AUSTRALIA ILU AU Price (at 06:10, 15 Apr 2015 GMT) Underperform A$7.73 Valuation A$ - DCF (WACC 9.0%, beta 1.5, ERP 5.0%, RFR 3.8%) 6.35 12-month target A$ 6.50 12-month TSR % -12.6 Volatility Index Medium GICS sector Materials Market cap A$m 3,237 30-day avg turnover A$m 17.8 Number shares on issue m 418.7 Investment fundamentals Year end 31 Dec 2014A 2015E 2016E 2017E Revenue m 724.9 1,005.6 1,024.9 1,021.8 EBIT m 20.5 278.2 401.7 316.9 Reported profit m -62.5 188.9 285.8 227.4 Adjusted profit m 19.5 188.9 285.8 227.4 Gross cashflow m 256.5 357.0 465.1 412.7 CFPS 60.9 84.8 110.5 98.0 CFPS growth % -10.5 39.2 30.3-11.3 PGCFPS x 12.7 9.1 7.0 7.9 PGCFPS rel x 1.36 0.93 0.83 0.99 EPS adj 4.6 44.9 67.9 54.0 EPS adj growth % -66.8 869.0 51.3-20.5 PER adj x 166.9 17.2 11.4 14.3 PER rel x 9.83 0.99 0.71 0.98 Total DPS 19.0 18.0 27.2 21.6 Total div yield % 2.5 2.3 3.5 2.8 Franking % 100 100 100 100 ROA % 0.9 12.3 16.8 12.9 ROE % 1.3 12.7 17.5 12.7 EV/EBITDA x 12.8 7.4 5.7 6.6 Net debt/equity % 4.1-5.1-8.6-6.9 P/BV x 2.3 2.1 1.9 1.7 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, April 2015 (all figures in AUD unless noted) 16 April 2015 Macquarie Securities (Australia) Limited A soft start to FY15 Event ILU has reported its March quarter production outlining a weak start to FY15. Impact A slow start to the year. ILU produced 65.7kt of zircon and 20.3kt of rutile and 1.6kt of synthetic rutile in the March quarter along with 79.6kt of ilmenite. Combined Z/R/SR production was down 21.1% on the pcp. The lower zircon and rutile volumes are largely attributable to the idling of the Hamilton MSP in January and February; processing re-commenced in March. Mining at J-A continued at full utilisation rates and the Narngulu MSP continued at 50% utilisation. Mining at Tutunup South was ramped up to full capacity and is now providing feed for synthetic rutile production. SR Kiln 2 was successfully restarted on 21 March; re-commissioning is progressing smoothly with the first SR planned to be shipped in April. ILU plans to produce 140kt of SR in 2015. No movement in pricing. ILU reported mineral sands revenue of A$115.2m (US$90m) weaker than the pcp of A$130.7m (US$117m). As is normal for the March quarter ILU did not disclose sales volumes but has stated that it has not seen any material change in pricing. Weighted average prices as reported in ILU s Full Year result were Z $1,033/t, R $777/t and SR $750/t. Along with seasonally low sales volumes the March quarter revenue was reportedly impacted by deferred Z and SR sales due to shipping schedules, delayed Z deliveries due to pricing and payment negotiations and lower ilmenite sales due to weak demand. Earnings and target price revision We ve made a number of changes to our production forecasts for ILU; we have kept full year produced volumes in line with guidance which has pushed additional production and sales into the remaining quarters of the year. We have lowered our FY15 earnings forecast by 6% but note that this requires substantially stronger quarterly revenue for the remainder of FY15. We have also made adjustments to some of our estimated mining parameters resulting in changes to our forecasts beyond FY15. Our valuation falls 3% but we leave our target price unchanged at $6.50/sh. Price catalyst 12-month price target: A$6.50 based on a DCF methodology. Catalyst: A key risk to our thesis on ILU is renewed stimulus in China. However, we think stimulus is likely to be much more targeted than previously and unlikely to generate a broad based recovery in demand. Replacement production is required in the Murray Basin and with Balranald study work close to completion we see it becoming a potential catalyst. Action and recommendation Maintain Underperform. Whilst in line with the seasonal nature of the mineral sands market the March quarter would appear to have been a weak one. With 1Q15 R and SR pricing reportedly well below our FY15 forecasts of $915/t and $805/t respectively we believe our earnings forecast are at risk. Market expectations of a strong painting season in the US will need to deliver. Please refer to page 5 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.
1Q15 production analysis A slow start to the year ILU produced 65.7kt of zircon and 20.3kt of rutile and 1.6kt of synthetic rutile in the March quarter along with 79.6kt of ilmenite. Combined Z/R/SR production was down 21.1% on the pcp. The lower zircon and rutile volumes are largely attributable to the idling of the Hamilton MSP in January and February; processing re-commenced in March. Hamilton will continue to process stockpile material from WRP and J-A ahead of the development of Balranald. Mining at J-A continued at full utilisation rates and the Narngulu MSP continued at 50% utilisation. Successful SR kiln restart and ramp up at Tutunup Mining at Tutunup South was ramped up to full capacity and is now providing feed for synthetic rutile production. SR Kiln 2 was successfully restarted on 21 March, and re-commissioning is progressing smoothly with the first SR planned to be shipped in April. ILU plans to produce 140kt of SR in 2015. No movement in pricing ILU reported mineral sands revenue of A$115.2m (US$90m) weaker than the pcp of A$130.7m (US$117m). As is normal for the March quarter ILU did not disclose sales volumes but has stated that it has not seen any material change in pricing. Weighted average prices as reported in ILU s Full Year result were Z $1,033/t, R $777/t and SR $750/t. Along with seasonally low sales volumes the March quarter revenue was reportedly impacted by deferred Z and SR sales due to shipping schedules, delayed Z deliveries due to pricing and payment negotiations and lower ilmenite sales due to weak demand. Fig 1 Iluka Price US$/tonne FOB CY10 CY11 CY12 CY13 CY14 Macq FY15e Zircon 880 1886 2080 1150 1033 1080 Rutile 550 1174 2462 1069 777 894 Syn Rutile 450 878 1771 1150 750 786 AUD/USD 0.92 103.2 103.6 96.8 90.3 0.72 Source: Company data, Macquarie Research, April 2015 Balranald moving to the fore? ILU s quarterly commentary would appear to suggest that the development of Balranald is looking more likely. The study process is approaching completion with detailed engineering due to commence. Study work is also continuing at Cataby in WA and in the Eucla Basin. Changes to our earnings forecasts and target price We ve made a number of changes to our production forecasts for ILU; we have kept full year produced volumes in line with guidance which has pushed additional production and sales into the remaining quarters of the year. We have lowered our FY15 earnings forecast by 6% but note that this requires substantially stronger quarterly revenue for the remainder of FY15. We have also made adjustments to some of our estimated mining parameters resulting in changes to our forecasts beyond FY15. With 1Q15 R and SR pricing reportedly well below our FY15 forecasts of $915/t and $805/t respectively we believe our earnings forecast are at risk. Market expectations of a strong painting season in the US will need to deliver. Our valuation falls 3% but we leave our target price unchanged at $6.50/sh. Fig 2 Our FY15 earnings forecast falls 6% Y/E Dec (A$m) FY15e FY16e FY17e FY18e FY19e NPV Old 202 294 219 196 196 6.54 New 189 286 227 210 219 6.35 Change -6% -3% 4% 7% 12% -3% Source: Company data, Macquarie Research, April 2015 16 April 2015 2
ASX: ILU Price: (A$ps) 7.73 Year end: Dec Rating: Underperform Up/dn TSR Mkt cap: (A$m) 3,237 Diluted shares (m) 418.7 Target: 6.50-16% -13% ASSUMPTIONS FY13 FY14 FY15e FY16e FY17e FY18e ATTRIBUTABLE MINE OUTPUT FY13 FY14 FY15e FY16e FY17e FY18e FY19e Exchange Rate A$/US$ 0.95 0.90 0.72 0.68 0.75 0.80 Valuable Heavy Mineral Production (equity) Zircon US/t 1311 1057 1080 1100 1150 1270 Zircon (kt) 262.3 357.6 396.4 366.4 350.0 329.6 329.6 Rutile US/t 1217 862 894 1000 1050 1080 Rutile (kt) 126.8 177.2 140.7 152.3 140.6 116.8 116.8 Synthetic rutile US/t 1117 762 786 880 924 950 Synthetic rutile (kt) 59.0 0.0 139.4 126.2 126.2 126.2 126.2 Ilmenite US/t 240 138 131 150 173 178 Total Z/R/SR production (kt) 448.1 534.8 676.5 645.0 616.8 572.6 572.6 Saleable ilmenite 441.8 364.6 334.8 295.5 568.7 555.1 555.1 RATIO ANALYSIS FY13 FY14 FY15e FY16e FY17e FY18e Valuable Heavy Mineral Sales (equity) Diluted share capital m 418.7 418.7 418.7 418.7 418.7 418.7 Zircon (kt) 370.2 352.2 409.7 366.4 350.0 329.6 346.0 EPS (diluted and pre sig. items) A 8.9 4.6 44.9 67.9 54.0 49.9 Rutile (kt) 168.0 182.0 145.7 152.3 140.6 116.8 122.7 P/E x 87.0x 166.9x 17.2x 11.4x 14.3x 15.5x Synthetic rutile (kt) 46.2 82.0 144.7 126.2 126.2 126.2 132.5 CFPS A 163.5 84.7 122.7 181.9 174.6 168.0 Total Z/R/SR sold (kt) 584.4 616.2 700.1 645.0 616.8 572.6 601.3 P/CF x 4.7x 9.1x 6.3x 4.2x 4.4x 4.6x DPS A 9.0 19.0 18.0 27.2 21.6 20.0 Z/R/SR C1 A$/t 1,007 857 831 663 891 928 939 Dividend yield % 1.2% 2.5% 2.3% 3.5% 2.8% 2.6% Notional Cash Margin A$/t 319 243 524 851 548 523 507 Franking Level % 100% 100% 100% 100% 100% 100% Z/R/SR AISC A$/t 1,451 1,147 1,056 883 1,115 1,169 1,185 Book value per share x 3.67 3.43 3.70 4.11 4.44 4.75 Operational EBIT Contribution P/Book value x 2.1x 2.3x 2.1x 1.9x 1.7x 1.6x Perth Basin A$m -142.2 25.2 6.4 32.8 23.3 18.6 27.0 R.O.E. (pre sig items) % 2% 1% 12% 17% 12% 11% Eucla Basin A$m 127.0 69.8 249.1 268.5 231.3 241.9 262.3 R.O.A. (pre sig items) % 2% 1% 12% 17% 13% 11% Murry Basin A$m 114.4-76.5 54.4 114.3 31.9 0.0 0.0 Interest Cover x 0.0x 0.0x 33.7x -61.2x -40.2x -60.1x USA A$m 18.0 53.0 31.8 0.0 0.0 0.0 0.0 EBITDA per share A$ps 0.54 0.51 0.99 1.31 1.12 1.03 Revenue to cash cost ratio x 1.30 1.37 1.73 2.40 1.86 1.80 1.74 EV/EBITDA x 15.3x 15.5x 7.6x 5.6x 6.6x 7.4x OPERATIONAL OUTLOOK EARNINGS FY13 FY14 FY15e FY16e FY17e FY18e Sales Revenue A$m 766 725 1,006 1,025 1,022 955 Other Revenue (MAC royalty) A$m 88 67 48 54 56 57 Total Revenue A$m 854 792 1054 1079 1078 1012 Operating Costs A$m (458) (433) (527) (416) (493) (463) Operational EBITDA A$m 396 359 527 662 585 548 Exploration Expense/Write-offs A$m (45) (45) (32) (33) (34) (35) Corporate & Other Costs A$m (126) (101) (80) (81) (83) (84) EBITDA A$m 225 212 414 548 468 429 D&A A$m (182) (192) (136) (146) (151) (134) EBIT A$m 43 20 278 402 317 295 Net Interest A$m (12) (15) (8) 7 8 5 Profit Before Tax A$m 32 5 270 408 325 300 Tax Expense A$m 6 14 (81) (122) (97) (90) Minorities A$m 0 0 0 0 0 0 Adjusted NPAT A$m 37 19 189 286 227 210 Significant Items (post tax) A$m (19) (82) 0 0 0 0 Reported NPAT A$m 18 (63) 189 286 227 210 18% 20% 36% 48% 40% 39% CASHFLOW FY13 FY14 FY15e FY16e FY17e FY18e (kt) 450 Zircon Synthetic rutile Rutile Z/R//SR AISC 1600 400 1400 350 1200 300 1000 250 800 200 600 150 400 100 50 200 0 0 FY12 FY13 FY14 FY15e FY16e FY17e FY18e FY19e FY20e FY21e FY22e FY23e FY24e Net Profit A$m 37 19 189 286 227 210 RESERVES Interest/Tax/D&A A$m 437 271 299 429 452 405 ILU Reserves Working Capital/other A$m 210 64 26 47 51 89 Project Classification Mt HM HM Mt Ilmenite Zircon Rutile Net Operating Cashflow A$m 685 355 514 762 731 704 Western Australia Proved 8.2 8.8% 0.71 59.0% 14.0% 2.0% Capex A$m 51 48 174 228 209 211 Probable 305.1 5.4% 16.54 59.0% 10.0% 5.0% Investments A$m 0 19 0 0 0 0 Jacinth-Ambrosia Proved 110.6 4.1% 4.57 27.0% 51.0% 4.0% Sale of PPE and Other A$m 5 0 0 0 0 0 Probable 3.9 2.3% 0.09 20.0% 52.0% 4.0% Free cash flow A$m 740 421 688 990 940 915 Murray Basin Proved 0.9 25.8% 0.23 54.0% 10.0% 19.0% Dividends Paid A$m 63 42 67 121 105 80 Probable 11.1 15.2% 1.70 46.0% 14.0% 19.0% Debt A$m 84 (101) (110) (30) 0 0 Virginia Proved 7.3 5.0% 0.36 68.0% 15.0% 0.0% Equity Issuance A$m (2) (5) 0 0 0 0 Probable 12.4 5.3% 0.66 56.0% 19.0% 0.0% Other A$m 0 0 0 0 0 0 ILU Total Reserves Total 459.5 5.4% 24.86 52.2% 18.7% 6.0% Net Financing Cashflow A$m 145 (64) (43) 91 105 80 Net change in cash A$m 884 357 645 1,081 1,045 994 EQUITY DCF VALUATION Projects A$m A$ps BALANCE SHEET FY13 FY14 FY15e FY16e FY17e FY18e Western Australia 446 1.07 Cash A$m 46 101 136 175 155 104 Jacinth-Ambrosia 1,325 3.16 PP&E & Mine Development A$m 1,430 1,315 1,117 1,155 1,237 1,295 Murray Basin 240 0.57 Inventories A$m 795 810 835 806 875 976 Virginia 17 0.04 Total Assets A$m 2,369 2,173 2,355 2,422 2,500 2,631 Balranald 74 0.18 Debt A$m 253 160 57 27 27 27 Other Projects & undeveloped resources 134 0.32 Total Liabilities A$m 831 739 807 701 640 644 MAC Royalty @ 5% WACC 867 2.07 Total Net Assets / Equity A$m 1,538 1,435 1,548 1,721 1,860 1,987 Corporate (315) (0.75) Net Debt / (Cash) A$m 207 59 (79) (148) (128) (77) Net debt (cash) 130 (0.31) Gearing (net debt/(nd + equity)) % 12% 4% (5%) (9%) (7%) (4%) Net Equity Value (@ 9% WACC) 2,918 6.35 Gearing (net debt/equity) % 13% 4% (5%) (9%) (7%) (4%) Price Target 6.50 Source: Company data, Macquarie Research, April 2015 16 April 2015 3
Fundamentals Macquarie Quant View The quant model currently holds a marginally negative view on Iluka Resources. The strongest style exposure is Valuations, indicating this stock is under-priced in the market relative to its peers. The weakest style exposure is Price Momentum, indicating this stock has had weak medium to long term returns which often persist into the future. 751/1090 Global rank in Materials % of BUY recommendations 64% (9/14) Number of Price Target downgrades 1 Number of Price Target upgrades 3 Attractive Quant Local market rank Global sector rank Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. Two rankings: Local market (Australia & NZ) and Global sector (Materials) Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score. 0.2-0.5-2.4-2.5-3.0-2.0-1.0 0.0 1.0 2.0 3.0-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple. 0.0 0.2-2.2-0.9-3.0-2.0-1.0 0.0 1.0 2.0 3.0-100% -50% 0% 50% 100% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Operating Leverage NTM CPS Revisions 3 Month 3m Earnings Revisions Capex to Sales FY0 Turnover (USD) 250 Day DPS Growth 5yr Historic Interest Cover Altman Z-Score -33% -37% -30% -30% Negatives Positives 28% 28% 27% 33% -40% -20% 0% 20% 40% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market. Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score -0.48-0.04-0.26-0.36-0.18-0.69-0.32 0.12-1.25-0.45 0.77 Percentile relative to sector(/1090) Percentile relative to market(/418) 0 50 100 0 50 100 0 0 1 1 Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 16 April 2015 4
Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie First South - South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down 60 100% in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2015 AU/NZ Asia RSA USA CA EUR Outperform 48.99% 59.51% 49.30% 43.79% 59.59% 52.20% (for US coverage by MCUSA, 7.42% of stocks followed are investment banking clients) Neutral 34.12% 26.62% 35.21% 50.29% 34.93% 31.32% (for US coverage by MCUSA, 5.68% of stocks followed are investment banking clients) Underperform 16.89% 13.87% 15.49% 5.93% 5.48% 16.48% (for US coverage by MCUSA, 0.87% of stocks followed are investment banking clients) ILU AU vs ASX 100, & rec history (all figures in AUD currency unless noted) Note: Recommendation timeline if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, April 2015 12-month target price methodology ILU AU: A$6.50 based on a DCF methodology Company-specific disclosures: ILU AU: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Limited's equity securities. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures. Date Stock Code (BBG code) Recommendation Target Price 10-Apr-2015 ILU AU Underperform A$6.50 10-Jul-2014 ILU AU Underperform A$7.50 21-Feb-2014 ILU AU Neutral A$9.50 16-Jan-2014 ILU AU Neutral A$9.00 12-Dec-2013 ILU AU Underperform A$8.50 22-Oct-2013 ILU AU Underperform A$9.60 26-Sep-2013 ILU AU Underperform A$9.50 17-Jul-2013 ILU AU Underperform A$9.30 18-Jun-2013 ILU AU Underperform A$8.90 23-May-2013 ILU AU Underperform A$8.00 14-Nov-2012 ILU AU Underperform A$6.50 11-Oct-2012 ILU AU Neutral A$10.00 19-Sep-2012 ILU AU Neutral A$10.66 10-Jul-2012 ILU AU Outperform A$10.50 17-May-2012 ILU AU Outperform A$17.20 Target price risk disclosures: ILU AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. Specifically, prices are denoted in US$ and costs in A$, making currency exposure significant. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. The company is exposed to the Chinese market for zircon which is linked to Chinese residential construction activity. This has been slowing and the outlook remains uncertain. In addition, Europe forms a large portion of zircon and rutile sales and continued economic difficulties may impact rutile sales negatively. 16 April 2015 5
Analyst certification: The views expressed in this research reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd (ABN 94 122 169 279, AFSL No. 318062) ( MGL ) and its related entities (the Macquarie Group ) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited (ABN 58 002 832 126, AFSL No. 238947) a Participant of the Australian Securities Exchange (ASX) and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Equities Limited (ABN 41 002 574 923, AFSL No. 237504) ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN 46 008 583 542, AFSL No. 237502) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act 1989. Any MGL subsidiary noted in this research, apart from MBL, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures. 16 April 2015 6