Wesfarmers - Morgans

Retail│Australia│Equity research│March 16, 2018

Wesfarmers Good things are happening at WES

HOLD (no change) Current price: Target price: Previous target: Up/downside: Reuters: Bloomberg: Market cap:

A$43.80 A$44.65 A$41.18 1.9% WES.AX WES AU US$38,940m A$49,662m US$78.34m A$105.9m 1,134m 100.0%

Average daily turnover: Current shares o/s Free float: Key changes in this note N/A

Price Close

Relative to S&P/ASX 200 (RHS)

46.0 45.0 44.0 43.0 42.0 41.0 40.0 39.0 15

104.0 101.4 98.9 96.3 93.7 91.1 88.6 86.0

Vol m

10

■ WES has announced its intention to demerge Coles following a review of its group portfolio.

■ We think the demerger makes sense given long term structural headwinds in the supermarket sector and it frees up capacity to invest in higher returning businesses and/or pursue M&A opportunities.

■ While we make no changes to earnings forecasts, our SOTP-based target price increases to A$44.65 (from A$41.18). We believe a greater focus on the existing stronger returning businesses should lead to improved growth prospects and a higher trading multiple.

Coles to be demerged WES has announced its intention to demerge Coles. The decision follows a review of WES’s portfolio and management’s intention to target a higher capital weighting towards businesses with strong future growth prospects. For FY19, we estimate Coles represents 34% of group EBIT while Home Improvement represents 33%. Following the demerger of Coles, Home Improvement’s percentage of earnings will rise substantially to 50% of group EBIT. This composition will likely change further over time as management pursues acquisitions and divestments. Following the demerger, WES intends to retain a minority stake of 20% in Coles to support strategic alignment between WES and Coles in relation to various growth initiatives such as digital and data. The demerger is subject to final board approval, third party consents, and regulatory and shareholder approvals. If approved, the transaction is expected to be completed in FY19. In addition to the demerger, WES also announced that current Coles Managing Director, John Durkan will step down and be replaced by Steven Cain.

5 Mar-17

Jun-17

Sep-17

Demerger will allow greater focus on existing businesses and M&A

Dec-17

E [email protected]

Given Rob Scott’s focus on return on capital we believe the demerger makes sense. Coles generates only 9% ROC but consumes approximately 60% of WES’s capital employed. This is well below Bunnings ANZ (47%), Department Stores (26%), Industrials (18%) and Officeworks (16%). By demerging Coles management can focus on deploying capital to better returning businesses within the portfolio and free up capacity to make value accretive acquisitions. We think this move makes sense and given our bearish view on the long term outlook for the supermarket sector, a WES without Coles looks to be a stronger business that should trade on a higher multiple. As a standalone entity we value Coles on an enterprise value of A$17.7bn based on a 12x FY19F EV/EBIT multiple, in line with global supermarket peers.

Josephine LITTLE

Maintain Hold rating on a higher A$44.65 target price

T (61) 7 3334 4505

While we make no changes to earnings forecasts, our SOTP-based target price increases to A$44.65 (from A$41.18). The increase in our target price is based on a roll forward of our valuation to FY19 earnings forecasts as well as higher valuation multiples for Home Improvement and Officeworks. We believe a greater focus on the existing higher returning businesses should lead to improved growth prospects.

Source: Bloomberg

Price performance Absolute (%) Relative (%)

1M 7.7 7.4

3M -1.8 -0.5

Alexander LU, CFA T (61) 2 9043 7901

E [email protected]

12M -0.6 -2.9

Financial Summary Revenue (A$m) Operating EBITDA (A$m) Net Profit (A$m) Normalised EPS (A$) Normalised EPS Growth FD Normalised P/E (x) DPS (A$) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) ROE % Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x)

Jun-17A 68,444 5,668 2,873 2.54 27.1% 17.23 2.23 5.09% 9.51 20.63 18.4% 2.07 12.3%

Jun-18F 70,081 5,471 1,507 2.41 (5.3%) 18.19 2.23 5.09% 9.80 14.79 17.3% 2.16 11.6% 0% 0.99

Jun-19F 72,190 5,677 2,851 2.51 4.4% 17.42 2.30 5.25% 9.41 19.47 16.2% 2.14 12.3% 0% 1.02

Jun-20F 74,953 5,995 3,039 2.68 6.6% 16.34 2.35 5.37% 8.86 18.88 14.6% 2.10 13.0% 0% 1.02

Jun-21F 77,483 6,264 3,197 2.82 5.2% 15.53 2.45 5.59% 8.42 18.25 12.7% 2.06 13.4% 0%

SOURCE: MORGANS, COMPANY REPORTS

IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS CAN BE FOUND AT THE END OF THIS DOCUMENT. MORGANS FINANCIAL LIMITED (ABN 49 010 669 726) AFSL 235410 - A PARTICIPANT OF ASX GROUP

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Retail│Australia│Equity research│March 16, 2018

Figure 1: Financial summary Y/E 30 Jun Income statement (A$m) Sales revenue (cont. ops)

AIFRS FY16A 65,981.0

AIFRS FY17A 68,444.0

AIFRS FY18F 70,081.1

AIFRS FY19F 72,189.8

AIFRS FY20F 74,953.1

EBITDA Depreciation & amortisation EBIT (cont. ops) Net interest expense Pre-tax profit Tax expense Minorities NPAT pre-abnormals (cont. ops) EPS pre-abnormals (cps) Abnormal items after tax Reported NPAT Reported EPS (cps) DPS (cps) - ordinary DPS (cps) - special DPS (cps) - total Franking (%)

4,758.0 1,296.0 3,462.0 -308.0 3,154.0 -903.0 0.0 2,251.0 200.1 -1,844.0 407.0 36.2 186.0 0.0 186.0 100.0%

5,668.0 1,266.0 4,402.0 -264.0 4,138.0 -1,265.0 0.0 2,873.0 254.2 0.0 2,873.0 254.2 223.0 0.0 223.0 100.0%

5,471.3 1,299.3 4,172.0 -229.2 3,942.8 -1,213.0 0.0 2,729.7 240.9 -1,223.0 1,506.8 132.9 223.0 0.0 223.0 100.0%

5,676.5 1,371.6 4,304.9 -232.1 4,072.8 -1,221.8 0.0 2,851.0 251.4 0.0 2,851.0 251.4 230.0 0.0 230.0 100.0%

5,994.6 1,424.1 4,570.5 -229.3 4,341.2 -1,302.4 0.0 3,038.8 268.0 0.0 3,038.8 268.0 235.0 0.0 235.0 100.0%

FY16A 1,860.0 1,214.0 275.0 134.0 47.0 -68.0 3,462.0

FY17A 1,609.0 1,245.0 543.0 144.0 915.0 -54.0 4,402.0

FY18F 1,499.2 1,220.7 597.7 157.9 783.0 -86.5 4,172.0

FY19F 1,501.0 1,444.4 656.0 170.9 621.6 -89.0 4,304.9

FY20F 1,502.3 1,616.9 703.3 179.2 660.6 -91.7 4,570.5

FY16A 4,758.0 -157.0 -1,009.0 -227.0 74.0 -74.0 3,365.0 -1,899.0 0.0 -1,899.0 -233.0 -2,132.0 -2,270.0 1.0 936.0 0.0 -1,333.0 0.0 -100.0 1,466.0 130.3 -804.0

FY17A 5,668.0 -151.0 -951.0 684.0 46.0 -1,070.0 4,226.0 -1,681.0 0.0 -1,681.0 1,628.0 -53.0 -1,998.0 1.0 -1,774.0 0.0 -3,771.0 0.0 402.0 2,545.0 225.2 547.0

FY18F 5,471.3 -229.2 -1,213.0 -526.7 53.0 2.0 3,557.3 -1,491.0 0.0 -1,491.0 992.1 -498.8 -2,528.9 0.0 299.4 0.0 -2,197.5 0.0 829.0 2,034.4 179.5 -494.5

FY19F 5,676.5 -232.1 -1,221.8 -93.4 60.0 0.0 4,189.2 -1,440.2 0.0 -1,440.2 0.0 -1,440.2 -2,551.1 0.0 -197.8 0.0 -2,749.0 0.0 0.0 2,749.0 242.4 197.8

FY20F 5,994.6 -229.3 -1,302.4 -81.8 60.0 0.0 4,441.1 -1,495.3 0.0 -1,495.3 0.0 -1,495.3 -2,630.5 0.0 -315.3 0.0 -2,945.8 0.0 0.0 2,945.8 259.8 315.3

FY16A

FY17A

FY18F

FY19F

FY20F

611.0 2,463.0 6,260.0 350.0 9,684.0

1,013.0 1,633.0 6,530.0 491.0 9,667.0

1,842.0 2,527.8 6,287.7 599.0 11,256.5

1,842.0 2,641.6 6,570.8 599.0 11,653.4

1,842.0 2,741.3 6,818.8 599.0 12,001.1

9,612.0 19,073.0 1,042.0 1,372.0 31,099.0 40,783.0

9,440.0 18,936.0 971.0 1,101.0 30,448.0 40,115.0

8,656.6 17,945.0 922.0 1,165.0 28,688.6 39,945.0

8,725.1 17,945.0 922.0 1,165.0 28,757.1 40,410.5

8,796.3 17,945.0 922.0 1,165.0 28,828.3 40,829.4

6,491.0 1,861.0 1,632.0 440.0 10,424.0

6,615.0 1,743.0 1,347.0 712.0 10,417.0

6,740.8 1,823.0 1,231.0 945.0 10,739.8

7,044.3 1,823.0 1,231.0 1,005.0 11,103.3

7,310.2 1,823.0 1,231.0 1,065.0 11,429.1

5,671.0 0.0 1,554.0 185.0 7,410.0 17,834.0 22,949.0

4,066.0 0.0 1,511.0 180.0 5,757.0 16,174.0 23,941.0

4,575.4 0.0 1,498.0 176.0 6,249.4 16,989.1 22,955.9

4,377.5 0.0 1,498.0 176.0 6,051.5 17,154.8 23,255.7

4,062.2 0.0 1,498.0 176.0 5,736.2 17,165.4 23,664.0

21,909.0 166.0 874.0 0.0 22,949.0

22,242.0 190.0 1,509.0 0.0 23,941.0

22,225.0 245.0 485.9 0.0 22,955.9

22,225.0 245.0 785.7 0.0 23,255.7

22,225.0 245.0 1,194.0 0.0 23,664.0

Segmental EBIT (A$m) Coles Home Improvement Department stores Officeworks Industrials Corporate / Other Total underlying EBIT Cash flow statement (A$m) EBITDA Net interest paid Tax paid Working capital Dividends received Other Operating cash flow (1) SIB capex (2) Growth capex (3) Total capex Other Investing cash flow Cash dividends paid (4) Equity raised / (repurchased) Net borrowings / (repaid) Other Financing cash flow FX impact Net cash flow Free cash flow (1-2) per share Deployable cash flow (1-2-3-4) Balance sheet (A$m) Current assets Cash Receivables Inventories Other current assets Total current assets Non-current assets Property, plant and equipment Intangible assets Deferred tax assets Other non-current assets Total non-current assets Total assets Current liabilities Payables Provisions Interest bearing liabilities Other current liabilities Total current liabilities Non-current liabilities Interest bearing liabilities Deferred tax liabilities Provisions Other non-current liabilities Total non-current liabilities Total liabilities Net assets Shareholders equity Issued capital Reserves Retained profits Minority interest Total shareholder funds

HOLD Projected return Current share price

A$43.80

Price target Upside (downside) 12mth dividend yield TSR

A$44.65 1.9% 5.1% 7.0%

Shares on issue (m) WES market cap (A$m)

1,133.8 49,662.2

Trading multiples (x) EV/EBITDA EV/EBIT PE

FY16A 11.4 15.6 21.9

FY17A 9.5 12.3 17.2

FY18F 9.9 13.0 18.2

FY19F 9.5 12.6 17.4

FY20F 9.0 11.8 16.3

Valuation summary DCF Sum-of-the-parts PE-relative

A$44.63 A$44.65 A$42.75

DCF inputs RF rate Debt premium Cost of debt Beta MRP Cost of equity Net debt (A$m) EV (A$m) L/T growth WACC

4.3% 2.0% 6.3% 0.90 6.0% 10.7% 4,400.0 54,062.2 2.5% 8.8%

Key earnings ratios Revenue growth YoY EPS growth (adjusted) Dividend yield - ordinary Dividend yield - total Payout ratio Free cash flow yield Effective tax rate

FY16A 10.3% n.a. 4.2% 4.2% 93.0% 3.0% 28.6%

FY17A 3.7% 27.1% 5.1% 5.1% 87.7% 5.1% 30.6%

FY18F 2.4% -5.3% 5.1% 5.1% 92.6% 4.1% 30.8%

FY19F 3.0% 4.4% 5.3% 5.3% 91.5% 5.5% 30.0%

FY20F 3.8% 6.6% 5.4% 5.4% 87.7% 5.9% 30.0%

FY16A 6,692.0 29.2% 22.6% 1.4x 11.2x

FY17A 4,400.0 18.4% 15.5% 0.8x 16.7x

FY18F 3,964.4 17.3% 14.7% 0.7x 18.2x

FY19F 3,766.5 16.2% 13.9% 0.7x 18.5x

FY20F 3,451.2 14.6% 12.7% 0.6x 19.9x

Working capital metrics Inventory/Sales Debtor days Creditor days

FY16A 9.5% 13.6 35.9

FY17A 9.5% 8.7 35.3

FY18F 9.0% 13.2 35.1

FY19F 9.1% 13.4 35.6

FY20F 9.1% 13.3 35.6

Return metrics Return on assets Return on equity

FY16A 8.5% 9.4%

FY17A 10.9% 12.3%

FY18F 10.4% 11.6%

FY19F 10.7% 12.3%

FY20F 11.3% 13.0%

Key assumptions

FY16A

FY17A

FY18F

FY19F

FY20F

EBIT margins Coles Home Improvement Department stores Officeworks Industrials Total underlying EBIT

4.7% 10.5% 3.2% 7.2% 1.0% 5.2%

4.1% 9.2% 6.4% 7.3% 22.0% 6.4%

3.8% 8.6% 6.8% 7.4% 15.0% 6.0%

3.7% 9.4% 7.2% 7.5% 13.8% 6.0%

3.6% 9.9% 7.4% 7.5% 14.1% 6.1%

Balance sheet debt metrics Net debt Gearing (ND/Equity) Gearing (ND/ND+Equity) Net debt/EBITDA EBIT interest cover

SOURCE: MORGANS RESEARCH, COMPANY

2

Retail│Australia│Equity research│March 16, 2018

Coles to be demerged WES has announced its intention to demerge Coles. The decision follows a review of WES’s portfolio and management’s intention to target a higher capital weighting towards businesses with strong future growth prospects. WES’s two largest divisions are Coles and Home Improvement (includes Bunnings ANZ and Bunnings UK & Ireland). For FY19, we estimate Coles represents 34% of group EBIT while Home Improvement represents 33%. Following the demerger of Coles, Home Improvement’s percentage of earnings will rise substantially to 50% of group EBIT. This composition will likely change further over time as management pursues acquisitions and divestments. Following the demerger, WES intends to retain a minority stake of 20% in Coles to support strategic alignment between WES and Coles in relation to various growth initiatives such as digital and data. WES also intends to retain a substantial stake in flybuys which it sees as strategically important going forward. The demerger is subject to final board approval, third party consents, and regulatory and shareholder approvals. If approved, the demerger is expected to be completed in FY19. Shareholders would receive new shares in Coles proportional to their existing shareholding in WES. In addition to the demerger, WES has also announced that current Coles Managing Director, John Durkan will step down and be replaced by Steven Cain. Steven Cain is currently CEO of Supermarkets and Convenience at Metcash (MTS) and has a strong retail background both domestically and overseas. He was also an advisor to WES on its takeover of Coles Group in 2007. Figure 2: WES pre and post Coles demerger

SOURCES: COMPANY REPORTS

3

Retail│Australia│Equity research│March 16, 2018

We value Coles at A$17.7bn While limited financial details have been given about the Coles demerger including capital structure and dividend policy, under our assumptions we value Coles on an enterprise value of A$17.7bn. This is based on a 12x FY19F EV/EBIT multiple, which is in line with global supermarket peers. We also assume Coles will incur an additional A$30m in corporate costs as a separately listed entity. Figure 3: Coles valuation (A$m) Comments FY19F EBIT

1,471 Assume corporate costs of A$30m

EV/EBIT valuation multiple (x) Enterprise value

12.0 In line with global supermarket peers 17,652

Less: net debt

2,310 Assume 14% ND/(ND+E), in line with WES

Market cap

15,342

Shares on issue

1,134 Assume 1:1

Equity value per share (A$)

13.53 SOURCES: MORGANS, COMPANY REPORTS

Below we set out the key financial metrics for WES pre and post the Coles demerger. Based on WES’s last closing price and our Coles equity valuation, we estimate the market is valuing WES post-demerger at A$30.27 per share. This represents 18.1x FY19F PE versus WES’s pre-demerger multiple of 17.4x. By demerging Coles, management can focus on deploying capital to better returning businesses within the portfolio and it frees up capacity to make value accretive acquisitions. Given our bearish view on the long term outlook for the supermarket sector, we believe a WES without Coles is a stronger business that should trade on a higher multiple. Figure 4: WES pre and post Coles demerger FY19F

FY19F

WES

WES-post demerger

Coles

Revenue

72,190

31,356

40,834

EBITDA

5,677

3,573

2,104

D&A

1,372

739

633

EBIT

4,305

2,804

1,471

(A$m)

Net interest

FY19F

-232

-90

-142

PBT

4,073

2,714

1,329

Tax

-1,222

-814

-399

NPAT

2,851

1,900

930

Shares (m)

1,134

1,134

1,134

DPS (cps)

230.0

156.2

73.8

EPS (cps)

251.4

167.6

82.0

Price (A$) Market cap (A$m) Net debt (A$m)

43.80

30.27

13.53

49,662

34,320

15,342

3,767

1,457

2,310

EV (A$m)

53,429

35,776

17,652

Equity (A$m)

23,256

9,066

14,190

9.4

10.0

8.4

12.4

12.8

12.0

EV/EBITDA (x) EV/EBIT (x) PE (x) Dividend yield ND/(ND+E) ND/EBITDA (x)

17.4

18.1

16.5

5.3%

5.2%

5.5%

14%

14%

14%

0.7

0.4

1.1

SOURCES: MORGANS ESTIMATES

4

Retail│Australia│Equity research│March 16, 2018

Maintain Hold rating on a higher A$44.65 target price While we make no changes to earnings forecasts, our SOTP-based target price increases to A$44.65 (from A$41.18). The increase in our target price is based on a roll forward of our valuation to FY19 earnings forecasts as well as higher valuation multiples for Home Improvement and Officeworks. Given Coles represents 34% of group EBIT but consumes approximately 60% of capital employed, we believe the demerger will free up significant management time and capital to focus on the existing higher returning businesses that should lead to improved growth prospects. Figure 5: Sum-of-the-parts (SOTP) valuation EV/EBIT FY19F valuation EBIT multiple Implied (A$m) (x) EV (A$m) Comment 1,501 12.0 18,012 Broadly in line with global supermarkets comps

Coles Home Improvement

1,444

15.0

Department stores

656

9.5

Officeworks

171

13.0

2,222 Premium to big box comps

Industrials

622

11.5

7,149 Broadly in line with Industrials comps

Corporate / other

-89

10.0

Total

4,305

21,665 Premium to big box comps 6,232 Broadly in line with department stores comps

-890 54,390

Less: Liabilities

3,767

Equity value

50,624

Equity value per share (A$)

44.65 SOURCES: MORGANS ESTIMATES

Figure 6: WES comps (June Y/E equivalent) EBIT EV/EBITDA EV/EBIT ND/EBITDA interest (x) (x) PE (x) EPSg (%) ROE (%) (x) ND/(ND+E) Div yield cover (x) P/FCF Company name

P/B

2-yr EPS 2-yr EBIT CAGR CAGR

2019

2019

2019

2019

2019

2019

2019

2019

2019

2019

2019

Tesco PLC

7.7

13.1

14.9

23.9

11.3

1.5

45%

2.3%

5.1

N/A

2.0

23.4%

17.6%

Carrefour SA

5.8

10.6

13.8

10.1

8.3

2.4

43%

1.7%

6.6

0.9

1.1

12.3%

13.1%

J Sainsbury PLC

4.2

8.5

10.9

9.2

6.9

0.7

13%

4.7%

6.0

8.1

0.7

8.2%

5.8%

Kroger Co/The

6.6

12.4

11.0

4.3

25.2

2.8

69%

3.1%

N/A

0.4

0.0

4.8%

-6.3%

10.8

15.0

20.2

1.8

35.0

-0.5

-39%

1.7%

N/A

0.2

7.1

0.7%

1.0%

7.0

11.9

14.2

9.8

17.3

1.4

26%

2.7%

5.9

2.4

2.2

9.9%

6.2%

Myer Holdings Ltd

3.0

7.1

9.2

2.2

4.0

0.7

10%

7.3%

7.5

7.2

0.3

2.2%

0.1%

Adairs

6.2

7.3

9.8

11.8

28.3

0.5

22%

7.0%

25.6

19.9

2.7

9.4%

8.3%

11.1

13.3

16.5

13.7

9.9

0.0

0%

4.5%

1761.7

822.6

1.6

13.7%

15.7%

6.8

9.2

11.9

9.2

14.1

0.4

10%

6.3%

598.3

283.3

1.6

8.4%

8.1%

Harvey Norman Holdings Ltd

7.3

8.5

11.1

-0.3

12.9

0.9

18%

6.6%

-37.5

18.8

1.4

-0.4%

0.6%

JB Hi-Fi Ltd

7.8

9.3

11.9

3.9

25.5

1.1

36%

5.5%

43.2

20.4

2.9

1.9%

1.7%

Average

7.6

8.9

11.5

1.8

19.2

1.0

27%

6.0%

2.8

19.6

2.1

0.8%

1.1%

Incitec Pivot Ltd

8.8

12.8

16.1

11.2

8.1

1.8

25%

3.2%

6.1

19.5

1.3

8.8%

5.8%

Nufarm Ltd/Australia

6.6

8.5

13.7

24.6

9.7

1.3

30%

2.0%

4.4

479.2

1.3

17.0%

13.0%

Orica Ltd

8.6

12.2

17.2

10.7

14.0

1.5

33%

3.0%

N/A

31.8

2.3

14.9%

11.7%

Average

8.0

11.2

15.7

15.5

10.6

1.5

29%

2.8%

5.3

176.8

1.6

13.6%

10.2%

Global supermarkets

BJA Croonen BV Average Department/Apparel stores

Premier Investments Ltd Average Big box retail

Chemicals, Energy & Fertiliser

SOURCES: MORGANS, BLOOMBERG *Priced as at 16/03/2018

With a forecast 12-month total shareholder return of 7% we retain our Hold rating.

5

Retail│Australia│Equity research│March 16, 2018

Downside risks to our valuation and target price include the demerger not obtaining the relevant approvals, failure of the retail businesses to adequately follow consumer trends, and inability of management to execute on cost out initiatives. Upside risks include better-than-expected growth in the housing market and continued execution of growth strategies in the retail divisions ahead of our expectations.

6

Retail│Australia│Equity research│March 16, 2018

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+61 8 6462 1999

South SouthAustralia Australia

Brisbane: North Quay

+61 7 3245 5466

Bowral

+61 2 4851 5555

Geelong

+61 3 5222 5128

Adelaide

+61 8 8464 5000

Bundaberg

+61 7 4153 1050

Chatswood

+61 2 8116 1700

Richmond

+61 3 9916 4000

Norwood

+61 8 8461 2800

Cairns

+61 7 4222 0555

Coffs Harbour

+61 2 6651 5700

South Yarra

+61 3 8762 1400

Caloundra

+61 7 5491 5422

Gosford

+61 2 4325 0884

Southbank

+61 3 9037 9444

Gladstone

+61 7 4972 8000

Hurstville

+61 2 8215 5079

Traralgon

+61 3 5176 6055

Gold Coast

+61 7 5581 5777

Merimbula

+61 2 6495 2869

Warrnambool

+61 3 5559 1500

Ipswich/Springfield

+61 7 3202 3995

Mona Vale

+61 2 9998 4200

Kedron

+61 7 3350 9000

Neutral Bay

+61 2 8969 7500

Australian Capital Territory

Mackay

+61 7 4957 3033

Newcastle

+61 2 4926 4044

Canberra

Milton

+61 7 3114 8600

Orange

+61 2 6361 9166

Noosa

+61 7 5449 9511

Port Macquarie

+61 2 6583 1735

Northern Territory

Redcliffe

+61 7 3897 3999

Scone

+61 2 6544 3144

Darwin

Rockhampton

+61 7 4922 5855

Sydney: Level 7

+61 2 8216 5111

Spring Hill

+61 7 3833 9333

Currency House

Sunshine Coast Toowoomba

+61 7 5479 2757 +61 7 4639 1277

Sydney: Grosvenor Place

+61 2 8215 5000

Townsville

+61 7 4725 5787

Sydney Reynolds

+61 2 9373 4452

Securities Wollongong

+61 2 4227 3022

+61 2 6232 4999

+61 8 8981 9555

Tasmania Hobart

+61 3 6236 9000

Disclaimer The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual’s relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so. Those acting upon such information without advice do so entirely at their own risk. This report was prepared as private communication to clients of Morgans and is not intended for public circulation, publication or for use by any third party. The contents of this report may not be reproduced in whole or in part without the prior written consent of Morgans. While this report is based on information from sources which Morgans believes are reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect Morgans judgement at this date and are subject to change. Morgans is under no obligation to provide revised assessments in the event of changed circumstances. This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment whatsoever.

Disclosure of interest Morgans may from time to time hold an interest in any security referred to in this report and may, as principal or agent, sell such interests. Morgans may previously have acted as manager or co-manager of a public offering of any such securities. Morgans affiliates may provide or have provided banking services or corporate finance to the companies referred to in the report. The knowledge of affiliates concerning such services may not be reflected in this report. Morgans advises that it may earn brokerage, commissions, fees or other benefits and advantages, direct or indirect, in connection with the making of a recommendation or a dealing by a client in these securities. Some or all of Morgans Authorised Representatives may be remunerated wholly or partly by way of commission.

Regulatory disclosures Analyst owns shares in the following mentioned company(ies): -

Recommendation structure For a full explanation of the recommendation structure, refer to our website at http://www.morgans.com.au/research_disclaimer

Research team For analyst qualifications and experience, refer to our website at http://www.morgans.com.au/research-and-markets/our-research-team

Stocks under coverage For a full list of stocks under coverage, refer to our website at http://www.morgans.com.au/research-and-markets/company-analysis/ASX100-Companies-under-coverage and http://www.morgans.com.au/research-and-markets/company-analysis/EX-100-Companies-under-coverage

Stock selection process For an overview on the stock selection process, refer to our website at http://www.morgans.com.au/research-and-markets/company-analysis

www.morgans.com.au If you no longer wish to receive Morgans publications please contact your local Morgans branch or write to GPO Box 202 Brisbane QLD 4001 and include your account details. 12.12.17

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