AUSTRALIA ACX AU Price (at 09:01, 05 Aug 2015 GMT) Outperform A$4.40 Valuation - EV/EBIT A$ 2.84-3.78 12-month target A$ 4.50 12-month TSR % +2.3 Volatility Index Medium GICS sector Software & Services Market cap A$m 725 30-day avg turnover A$m 0.9 Number shares on issue m 164.7 Investment fundamentals Year end 30 Jun 2015E 2016E 2017E 2018E Revenue m 79.5 106.0 129.9 152.5 EBIT m -1.3 7.1 14.1 22.8 Reported profit m 12.5 6.8 13.7 19.1 Adjusted profit m -2.2 6.8 13.7 19.1 Gross cashflow m 2.2 12.5 20.9 28.1 CFPS 1.3 7.6 12.7 17.1 CFPS growth % nmf 471.2 68.2 34.2 PGCFPS x 331.8 58.1 34.5 25.7 PGCFPS rel x 35.43 6.78 4.59 3.72 EPS adj -1.3 4.1 8.3 11.6 EPS adj growth % nmf nmf 101.7 39.6 PER adj x nmf 106.5 52.8 37.8 PER rel x nmf 7.27 4.37 3.53 Total DPS 0.0 0.0 0.0 0.0 Total div yield % 0.0 0.0 0.0 0.0 ROA % -1.4 6.4 9.4 11.8 ROE % -2270.8 194.5 99.7 63.4 EV/EBITDA x 230.2 54.7 32.8 22.0 Net debt/equity % - 27645. 8-476.2-269.0-216.2 P/BV x 7,535.0 105.0 35.1 18.2 ACX 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 2015 (all figures in AUD unless noted) 5 August 2015 Macquarie Securities (Australia) Limited Cornering the domestic market Event (ACX) has announced a multi-year strategic partnership with CIMIC Group (CIM AU, A$24.09, Outperform, TP: A$25.71) and certain related entities. Under the terms of the agreement, ACX will pay CIMIC $6.4m in cash for the IP and assets of the internally developed INCITE Keystone product. Impact Agreement reinforces industry standard market position in Australia. CIMIC (formerly Leighton Holdings) is one of the largest contractor groups in Australia and Asia. It has operations in Australia, SE Asia, New Zealand and the Middle East under key subsidiaries including Leighton Contractors, Leighton Asia, India and Offshore and Thiess. CIMIC were one of the last remaining domestic majors still using an internal purpose-built software solution. The increasing recognition of the economic and risk mitigation benefits of SaaS-based technology is driving penetration. Terms of agreement. will operate the INCITE Keystone platform until all projects are completed or transitioned to the platform. expects the partnership with CIMIC will generate c$16.5m of committed revenue for the base management of existing and new projects over the next four years. If we assume revenue is spread evenly over a four-year period, the contract equates to a c10% increase on FY16e ANZ revenues of $40m. Flagging increased investment. Product development and support roles within INCITE will be transitioned into the workforce. Functionality specific to infrastructure projects will be integrated over a 12-month period and leveraged across the broader platform, given s SaaS operating model. We subsequently increase our capex assumptions from 15% to 17% of revenue between FY16-FY18 (55% expensed and 45% capitalised). Earnings and target price revision We include minor upgrades to EPS in FY16/FY17. Longer-term assumptions have been upgraded to reflect growth opportunities from the contract win. TP increased to $4.50 (from $3.41) as we roll forward our forecasts on increased confidence of international growth from recent contract wins. Price catalyst 12-month price target: A$4.50 based on an EV/EBIT methodology. Catalyst: Acquisitions. Contract wins. Action and recommendation The long-term enterprise commitment from one of the largest contractor groups in Australia and Asia confirms s industry-leading position. The agreement also highlights the functionality gap between legacy on-premise software and is widening. With a substantial market penetration opportunity, the growth outlook remains one of the strongest in our Emerging Leaders universe. That said, the stock has run hard, near-term multiples are demanding and there is little margin for disappointment. Please refer to page 8 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.
CIMIC agreement The multi-year strategic partnership with CIMIC Group (CIM AU, OP) corners the domestic market and consolidates s industry standard market position in Australia. CIMIC were one of the last remaining domestic majors still using an internal purpose built software solution (INCITE Keystone). The decision to upgrade to highlights an increasing recognition of the economic and risk mitigation benefits of independent SaaS based collaboration solutions. CIMIC will provide penetration opportunities both locally and offshore. CIMIC (formerly Leighton Holdings) is one of the largest contractor groups in Australia and Asia. It has operations in Australia, SE Asia, New Zealand and the Middle East under key subsidiaries including Leighton Contractors, Leighton Asia, India and Offshore and Thiess. Terms of agreement will operate the INCITE Keystone platform until all projects are completed or transitioned to the platform. expects the partnership with CIMIC will generate c$16.5m of committed revenue for the base management of existing and new projects over the next four years. Product development and support roles from INCITE will be transitioned into the team. Functionality specific to infrastructure projects will be integrated over a 12-month period and leveraged across the broader platform. As part of the agreement, plan to moderately increase research and development costs over the next 12months. FY16 outlook We update our FY16 forecasts for the CIMIC deal and assume the additional $16.4m of committed revenue is recognised evenly over a four-year period. We update earnings for updated currency forecasts provided by our economics team. Macquarie currency forecasts suggest the AUD/USD rate falls to $0.68 in FY16, before appreciating through FY17 and FY18 to settle at AUD $0.82. New enterprise deals typically increase direct operating costs like regional sales and marketing, IT infrastructure/development, hosting/bandwidth and helpdesk operations in the near term. However longer term, more users reduce service costs, as repeat users require less training and support. As part of the CIMIC agreement, plan to moderately increase research and development costs over the next 12 months. We therefore increase our capex assumptions from 15% to 17% of revenue between FY16-FY18 (55% expensed and 45% capitalised). We include minor upgrades to EPS in FY16/FY17. Longer-term assumptions from FY18+ have been upgraded to reflect growth opportunities generated from the contract win. Fig 1 Earnings updated for CIMIC deal and updated Macquarie currency forecasts $ m FY15(e) 1H16(e) 2H16(e) FY16(e) %Chg OLD %Diff Revenue 79.5 48.9 57.1 106.0 33.3% 100.1 5.9% EBITDA 3.0 5.8 7.0 12.8 11.6 10.2% Depreciation 4.4 2.4 3.3 5.7 4.8 EBIT -1.3 3.4 3.7 7.1 6.8 5.3% Interest expense -0.3-0.2-1.0-1.2-1.2 Pre-tax profit -1.0 3.6 4.7 8.3 7.9 4.5% Tax expense 1.2 0.6 0.9 1.5 1.2 Net Profit -2.2 2.9 3.9 6.8 6.7 0.8% Reported Net Profit 12.5 2.9 3.9 6.8 6.7 0.8% Adjusted Net Profit -2.2 2.9 3.9 6.8 6.7 0.8% EPS adj. diluted -1.3 1.8 2.4 4.1 4.1 0.8% DPS 0.0 0.0 0.0 0.0 0.0 EBITDA Margin (%) 3.8% 11.9% 12.2% 12.1% 11.6% Source: Macquarie Research, August 2015 5 August 2015 2
Valuation Our equity valuation range for is $467-$622m or $2.84-$3.78 per share. We have valued the ANZ business by applying an EV/EBIT multiple of 16-18x FY16 EBIT and valued the international business by applying an EV/Sales multiple of 3-5x FY16 sales. Fig 2 Valuation methodologies support a valuation range between $2.84 $3.78 Valuation Methodology Relevant multiples Valuation A$m Low High Low High ANZ Enterprise Value EV/EBIT 16x 18x 249 281 International Enterprise Value EV/Sales 3x 5x 186 310 Total Enterprise Value 435 591 Plus FY15e Net Cash 32 32 Equity Value 467 622 Shares on issue (m) 164.4 164.4 Equity Value / share $2.84 $3.78 Macq 12-mth PT $4.50 Implied FY16E EV/EBIT 99.7 Implied FY16E EV/Revenue 6.7 Source: Macquarie Research, January 2015 We value using SOTP methodology to capture the value of the highly profitable ANZ operations and the rapidly growing but currently loss-making international operations. The Australian operations are generating strong operating contribution and margins. Internationally, the business is gaining scale and expected to be the key driver of the group s medium to longer term earnings growth. Our 12-month price target of $4.50 reflects the roll forward to FY17 forecasts on increased confidence of international growth from recent contract wins. With a substantial market penetration opportunity and the delivery of four major contracts over the past three months, the growth outlook remains one of the strongest in our Emerging Leaders universe. We note our PT demands the delivery of strong medium-term earnings growth. We also acknowledge operate in competitive markets. The sector is rapidly evolving and will need to adapt to new technologies to maintain market leadership in Australia and increase penetration internationally. We now summarise our logic behind separating s domestic and international segments and selecting our valuation comparables. 5 August 2015 3
Australia and New Zealand division In assessing the market value of ANZ, we have compared it to other listed Australian technology and online companies. While none are direct comparables in our view, many of these businesses share similar operating or financial characteristics with. They typically have a high proportion of recurring or annuity style revenues, generate high margins and ROE, and have minimal capital requirements. Some offer SaaS-based services, many conduct a high proportion of their operations online and most have highly scalable operating models. These stocks typically command significant premium multiples that reflect both their strong track record as well as their long-term growth prospects. Fig 3 Australian Technology and Online/Platform Comparables Share Price Mkt Cap EV EV/EBITDA EV/EBIT PER Revenue CAGR FY15-17 EBITDA CAGR FY15-17 EBITDA Margin FY16 AUD m AUD m 2016F 2017F 2016F 2017F 2016F 2017F AUD AUD m AUD m Australian Technology Limited 4.02 1,249 1,194 21.1x 18.2x 22.9x 19.4x 30.7x 26.2x 11.3% 15.7% 24.3% GBST Holdings Ltd 3.75 250 247 9.0x 8.0x 11.3x 9.7x 15.0x 12.8x 5.9% 11.2% 23.3% Limited 2.04 229 368 8.8x 8.3x 13.2x 12.5x 11.6x 10.6x 4.9% 6.4% 38.7% Infomedia Ltd 1.00 306 293 9.9x 8.3x 13.9x 11.1x 19.0x 15.1x 11.0% 16.4% 44.4% Integrated Research 1.27 215 200 7.2x 6.4x 10.5x 8.9x 14.3x 12.2x 14.1% 14.2% 37.0% Iress Limited 10.40 1,664 1,770 14.2x 13.1x 16.7x 15.0x 20.8x 19.6x 6.1% 12.0% 32.6% 3P Learning Limited 2.20 297 281 12.8x 10.8x 15.7x 13.3x 21.2x 18.1x 17.0% 24.5% 41.5% Xero Limited 17.40 3,276 2,099 nmf nmf nmf nmf nmf nmf 64.0% 2.6% nmf iproperty Group Ltd. 2.52 473 461 nmf 31.8x nmf 34.8x nmf 40.2x 33.9% 215.0% nmf Freelancer Ltd. 0.61 271 251 29.5x nmf nmf nmf nmf nmf 35.0% 158.2% nmf isentia Group 3.56 750 744 15.0x 13.2x 21.1x 16.5x 22.0x 19.1x 9.7% 14.6% 35.4% Mean 14.2x 13.1x 15.7x 15.7x 19.3x 19.3x 19.4% 44.6% 34.7% Median 12.8x 10.8x 14.8x 13.3x 19.9x 18.1x 11.3% 14.6% 36.2% Australian Online / Platform Seek 15.30 4,838 5,653 13.5x 11.5x 15.3x 12.7x 23.9x 19.3x 16.3% 18.8% 40.6% REA Group 43.65 5,165 5,707 15.9x 13.4x 17.1x 14.1x 24.2x 19.9x 14.5% 19.6% 57.3% OzForex Group 2.31 578 380 9.7x 8.3x 9.8x 8.4x 19.2x 16.8x 17.8% 18.2% 36.9% Carsales.Com 10.89 2,446 2,790 16.1x 14.7x 15.3x 13.7x 22.1x 19.7x 10.8% 9.8% 49.4% Veda Group 2.43 1,870 2,299 14.0x 12.3x 16.6x 14.6x 22.5x 20.1x 11.0% 13.4% 43.9% Mean 13.8x 12.0x 14.4x 12.2x 22.3x 18.9x 14.9% 16.6% 46.1% Median 14.7x 12.4x 15.3x 13.2x 23.0x 19.5x 15.4% 18.5% 45.0% Source: Macquarie Research, FactSet, August 2015. Prices as of 4 August 2015. The EV/EBIT multiple range we have selected of 16-18x FY16 EBIT is broadly in line with the average of the Australian Technology and Australian online peer group selected above. Fig 4 ANZ technology and online comps support range FY16 EV/EBIT 25.0x 23.0x 21.0x 19.0x 17.0x 15.0x 13.0x 11.0x 9.0x 7.0x Carsales.Com Iress Infomedia Source: FactSet,, Macquarie Research, August 2015 Technology One Seek REA Group OzForex 3P Learning 5.0x -% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% EBITDA CAGR (FY15 - FY17) 5 August 2015 4
International division In valuing s International division, we have considered other SaaS businesses on the basis of an EV/sales methodology applied to FY16 revenues forecast from the international operations. In our view, the industry-specific capability associated with vertical SaaS provides (deep penetration of the one industry segment) a more relevant comparison to given its focus on the construction sector. These stocks command significant premium multiples reflecting specific functionality and workflow requirements associated with vertically aligned companies. Typically, vertical platforms generate higher margins reflecting lower sales and marketing expenditure associated with penetrating fewer industries. Vertically integrated SaaS platforms tend to have smaller addressable markets than their horizontal peers (same service across multiple industries). Given the size of the global construction industry this is not a limiting factor for construction collaboration solution providers. There are a large number of vertical SaaS companies listed, mainly overseas. The stocks in the table below were selected on the basis they offered enterprise SaaS with long sales cycles and/or were companies with an emphasis on collaboration/ network type businesses. Comparable companies include the construction industry company Textura (TXTR US). Fig 5 Vertical SaaS comparables Share Price Mkt Cap EV EV/Revenue EV/EBIT PER Revenue CAGR FY15-17 EBITDA CAGR FY15-17 EBITDA Margin FY16 AUD m AUD m 2016F 2017F 2016F 2017F 2016F 2017F AUD AUDm AUDm Vertical SaaS Textura Corp. 29.2 1,016 926 6.4x 4.7x na 31.5x na na 38.6% na 21.0% Advent Software, Inc. 44.2 3,142 3,381 5.8x na 17.4x na 39.0x na na na na FleetMatics Group 48.1 2,490 2,290 5.5x 4.8x 27.2x 19.6x 39.2x 26.6x 17.5% 29.9% 34.9% SciQuest, Inc. 11.8 443 na na na na na na na 7.7% 28.0% 19.5% SS&C Technologies, 69.7 9,084 8,726 5.4x 4.6x 13.6x 11.2x 30.8x 25.2x 24.1% 30.7% 43.9% Benefitfocus, Inc. 40.2 1,558 1,474 5.6x 4.5x na na na na 24.9% na na Dealertrack Technologies, Inc. 62.2 4,590 5,678 3.6x 3.1x 23.8x 32.1x 35.5x 28.2x 17.4% 27.3% 21.5% Mean 5.4x 4.3x 20.5x 23.6x 36.1x 26.7x 21.7% 14.4% 28.2% Median 5.5x 4.6x 20.6x 25.5x 37.2x 26.6x 20.8% 28.0% 21.5% Source: FactSet, August 2015 Our EV/Sales multiple range selected of 3-5x FY16 revenue is in line with vertical SaaS peers selected in the table above. Fig 6 Vertical SaaS peers support International division range FY16 EV/Sales 8.0x 7.0x 6.0x 5.0x 4.0x 3.0x Benefitfocus FleetMatics Marketo Source: FactSet,, Macquarie Research, August 2015 Textura 2.0x 1.0x Jive Marin Software - x -% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% Revenue CAGR (FY15-FY17) 5 August 2015 5
(ACX:$4.40) 5-Aug-15 Interim results 1H/14A 2H/14A 1H/15A 2H/15E Profit & Loss 2014A 2015E 2016E 2017E Revenue 32.1 34.1 38.1 41.4 Revenue $m 66.2 79.5 106.0 129.9 EBITDA $m -0.7-3.4 0.5 2.6 EBITDA $m -4.1 3.0 12.8 21.4 Depreciation $m 2.7 2.1 1.9 2.4 Depreciation $m 4.8 4.4 5.7 7.2 Amortisation of goodwill $m 0.0 0.0 0.0 0.0 Amortisation of goodwill $m 0.0 0.0 0.0 0.0 EBIT $m -3.4-5.5-1.5 0.1 EBIT $m -8.9-1.3 7.1 14.1 Net Interest expense $m -0.2 0.3 0.0-0.3 Interest expense $m 0.1-0.3-1.2-1.1 Pre-Tax Profit $m -3.2-5.8-1.5 0.5 Pre-Tax Profit $m -9.0-1.0 8.3 15.2 Tax Expense $m 4.3-3.4 0.7 0.5 Tax Expense $m 0.9 1.2 1.5 1.5 Net Profit $m -7.5-2.4-2.1 0.0 Net Profit $m -9.9-2.2 6.8 13.7 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 0.0-13.8 14.6 0.0 Net Abnormals/Extra. $m -13.8 14.6 0.0 0.0 Reported Earnings $m -7.5-16.2 12.5 0.0 Reported Earnings $m -23.7 12.5 6.8 13.7 Adjusted Earnings $m -7.5-2.4-2.1 0.0 Adjusted Earnings $m -9.9-2.2 6.8 13.7 Gross Cashflow $m -0.7-4.3 0.8 1.7 Gross Cashflow $m -5.0 2.5 12.7 21.0 EPS (Adj/dil) c -4.6-1.4-1.3 0.0 EPS (adj/diluted) c -6.0-1.3 4.1 8.3 EPS growth % nmf nmf -71.6-98.5 EPS growth % -42.5-78.0 nmf 101.7 CFPS c -0.5-2.6 0.5 1.0 PE (adj) x nmf nmf 106.5 52.8 CFPS Growth % #REF! #REF! nmf nmf CFPS c -3.0 1.5 7.8 12.8 EBITDA/Sales % -2.3-9.9 1.2 6.2 CFPS Growth % -52.5 nmf 413.8 64.6 EBIT/Sales % -10.7-16.0-3.8 0.3 PGCFPS x nmf 291.7 56.8 34.5 Earnings Split % 76.2 23.8 98.3 1.7 DPS c 0.0 0.0 0.0 0.0 Revenue Growth % 75.4 0.3 18.6 21.6 Yield % 0.0 0.0 0.0 0.0 EBIT Growth % #REF! #REF! -57.6 nmf Franking % nmf nmf nmf nmf Profit and Loss ratios 2014A 2015E 2016E 2017E Cashflow Analysis 2014A 2015E 2016E 2017E Revenue Growth % 26.6 20.1 33.3 22.5 EBIT Growth % -46.8-85.2-640.2 98.0 Pre-tax Profit $m -9.0-1.0 8.3 15.2 EBITDA/Sales % -6.2 3.8 12.1 16.4 Depreciation & Amortisation $m 4.8 4.4 5.7 7.2 EBIT/Sales % -13.4-1.7 6.7 10.9 Tax Paid $m -0.8-0.9-1.2-1.5 Effective tax rate % -10.0-122.4 18.0 10.0 Gross cashflow $m -5.0 2.5 12.7 21.0 Payout ratio % 0.0 0.0 0.0 0.0 Changes in working capital $m -4.9-13.4 1.1 2.6 EV/EBITA x -78.4-527.9 96.8 47.3 Other $m 14.5 11.8-0.5 0.0 EV/EBITDA x -170.1 229.2 54.0 31.3 Operating Cashflow $m 4.6 0.9 13.4 23.6 EV/Sales* x 10.5 8.8 6.5 5.1 Acquisitions $m 0.0 0.0-9.4-3.5 Capex - Plant & Equip. $m -4.2-6.3-7.7-9.4 Balance sheet ratios Asset Sales $m 0.0 0.0 0.0 0.0 ROE % 57.6 12.7 194.5 99.7 IT development $m 0.0 0.0 0.0 0.0 ROA % -64.1-2.8 9.6 16.9 Investing cashflow $m -4.2-6.3-17.1-12.9 ROFE % 29.5 3.0-27.2-46.5 Dividend (ordinary) $m 0.0 0.0 0.0 0.0 Net Debt $m -25.9-26.5-32.8-55.4 Equity raised $m 0.0 22.0 0.0 0.0 Net Debt/Equity % 75.4 < 0 < 0 < 0 Other $m 0.0-16.1 10.0 11.9 Interest Cover x nmf 3.9 nmf nmf Financing cashflow $m 0.0 6.0 10.0 11.9 Price/NTA x 0.0 0.0 0.0 0.0 NTA per share $ -0.24-0.03 0.01 0.10 Net Change in cash/debt $m 0.4 0.6 6.3 22.6 EFPOWA m 164.4 164.4 164.4 164.4 Historical performance 2011A 2012A 2013A 2014A Balance Sheet 2014A 2015E 2016E 2017E Cash $m 25.9 26.5 48.5 83.5 Revenue $m 8.9 44.3 52.3 66.2 Receivables $m 15.3 27.4 28.6 28.6 EBITDA $m 0.7-4.2-9.9-4.1 Inventories $m 0.0 0.0 0.0 0.0 Depreciation/Amortisation $m 5.3 5.7 6.8 4.8 Investments $m 0.0 0.0 9.4 12.9 EBIT $m -4.6-9.9-16.7-8.9 Property, plant & equipment $m 2.8 4.8 6.8 9.0 Net interest expense $m -0.4-0.4-0.1 0.1 Intangibles $m 4.5 4.5 4.5 4.5 Pre-Tax Profit $m -4.2-9.6-16.6-9.0 Other Assets $m 5.1 31.3 31.3 31.3 Tax Expense $m 0.2 0.1 0.6 0.9 Total Assets $m 53.7 94.6 129.2 169.8 Net Profit $m -4.4-9.7-17.2-9.9 Payables $m 10.4 9.1 11.5 14.0 Net Abn/Extra $m 0.0 0.0 0.0-13.8 Short Term Debt $m 0.0 0.0 0.0 0.0 Long Term Debt $m 0.0 0.0 15.7 28.1 Reported Earnings $m -9.7-17.2-23.7 Other Liabilities $m 77.7 85.3 95.1 107.0 Adjusted Earnings $m -9.7-17.2-9.9 Total Liabilities $m 88.1 94.5 122.3 149.2 Ordinary DPS c 0.0 0.0 0.0 0.0 Shareholders Funds $m -34.4 0.1 6.9 20.6 EBITDA/Sales % 7.5-9.6-19.0-6.2 Minority Interests $m 0.0 0.0 0.0 0.0 EBIT/Sales % -52.0-22.3-32.0-13.4 Total Shareholders Equity $m -34.4 0.1 6.9 20.6 ROE % nmf nmf nmf 57.6 ROFE % nmf nmf nmf 29.5 Total Funds employed $m 53.7 94.6 129.2 169.8 EFPOWA m 200.0 164.4 164.4 164.4 Key operating metrics 2014A 2015E 2016E 2017E Revenue by segment ANZ $m $31.5 $34.8 $44.0 $48.4 Americas $m $10.7 $14.9 $21.7 $27.2 Asia $m $7.6 $9.8 $13.3 $17.9 EMEA $m $16.5 $20.0 $27.0 $36.4 Total $m $66.2 $79.5 $106.0 $129.9 Operating contribution ANZ $m 20.5 23.3 28.6 32.4 Americas $m -1.5 0.1 3.3 5.7 Asia $m 0.9 1.4 3.3 4.5 EMEA $m 5.1 7.4 10.8 16.8 Total $m 25.0 32.2 46.0 59.4 Source: Company data, Macquarie Research, August 2015 5 August 2015 6
Fundamentals Macquarie Wealth Management Macquarie Quant View The quant model currently holds a reasonably positive view on. The strongest style exposure is Price Momentum, indicating this stock has had strong medium to long term returns which often persist into the future. The weakest style exposure is Profitability, indicating this stock is not efficiently converting its investments to earnings as proxied by ratios such as ROE, ROA etc. 81/609 Global rank in Software & Services % of BUY recommendations 100% (5/5) Number of Price Target downgrades 0 Number of Price Target upgrades 0 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 (Software & 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. CSG 1.1 1.0 1.3 CSG SMS Management & Technolo isentia Group NextDC 0.5 0.3 0.2-0.4 SMS Management & Technolo isentia Group NextDC -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. CSG SMS Management & Technolo isentia Group NextDC -1.7 0.6-0.3 0.4 0.4 0.6 1.6 CSG SMS Management & Technolo isentia Group NextDC -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 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 0.97-0.62 0.60-0.79 0.76 0.84-0.54 0.66-0.41-0.94-0.50 Percentile relative to sector(/609) Percentile relative to market(/414) 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) 5 August 2015 7
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 30 June 2015 AU/NZ Asia RSA USA CA EUR Outperform 46.23% 58.36% 47.27% 44.20% 60.65% 43.01% (for US coverage by MCUSA, 9.68% of stocks followed are investment banking clients) Neutral 37.67% 25.65% 29.09% 49.29% 34.19% 40.93% (for US coverage by MCUSA, 5.53% of stocks followed are investment banking clients) Underperform 16.10% 15.99% 23.64% 6.52% 5.16% 16.06% (for US coverage by MCUSA, 1.38% of stocks followed are investment banking clients) ACX AU vs Small Ordinaries, & rec history CIM AU vs ASX 100, & rec history (all figures in AUD currency unless noted) (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, August 2015 12-month target price methodology ACX AU: A$4.50 based on a EV/EBIT methodology CIM AU: A$25.71 based on a Sum of Parts methodology Company-specific disclosures: ACX AU: MACQUARIE CAPITAL (AUSTRALIA) LIMITED or one of its affiliates managed or co-managed a public offering of securities of Ltd in the past 12 months, for which it received compensation. MACQUARIE EQUITIES LIMITED or one of its affiliates managed or co-managed a public offering of securities of Ltd in the past 12 months, for which it received compensation. CIM AU: MACQUARIE CAPITAL (AUSTRALIA) LIMITED or one of its affiliates has provided Leighton Holdings Ltd with investment advisory services in the past 12 months, for which it received compensation. 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-Jun-2015 ACX AU Outperform A$3.41 30-Apr-2015 ACX AU Outperform A$2.80 19-Jan-2015 ACX AU Outperform A$2.30 Target price risk disclosures: ACX 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. CIM 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. Also chasing underclaims outcome around which are uncertain and may impact profit. 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 5 August 2015 8
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. 5 August 2015 9