AUSTRALIA AU Price (at 10:28, 20 May 2015 GMT) Outperform A$89.68 Valuation A$ 95.47 - DCF (WACC 8.1%, beta 1.0, ERP 5.0%, RFR 3.8%, TGR 2.5%) 12-month target A$ 102.00 12-month TSR % +15.7 Volatility Index Low GICS sector Pharmaceuticals, Biotechnology & Life Sciences Market cap A$m 41,943 30-day avg turnover A$m 106.9 Number shares on issue m 467.7 Investment fundamentals Year end 30 Jun 2014A 2015E 2016E 2017E Revenue m 5,334.8 5,527.5 6,182.8 6,851.4 EBIT m 1,701.2 1,775.7 1,924.7 2,209.6 Reported profit m 1,307.0 1,381.7 1,851.5 1,752.1 Adjusted profit m 1,346.0 1,401.7 1,519.5 1,752.1 Gross cashflow m 1,540.9 1,599.4 1,730.5 1,965.6 CFPS 317.3 337.1 368.7 426.6 CFPS growth % 12.0 6.3 9.4 15.7 PGCFPS x 22.4 21.0 19.2 16.6 PGCFPS rel x 2.47 2.16 2.23 2.08 EPS adj 277.2 295.4 323.8 380.2 EPS adj growth % 14.0 6.6 9.6 17.4 PER adj x 25.6 24.0 21.9 18.7 PER rel x 1.62 1.45 1.44 1.35 Total DPS 113.0 118.2 129.5 152.1 Total div yield % 1.6 1.7 1.8 2.1 Franking % 0 0 0 0 ROA % 27.8 28.8 26.6 25.9 ROE % 43.6 49.0 47.6 45.2 EV/EBITDA x 18.4 17.3 16.0 13.8 Net debt/equity % 40.5 73.6 42.9 47.0 P/BV x 10.7 12.9 8.6 8.2 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, May 2015 (all figures in USD unless noted, TP in AUD) 20 May 2015 Macquarie Securities (Australia) Limited New competitor on the block Event competitor Baxter overnight held a conference outlining the structure and strategy of its soon to be spun-off plasma-fractionation business Baxalta. We discuss the implications for. Impact appears to have a fractionation efficiency advantage: We anticipated Baxalta would report higher margins than, due to a large proportion of its sales coming from high-margin recombinant haemophilia products, which does not manufacture (at present). Instead Baxalta is expecting an EBIT margin of 29% in CY16, slightly below our 3% F16 forecast for. Baxalta does have higher R&D costs than ($650m vs. $460m) which imparts a ~320 bps margin headwind on it; however we believe the tailwind from its recombinant products (which are not derived through plasma fractionation and hence need to be ignored when assessing fractionation efficiency) is likely considerably higher than this. Lower dividend than, higher capex: Baxalta aims to pay out only ~15% of earnings as a dividend, well below s current rate of ~40%. Instead it plans to spend the bulk of its FCF on capex, with a chunky $1.2b to be spent this calendar year, fading to ~$800m pa by 2020 as construction of its greenfield facility in Georgia is completed. Conversely will spend ~$430m in F15 and likely reduce as its recombinant and privigen expansion projects come to an end. Capacity growth ahead of industry growth at ~10%pa: Baxalta has stated it plans to increase capacity from ~8m litres in CY15 to ~13m in CY20, which equates to a CAGR of 10%, ahead of both long-term industry Ig volume growth of ~7% pa and its own targeted Ig sales growth of 8% pa through 2020. However given the company is likely operating at capacity at present, we are not surprised it appears to be building some redundancy into its system. Positive commentary on market outlook: Baxalta expects industry sales growth to be 4-6% annually for haemophilia through to 2020 and 6%+ for plasma-derived products. On prices it stated it is expects nominal price benefits to be offset by austerity and pressures in select geographies. Earnings and target price revision No change Price catalyst 12-month price target: A$102.00 based on a DCF methodology. Catalyst: Quarterly CMS pricing data Action and recommendation Outperform: We believe the formation of Baxalta will likely result in a more dynamic and focused competitor for. However, given s base fractionation cost advantage, strong R&D pipeline and high share in the fastgrowing China albumin market, we believe it will continue to grow sales ahead of system and expand margins. Please refer to page 5 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.
Analysis Baxalta similar sales to, but skewed to haemophilia: The new Baxalta entity is forecasting sales of $5.9b in CY15, similar to the $5.6b we are forecasting for in F15. The composition is quite different however with ~50% of Baxalta s sales from haemophilia products, 30% from Ig and 20% from others products. conversely generates only 19% of sales from haemophilia, 44% from Ig and 35% from others (ie albumin, speciality products). appears to have a fractionation efficiency advantage: We anticipated that Baxalta would have reported higher margins than, due to a large proportion of its sales coming from highmargin recombinant haemophilia products ( conversely manufacturers no recombinant products at present). Instead however Baxalta expects its EBIT margin to be 29% in CY16, slightly below the 3% we are forecasting for. It needs to be noted that Baxalta has higher R&D costs than ($650m vs. $460m) which imparts a ~320 bps margin headwind on it; however we would expect the tailwind from its recombinant products (which are not derived through plasma fractionation and hence need to be ignored when examining fractionation efficiency) would be considerably higher than this. Carrying more debt than, but balance sheet still solid: Baxalta will begin life with ~$5.0b of debt, which equates to 2.5x EBITDA. However the company will also have a large cash balance of ~$1.5b (2/3 of which is sitting outside the US and subject to additional tax if repatriated to the US), meaning than net debt to EBITDA will sit ~1.6x initially. The company however expects this to decrease with a target leverage ratio communicated yesterday of 1.0x. s gearing conversely sits at 1.0x post the acquisition of the Novartis flu business. Lower dividend than, higher capex: Baxalta aims to pay out only ~15% of earnings as a dividend, well below s current rate of ~40%. Instead it plans to spend the bulk of its FCF on capex, with a chunky $1.2b to be spent this calendar year, fading to ~$800m pa by 2020 as construction of its greenfield facility in Georgia is completed. Conversely will spend ~$430m in F15 and likely reduce as its recombinant and privigen expansion projects come to an end. Capacity growth ahead of industry growth at ~10%pa: Baxalta has stated it plans to increase capacity from ~8m litres in CY15 to ~13m in CY20, which equates to a CAGR of 10%, ahead of both long-term industry Ig volume growth of ~7% pa and its own targeted Ig growth through 2020 of 8% pa. Given the company has experienced some capacity constraints of late and is likely operating at near capacity currently, we are not surprised it appears to be building in some redundancy into its system. Positive commentary on market outlook: Baxalta today gave commentary on what it expects industry sales growth to be across its key segments and the growth it is targeting within those segments. For haemophilia it is targeting 1-3% growth vs. 4-6% for the industry (as new competing products take share), and plasma-derived therapeutics (Ig, albumin and alpha-1) it is targeting 8%+ growth vs. industry at 6%+, annually through to 2020. On prices Baxalta stated it is including both nominal price benefits as well as modest price pressures in select areas in its industry and financial forecasts. Interestingly the company also gave estimates to what it believes penetration is for the main disease areas it treats: haemophilia 5-30%, PID 30%, CIDP 80%, MMN 60% and alpha-1 AT deficiency 20%. Large focus on R&D, with pipeline looking solid: A large feature of yesterday s presentations was the strong focus the company plans to have on R&D. Much of this will be focused on oncology, an area in which it plans to expand aggressively into (and which does not focus on), with 13 of 30 planned product launches through to 2020 for oncology products. With regard to plasma therapeutics, there was not a huge amount of information we had not seen before, other than perhaps that it expects to launch a 20% sc Ig product in the US and EU in CY16, and that it hopes to launch a factor IX gene therapy product by 2020. Baxalta remains bullish on HyQ: Another topic discussed today relevant to, was Baxalta s high expectations for its sub-cutaneous Ig HyQ product. It stated it believes it is positioned to be the leader in the sub-cutaneous Ig segment, currently dominated by s Hizentra. And also reiterated its view that it has already captured 10% of the US sc market for PID, and that ~30% of these patients had switched from other providers. 20 May 2015 2
Fig 1 ( AU) Profit & Loss 1H/14A 2H/14A 1H/15E 2H/15E 1H/16E 2H/16E 1H/17E 2H/17E 2014A 2015E 2016E 2017E Sales Behring $USm 2,357 2,585 2,492 2,831 2,706 3,080 2,950 3,359 4,942 5,323 5,787 6,308 bio $USm 217 176 252 204 706 320 767 336 393 457 1,026 1,103 Segment Revenue $USm 2,574 2,761 2,744 2,783 3,112 3,071 3,445 3,406 5,335 5,527 6,183 6,851 Organic (cc) % 6.0% 12.0% 8.0% 9.9% 6.7% 7.6% 8.9% 8.6% 9.0% 9.0% 6.9% 8.8% IP revenue $USm 101 44 92 53 92 53 92 53 145 145 145 145 Other / unallocated $USm 16 9 5 20 5 20 5 20 25 25 25 25 Operating Revenue $USm 2,691 2,813 2,841 2,856 3,209 3,144 3,542 3,479 5,504 5,697 6,352 7,021 COGS 1,231 1,373 1,364 1,385 1,552 1,513 1,668 1,649 2,604 2,748 3,065 3,318 Segment Gross Profit $USm 1,343 1,388 1,381 1,399 1,560 1,557 1,777 1,757 2,731 2,779 3,117 3,534 margin % 52.2% 5% 5% 50.2% 50.1% 50.7% 51.6% 51.6% 51.2% 5% 50.4% 51.6% R&D $USm 229 237 233 225 236 251 240 263 466 458 487 503 Selling & marketing expenses $USm 242 263 242 240 352 279 383 303 505 482 632 686 General & admin expenses (excluding D&A $USm 12 21 33 29 37 32 41 35 33 62 69 76 Other operating costs $USm - - - - 26-34 - 2 7 7 - - 26-36 14 Total OPEX 484 521 508 467 591 560 671 609 1,004 975 1,151 1,280 IP revenue and unallocated $USm 117 53 97 73 97 73 97 73 169 169 169 169 EBITDA $USm 976 920 969 1,004 1,065 1,070 1,202 1,221 1,896 1,973 2,136 2,423 D&A 94.2 100.7 90.6 107.1 95.5 115.5 104.7 108.8 195 198 211 214 EBIT 882 819 878 897 970 955 1,098 1,112 1,701 1,776 1,925 2,210 margin % 32.8% 29.1% 30.9% 31.4% 30.2% 30.4% 31.0% 32.0% 30.9% 31.2% 3% 31.5% CC (organic) yoy % 9.0% 18.4% 1.4% 28.9% 8.8% -10.6% 9.6% 19.7% 9.8% 15.1% -1.1% 14.6% net yoy % $USm 12.3% 17.0% -0.4% 9.5% 10.4% 6.4% 13.2% 16.5% 14.5% 4.4% 8.4% 14.8% Net Interest $USm 16 17 21 24 27 21 23 24 33 45 49 47 Pre-tax Profit $USm 866 802 857 873 943 933 1,075 1,088 1,668 1,730 1,876 2,163 Tax $USm 182 141 165 164 179 177 204 207 322 329 356 411 Tax rate $USm 21.0% 17.5% 19.2% 18.8% 19.0% 19.0% 19.0% 19.0% 19.3% 19.0% 19.0% 19.0% Anormals $USm - 39 - - - 20 372-40 - - - 39-20 332 - Reported Profit $USm 646 661 692 689 1,135 716 871 881 1,307 1,382 1,852 1,752 Adjusted Profit $USm 685 661 692 709 763 756 871 881 1,346 1,402 1,520 1,752 growth % $USm 9.2% 12.2% 1.1% 7.3% 1% 6.6% 14.0% 16.6% 10.7% 4.1% 8.4% 15.3% Adjusted EPS $USm 141 137 145 150 164 160 189 191 277 295 324 380 growth % $USm 13.1% 15.0% 3.5% 9.8% 12.7% 6.6% 15.4% 19.5% 14.0% 6.6% 9.6% 17.4% DPS 53.0 60.0 58.0 60.2 65.6 63.9 75.7 76.4 113.0 118.2 129.5 152.1 growth % 6.0% 15.4% 9.4% % 13.1% 6.2% 15.4% 19.5% 10.8% 4.6% 9.6% 17.4% Yield 0.8% 0.9% 0.8% 0.9% 0.9% 0.9% 1.1% 1.1% 1.6% 1.7% 1.8% 2.2% Payout ratio 37.7% 43.9% 39.9% 40.1% 40.0% 40.0% 40.0% 40.0% 40.8% 40.0% 40.0% 40.0% EV / Sales 13.1 12.3 12.2 12.1 10.8 10.9 9.6 9.7 6.3 6.0 5.4 4.8 EV / EBITDA 36.0 37.7 35.7 34.3 32.4 32.0 28.3 27.6 18.3 17.5 16.0 13.9 EV / EBIT 39.8 42.3 39.4 38.4 35.6 35.9 31.0 3 20.4 19.4 17.8 15.2 PE (adj) x 50.0 51.5 48.3 46.9 42.9 44.0 37.1 36.8 25.4 23.8 21.7 18.5 Cashflow Analysis 1H/14A 2H/14A 1H/15E 2H/15E 1H/16E 2H/16E 1H/17E 2H/17E 2014A 2015E 2016E 2017E EBITDA $USm 976 920 969 1,004 1,065 1,070 1,202 1,221 1,896 1,973 2,136 2,423 - Inc. in Working capital $USm 244-107 98 22 176-14 165-13 136 121 162 152 - Net Interest Paid $USm 14 37 21 21 24 27 21 23 50 43 51 44 - Tax Paid $USm 207 143 193 165 164 179 177 204 349 358 343 382 + Other $USm - - - - 20-40 - 40 - - - - - 20 - Net Cash in Op Activities $USm 513 848 656 776 661 838 839 1,006 1,361 1,452 1,559 1,845 - Capex $USm 189 213 177 254 202 200 207 204 402 431 402 411 - Acquisitions $USm - 0 - - 275 - - - 0-275 - + Asset Sales $USm 0 0 0 - - - - - 0 0 - - + Other $USm - 0 0 - - - - - 0 0 - - Net cash in investing $USm - 189-213 - 177-254 - 477-200 - 207-204 - 402-431 - 677-411 - Dividends Paid (before DRP) $USm 256 266 268 275 279 304 296 347 522 543 583 643 + Equity Movements (inc. DRP) $USm - 229-584 - 136-857 - - - 500-500 - 812-993 - - 1,000 + Debt Movements $USm 98 98 492 5 600 400 - - 197 496 1,000 - + Other $USm - - - - - - - - - - - - Net cash in financing $USm - 386-751 88-1,128 321 96-796 - 847-1,137-1,040 417-1,643 Opening Cash balance $USm 762 694 609 1,061 455 960 1,694 1,530 762 609 455 1,694 Net Cash movement $USm - 63-115 567-606 505 734-164 - 45-178 - 18 1,299-209 + Net Exchange Rate Differences $USm - 6 30-115 - - - - - 24-115 - - Cash Balance + Cash $USm 694 609 1,061 455 960 1,694 1,530 1,485 609 475 1,754 1,485 Performance Analysis Balance Sheet 2014A 2015E 2016E 2017E Cash 762 609 455 1,694 FY14 Revenue breakdown FY14 OPEX breakdown Receivables 851 953 910 984 Inventory 1,639 1,645 1,640 1,800 General Current Assets 7 1 23 23 IP & Admin bio Fixed Assets 1,587 1,831 1,917 2,828 3% 3% 7% Intangibles 856 924 834 800 Other 272 314 291 291 Total Assets 5,975 6,277 6,070 8,422 Behring 90% Selling & marketing 50% Source: Company data, Macquarie Research, May 2015 R&D 47% total asset growth 0 0-0 0 Creditors 648 631 610 683 Other Current Liabilities 248 205 152 152 Long Term Debt 1,673 1,885 2,329 3,329 Other Liabilities 34 36 34 45 Net Assets 3,365 3,514 2,939 4,208 Shareholders Funds 3,007 3,162 2,555 3,824 Total Shareholder Funds 3,007 3,162 2,555 3,824 Ratios 2014A 2015E 2016E 2017E Working Capital 1756 1874 1883 2045 D/(D+E) (%) 23.4% 28.8% 42.4% 30.0% Return on Equity (%) 44.8% 44.3% 59.5% 45.8% Return on Assets (%) 0.0% 0.0% 0.0% 0.0% NTA (est) ($) $4.30 $4.61 $3.63 $6.44 20 May 2015 3
Fundamentals Macquarie Quant View The quant model currently holds a reasonably positive view on. The strongest style exposure is Profitability, indicating this stock is efficiently converting its investments to earnings as proxied by ratios such as ROE, ROA etc. The weakest style exposure is Earnings Momentum, indicating this stock has received earnings downgrades and is not well liked by sell side analysts. 82/592 Global rank in Pharma, Biotech & Life Sciences % of BUY recommendations 75% (12/16) Number of Price Target downgrades 0 Number of Price Target upgrades 7 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 (Pharma, Biotech & Life Sciences) 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. 1.0 0.7 0.7 0.5-3.0-2.0-1.0 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. 0.5 0.0-0.2 0.2-0.7 0.1-3.0-2.0-1.0 0.0 1.0 2.0 3.0-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 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. PEG Ratio Inverted Sales Revisions 3 Month Operating Leverage Inc. Piotroski Score Quick Ratio (Worldscope) Operating Accruals Working Capital Inc. RNOA Negatives Positives -29% -30% -31% -34% 29% 27% 27% 47% -60% -40% -20% 0% 20% 40% 60% 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 0.73-0.16 0.04 1.22-0.29 0.44 0.56-0.25 1.26 0.18-7 Percentile relative to sector(/592) Percentile relative to market(/416) 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) 20 May 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) 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, May 2015 12-month target price methodology AU: A$102.00 based on a DCF methodology Company-specific disclosures: 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 17-Mar-2015 AU Outperform A$102.00 12-Feb-2015 AU Outperform A$95.00 16-Jan-2015 AU Outperform A$82.00 27-Oct-2014 AU Outperform A$85.00 14-Aug-2014 AU Outperform A$83.00 19-May-2014 AU Outperform A$77.00 13-Feb-2014 AU Outperform A$80.00 31-Oct-2013 AU Outperform A$77.00 15-Aug-2013 AU Outperform A$75.00 17-Jun-2013 AU Outperform A$71.00 13-Feb-2013 AU Outperform A$63.85 15-Jan-2013 AU Outperform A$62.00 17-Dec-2012 AU Outperform A$60.00 27-Nov-2012 AU Outperform A$55.00 08-Oct-2012 AU Outperform A$50.00 02-Aug-2012 AU Outperform A$45.00 Target price risk disclosures: AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. 20 May 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. 20 May 2015 6