROPERTY O/P CFX CFS Retail 17/12/ Paul Juniper O/P LLC Lend Lease 03/03/ Paul Juniper EMERGING LEADERS O/P BKN Bradken 15/04/ Andrew Wackett O/P BPT Beach Energy 03/03/ Adrian Wood O/P MIN Mineral Resources 13/05/ Andrew Wackett O/P SAI SAI Global 03/03/ Jodie Bannan NEW ZEALAND all data in NZD O/P SKC Sky City Ent Group 13/05/ Brooke Bone Source: Macquarie Research, FactSet pricing, June 2011; share price as of 15 June 2011 close 17 June 2011 Macquarie Securities (Australia) Limited Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

6 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Macquarie Marquee Ideas All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 17 June

7 GLOBAL 14 June 2011 Global Economic Outlook A difficult couple of months Event We revise our outlook for the global economy. Impact It will be a difficult couple of months for the global economy. Developed economies such as the US and Europe are experiencing a temporary slowing of growth. This reflects the unfortunate confluence of higher oil prices, supply chain shocks resulting from the Japanese earthquake, inclement weather and a more general mid-cycle moderation in growth rates. Meanwhile, emerging economies are still grappling with high levels of inflation. Hence, markets will also be faced with policy-driven slowdowns as growth returns to a more sustainable pace. Macquarie Economics' key macro calls are: that the slowdown in US growth will prove transitory and that Chinese policymakers are ahead of the curve on inflation and will ease back on policy tightening in the second half of this year. Hence, while the macro data will continue to look weak for the next 2-3 months, come August/September we expect a significant positive surprise to current economic and investor sentiment. Outlook In response to weaker-than-expected data during 2Q11, we have revised down our 2011 US GDP forecast to a still above-consensus 3.1%, from 3.5% previously. This largely results from a downward revision in our expectations for growth in 2Q11 as opposed to any change in our view over the strength of the recovery in 2H11. The most recent data from the US, including the ISM manufacturing survey and payrolls data, has been weak. Moreover, weaker estimates of income growth suggest that personal consumption growth will be slower than previously expected. And the supply chain shock from the Japanese earthquake will weigh on the inventory component of GDP growth in the current quarter. Indeed, much of the current weakness in the US is from transitory factors, such as higher oil prices, inclement weather and supply chain shocks. Hence, while these factors will continue to play out in the macroeconomic data for the next couple of months, we expect an acceleration in growth in 2H11. Low long-term interest rates, a weak US$ and a building capital expenditure budget from US companies should all contribute to a business investment and export led recovery. Moreover, despite recent market commentary focusing on the possibility of a double-dip recession, in our view the main risk is not another recession but rather that the recovery is delayed by a couple of months until 4Q11. That is, rather than coming through in 2-3 months, that the macro data does not turn for 4-5 months instead. This could occur if, for example, it takes longer than expected for Japan to re-establish full supply. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

8 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Global Economic Outlook All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 14 June

9 GLOBAL Weak US dollar generally good for Emerging Market equities Selected Emerging Markets MSCI EM relative to S&P500 US Dollar Futures Index Global Country Model Alpha Forecast Argentina 12.53% Russia 10.01% Thailand 6.35% Korea 2.27% Peru 1.69% China 1.04% Indonesia 0.93% Taiwan 0.47% Brazil 0.15% Malaysia -1.31% Mexico -3.27% Chile -4.06% Philippines -4.11% India -5.28% Source: Macquarie Research, June Global Sector Opportunities Superior returns in EM Staples Event The US dollar futures index is currently around 74 and the currency is likely to remain weak at least until the Fed starts to talk about raising rates. Impact Historically, emerging market equities tend to outperform the S&P500 when the US dollar is weak, as you can see from the chart on the left. Our global economics team thinks the US dollar will remain weak for a number of reasons. Most notable among these is the country s low interest rates relative to Europe, and a desire to promote growth in the US by driving down the nominal exchange rate. Paul Cavey believes China s growth will slow as a result of tight monetary policy, and as America s 2 nd largest trading partner this will also put a drag on US growth. While the slowdown is expected to be temporary, it will also put downward pressure on the US dollar in the near term. Looking at historical risk/return relationships it is clear emerging markets offer more capital growth, while US equities are more defensive in comparison. Most emerging market sectors also offer higher risk-adjusted returns, as shown by their generally superior sector Sharpe ratios. The highest Sharpe ratios are seen in the consumer staples, energy, materials and telecom sectors in emerging markets. Outlook Given the weak outlook for the US dollar, emerging market equities could be expected to outperform towards the end of the year. Thus, the seasonal weakness expected in equities over the coming months presents a good opportunity to accumulate emerging market equities given their superior long term growth potential and record of superior risk adjusted returns. While the macro outlook remains uncertain we recommend to focus buying on more defensive sectors with higher Sharpe ratios such as consumer staples and telecommunications. We would also accumulate emerging market companies that are building global brands. Our Asian strategist, Michael Kurtz, currently prefers Korea and Thailand, which happen to also rank near the top of our Country Alpha Model. Two key stock picks in Korea are Hyundai Motor Company ( KS, Won223,000, Outperform) and Samsung Electronics ( KS, Won851,000, Outperform), which are both offering forecast 12 month shareholder returns over 40% to our target prices. A key pick in Thailand, and one that s also in the high Shape ratio consumer staples sector, is Big C Supercentre (BIGC TB, Bt88.25, Outperform). 10 June 2011 Macquarie Securities (Australia) Limited Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

10 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Confidence being tested All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 17 June

11 AUSTRALIA Business conditions have deteriorated Index Business conditions by component Aug-02 Jul-05 Jun-08 May-11 Source: NAB, Macquarie Research, June 2011 Households remain concerned about their financial position Index Trading Profitability Monthly May-85 Nov-91 May-98 Nov-04 May-11 *3mma Consumer confidence* (LHS) Current household finances* (RHS) Monthly Index Source: Westpac M.I, Macquarie Research, June Index Confidence being tested Freeze frame Event Consumer and business confidence figures were released this week, while Reserve Bank Governor Stevens delivered a speech on Economic conditions and prospects. Impact The business and consumer sentiment surveys show a consistent theme of softening domestic demand conditions. The divergence between very strong mining sector activity and the subsequent weakness in other parts of the economy is becoming increasingly evident in the business survey results, while consumers remain concerned about their financial position. Despite this, the Reserve Bank remains convinced that the benefits of the mining boom will filter through to households and the economy more broadly, meaning that inflation is more likely to rise than fall. This was the crux of the RBA Governor s speech this week, which suggested that policymakers retain a firm tightening bias. Moreover, by drawing attention to the release of Q2 inflation data in late July, the RBA has implicitly set the August Board meeting as the most likely timing for a future rate hike. Analysis The NAB monthly business survey provides a clear indication of the major issue being faced by the Australian economy. That is, despite ongoing strength in the mining sector, overall business conditions continue to deteriorate because of high interest rates and a stronger A$. Indeed, key industries such as retail, manufacturing and construction continued to report negative business conditions, which dragged down the headline result. The decline in business conditions was also broad based in May, with all the sub-components (employment, trading and profitability) falling in the month. This brought the aggregate index down 3.9 points to a reading of 0.7 well below the long run average of 5.8. Business confidence was also weaker (down 1.6 points to a reading of 5.5), with the details of the survey pointing to very few reasons to be optimistic in May. Measures of forward orders, stocks and exports were all weaker, while capacity utilisation appears to have stabilised in the past few months. At the same time, consumers continue to exhibit deteriorating levels of confidence, with the consumer sentiment index falling 2.6% in June. This brought the headline index down to a level of (just below the long-run average). Current and one year forward household finances remain the biggest concern for consumers, while expectations for economic activity had a large impact on the decline in the month. 17 June 2011 Macquarie Securities (Australia) Limited This is consistent with recent reports of a slowdown in jobs growth, as households viewed news on employment as extremely unfavourable over the past three months. This could have important implications for consumer spending, with households more likely to build up precautionary savings if job security diminishes. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

12 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Confidence being tested All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 17 June

13 AUSTRALIA Portfolio performance vs index 120% v XSO v XSOAI 100% 80% 60% 40% 20% 0% Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Source: Macquarie Research, IRESS, June 2011 Portfolio performance vs index Macquarie ELG portfolio 450% Small Ords Small Ords Accum. Index 400% 350% 300% 250% 200% 150% 100% 50% 0% -50% Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Source: Macquarie Research, IRESS, June 2011 Monthly performance 19.0% Monthly Relative Performance v Small Ords Monthly Absolute Performance 14.0% 9.0% 4.0% -1.0% -6.0% Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Source: Macquarie Research, IRESS, June 2011 Emerging Leaders weekly The good oil This week we highlight three of our key picks in the Emerging Leader oil and gas sector. Beach Energy (BPT, A$0.95/sh, Outperform, A$1.35/sh PT): In the nearterm BPT is drilling 26 wells in the Western Flank of the Cooper Basin, targeting 6mmbbls of recoverable reserves and 5,500bopd of net production additions. With the first four wells proving successful, BPT has made an encouraging start to this program. BPT is also de-risking the transformational shale gas opportunities in the Cooper Basin where management estimates 40 80tcf of gas-in-place in PEL 218 alone. A fracture stimulation program has commenced, which will help BPT plan for a wider pilot production test early next year. Outperform. Tap Oil (TAP, A$0.93/sh, Outperform, A$1.60/sh PT): Despite encouraging exploration results in 1H11, TAP's share price has fallen by 20% from its peak. At Zola, management estimates the resource could come in towards the top end of the 1 2tcf pre-drill estimate. While we expect resources will be developed through the domestic market, it could potentially provide feedstock for any one of the numerous LNG projects planned in WA. Initial signs appear encouraging at Finucane South, where TAP was targeting 8mmbbls of oil which could be easily developed through the nearby Mutineer infrastructure. With BHP Billiton recently pre-empting on TAP s 25% sale of WA-351-P, we expect the exploration news flow will continue through to early Outperform. Horizon Oil (HZN, A$0.34/sh, Outperform, A$0.50/sh PT): HZN signed an agreement to purchase an additional 12.25% stake in Block 22/12 in China, increasing its interest in the recently sanctioned Beibu Gulf development to 26.95%. The interest was acquired from Petsec Energy Ltd (PSA AU, Not Rated) for A$38m upfront and 15m HZN options. Separately, a US$80m convertible bond was successfully issued to fund the acquisition and further development at the Stanley liquids stripping development in PNG. HZN has secured additional exposure to the low risk, near-field potential at Beibu Gulf for what we view to be an attractive price. While the acquisition has placed an additional burden on HZN's funding position, the company has commenced discussions to secure a reserves-based debt facility to fill this gap. Outperform. ELG model portfolio performance Our model portfolio is down 2.99% thus far in June compared to the Small Ordinaries Index which is down 5.71%. Best performers include Invocare (5.8%) and Slater and Gordon (4.1%) while Independence (-10.0%), Thorn (-9.3%), and Ausdrill (-8.3%) have been the biggest detractors to performance this month. 15 June 2011 Macquarie Securities (Australia) Limited Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

14 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Emerging Leaders weekly All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 15 June

15 NEW ZEALAND Retail sales rebounded in Q1 QoQ% Nominal retail sales Mar-97 Nov-01 Jul-06 Mar-11 Source: Stats NZ, Macquarie Research, June 2011 Retail inflation is subdued as some segments continue to discount prices QoQ% QoQ% (LHS) YoY% (RHS) Quarterly Implicit price deflator core retail sales QoQ% (LHS) YoY% (RHS) Nov-03 Sep-05 Jul-07 May-09 Mar-11 Quarterly Source: Stats NZ, Macquarie Research, June 2011 YoY% YoY% Retail rebound Kiwi lineout Event We take a closer look at the increase in New Zealand March quarter retail sales. Impact The March quarter retail sales data provide confirmation of stronger consumer spending at the start of the year, likely providing a valuable boost to Q1 GDP growth. To be sure, we do not expect policymakers to read too much into this improvement just yet as they look for signs of a more sustained upswing but the broadening economic recovery does support our expectation that interest rates can begin to move higher before the end of the year. Analysis The 2.0% rise in nominal retail sales during the March quarter was in line with market expectations, given the earlier increase in electronic card transactions within the retail sector. As a result, the retail sales figures serve to confirm the improvement in spending at the start of the year, but also provide some additional detail on the breadth of improvement in retail activity. Indeed, it is likely that consumer spending would have been even stronger if not for the disruption caused by the Canterbury earthquake in February. This is because retail sales were up sharply in every region except Canterbury, which recorded a 2.2% fall during the quarter. Auckland continued to be a standout performer, with sales rising 3.2% in the quarter (to be up 6.2% over the past year). This is consistent with stronger housing market conditions in Auckland over recent months, and further improvements are expected given the extended period of very low interest rates and the potential for temporary internal migration flows out of Christchurch. Indeed, ongoing aftershocks in Canterbury likely means that this divergence in regional conditions continued in the June quarter. Taking the impact of prices out of the equation, the volume of retail sales was up by a strong 0.9% in the quarter, which would have been an important support for GDP growth in the March quarter (note that the timing of release for Q1 retail sales and GDP data was delayed due to the impact of the earthquakes on data collection). Widespread discounting through the sector appears to have had the desired impact on volume growth, with the biggest volume gains coming in the furniture (up 8.0%) and electronic goods (up 4.1%) segments. Implied prices in these segments fell by 1.9% and 2.9% respectively, likely aided by the strength in the NZD. The flip-side of the stronger NZD is that tourism was slower at the start of the year, which weighed on the accommodation segment (down 3.6% in the quarter). Meanwhile, sales at supermarkets and grocery stores were down slightly (-0.4%). 16 June 2011 Macquarie Securities (Australia) Limited Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

16 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Retail rebound All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 16 June

17 AUSTRALIA CSL AU Price 16 Jun 11 Volatility index Underperform A$32.15 Low CSL Swiss currency causing headaches Event 12-month target A$ month TSR % +0.0 Valuation A$ DCF (WACC 9.9%, beta 1.0, ERP 5.0%, RFR 5.0%, TGR 3.3%) GICS sector Pharmaceuticals, Biotechnology & Life Sciences Market cap A$m 16, day avg turnover A$m 55.3 Number shares on issue m Investment fundamentals Year end 30 Jun 2010A 2011E 2012E 2013E Revenue m 4, , , ,857.9 EBIT m 1, , , ,426.5 Reported profit m 1, ,118.0 Adjusted profit m 1, ,118.0 Gross cashflow m 1, , , ,305.1 CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x CSL AU vs ASX 100, & rec history We update our earnings forecasts and valuation for CSL based on recent currency movements and updated Macquarie currency forecasts. Impact Currency hurts earnings and valuation by 4%: Continuing strength of the AUD combined with a recent rally in the CHF (which has appreciated 5.6% in the past 5 weeks) impacts our earnings forecasts by -1% in FY11, -3% in FY12 and -2% in FY13. This, combined with an updated long-term AUD:USD assumption (from 80c to 82c), means that we also reduce our price target by -4% to $ Despite recent falls, CSL still looks expensive: Now that Ig prices are fixed to the incremental cost of fractionation (due to Ig being the only last-litre product), industry revenues in our view will grow at the blended volume growth of all plasma products, which has been ~3-5% pa historically. Despite recent share price falls, CSL is still trading at 18x consensus FY11E earnings a level we view as lofty given the subdued market outlook. Octagam re-entry could push industry profit growth to zero: During the last major safety-related recall, the return of Aventis Behring and Alpha Therapeutics products to the market precipitated a ~50% reduction in plasma revenues. Whilst we do not expect the return of Octagam to be this material, this episode shows how sensitive prices are to sudden increases in supply. Given a 5% reduction in Ig price reduces CSL s EPS by 5.8% (by our calculations), we believe it is quite conceivable that the Octagam return could wipe out industry profits next year. CSL competitors have expectation of price disruption: We met with a large competitor of CSL s last week and they informed us they were expecting near-term disruptions once Octagam is returned to the market. CSL management has also provided subdued commentary, stating that prices could get a bit lumpy in Europe next year. As we are currently forecasting flat Ig prices, this dynamic poses a material downside risk to our valuation. Earnings and target price revision Adjusted profit: FY11-1%, FY12-3%, FY13-2%. Target price revised down 4% to $31.30 Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) Price catalyst 12-month price target: A$31.30 based on a DCF methodology. Catalyst: Ig pricing data post-octagam return Action and recommendation 16 June 2011 Macquarie Securities (Australia) Limited Maintain Underperform: Recent currency movements have reduced our valuation by -4%. And despite a recent softening of CSL s share price we still view the stock as expensive given a subdued outlook for industry growth and the material risk to profitability that the Octagam return poses. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

18 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 CSL EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (for US coverage by MCUSA, 0.00% of stocks covered are investment banking clients) Company Specific Disclosures: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of CSL Limited's equity securities. Important disclosure information regarding the subject companies covered in this report is available at General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 16 June

19 AUSTRALIA RIO AU/RIO LN Outperform Price 14 Jun 11 A$80.08/ Volatility index Medium 12-month target A$ / month TSR % Valuation A$ / DCF (WACC 9.3%, ERP 5.0%, RFR 6.0%) GICS sector Materials 30-day avg turnover A$m Combined market cap US$m 128,525 Number shares on issue m Investment fundamentals Year end 31 Dec 2010A 2011E 2012E 2013E Revenue m 60,323 70,463 72,494 72,939 EBIT m 21,128 27,948 29,737 28,242 Reported profit m 14,324 18,906 19,662 18,665 Adjusted profit m 13,987 18,668 19,662 18,665 Gross cashflow m 18,318 23,128 24,578 23,687 CFPS , , ,255.7 CFPS growth % PGCFPS x PGCFPS rel x EPS adj , EPS adj Aus Aó , ,145.1 EPS adj growth % PER adj x PER rel x Total DPS Total DPS Aus Aó Total DPS Uk UKp Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x RIO AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in USD unless noted) Rio Tinto Speeding up the expansion Event Rio Tinto announced spending of US$350m for early works and procurement of long lead items relating to the Pilbara iron ore expansion project. As a result of this spending, Rio Tinto expects the installed capacity of 333mtpa (100% basis) to be completed six months earlier than previously forecast, with completion now anticipated in 1H15. Impact Bringing forward capacity. Rio Tinto's announced US$676m investment (US$350m attributable) will be used to bring forward engineering work for the longest lead time components of the port and rail infrastructure. The result of this is a six-month improvement on the completion data for the 333mpta installed capacity. Delivering maximum production by Rio Tinto does not expect to be fully producing at this nameplate 333mtpa capacity until 4Q15, with the first year of full capacity output being in CY16. In our modelling we are more conservative, anticipating that the ramp-up to production at 333mtpa does not occur until CY17. Capital cost guidance unchanged. Rio Tinto confirmed that the earlier spending would allow benefits to be captured "at no additional cost" and therefore their current guidance for a capital intensity of US$140/t remains unchanged. As with the vast majority of Australian iron ore expansions in our universe, we take a less optimistic view of the current operating environment and model the expansion capital intensity at ~US$ /t. Reflects bullish outlook for iron ore. This commitment to get tonnes to market sooner clearly reflects Rio Tinto's belief that the market will remain undersupplied in the short to medium term. According to Rio Tinto chief executive, Iron Ore and Australia, Sam Walsh, "the demand outlook continues to be strong with supply lagging elsewhere in the industry and we are seeing new supplies proving slower to materialise than predicted". Earnings and target price revision No change. Price catalyst 12-month price target: A$ based on a DCF methodology. Catalyst: Sustained strength in spot iron ore prices. Action and recommendation Even taking a conservative view on the timing and cost of Rio Tinto's flagship project, the stock appears comfortably inexpensive on almost all conventional valuation metrics given our view on a potential multi-year shelf in iron ore prices. Outperform. 15 June 2011 Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

20 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Rio Tinto All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (for US coverage by MCUSA, 0.00% of stocks covered are investment banking clients) Company Specific Disclosures: The Macquarie Group is acting as financial advisor to RIO on a recommended off-market takeover bid of Riversdale Mining Ltd as announced on 23 December The Macquarie Group acted for Rio Tinto in relation to its proposed Western Australian Iron Ore Production Joint Venture with BHP Billiton as announced on 5 June The Macquarie Group acted as Joint Global Coordinator in relation to the Rights Issues by Rio Tinto PLC and Rio Tinto Limited as announced 5 June The Macquarie Group acted as Advisor to Rio Tinto Ltd. and Rio Tinto PLC in relation to its partnership with Chinalco as announced 12 February Within the last 12 months, Macquarie Group has received compensation for investment advisory services from Rio Tinto Limited. The analyst and/or associated parties own or have other interests in securities issued by RIO. Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Rio Tinto Limited's equity securities.the analyst and/or associated parties own or have other interests in securities issued by Rio Tinto Limited. Important disclosure information regarding the subject companies covered in this report is available at General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 15 June

21 AUSTRALIA ERA AU Price 14 Jun 11 Volatility index Underperform A$4.20 High 12-month target A$ month TSR % -3.1 Valuation A$ DCF (WACC 9.3%, beta 1.3, ERP 5.0%, RFR 6.0%, TGR 3.0%) GICS sector Energy Market cap A$m day avg turnover A$m 2.9 Number shares on issue m Investment fundamentals Year end 31 Dec 2010A 2011E 2012E 2013E 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 % nmf nmf nmf PER adj x 17.1 nmf 24.7 nmf PER rel x 0.90 nmf 2.25 nmf Total DPS Total div yield % Franking % nmf ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x ERA AU vs Small Ordinaries, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) Energy Resources of Australia Plant operations to restart Event ERA announced the recommencement of processing plant operations after almost five months of rain-induced shutdown. Impact Ramping back up. ERA closed the processing plant at the Ranger mine in early January in order to ensure the heavy rainfall did not lead to a breach of the Tailing Storage Facility's authorised limit. Guidance provided in April indicated that the processing facility would return to operation in late July. By restarting the plant today, ERA expects to reach full processing capacity in about one month; well within the previously disclosed schedule. Busy six months ahead. While this announcement is a clear positive for ERA, there is still much work to do if it is to achieve its full year production guidance of 2,400t of uranium. An update on this guidance and the progress of the ramp-up is expected to be given in the impending 2Q11 operations review. First half loss range narrowed. ERA also announced a revised first half loss range of between A$20 30m from previous guidance of A$30 50m. We believe this revision, in conjunction with the earlier-than-forecast plant restart, highlights the rightly conservative approach that management have taken during this difficult period, and represents a sensible strategy given the nature and location of their operations. Earnings and target price revision No change. Price catalyst 12-month price target: A$4.00 based on a DCF methodology. Catalyst: Deeps decline approval at June board meeting. Action and recommendation Despite these two announcements being a clear positive for the company in the immediate term, we continue to see structural issues with ERA's business model, particularly concerning the uncertainty around the two key growth projects: the Deeps underground development and the Heap Leach. In addition, the broader uranium demand dynamic continues to look volatile with the Italian public on Monday voting more than 90% in favour of joining Germany and Switzerland in abandoning its long-term nuclear plans. As a result of the combination of these issues, we maintain our Underperform rating. 16 June 2011 Macquarie Securities (Australia) Limited Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

22 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Energy Resources of Australia All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 16 June

23 AUSTRALIA IFN AU Price 13 Jun 11 Volatility index Outperform A$0.33 High 12-month target A$ month TSR % Valuation - DCF (WACC 8.0%, beta 1.0) A$ 0.60 GICS sector Utilities Market cap A$m day avg turnover A$m 0.9 Number shares on issue m Investment fundamentals Year end 30 Jun 2010A 2011E 2012E 2013E Revenue m EBITDA m EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % EPS rep EPS adj EPS adj growth % nmf nmf PER adj x nmf nmf nmf 39.1 PER rel x nmf nmf nmf 4.11 Total DPS Total div yield % Franking % 0 0 nmf nmf ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x IFN AU vs Small Ordinaries, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) 14 June 2011 Macquarie Capital (Europe) Limited Infigen Energy Tackling its debts Event Infigen Energy (IFN) has made three separate announcements. It has agreed the sale of its remaining European wind farms, it has completed the project financing of its new wind farm in Australia, and it has also suspended its dividend. Impact IFN s balance sheet position is uncomfortable, and all these three developments improve the balance sheet outlook in some way. The German wind farms are to be sold at a price of 1.20 per MW. This is a higher value than we had estimated in our sum-of-the parts valuation. The disposal should reduce net debt by ~A$190m, should enhance earnings slightly, and gives encouragement that the US assets can be sold (the disposal of the German assets was pulled at broadly the same time as the US assets, 15 months ago). We are confident that most institutional shareholders expected all dividend payments to be suspended. IFN is now in cash sweep, and all cash generated from operations and disposals must pay down its significant debt balance under the terms of the global borrowing facility. In our view, it is therefore not appropriate for IFN to be paying out dividends from the cash balance outside the borrower group. Suspending the dividend through FY13 is thus a sensible move to conserve cash in our opinion. IFN has now satisfied all conditions under the project finance facility for its Woodlawn Australian wind farm. It has started to draw down the A$55m and this will more than cover the outstanding A$40m of project cash costs. Overall, IFN s forecast debt ratios for FY12 and beyond have improved as a result of these developments. Earnings and target price revision Whilst IFN remains loss-making at the earnings level in our FY11-12 forecasts, the disposal and dividend suspension should take FY13 EPS from A$c0.2 to A$c0.8 and FY14 EPS from A$c5.0 to A$c5.7. Price catalyst 12-month price target: A$1.00 based on a SOTP methodology. Catalyst: 30 August FY11 results should confirm no breach of covenant. Action and recommendation We continue to argue that IFN stock represents an undervalued pool of assets, and our sum-of-the-parts valuation suggests A$1.00 per share. Given its debt burden, it is a high risk investment, in our view, relative to its international wind farm peer group, but today s developments reduce this risk slightly and support our valuation. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

24 Macquarie Research 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 Macquarie First South - South Africa 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 Infigen Energy All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (for US coverage by MCUSA, 0.00% of stocks covered are investment banking clients) Company Specific Disclosures: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Infigen Energy Limited's equity securities. Important disclosure information regarding the subject companies covered in this report is available at General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 14 June

25 NEW ZEALAND PPL NZ Price 14 Jun 11 Volatility index Outperform NZ$1.10 Medium 12-month target NZ$ month TSR % Valuation NZ$ DCF (WACC 11.2%, beta 1.0, ERP 7.0%, RFR 5.0%, TGR 2.0%) GICS sector Retailing Market cap NZ$m day avg turnover NZ$m 0.2 Number shares on issue m Investment fundamentals Year end 31 Jul 2010A 2011E 2012E 2013E 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 div yield % Franking 1 % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x NZ imputation credits are only able to be used by shareholders to offset NZ income tax liability. PPL NZ vs NZSE50, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in NZD unless noted) 16 June 2011 Macquarie Securities (NZ) Limited Pumpkin Patch US prickle pulled out Event FY12 trading update and commentary on a business restructure. On balance, we consider the announcement to be positive, directly addressing the underperformance in the northern hemisphere, signalling a new commitment to addressing the cost base of the core business and general operating efficiency and leaving the global growth opportunities intact. We have lifted the recommendation to Outperform. Impact Earnings downgrade: FY12 NPAT is now forecast to be $12 14m compared to previous guidance of $16 18m (consensus $17.5m). At the mid point of the guidance, this implies a 23% downgrade. Trading conditions in all markets (particularly Australia) remain challenging and volatile, with PPL stating that there is no indication that there will be any near-term recovery. Business restructure: The business restructuring will see PPL close all 20 US stores, take an impairment charge of $2m for underperforming UK stores, and realign Head Office operations to match the reorganised store network. Cost of restructure: PPL expects to take a (net) EBIT charge of $9-11m from the business restructuring. Benefit of restructure: PPL expects the restructure will have a positive EBIT impact in FY12 of $7 9m increasing to $10 12m in FY13 underpinned by lower HO costs ($3 4m), the elimination of losses from the USA ($3.0m) and an enhanced contribution from the UK reflecting renegotiated leases or store closures. Earnings and target price revision FY11 EPS forecast lowered 26% and FY12 EPS forecast lowered 20%. Price target raised to $1.46 from $1.22. Price catalyst 12-month price target: NZ$1.46 based on a Sum of Parts methodology. Catalyst: Delivery of improved EBIT from restructure. Action and recommendation The trading update confirms our view of current global retailing trading conditions. While the downgrade is disappointing, we view the nature and scale of the restructuring and the implied recommitment to improved core operating performance as very positive. With PPL s global growth potential intact and the millstone of northern hemisphere losses removed, we have upgraded our recommendation to Outperform from Underperform with a price target of $1.46 per share. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

26 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Pumpkin Patch All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 16 June

27 AUSTRALIA SGM AU Price 14 Jun 11 Volatility index Outperform A$16.72 Medium 12-month target A$ month TSR % Valuation A$ - DCF (WACC 10.0%, beta 1.2, ERP 5.0%, RFR 6.0%) GICS sector Materials Market cap A$m 3, day avg turnover A$m 8.7 Number shares on issue m Investment fundamentals Year end 30 Jun 2010A 2011E 2012E 2013E Revenue m 7,459 8,556 9,729 10,249 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x SGM AU vs Small Ordinaries, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) 15 June 2011 Sims Metal Management Where there s muck there s money Event A change of analyst brings fresh eyes to SGM. Impact Current issues look to be more cyclical than structural. While the steel industry faces both cyclical and structural headwinds, the issues impacting the scrap industry look to be more cyclical in nature. Indeed, margin compression at this point in the cycle has been predominantly driven by weaker volumes and higher sourcing costs. While challenges remain, in our view SGM is well placed versus steelmaking peers to cope with a new environment of higher commodity prices, a strong A$ and the proposed carbon tax in Australia. Strong leverage to a recovery in the US. With SGM deriving 60% of earnings from North America back in FY08 (versus c40% in FY10), an improvement in the US remains the key delta for earnings. Indeed, if we compare FY10 with peak earnings in FY08, the North American operations have a swing factor of $330m. With 70% of Group ferrous volumes sourced from the US, a recovery in construction and consumption in this region will be important for both revenues (via improved sales volumes) and EBIT (via fixed cost leverage and lower sourcing costs / greater scrap availability). An alternative play on iron ore. Historically, directional movements in scrap and iron ore prices have been highly correlated, with both representing interchangeable iron units in the steelmaking process. With raw material supply set to remain the bottleneck in the steel value chain and Chinese domestic cost inflation supporting the iron ore price above $150/tn CFR China, we expect scrap prices to trade above historical norms over the next 5 years, while an OECD construction rebound provides potential upside risk. Our commodity team currently forecast average scrap prices of US$418/tn for the period versus US$340/tn between Valuation remains attractive. SGM s average ROFE between FY97 and FY10 has been 23% (peaking at 53% in FY05). While lower volumes and higher sourcing costs are likely to weigh on margins in the near term, our A$18.94ps target price assumes a mid cycle ROFE of 14% and a mid-cycle EV/EBITDA multiple of 6.5x (in-line with historical averages). On a peer multiple basis we derive a valuation of A$19.39ps, while on a price to NTA of 2.0x the stock is trading at a 44% discount to its historical average of 3.6x. Earnings and target price revision FY11 and FY12 EPS lowered by 28% and 17% on the back of a change in analyst. We have increased our target price from $18.00ps to $18.94ps. Price catalyst 12-month price target: A$18.94 based on a Higher volumes methodology. Catalyst: US macroeconomic data, FY11 results in early August. Action and recommendation We move to an Outperform recommendation with a $18.94ps target price. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

28 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Sims Metal Management All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 15 June

29 AUSTRALIA AIO AU Price 14 Jun 11 Volatility index Outperform A$1.52 Medium 12-month target A$ month TSR % Valuation A$ - DCF (beta 1.2, ERP 5.0%, RFR 6.0%) 2.00 GICS sector Transportation Market cap A$m 4, day avg turnover A$m 21.2 Number shares on issue m 2,926 Investment fundamentals Year end 30 Jun 2010A 2011E 2012E 2013E Revenue m 2, , , ,026.6 EBITDA m ,116.6 EBITDA growth % EBIT m EBIT growth % Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % nmf ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x AIO AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) 16 June 2011 Macquarie Securities (Australia) Limited Asciano A first in Queensland with BHP Event Asciano has announced it has successfully tendered for the BHP contract on the NML with 4.2mt starting up in January 2013 with two train sets. This is AIO s first contract with BHP (BMC JV) in Queensland and, importantly, AIO s first major contract win since losing the NSW volume in QRN in Impact The critical element of the contract is not the volume in itself, but winning volume with BHP. BHP s current volume split is ~95% QRN and 5% AIO. We would anticipate this split will shift to being a little more balanced as BHP encourages competition. For AIO, over the next 5 years there is scope to provide 20mt of growth for BHP in Queensland and arguably 4-5mt in NSW. At least in Queensland we think AIO is in a strong position to build on its current service provision. For AIO we believe the contract is for Poitrel and South Walker Creek, with the residual volume still being hauled by QRN. It raises the question whether BMA new mine Daunia (4.9mt) opening during CY2013 has been contracted or BMC has subcontracted existing volume to BMA. There is still ~20mt of GAPE capacity and we anticipate a further 30mt of Wiggin Island volume to be contracted in the coming 12 months. Within GAPE, Rio Tinto is 4-8mt and Qcoal is 10mt. These are the last major contracts. Risk for AIO is Rio Tinto seeks to ensure competition by favouring QRN. However unlike BHP, Rio Tinto s is more balance between QRN and AIO is more balanced at 35:65 in AIO s favour. AIO is more at risk in NSW where it has 100% of the volume. Residual projects like Qcoal (10mt) are far more less certain for AIO given the mines are within the Newman system, where QRN has a monopoly presence, and already operates to Sonoma. Earnings and target price revision Minor lowering reflecting the labor dispute and ongoing soft economic numbers. Price catalyst 12-month price target: A$2.10 based on a DCF methodology. Catalyst: Resolution of the port s labor dispute. Action and recommendation AIO offers significant upside to its current trading price. It is leveraged to these incremental wins long term, but in the near term it will be clarity on the repricing of the existing Rio Tinto volume (+A$20-30m EBITDA) and resolution of the port labour dispute/maersk contract (A$20-25m EBITDA). Medium term to the recovery in the economy where intermodal and ports can leverage the under utilised asset base. We maintain the Outperform recommendation. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

30 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Asciano All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (for US coverage by MCUSA, 0.00% of stocks covered are investment banking clients) Company Specific Disclosures: The Macquarie Group acted as financial adviser to the consortium, made up of TPG Capital and Global Infrastructure Partners, that submitted a non binding indicative proposal to acquire all outstanding issued shares of the Asciano Group by way of scheme of arrangement, as announced on 4 August Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Asciano Group's equity securities. Important disclosure information regarding the subject companies covered in this report is available at General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 16 June

31 AUSTRALIA DOW AU Price 14 Jun 11 Volatility index Outperform A$3.78 Medium Downer EDI Railcorp approves; still need Syncora Event 12-month target A$ month TSR % Valuation - EV/EBIT A$ GICS sector Commercial & Professional Services Market cap A$m 1, day avg turnover A$m 8.6 Number shares on issue m Investment fundamentals Year end 30 Jun 2010A 2011E 2012E 2013E Revenue m 5, , , ,438.9 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x DOW AU vs ASX 100, & rec history DOW announced that RailCorp has completed its inspection of the first Waratah train set and that both parties are ready for Practical Completion. Reliance Rail is awaiting consent from its financiers (via Syncora) before PC can be achieved. DOW said it looks forward to the first Waratah train set entering passenger service in the near future. Impact While PC is still yet to be achieved, we believe acceptance by RailCorp is a key hurdle to clear and this is therefore a positive step forward for the project. We understand that there are still some minor defects for DOW to address and that DOW and RailCorp have agreed on a timeframe for these to be resolved. As this agreement represents a technical variation to the contract between Reliance Rail and Railcorp, Syncora (as security trustee for the financiers) is required to give its consent before PC can be finalised. DOW is hopeful that Syncora will provide consent in the coming weeks. Beyond PC of set 1 key focus is on-track performance and reliability of sets 1-6 in service (DOW targeting presentation of 6th set to RailCorp by Oct 2011, but provisioning assumes PC of Sets 1-6 is not achieved until January 2012). The key reliability performance target is onerous with no more than 1 fault for every 12,500km travelled. The production schedule through the project is the key cost driver and the project is only 38% complete based on total forecast cost. However, DOW appears to be making good progress on its revised manufacturing plan, including improved Chinese build quality and potential for less re-work in Cardiff vs provision assumption. In relation to earnings, we forecast EBIT of $272m (consensus $275m) which is below DOW's Feb 11 guidance of $300m. As flagged at Investor Day, DOW "managing a number of downside risks, weather continues to impact, NZ Works and UK Works worse than expected". Earnings and target price revision Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) No change. Price catalyst 12-month price target: A$4.20 based on an EV/EBIT methodology. Catalyst: Syncora consent expected in the coming weeks; Set 2-6 delivery between July and October Action and recommendation 16 June 2011 Macquarie Securities (Australia) Limited We retain an Outperform recommendation and a 12mth price target of $4.20. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

32 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Downer EDI All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (for US coverage by MCUSA, 0.00% of stocks covered are investment banking clients) Company Specific Disclosures: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Downer Edi Limited's equity securities. Important disclosure information regarding the subject companies covered in this report is available at General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 16 June

33 AUSTRALIA SHL AU Price 14 Jun 11 Outperform A$12.20 Volatility index Low/Medium 12-month target A$ month TSR % Valuation A$ DCF (WACC 9.2%, beta 1.0, ERP 5.0%, RFR 6.0%, TGR 2.2%) GICS sector Health Care Equipment & Services Market cap A$m 4, day avg turnover A$m 8.9 Number shares on issue m Investment fundamentals Year end 30 Jun 2010A 2011E 2012E 2013E Revenue m 2, , , ,731.1 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x PRY AU Price 14 Jun 11 Underperform A$3.30 Volatility index Low/Medium 12-month target A$ month TSR % -5.9 Valuation A$ DCF (WACC 9.7%, beta 1.2, ERP 5.0%, RFR 6.0%) GICS sector Health Care Equipment & Services Market cap A$m 1, day avg turnover A$m 5.4 Number shares on issue m Investment fundamentals Year end 30 Jun 2010A 2011E 2012E 2013E Revenue m 1, , , ,487.7 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x Source: FactSet, Macquarie Research, June June 2011 Macquarie Securities (Australia) Limited Australian Pathology Further concentration ahead? Event We assess the potential impact of Sonic Healthcare (SHL) or Primary healthcare (PRY) bidding for the pathology assets of not-for-profit operator St John of God (SJOG). Impact Synergies would be lower than other similar transactions: We see the synergies (and therefore the price) of a potential transaction being lower than what would normally be seen, due to (i) SJOG being exempt from payroll tax, which improves its EBITDA by ~30%, (ii) SJOG having a skew to manual esoteric testing, which has less scale, and (iii) SJOG having a skew to hospital testing, which is difficult to centralise due to much of it having to be carried out on-site. We estimate a value of $100-$150m: We see synergies for a potential transaction in the range of 15-20% of SJOG s cost base, lower than the 30-40% levels often seen in pathology acquisitions, due to the reasons described above. Under our calculations we believe a potential acquirer could pay 12x EBITDA (or $140m) and still generate a return on capital in excess of 10%. SHL & PRY could realise higher synergies, but would face tougher hurdles: Because Healthscope has smaller operations in SJOG s home state, Western Australia (WA), it will not be able to realise the same level of synergies as SHL or PRY (which have extensive operations in WA). However this also means Healthscope would be less likely to run into regulatory issues with the ACCC, which would likely be watching a potential transaction closely. ACCC may let transaction pass without conditions: Given a potential transaction may result in significant market concentration in WA, it could be expected that the ACCC would have reservations. However many features of this industry make such a transaction more likely, including: (i) many other states being highly concentrated with only two main providers (eg. Qld, Tasmania, NT), (ii) the fact that pricing is already tightly controlled with ~80% of revenues coming under a fixed 5yr agreement with the government, and (iii) previous experiences in Queensland suggesting that co-payment increases are difficult to implement, even when a region has only two providers. Earnings and target price revision No change Action and recommendation SHL Outperform. PRY Underperform. No change to our recommendations. This potential transaction would likely generate value for both PRY and SHL, unless bidding was so competitive that the price was driven up above 12x EBITDA. Because Healthscope, in our view, could not realise the same level of synergies as SHL & PRY, we see it as a less likely candidate, unless the ACCC were to intervene, which could leave Healthscope as the only potential suitor for SJOG s assets, at least in WA. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

34 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Australian Pathology All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (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 General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 15 June

35 AUSTRALIA MAP AU Price 10 Jun 11 Volatility index Outperform A$3.21 Low/Medium 12-month target A$ month TSR % Valuation A$ - DCF (WACC 11.9%, beta 1.2, ERP 5.0%, RFR 6.0%) 3.32 GICS sector Transportation Market cap A$m 5, day avg turnover A$m 16.5 Number shares on issue m 1,861 Investment fundamentals Year end 31 Dec 2010A 2011E 2012E 2013E Revenue m 1, , , ,409.2 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x Note: Based on proportionately consolidated cash earnings. MAP AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) 10 June 2011 Macquarie Securities (Australia) Limited MAp Airports Beyond Sydney Event In our previous article, we considered the likelihood of a special dividend (as high as $0.26 per share), as there are limited value accretive investment opportunities. The question that then arose was should MAp take the next step and become a single asset, namely Sydney Airport? Impact At this stage, the special dividend is the most material value add for investors. With an assumption that the current base yield of ~7% is maintained into 2012, we estimate income of $0.47 in 2011 and $0.32 in additional capital, thus a TSR of 25%. Capital growth reflects dividend growth will reflect underlying asset growth as dividends have now been realigned to cash earnings. The perennial valuation gap between the share price and NAV ($4.35) remains. At Sydney, the ability to realise the value is constrained due to foreign ownership limits but in Europe we believe there is scope to tap into the interest generated by Hochtief s asset sales process. European airport multiples have traded at least at 13x EV/EBITDA in the last three years. We estimate MAp s European airports have an implied multiple of ~10x in the current share price. With refinancing of Copenhagen imminent, thus a stable base established, both airports have a renewed five-year regulatory period; it is the ideal time to consider asset realisation. We estimate a realisation would generate $2.0bn, ie $1.07 per share, yet the dividend would only fall marginally. Assuming MAp s yield of % is maintained, we estimate a share price re-rating of $0.70. Operationally we believe a simplification of the structure could then emerge, with the roles of CEO and CFO of MAp being merged with Sydney Airport. This would generate cost savings, we estimate, of ~$5m pa as offices in Sydney and London are eliminated. Whilst there would be some loss of skills, we believe it would be on an equal footing to other listed airports like Auckland. At the very least, the sale of European airports will bring both operation and valuation benefits to MAp investors. Earnings and target price revision No change. Price catalyst 12-month price target: A$3.50 based on a DCF methodology. Catalyst: Refinancing of CADH, which we anticipate will be in the very near future. Action and recommendation MAp is attractively priced. At the very least, we see a special dividend for shareholders of $0.26. The opportunity is to lift the focus of the business and capture latent value in the European airports. The recent expansion of Kerrie Mather s role to CEO of Sydney highlights the natural split that can occur in the business. We believe such an approach would generate a $0.70 re-rating of MAp. With strong fundamentals and the opportunity to unlock latent value, we maintain our Outperform recommendation. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

36 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 MAp Airports All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (for US coverage by MCUSA, 0.00% of stocks covered are investment banking clients) Company Specific Disclosures: The Macquarie Group is a substantial securities holder in MAP. The analyst and/or associated parties own or have other interests in securities issued by MAP. Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of MAP Group's equity securities. Important disclosure information regarding the subject companies covered in this report is available at General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 10 June

37 AUSTRALIA ILU AU Price 10 Jun 11 Volatility index Neutral A$17.49 Medium 12-month target A$ month TSR % Valuation A$ - DCF (WACC 10.5%, beta 1.1, ERP 5.0%, RFR 6.0%) GICS sector Materials Market cap A$m 7, day avg turnover A$m 94.1 Number shares on issue m Investment fundamentals Year end 31 Dec 2010A 2011E 2012E 2013E Revenue m , , ,425.3 EBIT m , ,639.8 Reported profit m ,148.1 Adjusted profit m ,148.1 Gross cashflow m , ,356.1 CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % nmf 1, PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x ILU AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) Iluka Resources Price fly-up accelerates Event ILU reported price increases on all its key products. We update our financial forecast to take into account increased commodity prices. Impact Price fly-up accelerates. ILU has flagged rutile and synthetic rutile prices increase 70-75% for the next half year (1H increase was 30-40%, following the end of 'cap and collar' price increments on most of ILU's contracts) and zircon prices increase of 35-40% for the Sep quarter (June quarter: ~20%). Material valuation and earnings increase. Our valuation is based on a midpoint between a step-up and fly-up price scenario. Re-basing our stepup scenario to incorporate the latest pricing outcome, we estimate the earnings impact is ~60% increase in FY11E EPS and ~105% in FY12E, with NPV increasing to ~A$16ps from ~A$12ps. Re-basing the 'fly-up' scenario increases NPV to ~A$21ps from ~A$17ps. This does not yet take into account impact of higher prices on ILU's potential reserve life. Fundamentals in place for further price strength. We have reviewed potential zircon and rutile supply additions and there are few projects currently identified to fill incremental demand on a five year view. Lower grade mineral sands feedstocks can potentially be upgraded to synthetic rutile, potentially incentivising supply additions at higher prices; however, we see limited short dated supply additions. Earnings and target price revision FY11 EPS increased to A$1.14ps from A$0.71ps; FY12 EPS to A$2.26ps from A$1.10ps; FY13 EPS to A$2.74ps from A$1.36ps. Target price increased to A$18.50ps from A$14.50ps. Price catalyst 12-month price target: A$18.50 based on a DCF methodology. Catalyst: strong quarterly cash flow report, mid July; next quarterly price update for Zircon, September. Action and recommendation We recently upgraded our recommendation and target price based on an increasingly tight market outlook and bullish price forecasts. Prices have increased again. We increase our target price to A$18.50ps. Incorporating these upgrades, we note that valuation metrics have improved despite the recent share price run and we highlight further price strength as a risk to our call. 14 June 2011 Macquarie Securities (Australia) Limited Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

38 Macquarie Private Wealth 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 Macquarie First South - South Africa 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 Iluka Resources All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2011 AU/NZ Asia RSA USA CA EUR Outperform 45.65% 65.72% 59.70% 43.02% 68.91% 51.16% (for US coverage by MCUSA, 14.36% of stocks covered are investment banking clients) Neutral 39.49% 19.00% 29.85% 53.09% 26.43% 35.73% (for US coverage by MCUSA, 17.55% of stocks covered are investment banking clients) Underperform 14.86% 15.28% 10.45% 3.89% 4.66% 13.11% (for US coverage by MCUSA, 0.00% of stocks covered are investment banking clients) Company Specific Disclosures: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Iluka Resources Limited's equity securities. Important disclosure information regarding the subject companies covered in this report is available at General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. 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 general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do 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. No member of the Macquarie Group accepts any 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 or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 14 June

39 AUSTRALIA ORG AU Price 10 Jun 11 Volatility index Outperform A$15.66 Low 12-month target A$ month TSR % Valuation A$ DCF (WACC 9.1%, beta 1.1, ERP 5.0%, RFR 6.0%, TGR 2.0%) GICS sector Energy Market cap A$m 16, day avg turnover A$m 43.8 Number shares on issue m 1,064 Investment fundamentals Year end 30 Jun 2010A 2011E 2012E 2013E Revenue m 8,534 9,320 12,605 13,328 EBIT m 896 1,192 1,721 1,922 Reported profit m ,060 Adjusted profit m ,060 Gross cashflow m 1,059 1,272 1,627 1,784 CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x ORG AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, June 2011 (all figures in AUD unless noted) 10 June 2011 Macquarie Securities (Australia) Limited Origin Energy Getting closer on the funding front Event ORG has priced a EUR500m (AUD680m) hybrid: ORG has issued a 60 year hybrid with an initial coupon of 7.875% with various subsequent step up provisions. As with STO, S&P has granted this issue 100% equity credit. Not the knock out punch: Although smaller than expected, this issue has been optimised for rate and size but leaves lingering uncertainties over ORG s funding position. As a result, despite recently securing debt facilities, raising equity and now issuing this hybrid, we believe a possible funding gap remains. Impact A clear sign that APLNG is moving forward: While hybrids are attractive as a cheap form of equity, they are nevertheless an expensive form of debt and as such ORG would presumably not commit to this facility unless it was confident that APLNG was moving forward. As a result, we would expect an announcement on at least the first train FID imminently. A smaller raising than expected: Perhaps dictated by market conditions, this raising of EUR500m was only half the size suggested in recent press reports. As a result, this is unlikely to silence the funding bears who may suggest that less funds raised points to marketing headwinds and perhaps a one train FID. However, as STO demonstrated last year, there is the option of increasing the size of this issue later if it trades well in the after market. Fully funded at 37.5%: Including this hybrid, assuming an underwritten DRP and a two train development, we now see a A$1.4bn funding gap over the APLNG development period under S&P's forecasts (predicated on our lofty assumption of APLNG capex at A$23bn). We note however that this shortfall would be removed if ORG sells down to 37.5% in APLNG - this is in-line with previous guidance of an ultimate equity stake between 35% and 42.5%. Earnings and target price revision FY12E NPAT falls by 1.7%: We have lowered our NPAT forecasts by ~2% in FY12 (and going forward) to reflect the additional interest costs associated with the new hybrid. Price catalyst 12-month price target: A$20.00 based on a DCF methodology. Catalyst: With APLNG clearly progressing, we remain confident of both trains being sanctioned by year-end. Consequently we expect an announcement on at least the first train FID imminently along with news of marketing progress on the second. Action and recommendation Maintain Outperform rating and $20 price target: We see ORG committing to this hybrid as a strong vote of confidence in APLNG. While the bears may suggest less funds raised points to a one train FID, only ORG knows what equity sell down is expected in the project and so we believe is best positioned to quantify the company's funding needs. While we may initially see a 1 train sanction, we remain confident that both trains will be sanctioned by year-end. Under this scenario, our valuation could potentially rise to ~$22/sh, almost 40% above the current share price. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website