NEW ZEALAND FPH NZ Price (at 05:00, 28 May 2015 GMT) Outperform NZ$6.30 Valuation NZ$ 7.29 - DCF (WACC 8.8%, beta 0.9, ERP 7.0%, RFR 4.5%, TGR 2.0%) 12-month target NZ$ 7.25 12-month TSR % +17.6 Volatility Index Low GICS sector Health Care Equipment & Services Market cap NZ$m 3,515 30-day avg turnover NZ$m 6.4 Number shares on issue m 558.0 Investment fundamentals Year end 31 Mar 2015A 2016E 2017E 2018E Revenue m 672.3 755.6 883.3 970.2 EBIT m 170.1 184.0 253.2 309.3 Reported profit m 113.2 129.1 177.9 220.9 Adjusted profit m 116.9 133.6 182.9 225.9 Gross cashflow m 144.8 162.7 214.2 259.7 CFPS 26.1 29.1 38.3 46.3 CFPS growth % 12.3 11.8 31.4 21.0 PGCFPS x 24.2 21.6 16.4 13.6 PGCFPS rel x 2.28 2.24 1.80 1.56 EPS adj 21.0 23.9 32.7 40.3 EPS adj growth % 14.8 13.7 36.7 23.3 PER adj x 30.0 26.3 19.3 15.6 PER rel x 1.44 1.44 1.14 0.99 Total DPS 13.8 14.8 22.3 27.6 Total div yield % 2.2 2.3 3.5 4.4 Franking 1 % 100 100 100 100 ROA % 26.2 25.9 32.3 35.9 ROE % 26.6 26.9 33.2 36.5 EV/EBITDA x 17.7 16.4 12.4 10.3 Net debt/equity % 11.0 15.8 12.0 13.0 P/BV x 7.5 6.7 6.1 5.4 1 NZ imputation credits are only able to be used by shareholders to offset NZ income tax liability. FPH 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, May 2015 (all figures in NZD unless noted) 29 May 2015 Macquarie Securities (NZ) Limited Beats expectations again Event released its 2015 result. NPAT was ahead of expectations, but the underlying performance (constant currency revenue growth) was in line with our forecasts. In our view, this is a good result, but the change in US distribution strategy and another medical study supporting the use of Optiflow were the highlights of the result. Impact The result was slightly ahead of our expectations. In FY15 the company generated NPAT of $113m (Macq=$109m, guidance $105-110m). At the revenue level the outperformance of our estimates was driven by better hedge gains and a rebound in non-core distributed products; constant currency growth for RAC and OSA was in-line with our expectations. SG&A growth was lower than we expected, but this was offset by higher than expected R&D (arguably an investment in future growth) and interest expense (driven by a change in the accounting treatment of interest rate swaps, which result in a one-off charge of $3.5million). FPH are shifting the distribution of RAC products in the US in-house. In time this move will allow a more focused sales team to accelerate sales growth; it should also allow FPH to generate slightly better margins (post the transition period). While this type of transition creates risks we think that FPH s significant product advantages in this area and the experience in carrying out this transition in other regions mitigates the risk. We expect this transition to have a negative impact on earnings in 2016. A study published in the England Journal of Medicine has found a significant reduction in 90-day mortality rates for patients with acute hypoxemic respiratory failure when compared with standard oxygen therapy and non-invasive ventilation. Macquarie has adjusted its currency forecasts. We have taken the opportunity to update our currency assumptions; Macquarie s economics team has tweaked their currency forecasts since our last update in February. These changes have a 31 cps impact on our DCF valuation. Earnings and target price revision EPS revisions FY16=-5.9%, FY17=-2.7% and FY18=4.3%. We have elected to leave the price target unchanged. Price catalyst 12-month price target: NZ$7.25 based on a DCF methodology. Catalyst: Outlook commentary at AGM Action and recommendation We rate FPH an Outperform with a $7.25 price target. The company will release a significant number of new products over the next year, which should strengthen its market positions and drive sales growth in the medium term. The key risk to our positive view on the company is the NZ dollar: our valuation and future earnings estimates are very sensitive to the Kiwi. Please refer to page 6 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.
Shift to in-house distribution of RAC in the US FPH are shifting the distribution of RAC products in the US in-house. This is a significant move for FPH: in FY15 $82.9million of sales were made to Care Fusion (the US distributor), which represents 25% of RAC s total sales. The company indicated that Care Fusion is working with FPH to facilitate a smooth transition and that they are targeting a changeover in mid July. It seems likely the acquisition of Care Fusion by Becton Dickinson catalysed the move. The company praised the efforts of Care Fusion on the call, but also noted that in their experience inhousing distribution has significant advantages over the outsourced distribution model. The most significant advantage is that FPH gains control of the distribution effort. This allows them to ensure a high level of focus and also facilitates the distribution of new products (for instance Optiflow). This suggests that over time the sales growth of RAC in the US market may increase, and increase the acceleration of new product sales. FPH to generate slightly better margins. Once the transition is complete FPH will be able to take the distributors margin, but this benefit is secondary to control of the channel. This type of transition creates risks. Changing the distribution arrangements for 25% of RAC sales creates some pretty obvious risks, but we think that FPH s significant product advantages in this area and the experience in carrying out this transition in other regions mitigates the risk. We expect this transition to have a negative impact on earnings in 2016. The company indicated that they expect SG&A expense to increase by $10-15million as a result of this change and also signalled a slow-down in sales growth as Care Fusion sells down its inventories; we estimate that this will create a $10-15m revenue headwind. Given this change, guidance is ahead of the market s expectations. Consensus forecast for FY16 NPAT was $129 million before the result, which suggests the $125-130 million guidance is above expectations when the earnings drag of this transition in considered. If we use constant currency (rather than Macquarie forecasted currency) our NPAT forecast is $130.5 million. Further evidence of the benefits of Optiflow Optiflow is the key product driving the growth in new applications of RAC. It is difficult to overstate the importance of this product as it builds on FPH s very IP position in invasive ventilation as well as its knowledge of flow generation built up in OSA to create a new market opportunity. FPH estimate the addressable market at 30 million patients. This is based on the take up in some of the early adopter hospitals. In our view this approach is likely to provide a conservative estimate of the market potential. To put this into perspective, 10 million per annum are given invasive ventilation. A study published in the England Journal of Medicine compared the use of high flow oxygen through Nasal Cannula (Optiflow) with non-invasive ventilation and standard oxygen therapy for patients with acute hypoxemic respiratory failure. A total of 310 patients were involved in the study across 23 ICUs in France in Belgium. The study found a significant difference in 90-day mortality rates. The high flow oxygen therapy group suffered significantly less deaths (12%, 95% confidence interval = 7-20%) than standard oxygen (23%, 95% CI = 16-33%) and non-invasive ventilation (28%, 95% CI = 21-37%). There was no a significant difference intubation rate. High flow had lower intubation rates (high flow oxygen = 38%, standard oxygen = 47% and non-invasive = 50%), but the differences were statistically insignificant. 29 May 2015 2
Impact of Macquarie currency forecast changes Fisher & Paykel is leveraged to currency. In FY15 only 2% of FPH s operating revenues were denominated in NZD, and we estimate that 50% of the cost base is in NZ dollars. As a result a relatively modest change in NZ dollar forecasts has a meaningful impact on earnings and valuation (if the change is not transitory). The shift to Mexican manufacturing is reducing sensitivity. FPH is targeting half of consumables to be manufactured in Mexico by the end of 2017, which is up from less than a quarter in FY14. This shift reduces the % of COGS that is in NZ dollars (for instance labour and rent are denominated in Mexican Pesos and US dollars). We assume that this trend continues, and as a result a little less than 40% of the cost base in NZ dollars in our terminal year. As a result a 5% increase in the NZ Dollar reduces our earnings estimates by 8% in our terminal year (pre hedging and balance sheet impacts). In February we adjusted our earnings estimates following a similar change. That change had a modest impact on our valuation (15 cps) because the long term forecasts did not change significantly, but dramatically changed some of our short term earnings estimates. This time the changes in our terminal year are more significant. More specifically, all the changes are in the same direction (i.e. some forecast changes are not acting as an offset) and as a result changes have had a more significant impact on our valuation (31 cps). Fig 1 USD forecasts Fig 2 Euro forecasts 0.8500 0.7000 0.6800 0.8000 0.6600 0.7500 0.6400 0.6200 0.7000 0.6000 0.5800 0.6500 0.5600 0.5400 0.6000 0.5200 Source: Macquarie Research, May 2015 Source: Macquarie Research, May 2015 Fig 3 Japanese Yen Fig 4 Australian Dollars 88.00 86.00 84.00 82.00 80.00 1.0000 0.9800 0.9600 0.9400 0.9200 0.9000 78.00 0.8800 76.00 74.00 72.00 0.8600 0.8400 0.8200 0.8000 70.00 0.7800 Source: Macquarie Research, May 2015 Source: Macquarie Research, May 2015 29 May 2015 3
Fig 5 Financial summary PROFIT & LOSS 1H15a 2H15a 1H16e 2H16e PROFIT & LOSS FY15a FY16e FY17e FY18e Constant currency revenue Constant currency revenue Respiratory and acute care 163,719 188,931 176,073 212,788 Respiratory and acute care 352,650 388,861 448,284 515,954 Obstrustive sleep apena 130,136 148,703 148,070 165,639 Obstrustive sleep apena 278,839 313,710 345,363 365,036 Other and Distribution 5,359 7,165 5,230 5,230 Other and Distribution 12,524 10,461 10,461 9,689 Total 299,214 344,799 329,374 383,658 Total 644,013 713,032 804,108 890,679 NZ Dollar Profit & Loss NZ Dollar Profit & Loss Operating revenue 299,214 344,799 333,744 414,015 Operating revenue 644,013 747,759 900,475 941,096 Hedging 18,228 10,107 11,831-3,968 Hedging 28,335 7,863-17,188 29,062 Total revenue 317,442 354,906 345,575 410,047 Total revenue 672,348 755,622 883,287 970,158 COGS 125,229 136,140 133,612 148,427 COGS 261,369 282,039 308,752 326,188 Gross profit 192,213 218,766 211,963 261,620 Gross profit 410,979 473,583 574,535 643,970 Other Income 2,500 2,500 2,500 2,500 Other Income 5,000 5,000 5,000 5,000 SG&A 75,081 74,180 86,593 101,448 SG&A 149,261 188,040 213,686 219,444 R&D 31,338 33,649 33,866 38,954 R&D 64,987 72,821 76,362 81,451 EBITDA 88,294 113,437 94,004 123,718 EBITDA 201,731 217,722 289,486 348,074 Depreciation 13,917 14,026 14,330 14,849 Depreciation 27,943 29,179 31,346 33,796 Amortisation 1,754 1,951 2,019 2,488 Amortisation 3,705 4,507 4,953 5,000 EBIT 72,623 97,460 77,656 106,381 EBIT 170,083 184,037 253,188 309,278 Net interest expense 5,714 5,603 2,103 2,691 Net interest expense 11,317 4,795 6,040 2,464 Net profit before tax 66,909 91,857 75,552 103,690 Net profit before tax 158,766 179,242 247,147 306,814 Taxation 18,092 27,501 21,155 29,033 Taxation 45,593 50,188 69,201 85,908 Net profit after tax 48,817 64,356 54,398 74,657 Net profit after tax 113,173 129,054 177,946 220,906 EXCHANGE RATE ASSUMPTIONS 1H15a 2H15a 1H16e 2H16e EXCHANGE RATE ASSUMPTIONS FY15a FY16e FY17e FY18e NZ Dollar \ US Dollar 0.7310 0.7671 0.7266 0.6733 NZ Dollar \ US Dollar 0.7430 0.7224 0.6589 0.6900 NZ Dollar \ Euro 0.6631 0.6404 0.6812 0.6357 NZ Dollar \ Euro 0.6555 0.6524 0.6068 0.6110 NZ Dollar \ British Pound 0.4715 0.4929 0.4825 0.4440 NZ Dollar \ British Pound 0.4787 0.4731 0.4301 0.4458 NZ Dollar \ Australian Dollar 0.9342 0.9344 0.9425 0.9447 NZ Dollar \ Australian Dollar 0.9343 0.9405 0.9460 0.9511 NZ Dollar \ Canadian Dollar 0.8981 0.9072 0.9331 0.9218 NZ Dollar \ Canadian Dollar 0.9012 0.9207 0.9231 0.9509 NZ Dollar \ Japanese Yen 88.78 89.33 86.78 79.35 NZ Dollar \ Japanese Yen 88.96 85.15 77.06 79.21 NZ Dollar \ Mexican Peso 11.17 10.99 11.08 10.29 NZ Dollar \ Mexican Peso 11.11 10.79 10.01 10.09 MULTIPLES AND PER-SHARE METRICS 1H15a 2H15a 1H16e 2H16e MULTIPLES AND PER-SHARE METRICS FY15a FY16e FY17e FY18e EPS (reported) 8.8 11.6 9.7 13.4 EPS (reported) 20.4 23.1 31.8 39.4 PER (reported) 37.5x 28.6x 33.9x 24.7x PER (reported) 32.5x 28.6x 20.8x 16.8x Payout ratio 66% 69% 70% 60% Payout ratio 68% 64% 70% 70% DPS (cps) 5.80 8.00 6.80 8.00 DPS (cps) 13.8 14.8 22.3 27.6 Imputation 100% 100% 100% 100% Imputation 100% 100% 100% 100% Dividend yield (gross) 2.4% 3.4% 2.9% 3.4% Dividend yield (gross) 2.9% 3.1% 4.7% 5.8% NTA per share 0.71 0.79 0.81 0.86 NTA per share 0.79 0.86 0.97 1.10 P/NTA 9.3x 8.4x 8.1x 7.7x P/NTA 8.4x 7.7x 6.8x 6.0x EV/EBIT 25.9x 19.3x 24.2x 17.7x EV/EBIT 22.1x 20.5x 14.9x 12.2x EV/EBITDA 21.3x 16.6x 20.0x 15.2x EV/EBITDA 18.7x 17.3x 13.0x 10.8x Weighted average shares 554 557 558 559 Weighted average shares 557 559 560 561 KEY RATIOS 1H15a 2H15a 1H16e 2H16e KEY RATIOS FY15a FY16e FY17e FY18e Revenue growth (constant currrency) 12.7% 13.6% 10.1% 11.3% Revenue growth (constant currrency) 13.2% 10.7% 12.8% 10.8% Revenue growth (NZD) 4.5% 11.1% 8.9% 15.5% Revenue growth (NZD) 7.8% 12.4% 16.9% 9.8% NPAT growth 9.7% 22.4% 11.4% 16.0% NPAT growth 16.6% 14.0% 37.9% 24.1% EPS growth 10.1% 20.1% 10.6% 15.7% EPS growth 15.6% 13.5% 37.7% 23.9% DPS growth 7.4% 14.3% 17.2% 0.0% DPS growth 11.3% 7.2% 50.7% 23.8% ROA 23.2% 29.1% 22.3% 28.2% ROA 25.4% 24.4% 31.2% 33.9% ROE 23.6% 27.3% 22.2% 28.6% ROE 24.0% 24.7% 30.6% 33.7% Debt/(debt + equity) 14.6% 7.7% 10.5% 10.9% Debt/(debt + equity) 7.7% 10.9% 8.6% 9.3% Interest coverage 23.6x 16.0x 44.0x 44.6x Interest coverage 18.5 44.3 57.9 87.4 BALANCE SHEET 1H15a 2H15a 1H16e 2H16e BALANCE SHEET FY15a FY16e FY17e FY18e Cash and cash equivalents 6,882 13,621 13,621 13,621 Cash and cash equivalents 13,621 13,621 13,621 13,621 Trade and other receivables 100,335 109,287 103,673 123,014 Trade and other receivables 109,287 123,014 136,684 149,727 Inventories 100,415 96,143 110,584 131,215 Inventories 96,143 131,215 145,796 159,708 Property, plant and equipment 356,654 367,428 380,744 394,599 Property, plant and equipment 367,428 394,599 425,083 499,125 Other assets 61,549 83,337 88,553 91,565 Other assets 83,337 91,565 90,660 89,374 Total Assets 625,835 669,816 697,175 754,014 Total Assets 669,816 754,014 811,845 911,555 Trade and other payables 80,217 95,273 82,938 98,411 Trade and other payables 95,273 98,411 109,347 119,781 Interest-bearing liabilities 98,432 65,496 86,838 95,983 Interest-bearing liabilities 65,496 95,983 83,372 98,633 Other liabilities 32,934 37,857 37,857 37,857 Other liabilities 37,857 37,857 37,857 37,857 Total Liabilities 211,583 198,626 207,633 232,251 Total Liabilities 198,626 232,251 230,576 256,271 Shareholders' equity 414,252 471,190 489,542 521,763 Shareholders' equity 471,190 521,763 581,268 655,284 DCF VALUATION Total $/share % CASH FLOW FY15a FY16e FY17e FY18e Riskfree rate 4.50% Receipts from customers 659,513 739,032 891,805 933,054 Equity market risk premium 7.00% Payments to suppliers and employees -462,550-574,834-602,446-630,562 Asset beta 0.75 Other cashflows from operations -50,131-46,478-90,763-60,387 WACC 8.76% Net operating cash flows 146,832 117,720 198,597 242,105 terminal growth rate 2.00% Purchases of PP&E -39,271-56,349-61,830-107,838 Other cashflows from investments -14,304-12,735-4,048-3,714 Forecast cashflows 1,276,470 2.29 31% Net investment cash flows -53,575-69,084-65,878-111,552 Terminal value 2,869,616 5.14 70% Issue of share capital 2,109 4,131 6,234 7,731 Enterprise value 4,146,086 7.43 102% Net increase in debt (pre fx impact) -45,207 30,487-12,611 15,261 Net debt 73,217 0.13 2% Dividends paid -45,220-82,612-124,674-154,622 Equity value 4,072,869 7.29 100% Net financing cash flows -90,999-47,995-131,051-131,629 Source: Company data, Macquarie Research, May 2015 29 May 2015 4
Fundamentals Macquarie Wealth Management Macquarie Quant View The quant model currently holds a marginally positive view on Fisher & Paykel Healthcare. 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 Valuations, indicating this stock is over-priced in the market relative to its peers. 147/384 Global rank in Health Care Equip. & Services % of BUY recommendations 33% (2/6) Number of Price Target downgrades 1 Number of Price Target upgrades 2 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 (Health Care Equip. & Services) 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. 1.3 0.7 0.7 0.6 0.4 0.3-3.0-2.0-1.0 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. -0.1-1.2 0.0 0.1-0.7 0.5-3.0-2.0-1.0 0.0 1.0 2.0 3.0-60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 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. Interest Cover Number of Shares Increase Turnover(USD) 125 Day CPS Revisions 3 Month Operating Leverage Inc. DPS Growth FY1 SAL Growth 5yr Historic Altman Z-Score Negatives Positives -38% -39% -40% -41% 23% 22% 36% 34% -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 0.33-0.41-0.28 1.18-0.12 0.37 0.18 0.41 0.33 0.28-0.45 Percentile relative to sector(/384) Percentile relative to market(/417) 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) 29 May 2015 5
Important disclosures: Recommendation definitions Macquarie - Australia/ 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) FPH NZ vs NZSE50, & rec history (all figures in NZD 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 FPH NZ: NZ$7.25 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 FPH NZ Outperform NZ$7.25 20-Nov-2014 FPH NZ Outperform NZ$6.00 30-Sep-2014 FPH NZ Outperform NZ$5.50 18-Feb-2014 FPH NZ Outperform NZ$4.40 29-Oct-2013 FPH NZ Outperform NZ$4.10 27-Aug-2013 FPH NZ Outperform NZ$3.80 23-May-2013 FPH NZ Outperform NZ$3.60 10-May-2013 FPH NZ Outperform NZ$3.40 26-May-2012 FPH NZ Neutral NZ$2.41 Target price risk disclosures: FPH NZ: 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. 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. 29 May 2015 6
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 Zealand by Macquarie Equities Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in 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 Zealand by the Reserve Bank of Zealand under the Reserve Bank of 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. 29 May 2015 7