AUSTRALIA AAX AU Price (at 09:24, 23 Aug 2012 GMT) Outperform A$3.30 Volatility index High 12-month target A$ 3.70 12-month TSR % +18.0 Valuation - EV/EBITA A$ 3.43-3.90 GICS sector Capital Goods Market cap A$m 409 30-day avg turnover A$m 0.8 Number shares on issue m 123.9 Investment fundamentals Year end 31 Dec 2011A 2012E 2013E 2014E Revenue m 548.5 657.0 681.3 703.8 EBIT m 37.7 59.3 64.3 66.4 Reported profit m 26.4 40.1 43.9 45.7 Adjusted profit m 28.5 42.0 45.8 47.6 Gross cashflow m 35.5 50.6 54.4 56.1 CFPS 28.6 40.5 43.4 44.7 CFPS growth % 184.9 41.5 7.2 2.9 PGCFPS x 11.5 8.1 7.6 7.4 PGCFPS rel x 1.20 0.94 1.04 1.11 EPS adj 23.0 33.7 36.6 38.0 EPS adj growth % 405.9 46.3 8.6 3.9 PER adj x 14.3 9.8 9.0 8.7 PER rel x 0.86 0.72 0.78 0.88 Total DPS 12.9 19.0 20.0 21.0 Total div yield % 3.9 5.8 6.1 6.4 Franking % 51 24 25 25 ROA % 8.7 12.7 13.5 13.5 ROE % 11.7 16.1 16.4 16.0 EV/EBITDA x 8.4 5.7 5.3 5.2 Net debt/equity % 0.6-3.7-6.2-8.2 P/BV x 1.6 1.5 1.4 1.3 AAX 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, August 2012 (all figures in AUD unless noted) 23 August 2012 Macquarie Securities (Australia) Limited Growing global Event (AAX) reported 1H12 underlying NPAT of $20.3m (Macq. $18.2m), representing 164% growth on pcp. Guidance for FY12 was upgraded, with the Company now expecting NPAT of $41m (vs $40m previously). Impact A strong interim result, driven by a record amount of contract wins during the half, growth in staff numbers and continued improvement in utilisation rates. Work in hand (WIH) now stands at a record $494m of which 65% relates to brownfield project expansions, optimisation and debottlenecking of projects. Further, WIH is spread across to FY14. This, coupled with AAX s solid track record of converting studies to EPCM projects (typically 60-70% conversion rate), and the forming of strategic alliance agreements with key clients (Anglo American, GVK et. al.) provides us with reasonable visibility into outer year forecasts despite concerns around growth in future mining capex. After delivering a 24% increase in revenue in 1H12 and a 40bp sequential improvement in EBITDA margins (to 10.8%), we forecast AAX will deliver revenue of $657m for FY12. This represents a 7% HoH improvement in 2H12 (or 16% on pcp). Analysis of the Company s WIH balance suggests nearly 100% of this is already secured. This should produce FY12 EBITDA of c$70m assuming current margin trends continue. Whilst we acknowledge engineer wage pressures may be subsiding domestically, we understand the Group is experiencing c4% wage growth in North America and c10% in South America. Whilst one must hold some degree of caution over the likely timing of revenue conversion in the current environment, it s worth highlighting several of AAX s clients have recently secured financing to ensure progression of projects. In this regard we note Inmet Mining Corp, the developer of the $6.2bn Cobre Panama copper mine recently completed a $1.5bn debt offering and Teck Resources, owner of one the world s largest undeveloped copper deposits, Quebrada Blanca, completed a US$1bn note offering in February 2012, securing the outlook for its funding in anticipation of environmental approvals. Earnings and target price revision FY12 upgraded 5%. FY13 downgraded 5%. Price target $3.70 (from $4.19) reflecting a reduction in mining services peer multiples. Price catalyst 12-month price target: A$3.70 based on an EV/EBITA methodology. Catalyst: Contract wins, FY12 result Action and recommendation Despite the fact that there may be a lengthening in project approval times amidst the current market volaility, AAX s commodity, client and geographical exposures alleviates some of our concerns. Given the expected growth profile of the business over FY12 and FY13 we consider the stock undervalued at current levels. Outperform. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website www.macquarie.com/disclosures.
Analysis (AAX) reported interim underlying NPAT of $20.3m (Macq. $18.2m), representing 164% growth on pcp. Guidance for FY12 was upgraded, with the Company now expecting NPAT of $41m (vs $40m previously). Directors reported a 10cps dividend (24% franked), up significantly on the 3.1cps dividend declared in the pcp. We have summarised the1h12 result in the table below. Fig 1 AAX delivers a strong start to FY12 $m 1H11A 2H11A FY11A 1H12A % chg pcp MACQ % Diff Revenue 257.2 291.3 548.5 318.2 23.7% 300.4 5.9% EBITDA 16.7 30.2 46.9 34.5 106.4% 31.6 9.2% Depreciation 3.5 3.5 7.0 4.2 22.3% 3.5 21.0% Amortisation of goodwill 1.0 1.2 2.2 0.9-5.8% 1.1-17.9% EBIT 12.3 25.5 37.7 29.3 139.2% 27.0 8.8% Net interest expense 2.6 1.5 4.2 1.6-40.4% 2.3-32.8% Pre-Tax Profit 9.6 23.9 33.6 27.8 188.5% 24.6 12.8% Tax Expense 1.9 5.3 7.2 7.4 286.4% 6.4 15.9% Net Profit 7.7 18.6 26.4 20.3 164.0% 18.2 11.7% Reported Earnings 7.7 18.6 26.4 20.3 164.0% 18.2 11.7% Adjusted Earnings 8.7 19.8 28.5 21.3 144.6% 19.4 10.0% EBITDA margin 6.5% 10.4% 8.5% 10.8% 10.5% EBIT margin 4.8% 8.7% 6.9% 9.2% 9.0% Source: AAX, Macquarie Research, August 2012 had 3,410 staff as at June 2012, up from 3,060 in December 2011 and 2,400 in 2010. We understand utilisation has improved sequentially with several more contract wins in 2012 than 2011. In line with our expectations, the Company indicated $272m of work was won during the period, up 11% HoH. Fig 2 Employee # trajectory bodes well for future revenue growth Fig 3 WIH balance ($494m) at a record level #'s $bn $m 4,000 4.5 600 3,500 3,000 4.0 3.5 3.0 500 400 2,500 2,000 2.5 2.0 300 1,500 1,000 1.5 1.0 0.5 200 100 500 0 2009 2010 2011 2012 0.0 2009 2010 2011 2012 Create (EPCM) work (LHS) WIH 0 Source: AAX, Macquarie Research, August 2012 Source: AAX, Macquarie Research, August 2012 Revenue of $318.2m was up 24% on pcp and 5% ahead of our $300.4m expectation. Continued Evaluate (FEED/Study) work on key large scale projects including Wafi-Golpu (Newcrest/Harmony) and Minas Rio (Anglo American) and significant Create phase (EPCM) work on HudBay s Constancia project, Kazakhmys Aktogay/Bozshakol project and Base Resources Kwale project all contributed to the strong result. EBITDA margins (10.8%) improved 430bp relative to pcp and 40bp on a sequential basis as AAX benefited from increased cross-sell and strong Create phase work. We expect margins to remain broadly steady around 11% again in 2H12. 23 August 2012 2
Cash flow improved significantly Operating cash flow of $38.5m was a significant improvement on the $26.1m outflow in 1H111. This turnaround was driven by increased focus on debtor management and leaves the balance sheet well placed in a net cash position of $12.5m. Fig 4 Cash conversion improved in H2 $m 1H11(a) 2H11(a) FY11(a) 1H12(a) EBITDA 16.7 30.2 46.9 34.5 Operating Cashflow -26.1 37.4 11.4 38.5 + Tax Paid 0.2 2.9 3.1 1.7 + Net Interest Paid 2.6 1.5 4.2 1.6 Ungeared Pre tax Cashflow -23.3 41.9 18.6 41.7 Profit to cash Conversion -139.2% 138.8% 39.7% 120.9% Source: AAX, Macquarie Research, August 2012 s strategy to grow the business into projects over US$500m has seen the Company increase its bonding and funding capacity. Fig 5 Balance sheet flexibility provides room to grow $m 1H11 1H12 Total facilities 156.6 154 Less: cash facilities utilised -66.6-62.9 :ess: non cash facilities utilised -30.2-33.1 Available facilities 59.8 58.0 Plus: cash 67.7 78.5 Total cash/funding facilities available 127.5 136.5 Utilisation 62% 62% Source: Company data, Macquarie Research, August 2012 FY12 outlook upgraded Guidance for FY12 was upgraded, with the Company now expecting NPAT of $41m (vs $40m previously). We currently sit below FY12 guidance at $40.1m of NPAT, as detailed in the table below. Fig 6 FY12 outlook - we currently sit just below upgraded guidance $m 1H11A 2H11A FY11A 1H12A 2H12E FY12E % chg pcp Revenue 257.2 291.3 548.5 318.2 338.8 657.0 19.8% EBITDA 16.7 30.2 46.9 34.5 35.3 69.8 48.9% Depreciation 3.5 3.5 7.0 4.2 4.3 8.6 22.9% Amortisation of goodwill 1.0 1.2 2.2 0.9 1.0 1.9-12.0% EBIT 12.3 25.5 37.7 29.3 30.0 59.3 57.2% Net interest expense 2.6 1.5 4.2 1.6 2.0 3.6-13.2% Pre-Tax Profit 9.6 23.9 33.6 27.8 28.0 55.7 66.0% Tax Expense 1.9 5.3 7.2 7.4 8.2 15.6 116.4% Net Profit 7.7 18.6 26.4 20.3 19.8 40.1 52.2% Reported Earnings 7.7 18.6 26.4 20.3 19.8 40.1 52.2% Adjusted Earnings 8.7 19.8 28.5 21.3 20.8 42.1 47.5% EBITDA margin 6.5% 10.4% 8.5% 10.8% 10.4% 10.6% EBIT margin 4.8% 8.7% 6.9% 9.2% 8.9% 9.0% Source: Company data, Macquarie Research, August 2012 is currently tracking a large project pipeline (c$18.3bn) and, in our view, earnings visibility is reasonably solid due to conversion of studies to EPCM projects (typically c60-70% conversion rate) and the forming of strategic alliance agreements with key clients (Anglo American, GVK et al). 23 August 2012 3
We understand $3.7bn in EPCM projects are currently being worked on, and whilst it represents a slight decline relative to December 2011 ($4.1bn), the reduction relates to the completion of the Tucano and Martabe projects during the period. Current work in hand is a record $494m (from $447m at December 2011) and is spread across to FY13 providing visibility into future years. We estimate AAX has c$300m of EPCM work-in-hand as at June 2012. Given the disclosed work-in-hand balance of $494m, this would imply FEED/study/operations work-in-hand of c$200m. Year-to-date we understand AAX have been awarded c$270m of contracts of which we expect $160m of revenue to flow through in FY12. This would imply that AAX has already secured our FY12 revenue forecast of c$657m. Further, given flow-through of contracted revenue into FY13 and modest growth in Evaluate/Innovate work, we estimate the Group to have secured c65-70% of our FY13 revenue forecasts. This should produce FY12 EBITDA of c$70m, assuming current margin trends continue. Whilst we acknowledge engineer wage pressures may be subsiding domestically, we understand the Group is experiencing c4%wage growth in North America and c10% in South America. Given AAX s ability to pass through these pressures to the client, this (and increased cross-sell) should assist margin performance in 2H12, in our view. AAX has successfully transformed itself is a fundamentally different business now than it was several years ago. Not only is the Company fundamentally different from a revenue diversification perspective, but also from a client diversification, geographic diversification and service offering perspective. Fig 7 Not only has AAX achieved solid revenue growth Fig 8 but it has managed to diversify its geographical exposure $m 350 300 250 200 150 100 50 100% 80% 60% 40% 20% 0 1H05 1H06 1H07 1H08 1H09 1H10 1H11 1H12 0% 2005 2006 2007 2008 2009 2010 2011 1H12 Australia North America South America Asia Africa Other Australia North America South America Asia Africa Other Fig 9... diversify its commodity exposure... Fig 10 and diversify and improve the quality of its client base 100% 100% 80% 60% 80% 60% 40% 40% 20% 0% 2005 2006 2008 2009 2010 2011 1H12 Copper Gold Iron Ore Coal Mineral Sands Energy Agri, Uranium, Other etc 20% 0% 2006 2008 2011 2012 Globally Diversified Major Emerging Source: AAX, Macquarie Research, August 2012 Source: AAX, Macquarie Research, August 2012 Further, not only has AAX s balance sheet improved significantly over this period, but the balance sheet of its client base, in our view, is now far better placed to weather short term ructions in capital markets. 23 August 2012 4
Fig 11 AAX s balance sheet has improved Fig 12 as have the net debt/equity ratios of its Tier 1 client base $m 80 100% % 225 40 0-40 -80 50% 0% -50% -100% 175 125 75 25-120 -160 FY06(a) FY07(a) FY08(a) FY09(a) FY10(a) FY11(a) 1H12(a) -150% -200% -25 Anglo American Xstrata BHP RIO Freeport Newmont McMoran Mining Barrick Gold Net debt Net debt / Equity 2004 2005 2006 2007 2008 2009 2010 2011 Source: AAX, Macquarie Research, August 2012 Source: Bloomberg, Macquarie Research, August 2012 Whilst a combination of volatility in commodity prices and capital markets, rising capital and operating costs and concerns over the near term growth outlook for China has seen both BHP and RIO pare back large scale greenfield and brownfield expansion plans, to date, indicated none of its client base had indicated large scale project deferrals. Whilst this may be the case, we consider it prudent to maintain a cautious view over projects in commodities where the economics don t appear adequate under current (and expected) commodity price assumptions. Looking at the longer term outlook for both copper and gold (AAX s largest commodity exposures at 32% and 19% of revenues respectively), Macquarie s Commodity team expect Chinese inventories of copper will be significantly lower by mid-year, and in a deficit position by end 2012. This, along with a continuation of tight supply, should help see sustainability in elevated copper prices. With respect to gold, Macquarie s Commodities team see significant price upside from current levels for the balance of 2012 and beyond. In our view, AAX s growth outlook looks particularly promising given a rising project pipeline of predominantly South American copper and gold greenfield and brownfield expansions. Whilst one must hold some degree of caution over the likely timing of revenue conversion in the current environment, it s worth highlighting several of AAX s clients have recently secured financing to ensure progression of mining projects. In this regard we note Inmet Mining Corp, the developer of the $6.2bn Cobre Panama copper mine recently closed a $1.5bn debt offering and Teck Resources, owner of one the world s largest undeveloped copper deposits, Quebrada Blanca, completed a US$1bn note offering in February 2012, securing the outlook for its funding in anticipation of environmental approvals. Investment recommendation Despite the fact that there may be a lengthening in project approval times amidst the current market volatility, AAX s commodity, client and geographical exposures alleviates some of our concerns. Given the expected growth profile of the business over FY12 and FY13 we consider the stock undervalued at current levels. Maintain Outperform. Fig 13 Valuation: $3.43 to $3.90. Price target $3.70 $m FY12 ($m) Low multiple High multiple Value (low) Value (high) EBIT 59.3 7.0x 8.0x 415.27 474.59 Less: net debt 12.6 12.6 Equity Value 427.8 487.16 Shares on issue 124.9 124.9 Value per share $3.43 $3.90 Source: Macquarie Research, August 2012 23 August 2012 5
(AAX:$3.30) Source: Company data, Macquarie Research August 2012 23-Aug-12 Interim results 1H/11A 2H/11A 1H/12A 2H/12E Profit & Loss 2011A 2012E 2013E 2014E Revenue 257.2 291.3 318.2 338.8 Revenue $m 548.5 657.0 681.3 703.8 EBITDA $m 16.7 30.2 34.5 35.3 EBITDA $m 46.9 69.8 74.8 76.7 Depreciation $m 3.5 3.5 4.2 4.3 Depreciation $m 7.0 8.6 8.6 8.5 Amortisation of goodwill $m 1.0 1.2 0.9 1.0 Amortisation of goodwill $m 2.2 1.9 1.9 1.9 EBIT $m 12.3 25.5 29.3 30.0 EBIT $m 37.7 59.3 64.3 66.4 Net Interest expense $m 2.6 1.5 1.6 2.0 Net interest expense $m 4.2 3.6 3.3 2.8 Pre-Tax Profit $m 9.6 23.9 27.8 27.9 Pre-Tax Profit $m 33.6 55.7 60.9 63.5 Tax Expense $m 1.9 5.3 7.4 8.2 Tax Expense $m 7.2 15.6 17.1 17.8 Net Profit $m 7.7 18.6 20.3 19.8 Net Profit $m 26.4 40.1 43.9 45.7 Outside equity interests $m 0.0 0.0 0.0 0.0 Outside equity interests $m 0.0 0.0 0.0 0.0 Net Abn/Extra $m 0.0 0.0 0.0 0.0 Net Abnormals/Extra. $m 0.0 0.0 0.0 0.0 Reported Earnings $m 7.7 18.6 20.3 19.8 Reported Earnings $m 26.4 40.1 43.9 45.7 Adjusted Earnings $m 8.7 19.8 21.3 20.7 Adjusted Earnings $m 28.5 42.0 45.8 47.6 Gross Cashflow $m 13.9 25.7 31.2 27.7 Gross Cashflow $m 39.7 59.0 55.8 56.8 EPS (Adj/dil) c 7.0 16.0 17.1 16.6 EPS (adj/diluted) c 23.0 33.7 36.6 38.0 EPS growth % -182.9 97.9 142.8 3.8 EPS growth % nmf 46.2 8.6 3.9 CFPS c 11.2 20.7 25.0 22.2 PE (adj) x 14.3 9.8 9.0 8.7 CFPS Growth % nmf 36.6 122.7 7.1 CFPS c 32.0 47.2 44.6 45.3 EBITDA/Sales % 6.5 10.4 10.8 10.4 CFPS Growth % 1594.3 47.5-5.6 1.5 EBIT/Sales % 4.8 8.7 9.2 8.9 PGCFPS x 10.3 7.0 7.4 7.3 Earnings Split % 30.5 69.5 50.6 49.4 DPS c 12.9 19.0 20.0 21.0 Revenue Growth % 17.2-0.9 23.7 16.3 Yield % 3.9 5.8 6.1 6.4 EBIT Growth % nmf 121.3 139.2 17.7 Franking % 50.6 24.5 25.0 25.0 Profit and Loss ratios 2011A 2012E 2013E 2014E Cashflow Analysis 2011A 2012E 2013E 2014E Revenue Growth % 6.8 19.8 3.7 3.3 EBIT Growth % -586.5 57.2 8.4 3.2 Pre-tax Profit $m 33.6 55.7 60.9 63.5 EBITDA/Sales % 8.5 10.6 11.0 10.9 Depreciation & Amortisation $m 9.2 10.5 10.5 10.3 EBIT/Sales % 6.9 9.0 9.4 9.4 Tax Paid $m -3.1-7.2-15.6-17.1 Effective tax rate % 21.5 28.0 28.0 28.0 Gross cashflow $m 39.7 59.0 55.8 56.8 Payout ratio % 56.0 56.0 55.0 55.0 Changes in working capital $m -27.7-4.5-13.6-14.5 EV/EBIT x 10.8 6.7 6.1 5.8 Other $m -0.6 0.1-1.5-0.7 EV/EBITDA x 8.7 5.7 5.2 5.0 Operating Cashflow $m 11.4 54.5 40.8 41.5 EV/Sales x 0.7 0.6 0.6 0.5 Acquisitions $m 0.0 0.0 0.0 0.0 Capex - Plant & Equip. $m -9.0-9.0-8.0-8.0 Balance sheet ratios Asset Sales $m 5.5 0.0 0.0 0.0 ROE % 10.8 15.4 15.7 15.3 Other $m -2.5 0.0 0.0 0.0 ROA % 10.3 14.9 15.7 15.7 Investing cashflow $m -6.0-9.0-8.0-8.0 ROFE % 15.4 23.1 24.3 24.0 Dividend (ordinary) $m -3.8-23.6-24.8-26.1 Net Debt $m 1.4-10.0-18.0-25.4 Equity raised $m 0.0 0.0 0.0 0.0 Net Debt/Equity % 0.6 < 0 < 0 < 0 Other $m 0.0-10.6 0.0 0.0 Interest Cover x 9.0 16.4 19.2 23.4 Financing cashflow $m -3.8-34.1-24.8-26.1 Price/NTA x 0.0 0.0 0.0 0.0 NTA per share $ 0.61 0.75 0.92 1.09 Net Change in cash/debt $m 1.6 11.4 7.9 7.4 EFPOWA m 123.8 124.9 125.2 125.4 Historical performance 2008A 2009A 2010A 2011A Balance Sheet 2011A 2012E 2013E 2014E Cash $m 67.7 67.7 67.7 69.7 Revenue $m 622.7 441.4 513.5 548.5 Receivables $m 83.0 98.5 109.0 126.7 EBITDA $m 83.1 34.3 3.9 46.9 Inventories $m 0.0 0.0 0.0 0.0 Depreciation/Amortisation $m 9.9 12.8 11.7 9.2 Investments $m 0.0 0.0 0.0 0.0 EBIT $m 73.2 21.4-7.8 37.7 Property, plant & equipment $m 28.6 29.0 28.4 27.9 Net interest expense $m 1.8 4.4 2.8 4.2 Intangibles $m 177.0 175.1 173.2 171.3 Pre-Tax Profit $m 71.4 17.0-10.5 33.6 Other Assets $m 100.8 103.5 103.5 103.5 Tax Expense $m 15.1-3.1-8.1 7.2 Total Assets $m 457.0 473.8 481.8 499.1 Net Profit $m 56.3 20.1-2.5 26.4 Payables $m 87.5 98.5 95.4 98.5 Net Abn/Extra $m 0.0 0.0 0.0 0.0 Short Term Debt $m 9.3 9.3 9.3 9.3 Long Term Debt $m 59.8 48.4 40.4 35.0 EPS (adj/dil) c nmf nmf -0.4 23.0 Other Liabilities $m 47.7 48.3 48.3 48.3 EPS growth % nmf nmf nmf nmf Total Liabilities $m 204.2 204.5 193.4 191.1 Ordinary DPS c 30.3 31.8 9.5 12.9 Shareholders Funds $m 252.8 269.3 288.4 308.0 EBITDA/Sales % 13.3 7.8 0.8 8.5 Minority Interests $m 0.0 0.0 0.0 0.0 EBIT/Sales % 11.8 4.9-1.5 6.9 Total Shareholders Equity $m 252.8 269.3 288.4 308.0 ROE % 47.3 9.1-1.0 10.8 ROFE % 69.3 8.4-3.1 15.4 Total Funds employed $m 457.0 473.8 481.8 499.1 EFPOWA m 0.0 0.0 122.0 123.8 23 August 2012 6
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 Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 30 June 2012 AU/NZ Asia RSA USA CA EUR Outperform 55.67% 61.00% 53.43% 42.58% 69.23% 46.60% (for US coverage by MCUSA, 9.05% of stocks followed are investment banking clients) Neutral 30.50% 22.11% 36.99% 52.41% 28.02% 33.69% (for US coverage by MCUSA, 8.14% of stocks followed are investment banking clients) Underperform 13.83% 16.89% 9.59% 5.01% 2.75% 19.71% (for US coverage by MCUSA, 0.45% of stocks covered are investment banking clients) Company Specific Disclosures: Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures. Analyst Certification: The views expressed in this research accurately 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. 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