Australia│Equity research│August 26, 2016

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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Weekly Watch Key movements

SOURCE: IRESS

Weekly wrap Global stocks slid slightly lower on mixed data over the week as markets awaited clues on the course of US monetary policy and an assessment of the US economy. Weakness in US energy stocks was partially offset by solid housing market data providing evidence that the US economy may be picking up momentum. Locally, Australian share markets ended another heavy week of reporting season to close relatively unchanged although the lack of major index movements disguised some relatively choppy results. The XJO closed 11 points down to 5516.

Calls to action

Megaport Limited - We reinstate coverage on MP1 with an Add recommendation and

A$2.81 price target, following the recent capital raising. MP1 has: 1) completed two highly significant acquisitions which fast-track their European rollout, 2) signed deals with major data centre operators, and 3) in our view, capitalised the business sufficiently to see it through to becoming cash generative. In our view, these deals collectively cement MP1’s position as the global leader in software defined networking. They now have the largest physical footprint and having won the race for coverage should be best placed to attract paying customers which should, in turn, secure marketplace dominance. Click here for more... The Star Entertainment Group - Strong inbound tourism will continue to help drive

revenues with Star now taking a more active role in seeking to capture tourist gambling spend at its casinos. Ongoing upgrades at The Star and Jupiters will provide an improved customer experience, and coupled with increased marketing, will drive domestic market revenues. A strong balance sheet (ND/Equity of 23% at end-FY16) and healthy cash generation should enable Star to fund all future capex requirements internally. The Queen’s Wharf project is a key longer-dated value driver once Crown Sydney is up and running and will drive a substantial increase in visitation to the company’s Brisbane casino. We initiate coverage on Star with an Add rating and A$6.90 target price. Click here for more...

South32 Limited - S32 continues to impress with its exceptional bottom-of-the-cycle

FCF performance and superior strategy of maintaining balance sheet strength. While not exposed to any of our preferred commodity exposures, S32 has flexed its portfolio of mature assets to post impressive returns. S32 finished FY16 with net cash of US$312m. After updating for the detailed FY16 result, our price target increases to A$2.42 (from A$2.00) primarily driven by lower forward capex estimates. S32 offers substantial leverage to a recovery in commodities without the financial risk held by some of its peers. Add maintained. Click here for more...

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S&P ASX200 (5516)

Nasdaq (5212)

S&P 500 (2172)

Dow Jones (18448)

FT 100 (6817)

Research summary p 2

Stocks going ex div p 16

Current takeovers p 17

www.morgans.com.au

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Digital update – Morgans online

Morgans Blog – highlights

Bellamy’s (Belinda Moore) A long term growth story: https://www.morgans.com.au/Blog/2016/August/Sydney-Airport.aspx

Cleanaway Waste Management (Nathan Lead) Room for growth: https://www.morgans.com.au/Blog/2016/August/Cleanaway-Waste-Management.aspx

Healthscope (Derek Jellinek) A core portfolio holding https://www.morgans.com.au/Blog/2016/August/Healthscope.aspx

For more updates and analysis from our Research Team visit the Morgans Blog: http://www.morgans.com.au/Blog

Morgans Video – highlights

The Star Entertainment Group – we initiate with an Add recommendation (James Lawrence): https://www.youtube.com/watch?v=bNYFNXf06Dk

For more of our video updates subscribe to the Morgans YouTube channel:

https://www.youtube.com/channel/UC6SsLk01FkU4paURKnQ03Qg

SOURCE: Morgans

Notes released this week

SOURCE: MORGANS RESEARCH. Priced at COB

Large C ap

AM C Amcor HOLD 16.38 16.66 20.0 3.5%

APA APA Group HOLD 9.52 8.95 41.8 4.6%

ASX Aust Securities Exchange REDUCE 51.32 43.77 22.8 3.9%

BAL Bellamy's Australia ADD 13.96 16.65 23.6 1.3%

BKL Blackmores HOLD 129.00 136.35 18.5 3.5%

CM W Cromwell Property Group HOLD 1.04 1.04 12.1 7.9%

DUE DUET Group REDUCE 2.67 2.14 48.6 6.9%

FLT Flight Centre Travel HOLD 37.34 36.75 14.8 4.2%

M PL M edibank HOLD 2.74 2.60 18.7 4.0%

OSH Oil Search ADD 6.91 8.92 24.2 1.8%

STO Santos HOLD 4.48 4.72 14.9 0.0%

SEK SEEK ADD 15.99 17.05 27.3 2.2%

S32 South32 ADD 2.00 2.42 22.1 1.8%

VOC Vocus Communications HOLD 8.01 8.84 20.8 2.3%

WPL Woodside Petro leum HOLD 29.68 28.00 13.0 6.1%

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360 Capital Grp (A$0.92) ADD TP A$1.04 Transition complete

TGP’s FY16 result was in line with expectations with 95% of earnings underpinned by recurring income streams signaling its successful transition to a pure fund manager and co-investor. FY17 “business as usual” guidance comprises EPS of 6.8-7c and DPS of 6.5c. FUM stands at A$1.48bn across nine vehicles as well as co-investments of A$224m. The focus remains on growing listed funds. We retain our Add rating with a revised A$1.04 price target. Click here for more...

Amcor Limited (A$15.99) HOLD TP A$16.66

Moving on from Venezuela

AMC’s FY16 result was better than we expected driven by acquisitions, solid organic growth in both developed and emerging markets and good cost control. AMC has guided to higher constant currency earnings in FY17 (Morgans +6%). FY17F EBIT rises 3% to US$1,133m. Upgrade to Hold rating (from Reduce) on an increased A$16.66 target price. Click here for more... APA Group (A$9.25) HOLD TP A$8.95 Conservative DPS guidance with FY16 result

The FY16 result was unsurprising, given the stability of the business and the track record of hitting guidance targets. Company guidance indicates EBITDA growth of 7-8.5% and 5% DPS growth for FY17. Our forecasts are in the middle of the EBITDA guidance range (thus down 1%) and 0.5 cps above the 43.5 cps guidance. APA discussed its targeted areas for deploying growth capital (~$1.5bn) over the next three years, which includes renewables and international investment. Our target price has decreased 11 cps to $8.95 ps, due to minor declines in earnings forecasts. HOLD retained. Click here for more...

A.P. Eagers Limited (A$11.82) HOLD TP A$12.70 The consistent performers

APE delivered a strong 1H16 result (NPAT +11%) despite an exceptionally strong pcp which was boosted by SEQ hail storm activity. 2H16 will benefit from three recent acquisitions which will contribute 18% revenue growth alone (assuming a steady pcp). We continue to believe that Carzoos has the potential to be a significant earnings growth driver in coming years as APE utilises prominent shopping centre locations, technology and its large used car inventory. Click here for more...

APN Outdoor Grp (A$5.28) HOLD TP A$5.44 Soft trends ahead

APN Outdoor reported a weaker-than-expected first half, with revenue and NPAT well below analyst forecasts. Weakness in New Zealand, a pull-back in installation revenues, a collapse in low-margin point-of-sale print revenues and weakness in demand for static billboards all contributed to the downside surprise. APO warned that conditions in the second half were looking soft and downgraded full-year revenue and EBITDA guidance. We have reduced our forecasts to reflect guidance. Our DCF valuation drops to A$5.63 per share (from A$7.13/share). Our price target – set as an average of DCF valuation, PE multiple and EV/EBITDA multiple – falls to A$5.44 per share from A$7.38 per share. Click here for more...

Ardent Leisure Group (A$2.85) ADD TP A$3.30 Entering a long-term growth phase

AAD’s FY16 result beat Morgans (by 8.8%) and consensus forecasts by some margin with all divisions delivering solid growth above our expectations. The Health Clubs divestment is a clear positive and positions the group well to fund an accelerated Main Event centre rollout for several years (from 27 to 200 centres). Importantly, the DRP should now be removed which will allow profit growth to flow through to EPS more directly, something we haven’t seen in years. AAD has made a series of positive announcements which should set the

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group up well to deliver strong earnings growth over the medium-long term. Add rating maintained; A$3.30 PT. Click here for more...

Ardent Leisure Group (A$2.55) ADD TP A$2.73 Re-directing capital

We believe AAD’s proposed exit from both its Health Club and Marina businesses makes sound strategic sense. While the true quantum of retained capital is difficult to determine at this stage, the balance sheet repair to occur from the exits is significant. The next catalyst for the stock involves a well-articulated capital reallocation strategy from the Board (which hopefully largely relates to accelerating the Main Event rollout). We remain wary of the performance of Main Event at the upcoming FY16 result (high likelihood of negative constant centre revenue growth). Based on assumptions around retained capital from the sales, our SOTP valuation increases to A$2.73 (from A$2.36 DCF/SOTP previously). Click here for more...

Asia Pacific Data (A$1.62) HOLD TP A$1.54 Solid data

AJD delivered no surprises with the result with revaluations recently announced boosting the portfolio value to A$187m (6.95% WACR). NTA stands at A$1.43. 1H17 distribution guidance of 4.86c has been provided which is in line with our expectations. Market reviews are held every five years with the first market review due in December 2016 (M1 asset) followed by S1 and P1 in December 2017. We retain our Hold rating with a revised A$1.54 price target. Click here for more...

ASX Limited (A$51.51) REDUCE TP A$43.77 Stable performance but expensive

ASX’s FY16 NPAT of A$426m was 1% above Bloomberg consensus and up ~6% on the pcp. ASX continues to work towards a final investment decision on whether to replace CHESS with Distributed Ledger Technology by the end of FY17. We lift our ASX FY17/FY18 forecast EPS by ~1%. We view ASX as expensive trading at 22x FY17F PE and at a 37% premium to the All Ordinaries Index. Move to Reduce recommendation (from Hold) and a A$43.77 price target (from A$40.23). Click here for more...

Automotive Holdings (A$4.82) ADD TP A$5.20 Closer to unlocking significant value

AHG’s FY16 result showcased further outperformance by the key Automotive division while Cold Logistics continues to disappoint. There has been a clear change in messaging about the future of the Cold Logistics business with management indicating the business could be non-core in the future – a key catalyst in our view. Despite the recent share price re-rating and dilutionary impact of the capital raising, we continue to see material upside to the current valuation. Add rating maintained and A$5.20 PT. Click here for more...

Bega Cheese Ltd (A$6.76) HOLD TP A$6.20

Strong result considering…

BGA’s FY16 result was marginally below our forecast. However delivering 32.6% NPAT was impressive compared to peers but also reflected its different and more defensive business model and the benefits of having Bellamy’s as a key customer. Global dairy prices appear to be recovering, albeit off a low base. While BGA may not have as much leverage to rising dairy prices as some of its peers, we still expect solid earnings growth from the company over coming years. BGA has a great business however we struggle with its valuation (trading on an FY17F PE of 29.0x) for a company that generates an EBITDA margin of only 5.5% and ROE of 8.9%. Click here for more... Bellamy's Australia (A$13.50) ADD TP A$16.65 Investing but still strong growth

Despite the 2H16 being a period of investment, BAL reported an impressive FY16 result which surprised on the upside (16% NPAT beat for us). The result demonstrated that BAL can successfully manage regulatory change in China

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and in fact can be a beneficiary of it. There will be further investment in FY17 as BAL is focused on building a business that can become a world leader in organic infant nutrition and sustain a long term growth profile. With increased organic ingredients, a new manufacturing agreement to produce far greater volumes, strong demand for its products and a full year of price rises, we believe BAL is capable of delivering at least 59% NPAT growth in FY17. We reiterate our Add rating and A$16.65 price target. Trading on an FY17F PEG of only 0.4x, we believe BAL is attractively priced for its growth profile. Click here for more...

Blackmores Limited (A$129.50) HOLD TP A$136.35 Short term earnings uncertainty

Without a doubt, FY16 was an exceptional year for BKL (115% NPAT growth). However the result has been overshadowed by a weaker 4Q16 and 1Q17 due to China regulatory changes, resulting in high inventory level. We have consequently revised our forecasts however stress that short earnings uncertainty remains high. While BKL is a strong brand that is leveraged to favourable industry dynamics, given its premium multiple, we retain a Hold rating while there is short term earnings uncertainty. Click here for more...

Blue Sky Limited (A$7.58) HOLD TP A$8.50 Handing over the baton

BLA announced FY16 NPAT of A$16.3m, up 57% on the pcp. The result was driven by AUM +57%; management fees +27%; and performance fees +113%. Overshadowing the result was the announcement of Mark Sowerby’s (MD) retirement. Whilst the timing was unexpected (to us), we believe BLA has a strong and deep leadership team taking the business forward. BLA continued to experience very strong AUM momentum over 2H16, with institutional AUM up 180% (A$525m from A$187m in Dec-15). We estimate a further ~A$300m+ of institutional AUM is mandated but not deployed as yet. We believe BLA is positioned for continued strong AUM growth over FY17/18 supported by its deal pipeline; strong early traction in attracting institutional AUM; and a strong macro backdrop. We maintain our Hold based on valuation. Click here for more...

Cedar Woods Prop. (A$5.11) ADD TP A$5.62

Foundation for medium-term growth

CWP reported FY16 NPAT of A$43.6m, up 2.4% on the pcp and slightly (1.4%) ahead of guidance. CWP guided for FY17 earnings to be similar to FY16, supported by a solid level of pre-sales (total pre-sales +20% on the pcp). Despite a relatively flat outlook (and earnings growth pushed out again), CWP has a very strong development pipeline, which is well placed to deliver meaningful medium-term growth. We retain an Add recommendation. CWP presents long-term value (trading ~10% below the market value of its assets); has relatively high medium-term earnings certainty given its pre-sales profile; has a very high quality project pipeline; and a reliable ~6% yield. Click here for more... Cleanaway Waste Ltd (A$1.04) ADD TP A$1.13 Performance improvement evident in FY16

The FY16 result beat our expectations. 2H16 margins, small scale M&A, and contract wins (albeit with an oil price headwind) support improved earnings into FY17. This is indicated by the company outlook. We have made material upgrades to our forecasts which have driven a 36 cps increase in our target price to $1.13ps. Although the share price has rallied, we think there is more to it. Upgrade to ADD. Click here for more...

Cromwell Prop (A$1.06) HOLD TP A$1.04

Taking a conservative approach

CMW’s FY16 result was ahead of guidance driven by a full year’s contribution from Valad Europe; transactional fees; and its maiden IOF distribution. FY17 “business as usual” guidance has been provided and comprises operating EPS of not less than 8.4c with distributions expected to be no less than 8.34c. We

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note guidance does not assume any transactional income and takes into account the expected lower property income due to asset sales; current lease expiries; and ongoing uncertainty in the UK post Brexit. We retain our Hold rating with a revised price target of A$1.04. Click here for more... Data#3 Limited (A$1.43) ADD TP A$1.35 Double digit growth in 6 out of 7 states

DTL reported another big year with FY16 EPS up 30% yoy and DPS up 27%. It was a high quality result with growth across all segments as DTL takes market share in the legacy business and in the cloud world. DTL’s transition to an “as a service” business is progressing smoothly and DTL reported double digit revenue and gross profit growth across the board. A record dividend and positive outlook bode well for FY17. We have upgraded our FY17 EPS forecast by 10% and retain our Add recommendation Click here for more...

Duet Group (A$2.61) REDUCE TP A$2.14 Medium-term headwinds remain

The FY16 result was broadly in-line with our EBITDA forecast. Distribution guidance/targets are unchanged – 18.5c for FY17 and 19.0 for FY18. Our target price has increased by 10 cps to $2.14ps. We downgrade from HOLD to REDUCE, given share price strength and our concerns about medium-term DPS support and fundamental valuation of the DBP. Click here for more...

Ebos Group Ltd (NZ$17.19) ADD TP NZ$18.60

Sustainable growth expected

EBO posted a record result for FY16 and exceeded our forecast. Highlights include a substantial increase in dividends and strength across all operating divisions. Growth will come from extracting further operating efficiencies, a full year contribution from recent acquisitions and a proposed merger with the Terry White Group of pharmacies and its own Chemmart brand. No changes to forecasts although higher long term growth rates result in an uplift in valuation to NZ$18.60 from NZ$16.34. Click here for more... Empire Oil & Gas (A$0.34) ADD TP A$0.71 Debt re-fi sorted, now to Red Gully North-1

EGO is looking to undertake the remediation and testing of the Red Gully North-1 well which drilled in late 2015. Mineral Resources (MIN) bought a 19.36% holding EGO from ERM Power (EPW) (and associated holders) at A$0.45/share. Additionally MIN has provided EGO with a A$15.1m debt facility to repay the soon-to-mature EPW facility. Farm-out discussions are ongoing with potential parties and the imminent production at the Waitsia Gas Project and Origin Energy should result in increased interest in the Perth Basin. Retain Add recommendation on a slightly reduced SOTP-based target price of A$0.71. Click here for more...

ERM Power Limited (A$1.06) HOLD TP A$0.99

Devil’s in the detail

On the face of it, the FY16 EBITDA was in-line with our forecast, with reduced earnings from Oakey power station causing a 13% decline in EBITDA. The FY17 outlook was also unchanged. The change to accounting treatment of US broker costs indicates FY16 EBITDA guidance was missed and the outlook for USA costs has weakened. We have downgraded our earnings and cashflow forecasts. Our target price has reduced 12 cps to 99 cps. HOLD retained. Click here for more... Eureka Group Ltd (A$0.79) HOLD TP A$0.84 Partnered up

EGH continued to show significant growth on the pcp with strong acquisition rates through the year complementing full year contributions from FY15 village acquisitions. Aggressive acquisition strategy remains intact with significant partnership and brownfield development opportunities arising. We forecast strong cashflows through Terranora redevelopment in FY17/18. We have made small upward revisions to our occupancy rates and acquisition forecasts and,

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as such, our price target increases to A$0.84 (from A$0.72) although our recommendation moves to Hold (from Add). Click here for more...

Factor Therapeutics Ltd (A$0.05) ADD TP A$0.063 A new beginning

FY16 loss included an impairment of inventory, however the business is well funded to run key clinical trials. No changes to forecasts however terminal growth rate increased. Multi-centre Phase II clinic trial is key to driving share price. Add recommendation maintained. Click here for more...

Flight Centre Travel (A$36.23) HOLD TP A$36.75

Short term pain, for long term gain?

FLT’s FY16 result was in line with its recent downgrade. Despite strong top-line growth, increased costs impacted the bottom line. This investment is expected to result in a stronger business over the medium-to-longer term. While FLT usually provides earnings guidance for the new financial year, given the uncertain outlook, this has not occurred this year. We now forecast a flat FY17 result but note this is not without risk given volatile trading conditions. Given earnings uncertainty remains, we retain a Hold recommendation. Click here for more... GBST Holdings (A$4.06) ADD TP A$4.95 Increasing UK presence

GBST has reported a full year result slightly below management’s guidance (pre-Brexit), but above our forecast. Operational EBITDA was 18% lower to $20m. This implies $11.5m for the second half, slightly below guidance of A$12-14m but above our forecast of A$9.5m. After restructuring and other non-operating costs of $2.8m, reported EBITDA was A$17.2m. Adjusted NPAT (plus investment amortization) of $13.4m, was above our forecast of $13.1m. Revenue declined 5% to $108.1m from $114.3m, reflecting later than anticipated project starts, reduced services revenue and adverse fx impacts. After slight changes post the FY16 result our DCF valuation has increased from $5.22 to $5.40. Our Price target of $4.95 (previously $4.96) is based on an average of our FY17 EV/EBITDA valuation and the DCF. We maintain our ADD recommendation. Click here for more...

Generation Healthcare REIT (A$2.09) HOLD TP A$2.08 In good health

GHC has reported strong operating profit underpinned by new acquisitions, underlying rental growth and completed projects. FY17 guidance has been provided and comprises underlying net operating income of 10.21c and DPU of 8.973c. The pipeline of projects remains on time and budget. We retain our Hold rating with a revised price target of A$2.08. Click here for more...

GWA Group Ltd (A$2.68) HOLD TP A$2.57 Taking care of business

GWA reported FY16 earnings that were ahead of Morgans’ expectations. The result was driven by 3% revenue growth and cost reduction. Bathrooms & Kitchens EBIT +1.6%, Door & Access Systems EBIT +1.4%. We increase FY17F EBIT by 3.3% to A$80.3m. Hold rating maintained on an increased A$2.57 target price (from A$2.28). Click here for more...

IDT Australia Ltd (A$0.23) ADD TP A$0.44 Building for better

IDT reported a higher net loss than our forecast although stronger 2H sales is a good sign that the core business is strong. Forthcoming commercialisation of generics supports sales growth, although a staggered release and revenue timing may push out profit share to FY18. We have reduced our price target although maintain an Add recommendation. Click here for more...

ImpediMed Limited (A$1.60) ADD TP A$2.13 A big year expected

IPD’s FY16 result was broadly in line with our forecasts. We have rebased our

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operating costs, which sees a higher loss in FY17 and a lower profit in FY18. However, these changes are marginal with the main game being the commercialisation of the BIS technology. The launch of the next generation product has broad applications in the wellness and heart failure market, a potential game changer. Click here for more...

Industria REIT (A$2.20) HOLD TP A$2.18 Making progress

FY16 saw IDR reposition itself with a new Fund Manager, asset sales and improved leasing success at its key Brisbane asset. Looking forward, IDR has provided FY17 guidance comprising DPS of 15.6c and FFO per security of 17.5-17.7c. The key focus remains on dealing with upcoming lease expiries with proceeds from near term assets sales to provide capacity for potential acquisitions. We retain our Hold rating with a A$2.18 price target. Click here for more...

Ingenia Group (A$2.88) ADD TP A$3.10 More growth to come

INA’s FY16 result was in line with our expectations with underlying NPAT up +20% on the pcp (EPS +9%). The key Lifestyle & Holiday (L&H) result increased by 96% underpinned by significant acquisition activity and strong momentum in new development settlements (107 in FY16 vs 52 in FY15). The DMF portfolio divestment is ongoing, with discussions still in progress with interested parties. Add rating maintained; A$3.10 target price. Click here for more...

Insurance Australia (A$5.82) HOLD TP A$5.31 Much better than peers but still pressures

IAG’s FY16 insurance profit of A$1,178m was ~3% below Bloomberg consensus. The 2H16 underlying insurance margin (13.7%) was down 0.5% on 1H16 (14.2%) and showed the impact of pricing pressure in the Business Division and NZ. Capital metrics are now at the bottom/slightly below management target ranges, post the final dividend and buyback. We don’t believe further capital management is certain in FY17. We downgrade FY17/FY18 forecast NPAT by 2-3%. With think IAG’s ~17x FY17F PE multiple is expensive and move to a Reduce recommendation and SOTP-based PT of $5.10 (from A$5.31). Click here for more...

Japara Healthcare Lt (A$2.38) ADD TP A$2.97 A slower march forward

JHC posted a result lower than we and the market had expected. The outlook commentary suggests a more cautious stance is needed. While the underlying demand and supply fundamentals remain intact, changes to government funding is still hard to quantify post FY18. We maintain the Add recommendation on valuation grounds, however we have lowered our target price and recognise the growth profile is lower than we had expected. Click here for more...

Lovisa Holdings Ltd (A$2.91) HOLD TP A$3.07 UK gets the green light

LOV’s FY16 result met our expectations and guidance. FY16 saw a divergent P&L performance with revenue +14.3% while EBITDA and NPAT fell by 1.7% and 6%, respectively. The Gross Margin appears to have stabilized and while further UK and management investment is required into FY17, the FX loss absorbed in FY16 should not reoccur. Despite a short pilot phase, the LOV Board has enough confidence to push forward with a meaningful store rollout in this region. The UK continues to pose the greatest growth and valuation driver looking forward. We await further evidence of successful UK trading over the course of the next 3-6 months. In the meantime, we believe a 16.1x FY17F PE represents fair value. Click here for more...

Mantra Group Ltd (A$3.30) HOLD TP A$3.60 CBD taking a holiday

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MTR’s FY16 result came in at the top end of guidance, with underlying NPAT growth of 21%. However, an impressive Resorts performance was somewhat overshadowed by a weak CBD result. The mid-point of FY17 guidance was slightly below consensus estimates. With a track record of upgrading guidance at the half year, our forecasts are at the upper end of guidance. We also expect further property acquisitions. Following the result, we have made minor changes to our forecasts and our price target has fallen to A$3.60. With MTR trading on an FY17F PE of 18.8x and in line with peers, we maintain a Hold recommendation. Click here for more...

Medibank Private Ltd (A$2.84) HOLD TP A$2.60 Margins excellent but top-line still weak

MPL's FY16 NPAT (A$418m) was 3% above Bloomberg consensus. FY16 Health Insurance (HI) top line growth was the result disappointment at 4% below guidance of 4.5-5%. While cost performance is strong, FY16 HI gross profit margins (16.2%) are significantly above MPL’s previous five-year average (14.7%). We downgrade FY17/18 EPS by 1-3%. Our SOTP-based price target is lowered to A$2.60 and we maintain our Hold recommendation Click here for more...

Megaport Limited (A$2.28) ADD TP A$2.81 Got the coverage and customers coming next

We reinstate coverage on MP1 with an Add recommendation and A$2.81 price target, following the recent capital raising. MP1 has: 1) completed two highly significant acquisitions which fast-track their European rollout, 2) signed deals with major data centre operators, and 3) in our view, capitalised the business sufficiently to see it through to becoming cash generative. In our view, these deals collectively cement MP1’s position as the global leader in software defined networking. They now have the largest physical footprint and having won the race for coverage should be best placed to attract paying customers which should, in turn, secure marketplace dominance. Click here for more...

MG Unit Trust (A$1.30) ADD TP A$1.45 Time to have another look

The FY16 result was in line with recently downgraded guidance. FY17 guidance has been maintained. While the 2016/17 season will be a tough period for dairy farmers and MG, with management proactively making changes for the better (cost out, reducing working capital, capex and net debt) and global dairy prices now starting to improve, we expect strong profit growth in FY18. While there is still a lot of work to be done to restore MG’s reputation and financial position, we believe that its strategy is right and can see through to better times ahead. We move to an Add recommendation and A$1.45 price target. MG also offers unitholders an attractive distribution yield of 5.8% fully franked. Click here for more...

Monadelphous Group (A$8.99) HOLD TP A$7.93 Still feeling the construction downturn

MND’s FY16 result was broadly in line with our expectations. The result showed market conditions continue to be difficult with pressure on revenue and margins. MND has not provided formal FY17 earnings guidance. However, the company expects resources and energy markets to remain challenging with the outlook for maintenance and industrial services more positive. Changes to earnings forecasts see FY17F EBITDA fall 13% to A$87.7m and FY17F underlying NPAT decrease 15% to A$48.1m. While we do not see an improvement in the operating environment over the next 12 months, in our view we are getting closer to the bottom of the resources cycle. As such we move our recommendation back to a Hold (from Reduce). Despite earnings downgrades, our price target (DCF, EV/EBIT) lifts to A$7.93 (from A$5.56) on the back of appreciating peer multiples. Click here for more...

Nextdc Limited (A$3.89) HOLD TP A$4.22 A maiden profit and outlook for 75% growth

FY16 EBITDA was up 246% yoy and NXT reported NPAT of A$1.8m. NXT’s

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FY16 result was at the upper end of guidance and guidance for FY17 EBITDA of A$46-50m (up 75% on FY16) was ~3% ahead of market expectations. Our valuation increases slightly from A$4.12 to A$4.22 and the outlook for NXT is bright, in our view. However, following a strong share price run we move to a Hold recommendation, for now. Click here for more...

NIB Holdings Limited (A$4.44) HOLD TP A$4.39 More cautious than expected on FY17

NHF’s FY16 operating profit (UOP) of A$132m was in the middle of management's target range (A$125m-A$135m). Overall the result was reasonable in our view, with a strong Australia Residential Health Insurance (AHRI) business performance. However FY17 UOP guidance (A$130m-A$140m) is flat on FY16 (A$132m) and implies some expected ARHI net margin compression. Maintain Hold Recommendation on a revised A$4.39 price target. Click here for more...

Oil Search Ltd (A$7.38) ADD TP A$8.92 Value upside from growth

A good 1H16 result from OSH with EBITDAX and operating cash flow in line with our estimates, while NPAT trailed on higher-than-expected D&A and tax. OSH confirmed that landowners and government representatives had signed an agreement for benefits and a way forward. FY16 production guidance maintained at 28-30mmboe (expected to come in at the upper end of the range). We have made minor adjustments to our numbers post the result. No change to our view. OSH remains our key sector pick. Click here for more...

Origin Energy (A$5.56) ADD TP A$6.60 Debt tracking well

A reasonable result, although underlying NPAT did come in below our expectation. ORG has suspended its dividend, instead opting to cut debt faster. ND/EBITDA of 5.4x for FY16 remained elevated, although a successful start-up of APLNG T2 could see this multiple improve sharply. Energy markets continue to impress, accounting for most of ORG’s EBITDA in FY16. We expect margins to continue to improve. We have reduced our SOTP-valuation derived price target to A$6.60 (from A$6.65). Click here for more...

Pact Group Holdings Ltd (A$5.93) HOLD TP A$6.13 Staying focused on growth

PGH’s FY16 result was broadly in line with our expectations driven mainly by acquisitions and cost out, partially offset by lower volumes. Australia EBIT was up 10.8% to A$95.6m while International EBIT grew 1.1% to A$66.8m. We increase group FY17F EBIT by 2% to A$177.9m. We maintain our Hold rating on PGH on an increased A$6.13 target price. Click here for more...

Perpetual Limited (A$48.83) HOLD TP A$46.75

Needing to prove up growth strategy

PPT's FY16 underlying NPAT of A$128m was 2.5% above consensus (A$125m). The performance of the Corporate Trust (CT) business was the main positive from the result in our view. The main negative being some margin compression in both Perpetual Investments (PI) and Perpetual Private (PP) particularly in 2H16. We lift FY17/FY18 forecast EPS by 1-2%. Maintain Hold recommendation with a A$46.75 price target. Click here for more... Qube Holdings Ltd (A$2.65) HOLD TP A$2.58 Weak FY16. Moorebank value remains

The 2H/FY16 result was weak, as we had expected. Contract terminations in previous periods, weakened sales, cost control, and AIO impacts were features of the result. Management expects underlying earnings growth in FY17, assisted by the sale of the Asciano stake. We have increased our underlying EBIT forecast by 2% in FY17 and reduced our FY18-20F EBIT by 1-4%. Our target price has reduced 11 cps to $2.58 ps. HOLD retained. Click here for more...

Australia│Equity research│August 26, 2016

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Range International (A$1.52) ADD TP A$1.73 Plastic Fantastic

RAN is a unique plastic pallet manufacturer that is able to produce pallets out of 100% mixed waste plastic at a price competitive to wood pallets. Wood pallets consume a significant amount of the world’s cut timber every year. RAN’s pallets are more environmentally friendly – not only do they help reduce waste plastic globally, but they also aid in the reversal of ongoing deforestation. We believe RAN has significant growth potential by displacing wood pallets and increasing the penetration of plastic pallets globally. We initiate coverage of RAN with an Add rating and A$1.73 target price. Click here for more...

RCG Corporation Ltd (A$1.57) ADD TP A$1.92

Backing management

A strong FY16 result was somewhat overshadowed by a relatively soft trading update for the first eight weeks of FY17. The competitive pricing pressure which impacted TAF in July has since eased, while the softness in Hype should normalise as further exclusive products hit stores and delivery delays are resolved. Despite the softer start to the FY, this conservative management team has maintained FY guidance, which speaks volumes in our view. We see value at current prices, but acknowledge some patience is now required until upcoming trading updates reveal an acceleration in lfl sales momentum. Click here for more... Redbubble Limited (A$1.14) ADD TP A$1.62 Nice finish to FY16

Global art marketplace operator Redbubble has re-affirmed guidance for FY17 following a better-than-expected outcome for FY16. RBL reported an underlying EBITDA loss from operations of A$8.7m, which was A$1.5m better than prospectus forecast and comfortably better than our forecast. All other key metrics – gross transaction value, conversion rate, net revenue and gross margin – were in line with or better than prospectus. Guidance for FY17 in the recent prospectus was for an EBITDA loss of A$1.3m. Currency movements since the IPO have increased the odds of meeting or beating guidance. Our mid-point valuation and price target of A$1.62 per share is unchanged. Our ADD recommendation is maintained. Click here for more... Reliance Worldwide (A$3.26) HOLD TP A$3.15 The highs and Lowe’s

RWC has signed an agreement with Lowe’s in the US to supply its ~1,700 stores with RWC’s SharkBite PTC fittings and related products. Due to the agreement with Lowe’s, RWC has lost its exclusivity agreement with its largest customer, The Home Depot. We make no changes to earnings forecasts. Hold rating maintained. Click here for more...

Rhinomed Ltd (A$0.02) ADD TP A$0.06 Right under our noses

RNO posted a FY16 net loss which was higher than our forecast. The main reason relates to a higher level of marketing spend as the key products are launched in new geographies. We have made only minor changes to our forecasts. After adjusting for the capital raising during the period, our valuation has been revised down marginally. New global distribution partners have set the scene for an exciting FY17. The quarterly sales run rate is pleasing. We maintain our Add recommendation, noting the stock is suitable only for investors with a higher risk appetite. Click here for more...

Rhipe Ltd (A$0.85) ADD TP A$1.11 240% EBITDA growth in FY17 = look closer

RHP’s FY16 result was technically in-line with our expectations but operating results were weaker, due to a poor performance for the services business, which has now been rightsized. Costs were rebased in 2H16 and FY17 operating costs are on a tight leash, which means that RHP’s impressive growth in revenue and gross profit should flow through to heathy profit in FY17. The Board has guided to reported EBITDA in excess of A$5m, up 240% yoy

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and underlying EBITDA in excess of A$8m. Lower earnings and a revised valuation methodology result in our target price declining from A$1.89 to A$1.11. We retain our Add recommendation and believe recent share price weakness provides a compelling buying opportunity. Click here for more...

Santos Ltd (A$4.52) HOLD TP A$4.72 Focus on de-leveraging

A better 1H16 result than we expected with an underlying NLAT of –US$5m (vs Morgans –US$125m), although free cash flow remained negative for the half. Depressed profitability has put GLNG’s ramp-up rate at risk with reduced capital being invested in CSG field development. STO suspended its dividend after reporting an underlying loss. With STO’s profitability back on firmer ground, we change our price target basis from a blended spot/base case valuation to simply our base case SOTP valuation. Following the 1H16 result, and a review of our modelled assumptions, we have lowered our DCF valuation to A$4.72 (from A$5.79). Click here for more...

Seek Limited (A$16.36) ADD TP A$17.05 On track for growth

SEEK reported adjusted underlying NPAT of A$198m (pre start-up losses), in line with guidance and slightly above our forecast. The company maintained guidance for FY17 of adjusted underlying NPAT of A$215m-A$220m (pre start-up losses). Strength in the Australian and Asian employment business continues to offset weakness in Education and Brazil. Our DCF valuation decreases marginally to A$17.39/share (from A$17.67). Our price target – set by DCF valuation and EV/EBITDA multiple - lifts to A$17.05/share (up from A$16.89/share). Our ADD recommendation is maintained. Click here for more...

Senex Energy Limited (A$0.26) ADD TP A$0.31 A solid foundation for growth

SXY plans to spend A$60-70m on exploration in FY17 which will be a sharp increase on the A$26m spent in FY16. We believe the market is keenly awaiting the recommencement of oil drilling activities in the Cooper Basin. Further unconventional gas exploration and testing in the Cooper Basin will occur with costs being paid by Origin Energy. Activity at the Western Surat Gas Project will ramp up over the year ahead with a phase 1 appraisal program planned. With plenty of catalysts on the horizon we retain an Add recommendation and A$0.31 target price. Click here for more...

Seymour Whyte Ltd (A$0.72) ADD TP A$0.91 Nearly at the end of problem contracts

SWL’s result came in line with previous guidance with FY16 being weighed down with problem contracts. While we expect improvements in the underlying performance for SWL in FY17, we believe it will be a 2H story. The 1H will continue to be weighed down with the closure of problem contracts and higher tendering costs which will set up the order book for FY18. We might be early, but we have moved our rating back to an Add (from Hold). With the stock trading on a EV/EBITDA of 2x in FY17 and offering investors exposure to NSW infrastructure spend we believe SWL looks good value at these levels. Click here for more...

Shine Corporate (A$1.25) ADD TP A$1.46 Changing of the guard

Overall, SHJ’s result was in line with our expectations. Cashflow was the main positive, surprising on the upside at A$18.8m (A$13m in the pcp) vs our estimate of A$17.3m. Given we are forecasting reasonably benign growth through the P&L and the stock is trading on a FY17F EV/EBITDA of 4.7x, we are happy to move early and upgrade our recommendation to an Add (from Hold). We acknowledge there is still work to be done in the core business; however, we believe management has identified the issues and is putting the building blocks in place to support sustainable growth in the future. Click here for more...

Australia│Equity research│August 26, 2016

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Silver Chef Limited (A$10.40) HOLD TP A$11.05

Getting the volumes

SIV delivered a strong FY16 result (underling NPAT +20% on the pcp), driven by exceptionally strong volume growth of 63%. Volumes were led by GoGetta (+84% to A$160m) and Hospitality (+45% to A$143m). Canada continues to scale up, doubling the size of the asset book (to A$14m) and delivering A$6.6m in revenue (3% of group total). SIV expects the business can double again in FY17 and are investing accelerate the growth path. SIV’s medium to long-term growth profile remains attractive, however trading on 14.5x FY17 PE and close to our valuation, we maintain our Hold. Click here for more... Sirtex Medical (A$34.80) REDUCE TP A$20.08 What you don’t know CAN harm you

FY16 results were in line with consensus (but higher than our estimates), with double-digit earnings and sales growth, albeit FX and lower opex drove the profit uplift. Is SIRFOLX data/publication driving a meaningful uptick in US SIR-Spheres use beyond salvage mCRC? “Anecdotal evidence” says yes, hard data says no. Management expects continued double-digit dose sales growth into FY17, but the range is ambiguous and given a year of critical clinical trial readouts, we remain less sanguine that the data deluge will yield favourable results…caveat emptor. Our FY17-19 earnings estimates change modestly, with our blended SOTP/risk-adjusted DCF-based target price increasing to A$20.08. Reduce rating maintained. Click here for more...

Smartgrp Corporation (A$7.25) HOLD TP A$7.55 Bedding down

SIQ delivered a strong 1H16 result (NPATA up 45% on the pcp) driven primarily by the acquisition of ‘ASP’ in Dec-15. Implied organic revenue growth for the half of ~8% (vs 2H15) was strong, however costs were also added to scale up the business. Post bedding down all acquisitions in 2H16, we expect SIQ to deliver operational leverage and drive organic growth from its larger base. We continue to see strong growth for SIQ, with opportunities to extract synergies and organic growth from recent acquisitions still to come. In addition, further acquisitions are likely over the medium term, enabled by strong cash flow generation. We move to a Hold recommendation based on valuation, with SIQ trading in-line with our price target. Click here for more... South32 Limited (A$2.01) ADD TP A$2.42

From a position of strength

S32 continues to impress with its exceptional bottom-of-the-cycle FCF performance and superior strategy of maintaining balance sheet strength. While not exposed to any of our preferred commodity exposures, S32 has flexed its portfolio of mature assets to post impressive returns. S32 finished FY16 with net cash of US$312m. After updating for the detailed FY16 result, our price target increases to A$2.42 (from A$2.00) primarily driven by lower forward capex estimates. S32 offers substantial leverage to a recovery in commodities without the financial risk held by some of its peers. Add maintained. Click here for more... Speedcast International (A$3.83) ADD TP A$4.51 Setup for a strong 2H16

SDA’s reiterated FY16 guidance and their 1H16 results was in-line with expectations which is unsurprising considering the recent guidance update. The most noteworthy new information was: 1) gross profit margins edged slightly higher than 2H15 (contrary to what the pessimists were expecting); 2) operating cashflow was up 8.6% yoy; and 3) cash flow conversion was solid which resulted in SDA ending 1H16 with slightly less net debt than we expected. This aside there was not a lot of new information and we have made immaterial changes to our forecasts and valuation. We retain our Add recommendation, and increase our price target to A$4.51. SDA is one of our preferred picks in the telecommunications sector. Click here for more...

Australia│Equity research│August 26, 2016

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The Star Entertainment Group (A$6.00) HOLD TP A$4.00 Star shining bright

Strong inbound tourism will continue to help drive revenues with Star now taking a more active role in seeking to capture tourist gambling spend at its casinos. Ongoing upgrades at The Star and Jupiters will provide an improved customer experience, and coupled with increased marketing, will drive domestic market revenues. A strong balance sheet (ND/Equity of 23% at end-FY16) and healthy cash generation should enable Star to fund all future capex requirements internally. The Queen’s Wharf project is a key longer-dated value driver once Crown Sydney is up and running and will drive a substantial increase in visitation to the company’s Brisbane casino. We initiate coverage on Star with an Add rating and A$6.90 target price. Click here for more...

Sunland Group Ltd (A$1.65) ADD TP A$2.00 Storey time

SDG’s result was ahead of guidance, driven by higher margins. FY17 guidance will be provided at the AGM on 24 November. Near-term earnings visibility is good with contracts in hand valued at A$605m. We retain our Add rating with a revised A$2.00 price target. Click here for more...

Tassal Group Limited (A$4.14) HOLD TP A$4.00 Scaling up

TGR’s FY16 result was slightly weaker than expected. FY16 was a more challenging year for TGR due to the warm summer, in fact, it was the hottest on record. This resulted in higher costs and less than optimal supply. It was a strategically busy period with the acquisition of De Costi Seafoods. Following the result, we have made minor changes to our forecasts. Despite flat volumes and an elevated cost base, earnings growth in FY17 should reflect higher salmon prices, a better sales mix and further growth from De Costi Seafoods. In our view, TGR appears fairly priced given all the usual aquaculture risks it is subject to and we maintain a Hold recommendation. Click here for more...

Tox Free Solutions (A$2.49) REDUCE TP A$2.14 Cyclical headwinds remain

As anticipated, trading conditions remain challenging particularly around resources and manufacturing sectors. In our view, TOX will continue to be affected by the roll-off of high-volume construction contracts into lower-volume production contracts and east coast industrial work. Overall, we continue to be concerned about TOX's ability to maintain its Chevron contract at a reasonable margin (currently being renegotiated) and believe downside risk remains to FY17. If we assume the Worth acquisition is contributing its pro forma FY16 EBITDA contribution of A$12.9m in FY17, TOX’s guidance implies (at mid-point) that the core business is declining by 10.7% despite a significant improvement in corporate costs. With EPS decline and downside risk a possibility to FY17, we move our recommendation to a Reduce and our price target falls to A$2.14 (from A$2.72). Click here for more...

Vocus Communications (A$8.57) HOLD TP A$8.84 Backing up another big year

VOC’s FY16 underlying EPS were up strongly yoy and an 8c final dividend was declared. VOC had largely pre-released its numbers this so result was inline. No specific outlook commentary was provided but VOC did, pleasingly provide some dividend and capex guidance and noted integrations are tracking well. We retain our Hold recommendation and our PT declines slightly to A$8.84 Click here for more...

Watpac Limited (A$0.85) ADD TP A$0.98 Constructive cash balance

WTP reported underlying NPAT of A$8m, down 55% on the pcp and at the bottom-end of guidance. The reported result was impacted by ~A$29m (post tax) of impairments taken in 1H16. The core Contracting division (PBT down 23%) suffered from two loss making contracts (disclosed within the period), which incurred A$22.1m in losses. WTP continues to hold surplus cash levels,

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with headline net cash of ~A$233m and A$64m in surplus cash after adjusting for working capital. WTP stated the group has preserved surplus capital for “strategic growth opportunities”. We upgrade to Add. We believe WTP has the opportunity within the next 12-months to deploy their cash into accretive opportunities (acquisitions or larger JV opportunities) or alternatively return a meaningful amount back to shareholders. Click here for more...

Wellcom Group Ltd (A$5.16) HOLD TP A$4.88 Alignment with industry trends

Wellcom’s full year result was ahead of expectations with a 14% increase in NPAT from $9.8m to $11.1m All locations achieved growth, with a particularly strong turnaround in the UK where the company benefited from the acquisition of Additive Pixel and its partnership with Bartle, Bogle and Hegarty (BBH). Similarly, the purchase of Dippin’ Sauce assisted in the US. With excellent management, a strong track record and likely continued growth, we have a favourable view of the company, and believe WLL’s business model is becoming increasingly relevant in the structurally changing landscape to digital and social media. At current levels, we believe WLL is fairly priced and maintain our HOLD recommendation on a revised DCF-based target price of $5.11 (previously $4.88). Click here for more...

Woodside Petroleum (A$29.32) HOLD TP A$27.85 Good cost performance

WPL posted a good overall 1H16 result, with earnings marginally below our estimate but maintained impressive margins on further cost-out. EBITDAX was slightly behind our estimate, while underlying NPAT also came in below. However the highlight was WPL’s continuing strong margins. We forecast LNG earnings to rebound this half as lagged pricing flows through. WPL maintained its 80% payout ratio, with a first half dividend of US 34 cents (vs Morgans US 39 cents). WPL was clear in the result that M&A remains a key focus. We believe this could result further acquisitions similar to that of Senegal. Click here for more...

Australia│Equity research│August 26, 2016

16

Stocks going ex div

SOURCE: MORGANS

Description Code Ex Div Date Div Amt (c )

Franking

(%)

Bellamy'S Australia BAL 26-Aug-16 7.8 100

Aurizon Holdings Ltd AZJ 29-Aug-16 13.3 70

Ooh!Media Limited OML 29-Aug-16 4.0 100

Wesfarmers Limited WES 29-Aug-16 95.0 100

Woodside Petroleum WPL 29-Aug-16 44.1 100

Alumina Limited AWC 30-Aug-16 3.8 100

Bapcor Limited BAP 30-Aug-16 6.0 100

Boral Limited BLD 30-Aug-16 11.5 100

Greencross Limited GXL 30-Aug-16 9.5 100

SAI Global Limited SAI 30-Aug-16 9.5 100

AMP Limited AMP 31-Aug-16 14.0 90

Mineral Resources. MIN 31-Aug-16 21.0 100

Navitas Limited NVT 31-Aug-16 9.9 100

Tatts Group Ltd TTS 31-Aug-16 8.0 100

Treasury Wine Estate TWE 31-Aug-16 12.0 0

BHP Billiton Limited BHP 1-Sep-16 18.2 100

Challenger Limited CGF 1-Sep-16 16.5 100

GWA Group Ltd GWA 1-Sep-16 1.0 100

GWA Group Ltd GWA 1-Sep-16 8.0 100

Pact Group Hldgs Ltd PGH 1-Sep-16 11.0 65

Primary Health Care PRY 1-Sep-16 6.4 100

Sthn Cross Media SXL 1-Sep-16 3.5 100

Fortescue Metals Grp FMG 2-Sep-16 12.0 100

Isentia Group Ltd ISD 5-Sep-16 4.4 100

Nine Entertainment NEC 5-Sep-16 4.0 100

Perpetual Limited PPT 5-Sep-16 130.00 100

Spark Infrastructure SKI 5-Sep-16 7.25 0

Amcor Limited AMC 6-Sep-16 28.62 0

Bendigo and Adelaide BEN 6-Sep-16 34.00 100

Blackmores Limited BKL 6-Sep-16 210.00 100

Insurance Australia IAG 6-Sep-16 13.00 100

Medibank Private Ltd MPL 6-Sep-16 6 100

Oil Search Ltd OSH 6-Sep-16 1.3177 0

Tox Free Solutions TOX 6-Sep-16 4.5 100

Asaleo Care Limited AHY 7-Sep-16 4 50

Apn Outdoor Grp APO 7-Sep-16 6.5 100

Brambles Limited BXB 7-Sep-16 14.5 25

Cochlear Limited COH 7-Sep-16 120 100

Caltex Australia CTX 7-Sep-16 50 100

Idp Education Ltd IEL 7-Sep-16 5.5 35

Qantas Airways QAN 7-Sep-16 7 100

Spotless Grp Hld Ltd SPO 7-Sep-16 5 30

ASX Limited ASX 8-Sep-16 99 100

Iluka Resources ILU 8-Sep-16 3 100

IRESS Limited IRE 8-Sep-16 16 60

Monadelphous Group MND 8-Sep-16 32 100

OZ Minerals OZL 8-Sep-16 6 0

Australia│Equity research│August 26, 2016

17

Stocks going ex div

SOURCE: MORGANS

Current takeovers – from 26 August 2016

Closing Target Company Bidder Consideration

31/08/2016 Flinders Mines Limited TIO (NZ) Limited $0.025 cash per share 31/08/2016 Freshtel Holdings Limited Dominet Digital Corporation Pty Ltd $0.001 cash per share

2/09/2016 GPT Metro Office Fund Growthpoint Properties Australia (GOZ)

Either $1.25 cash and 0.3968 GOZ shares for every GMF share held OR $2.5 per GMF share

5/09/2016 Cuesta Coal Limited Longluck Investment (Australia) Pty Ltd $0.02485 cash per share 26/09/2016 Richfield International Limited Mercantile Investment Company Ltd $0.34 per share 26/09/2016 Renaissance Minerals Limited Emerald Resources NL (EMR) 1.55 EMR shares for every RNS share held

SOURCE: MORGANS

Description Code Ex Div Date Div Amt (c )

Franking

(%)

RCG Corporation Ltd RCG 8-Sep-16 3 100

Sonic Healthcare SHL 8-Sep-16 44 30

Tassal Group Limited TGR 8-Sep-16 7.5 100

Woolworths Limited WOW 8-Sep-16 33 100

BlueScope Steel Ltd BSL 9-Sep-16 3 100

Retail Food Group RFG 9-Sep-16 14.5 100

Cimic Group Ltd CIM 12-Sep-16 48 100

Orora Limited ORA 12-Sep-16 5 30

Qube Holdings Ltd QUB 12-Sep-16 2.8 100

Steadfast Group Ltd SDF 12-Sep-16 3.6 100

CSL Limited CSL 13-Sep-16 88.6652 0

Healthscope Limited HSO 13-Sep-16 3.9 0

Village Roadshow Ltd VRL 13-Sep-16 14 100

InvoCare Limited IVC 14-Sep-16 17 100

Seven Group Holdings SVW 14-Sep-16 20 100

Seven West Media Ltd SWM 14-Sep-16 4 100

Automotive Holdings. AHG 15-Sep-16 13 100

Breville Group Ltd BRG 15-Sep-16 14 70

Flight Centre Travel FLT 15-Sep-16 92 100

South32 Limited S32 15-Sep-16 1 0

Seek Limited SEK 15-Sep-16 19 100

Virtus Health Ltd VRT 15-Sep-16 15 100

Vocus Comms Ltd VOC 19-Sep-16 8 100

Cleanaway Waste Ltd CWY 20-Sep-16 0.9 100

Carsales.Com Ltd. CAR 21-Sep-16 19.5 100

Newcrest Mining NCM 21-Sep-16 9.7517 0

Altium Limited ALU 22-Sep-16 10 99

Crown Resorts Ltd CWN 22-Sep-16 39.5 70

COSTA GROUP HOLDINGS CGC 27-Sep-16 6 100

Japara Healthcare Lt JHC 27-Sep-16 5.75 100

Northern Star NST 27-Sep-16 4 100

Sirtex Medical SRX 27-Sep-16 30 77.66

Link Admin Hldg LNK 28-Sep-16 8 18.7

IOOF Holdings Ltd IFL 29-Sep-16 26 100

McMillan Shakespeare MMS 29-Sep-16 34 100

MYOB Group Ltd MYO 4-Oct-16 5.5 0

ARB Corporation. ARB 6-Oct-16 17 100

Sims Metal Mgmt Ltd SGM 6-Oct-16 12 100

Credit Corp Group CCP 18-Oct-16 27 100

Australia│Equity research│August 26, 2016

18

Queensland New South Wales Victoria Western Australia

Brisbane +61 7 3334 4888 Sydney +61 2 9043 7900 Melbourne +61 3 9947 4111 West Perth +61 8 6160 8700

Stockbroking, Corporate Advice, Wealth Management Stockbroking, Corporate Advice, Wealth Management Stockbroking, Corporate Advice, Wealth Management Stockbroking, Corporate Advice, Wealth Management

Brisbane: Edward St +61 7 3121 5677 Armidale +61 2 6770 3300 Brighton +61 3 9519 3555 Perth +61 8 6462 1999

Brisbane: Tynan Partners

+61 7 3152 0600 Ballina +61 2 6686 4144 Camberwell +61 3 9813 2945

South Australia

Bundaberg +61 7 4153 1050 Balmain +61 2 8755 3333 Domain +61 3 9066 3200 Adelaide +61 8 8464 5000

Cairns +61 7 4222 0555 Bowral +61 2 4851 5555 Farrer House +61 3 8644 5488 Norwood +61 8 8461 2800

Caloundra +61 7 5491 5422 Chatswood +61 2 8116 1700 Geelong +61 3 5222 5128

Gladstone +61 7 4972 8000 Coffs Harbour +61 2 6651 5700 Richmond +61 3 9916 4000

Gold Coast +61 7 5581 5777 Gosford +61 2 4325 0884 South Yarra +61 3 8762 1400

Ipswich/Springfield +61 7 3202 3995 Hurstville +61 2 9570 5755 Southbank +61 3 9037 9444

Kedron +61 7 3350 9000 Merimbula +61 2 6495 2869 Traralgon +61 3 5176 6055

Mackay +61 7 4957 3033 Neutral Bay +61 2 8969 7500 Warrnambool +61 3 5559 1500

Milton +61 7 3114 8600 Newcastle +61 2 4926 4044

Mt Gravatt +61 7 3245 5466 Newport +61 2 9998 4200 Australian Capital Territory

Noosa +61 7 5449 9511 Orange +61 2 6361 9166 Canberra +61 2 6232 4999

Redcliffe +61 7 3897 3999 Port Macquarie +61 2 6583 1735

Rockhampton +61 7 4922 5855 Scone +61 2 6544 3144 Northern Territory

Spring Hill +61 7 3833 9333 Sydney: Level 7 Currency House

+61 2 8216 5111 Darwin +61 8 8981 9555

Sunshine Coast +61 7 5479 2757 Sydney: Level 9 +61 2 8215 5000 Tasmania

Toowoomba +61 7 4639 1277 Sydney: Hunter St +61 2 9125 1788 Hobart +61 3 6236 9000

Townsville +61 7 4725 5787 Sydney: Reynolds Equities

+61 2 9373 4452

Wollongong +61 2 4227 3022

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 APE: A Director of Morgans Financial Limited is a Director of AP Eagers Limited and will earn fees in this regard. BAL: Analyst owns shares. BLA: Morgans Corporate Limited was a Joint Lead Manager and Underwriter to the placement & rights issue for Blue Sky Alternative Investments Limited and received fees in this regard. CMW: Analyst owns shares. CWP: Analyst owns shares. DTL: An associate of Morgans Financial Limited is a Director of Data#3 Limited and will earn fees in this regard. EGH: Analyst owns shares. EGO: Analyst owns shares. IDT: Analyst owns shares. INA: Morgans Financial was Joint Lead Manager and Under-writer to Ingenia Communities’ Dividend placement and SPP and received fees in this regard. IPD: Analyst owns shares. Morgans Corporate Limited was a participating broker to the placement and SPP offer by Impedimed Limited and received fees in this regard. MGP: Morgans Corporate Limited was a Co-Lead

Manager to the IPO of Murray Goulburn Unit Trust and received fees in this regard. MP1: Analyst owns shares Morgans Corporate Limited was the Lead Manager to the initial public offer and subsequent July 2016 capital raising of MegaPort and may have received fees in this regard. Morgans Corporate Limited was a lead manager to the public offer of shares in Megaport Limited in November 2015 and received fees in this regard. NXT: Analyst owns shares. ORG: Morgans Corporate Limited was a participating broker to the Origin Energy Limited rights issue and received fees in this regard. OSH: Analyst owns shares. RAN: Analyst owns shares in the following mentioned company(ies): Range International Morgans Corporate Limited is a lead manager to the IPO offer of shares in Range International and may receive fees in this regard. RBL: Analyst owns shares in the following mentioned company(ies): Redbubble. Morgans Corporate Limited was a lead manager to the IPO offer of shares in Redbubble and received fees in this regard. RCG: Analyst owns shares RNO: Analyst owns shares. SDA: This report was prepared solely by Morgans Financial Limited. ASX did not prepare any part of the report and has not contributed in any way to its content. The role of ASX in relation to the preparation of the research reports is limited to funding their preparation, by Morgans Financial Limited, in accordance with the ASX Equity Research Scheme. ASX does not provide financial product advice. The views expressed in this research report may not necessarily reflect the views of ASX. To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by ASX as to the adequacy, accuracy, completeness or reasonableness of the research reports. SEK: Analyst owns shares. SIV: Analyst owns shares. Morgans Corporate Limited was a Joint Lead Manager and Underwriter to the rights issue for Silver Chef Limited and received fees in this regard. ;A Director of Morgans Financial Limited is a Director of SilverChef Limited and will earn fees in this regard. SIQ: Analyst owns shares. STO: Analyst owns shares. Morgans Corporate Limited was a participating broker to the Santos Limited rights issue and received fees in this regard. TGP: This report was prepared solely by Morgans Financial Limited. ASX did not prepare any part of the report and has not contributed in any way to its content. The role of ASX in relation to the preparation of the research reports is limited to funding their preparation, by Morgans Financial Limited, in accordance with the ASX Equity Research Scheme. ASX does not provide financial product advice. The views expressed in this research report may not necessarily reflect the views of ASX. To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by ASX as to the adequacy, accuracy, completeness or reasonableness of the research reports. WTP: Morgans has been appointed broker to the Watpac on-market share buy back announced 25 August 2015 and may receive fees in this regard.

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

Australia│Equity research│August 26, 2016

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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

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