global small cap update - credit suisse

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

Client-Driven Solutions, Insights, and Access

Global Small Cap Update Small Cap Growth Strategies

23th April 2015 Eugène Klerk

+44 207 883 4678

[email protected]

Catherine Tillson

+44 20 7888 6052

[email protected]

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Why Credit Suisse Research? High impact research that spans across asset classes, sectors, and regions

Eugène Klerk

2

Why Credit Suisse Analytics? Access to innovative tools, models, and capabilities at your fingertips

Eugène Klerk

3

Contents page

Company Name Ticker Slide Number

Sm

all

cap

China DEHL DL.N 5

Kaveri Seeds KVRI.NS 7

Kforce Inc KFRC.OQ 9

PT PP PTPP.JK 11

Sthree STHR.L 13

Sumitomo Osaka Cement 5232.T 15

Va Tech Wabag VATE.BO 17

Mid

Cap

China Resources Gas 1193.HK 19

Dialog Semiconductor DLGS.DE 21

Dunkin' Brands Group DNKN.OQ 23

Eicher Motors EICH.BO 25

Global Payments, Inc GPN.N 27

Marico Ltd MRCO.BO 29

Rentokil RTO.L 31

Shenzhen Salubris Pharmaceuticals Co Ltd 002294.SZ 33

Spectris SXS.L 35

Start Today 3092.T 37

Jialong Shi| +852 2101 7437 | [email protected]

Long term investment thesis

Online education stil l at a nascent stage: Online education is

becoming a promising trend in China’s education market. However,

migration to online is likely a gradual and long-lasting process given the

time needed for users to adapt to a new learning experience.

A solid FY15 outlook. We believe that healthcare and construction test-

prep will continue to be the two drivers for its accelerating growth. The

management appeared confident of delivering its guided 27-32% topline

growth target in FY15.

Continued margin expansion. CDEL’s online model allows a high

student-to-lecturer ratio, which increased from 6,979 in FY13 to 9,359 in

FY14. CDEL does not need to invest significantly in physical classrooms.

Its capex/sales ratio has been maintained at 3-4% of its total revenue.

This pure model allows CDEL to scale its business efficiently and add or

update courses with relatively low incremental costs. In view of the cost

leverage, we model a 70 bp expansion in FY15E operating margin.

Big, untapped market potential. IDC estimates that China's finance

and accounting training market is likely to grow 9% from 2013-17E to

Rmb5 bn, of which CDEL's market share could reach 9%. CDEL

maintained a 33% revenue CAGR from FY11-14 driven by 26%

enrolment growth. It may continue to drive growth by increasing

enrolments of existing courses, and expanding course offerings.

Valuation:

We maintain our OUTPERFORM rating with target price of US$21, based

on 25x FY15E P/E, implying 22x CY15E P/E. CDEL’s business is strong

cash-flow generative. The company has a generous dividend policy,

returning most of the FCF to its shareholders annual.

Source: Company data, Credit Suisse estimates, pricing of close 20th April 2015

RATING: OUTPERFROM

PRICE: US$19.3 (20th APRIL 2015)

TARGET: US$21

Mkt Cap: 0.70 bln USD

Key Financials

China CDEL (DL.N)

Consumer Discretionary – Education Services

Key chart

35 41

49 58

70 84

102

126

158

205

5%

10%

15%

20%

25%

30%

35%

-

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E

Online educaiton YoY%(RHS)Rmb bn

Source:China Education online, Credit Suisse estimate

China Distance Education Holdings Limited (CDEL) offers a range of online education and test preparation courses and other related services and

products in China.

TP Upside vs Share Price 8.8% In USD mn, unless otherwise stated

Key financials 09/14A 09/15E 09/16E 09/17E

Sales revenue [USD mn] 97.2 125.5 151.9 184.9

EBITDA [USD mn] 26.4 34.5 43.0 52.8

EPS (Normalised) [c] 67.3 84.8 105.7 128.3

EPS Growth [%] 61.5 26.1 24.7 21.3

EBITDA Margin [%] 27.1 27.5 28.3 28.6

DPS [c] 80.0 97.2 114.6 139.6

Payout [%] 118.9 114.6 108.4 108.8

Free CFPS [c] 116.0 124.6 128.9 178.3

P/E 28.7 22.7 18.3 15.0

EV/EBITDA 21.7 16.8 13.4 10.6

Dividend Yield 4.1 5.0 5.9 7.2

CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Although a relatively young company, China CDEL’s CFROI© profile has remained largely above the cost of capital and has

trended upwards since 2010. Sales growth has remained high y-o-y, with margins ticking up from recent lows in 2010. Consensus

estimates are currently pricing in c100% upside as the young company’s CFROI© profile is expected to stabilise at CFROI© of

20%. The market is pricing in similar margins but more conservative sales growth of 7.5% vs. consensus at c20% from 2017

onwards.

Economic profit has grown substantially year on year since

2011. Driven largely by spread (CFROI over cost of capital)

until recently in 2014, when the growth in asset base

dominated.

China CDEL (DL.N)

Market implied scenario

Anantha Narayan | +91 22 6777 3730 | [email protected]

Key Financials

Kaveri Seeds (KVRI.BO)

Consumer staples – Agricultural products

Key chart: India accounts for just 4% of the global seed industry, despite

accounting for 11% of global arable land

RATING: OUTPERFROM

PRICE: 954.1 Rs (20th APRIL 2015)

TARGET: 1100.0 Rs


Kaveri Seed Company is a seed company engaged in the production and distribution of high quality hybrid seeds of field and vegetable crops but

also micro nutrients and bio-products.The Company operates in two segments: seed division and microtek division

27%

22%

6% 6%5% 4%

3% 3% 2% 2%

11%

8%

1%

5%3%

11%

0% 1%

3%1%

0%

5%

10%

15%

20%

25%

30%

US

A

Chi

na

Fra

nce

Bra

zil

Can

ada

Indi

a

Japa

n

Ger

man

y

Arg

entin

a

Italy

Contribution to seed industry (%) Contribution to global arable land (%)

Source: International Seed Federation (Jun'13), World Bank (2012),


Largest pure-play seed company in India with significant market share in

cotton (No. 2 player), corn (No. 4 player) and among top 3-5 players in

millets, paddy, sorghum and sunflower.

The Indian seed industry is estimated to be a US$2bn market or 4% of

the global seed market despite it having 11% of the global arable area.

Increasing hybrid seed penetration driven by food demand-supply

mismatch may correct this somewhat. The Indian seed industry is

estimated to be growing at 12% while the global industry growth is c5%.

Low hybrid seed penetration in corn, paddy and vegetables can drive the

next leg of growth. Despite high penetration, high-density planting can be

a driver for cotton seeds.

Why buy now?

Growth over the next 2–3 years will be driven by the existing portfolio of

seeds and we expect 20%+ earnings CAGR over FY15-17E.

The company is launching new hybrids across cotton and paddy for

medium term growth. Approval of BG2RRF (the next generation GM trait

from Monsanto) expected by June-16 can aid medium term growth.

The founders’ plans to sell significant stake in the company to venture into

food processing business are off the table for now removing a key

overhang on the stock.

Valuation:

While valuations have re-rated over the past year, we do not view them as

excessive given the large market opportunity, likely strong earnings

growth and strong financial metrics - net cash company, with strong

operating cash generation, low working capital requirement (30 days of

working capital at end-FY14), high EBITDA margins (~25%) and high

return ratios (ROE and ROCE of 45%+). We have an Outperform rating

on the stock with a target price of Rs1100 based on 17x FY17 EPS. Source: Company data, Credit Suisse estimates, pricing of close 20th April 2015

TP Upside vs Share Price 15.3% In INR mn, unless otherwise stated


Sales revenue [INR mn] 10,111.1 11,678.6 14,004.5 16,790.4

EBITDA [INR mn] 2,212.4 3,021.1 3,533.9 4,255.2

EPS (Normalised) [c] 3,039.7 4,398.3 5,241.4 6,404.5

EPS Growth [%] 64.3 44.7 19.2 22.2

EBITDA Margin [%] 21.9 25.9 25.2 25.3

DPS [c] 480.5 750.0 1,050.0 1,500.0

Payout [%] 15.8 17.1 20.0 23.4

Free CFPS [c] 2,442.3 3,676.2 4,335.9 5,381.8

P/E 31.4 21.7 18.2 14.9

EV/EBITDA 28.5 20.2 16.6 13.1


CFROI© Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Kaveri Seeds scores as Best in Class within the HOLT framework. It has seen significant CFROI© growth since 2009 to 2013,

12.5% and 33.5% respectively. This has been largely driven by improved asset turns and high sales growth. Consensus is

currently pricing in 84% upside due to high sales growth forecasts – reducing these to a more moderate 7% by 2017 produces

the market implied scenario.

Economic profit has more than doubled over the past three

years largely driven by growth.

Kaveri Seeds (KVRI.BO)


Historic high margins

Asset efficiency

improved

significantly from

2009

Anjaneya Singh| +212 325 7306| [email protected]

Key Financials

Kforce Inc (KFRC.OQ)

Industrials – Human Resource & Emplyment services

Key chart: Technology segment growth

RATING: OUTPERFROM

PRICE: 22.5 USD (20th APRIL 2015)

TARGET: 27.0 USD


Kforce Inc. provides professional and technical specialty staffing services and solutions in the United States and internationally. The company

operates through Technology (Tech), Finance and Accounting (FA), and Government Solutions (GS) segments.

0%

5%

10%

15%

20%

25%

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

CAGR: ~11.7%


We believe that skill shortages in information technology, combined with

higher staffing needs on the project side make KFRC’s business grow faster

than industrial / clerical staffing. IT staffing is the largest staffing end market

by ~2-3x, and is among the fastest growing end markets as well.

We think that the street is not giving full credit to sales force tenure

ramping up. Moreover, recent realignment initiatives are likely to result in

better margins vs. the prior cycle.

KFRC's balance sheet remains under-levered at a Net Debt / EBITDA

ratio of ~1.5x and at ~40% net debt/total cap. Over the medium term, we

expect management to become more aggressive in using the balance sheet

to pursue M&A or return more cash back through buybacks.

Why buy now?

KFRC’s stock has come under pressure recently, underperforming peers

and the S&P 500 since slightly missing 4Q estimates due to gross margin

pressures from product mix (less permanent placement fees) and client mix

(largest 25 clients are lower margin).

We believe investors are underestimating KFRC’s operating leverage as a

result, and expect to see operating margins to expand ~120bps to 5.5% in

2016. As a result, our 2016 EPS estimate is ~4% higher than consensus.

Valuation:

Our target price of $27 for KFRC is based on our normalized EBITDA

estimate of $95mm at a target multiple of 9.5x, discounted back slightly.

KFRC has traded at average NTM and LTM EV / EBITDA multiples of

~9.8x and ~10.8x since 2005.


TP Upside vs Share Price 20.1% In USD mn, unless otherw ise stated

Key financials 12/14A 12/15E 12/16E

Sales revenue [USD mn] 1,217.3 1,342.6 1,467.3

EBITDA [USD mn] 61.7 75.4 93.9

EPS (Normalised) [c] 97.5 131.2 167.3

EPS Growth [%] 44.7 34.7 27.5

EBITDA Margin [%] 5.1 5.6 6.4

DPS [c] 0.0 0.0 0.0

Payout [%] 0.0 0.0 0.0

Free CFPS [c] -99.6 109.1 76.2

P/E 23.1 17.1 13.4

EV/EBITDA 12.3 9.8 7.8

Dividend Yield 0.0 0.0 0.0

CFROI© Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Kforce’s CFROI© has varied significantly year on year, unable to reach back up to the historic highs in 2007 and 2008. Margins

have improved over the last five years although did marginally drop back down in 2013. Additionally, asset turns have declined

since 2008. Consensus estimates see a 30% upside, while our CS Analyst estimates produce 14% upside in the HOLT model.

Economic profit has varied over the past ten years helping

to explain the relatively flat TSR profile. Changes have been

largely due to spread (falls in cfroi relative to the discount

rate).

Kforce Inc (KFRC.OQ)


Danny Goh| +60 3 2723 2083 | [email protected]

Key Financials

PT PP Persero (PTPP.JK)

Industrials – Construction & Engineering

Key chart

RATING: OUTPERFROM

PRICE: 4015 Rp (20th APRIL 2015)

TARGET: 4800 Rp


PTPP is an SOE construction company that specialises in building construction. Besides construction, the company also has a property unit and

manufactures pre-cast concrete.

110.7140.5 153.9 174.9 189.3

255.6 261.53.5

5.02.0

3.02.0

25.5 28.8

114.2

145.5 155.9177.9

191.3

281.1 290.3

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

2011 2012 2013 2014budget

Old 2015budget

Proposedrevised2015

budget

Approvedrevised2015

budget

Rp'tn

Indonesia revised 2015 infrastructure budget

Infra budget Equity injection

Infra budget +63% vs 2014


Indonesia’s new government (under President Jokowi) is embarking on a

5-year infrastructure development plan with an estimated total

infrastructure spending of Rp5,500 tn. The four largest segment of

infrastructure spending is electricity (power plants) Rp980tn, sea ports

(develop the maritime logistics and transportation) Rp900tn, roads

Rp805tn and housing Rp528tn.

In the approved revised 2015 budget, Jokowi raised the infrastructure

budget by 63% to Rp290tn (highest level) and set aside Rp28tn for equity

injection into infrastructure-related SOE companies. The large amount

allocated for equity injection (a first for Indonesia) may encourage private

funding; via rights issue (for listed companies) and secondly through debt

funding with the enlarged equity base.

We believe PTPP is poised to benefit from a multi-year infrastructure

boom in Indonesia. PTPP overtook WIKA’s position as the largest

contractor in FY14 with a total outstanding orderbook of Rp42.5tn vs

WIKA’s Rp41.4tn. New orderbook target for FY15 is Rp27tn (+33%YoY).

Having bagged 2 of the 6 main ports in Indonesia; Tanjung Priok, the

largest seaport in Indonesia and New Makassar, Sulawesi, PTPP is well

positioned to secure future seaport projects, riding on Jokowi’s maritime

ambitions. Management expects the award of at least 2 sea port projects

in FY2015 with orderbook of more than Rp1.4tn.

Why buy now?

We believe Indonesia is undergoing a multi-year infrastructure boom and

2015 is the first of the 5-year infrastructure development plant.

Key potential catalyst are 1) government expediting the roll-out of

infrastructure projects; 2) listing of property and precast subsidiaries; and

3) potential equity injection by the government in 2016.

Valuation:

PTPP trades at a FY2016E PE of 19x vs sector average of 21x. Source: Company data, Credit Suisse estimates, pricing of close 20th April 2015

TP Upside vs Share Price 19.6% In IDR mn, unless otherwise stated


Sales revenue [IDR mn] 12,427,371.3 17,471,988.0 22,777,280.7 28,627,742.5

EBITDA [IDR mn] 1,241,411.9 1,608,557.7 2,124,007.6 2,692,338.9

EPS (Normalised) [c] 10,989.9 14,550.2 20,646.7 27,957.9

EPS Growth [%] 26.5 32.4 41.9 35.4

EBITDA Margin [%] 10.0 9.2 9.3 9.4

DPS [c] 3,295.6 4,363.7 6,192.6 8,386.0

Payout [%] 30.0 30.0 30.0 30.0

Free CFPS [c] 5,830.7 5,471.4 13,706.0 20,016.8

P/E 36.5 27.6 19.4 14.4

EV/EBITDA 16.2 13.3 10.3 8.0


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

PPTP scores as Quality at any price in the HOLT scorecard framwork. CFROI has picked up to historic highs in 2014 due to an

acceleration in margins from 8% to above 10%. Consensus estimates forecast c70% upside driven by continuing strong

margins and sales growth. Assuming these margins are sustainable the market is currently implying a fall in sales growth to

12.5% by 2019 – still substanitally higher than the sector median of 4.6%

Economic profit more than doubled in 2014 driven by a

combination of growth and spread (CFROI above the cost

of capital). The market cap tracks the economic profit

closely.

PT PP Persero (PTPP.JK)


Andrew Grobler| +44 20 7883 5943 | [email protected]


SThree is a leading professional recruitment industry that will benefit from

structurally growing end markets given underpenetrated end markets and

on-going shortages of skilled labour. In the shorter term most end markets

are benefitting from cyclical tailwinds that will support double digit gross

profit growth over the next 3 years and positive operational leverage.

Innately cash generative business through the cycle, which supports a

sustainable dividend (currently 4.1%). On-going ownership by founders of

the business cement this policy

Why buy now?

SThree is a structurally growing cyclical business with recovering end

markets. Demand is growing across most end markets with the

emergence of rising wages which drives incremental operational leverage

for the business. Conversion margins (EBITA/GP currently at 13.6%

(FY14E) vs a peak of 30.3% (FY06) providing amply scope for

improvement in the short and medium term. Additionally, it currently trades

at a discount to its peer group

Valuation:

Trades at 13.1x CY16E PE vs peer group at 17.4x. On an EV/EBITA

basis trades at 9.2x vs peer group at 11.6x. Dividend yield of 4.1%

Key Financials

Sthree (STHR.L)

Industrials – Human Resource & Emplyment services

Key chart

RATING: OUTPERFROM

PRICE: 362.8p (20th APRIL 2015)

TARGET: 360p


Source: Company data, Thomson Reuters,

SThree plc is a UK-based company engaged in the permanent & contract staffing business. Its recruitment areas include banking & finance,

accountancy, energy & natural resources, telecommunications, healthcare, etc.


TP Upside vs Share Price -0.8% In GBP mn, unless otherwise stated


Sales revenue [GBP mn] 746.9 841.5 984.9 1,156.8

EBITDA [GBP mn] 35.0 48.7 59.5 72.3

EPS (Normalised) [c] 16.3 21.4 25.6 31.0

EPS Growth [%] 78.7 30.9 20.0 20.9

EBITDA Margin [%] 4.7 5.8 6.0 6.2

DPS [c] 14.0 14.0 14.0 14.5

Payout [%] 85.8 65.5 54.6 46.8

Free CFPS [c] 0.0 7.0 14.4 18.7

P/E 22.2 17.0 14.1 11.7

EV/EBITDA 13.5 9.9 8.2 6.7


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Sthree’s CFROI profile fell off a cliff in 2009 driven by margins almost halving. However, as the CFROI profile has continually

earned well above the cost of capital it is classified as an eCAP within the HOLT frame work. Asset efficiency has improved to

historic highs over the past three years. Consensus estimates forecast a potential upside of greater than 100% driven largely by

high growth, while CS analyst estimates forecast a potential upside of 42%.

The economic profit fell substantially in 2009 and has not

recovered to the historic highs realised in 2006.

Sthree (STHR.L)


Jun Yamaguchi| +81 3 4550 9789| [email protected]

Long term investment thesis:

We expect Sumitomo Osaka Cement to see steady profit growth over the

next several years, driven by: (1) Japanese cement demand bottoming out

and returning to growth (spurred by aging infrastructure replacement,

Tokyo Olympics, Tohoku region recovery demand), (2) lower fuel costs

(e.g. coal and oil), and (3) cement price increases. With strong FCF

generation and an already-improved balance sheet, we believe the

company has scope to enhance shareholder returns in the future.

Why buy now?

Japanese cement demand YoY comparisons should begin to bottom out

and improve as we head towards the summer months. The stock is

currently trading at 12x forward P/E and 0.9x P/B and attractive on both

metrics.

Valuation:

We derive our ¥440 TP by assigning a fair-value P/E of 13.2x (15%

discount to the average 12-month forward P/E of 15.5x since 2005) to our

FY3/16 EPS forecast of ¥33.4.

Key Financials

Sumitomo Osaka Cement (5232.T)

Materials – Construction materials

Key chart

RATING: OUTPERFROM

PRICE: 399 YEN (20th APRIL 2015)

TARGET: 440 YEN


Sumitomo Osaka Cement Co., Ltd. is a Japan-based company that is primarily engaged in the cement business. It operates in five business

segments: Cement; Mineral; Construction Material; Photoelectric and New Materials; and Real Estate and Others.

Avg of Net debt reduction: 8.1

(20)

(15)

(10)

(5)

0

5

10(10)

(5)

0

5

10

15

20

05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3CS

16/3CS

17/3CS

ND YoY⊿(¥bn)FCF (¥bn) Annual FCF vs Net debt YoY value change

FCF (LHS) Net debt YoY⊿(RHS / Inverse)

Avg of Net debt YoY⊿(10/3-)


TP Upside vs Share Price 10.3% In JPY mn, unless otherwise stated


Sales revenue [JPY mn] 235,078.0 231,000.0 232,000.0 236,000.0

EBITDA [JPY mn] 38,103.0 37,800.0 39,200.0 40,600.0

EPS (Normalised) [c] 3,203.0 3,004.3 3,340.7 3,581.1

EPS Growth [%] 78.7 -6.2 11.2 7.2

EBITDA Margin [%] 16.2 16.4 16.9 17.2

DPS [c] 500.0 600.0 700.0 700.0

Payout [%] 15.6 20.0 21.0 19.5

Free CFPS [c] 3,562.2 2,595.2 3,470.5 3,710.9

P/E 12.5 13.3 11.9 11.1

EV/EBITDA 6.1 5.9 5.4 4.9


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

SOC has an interesting CFROI profile. It has continually remained below cost of capital, but with above average sales growth

and the second highest margins vs. peers in Japanese Construction materials. CS analyst forecasts in HOLT suggest a 56%

upside, Consensus estimates forcast an upside of 60%. The market is forcasting a drop off in margins to 8% by 2018,

significantly lower than the company’s 10 Year median of 14.4%.

SOC’s economic profit has remained in negative teritory

since 1993. Driven largely by the bias as it remains below

the cost of capital.

Sumitomo Osaka Cement (5235.T)


India (19.5%, 3.4%)

ChinaUS

Arab World

Sub-Saharan Africa

Indonesia

Japan

Russia

Brazil

Canada

Germany

UK

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

0.0% 5.0% 10.0% 15.0% 20.0%

(% o

f wor

ld w

ater

res

ourc

es)

(% of world water withdrawals)

Anantha Narayan | +91 22 6777 3730 | [email protected]

Key Financials

Va Tech Wabag (VATE.BO)

Utilities – Water Utilities

Key chart: While India accounts for a mere 3% of the world's fresh water

resources, it accounts for nearly 20% of freshwater withdrawals

RATING: OUTPERFROM


TARGET: 1012.5 Rs


Source: World Bank (2011), Credit Suisse estimates


Adverse water supply situation: India's per capita availability of 1,200 m3

of water compares to the global average of 6,000 m3. And the withdrawal-

to-resource ratio is 53% (in 2011, and has worsened from 35% in 1997)

versus the global average of 9%. Moreover, the quality of water is a key

challenge with 21 states having poor water quality.

VATW is one of the larger players in the Indian water treatment market

with about 2% market share (15% in its currently addressable market).

We believe its presence across the entire value chain, superior project

management skills, the strength of the WABAG brand (with 90 years of

history), a strong reference list, and access to superior technology have

been the key drivers for the company's success over the past few years.

The international business can supplement growth: The international

division (including exports from India), with presence across about 25

countries, accounted for over 60% of the company's FY14 revenue, 44%

of the FY14 order book and about half of the new order flows in FY14.

Why buy now?

Weak domestic business performance and no significant allocations to

water treatment during the Union Budget has led to flat stock

performance over the last 6 months which we believe provides a good

entry point.

There is significant focus from municipal corporations to improve drinking

water quality and to treat wastewater. Stringent pollution control norms

will drive industrial requirement for effluent treatment.

Valuation:

Leader in a segment with multi-year growth potential can likely sustain rich

valuations. While the stock trades at 25x FY16 PE, the underlying industry

can witness secular growth of 15%+ for many years and VA Tech can

potentially gain market share and improve on margins, leading to 20%+

EBITDA growth.

VA Tech Wabag is one of India's largest players in the water and wasterwater treatment market.




Sales revenue [INR mn] 22,386.0 25,640.8 31,257.8 37,437.7

EBITDA [INR mn] 2,090.0 2,153.8 2,969.5 3,706.3

EPS (Normalised) [c] 2,035.5 2,171.0 3,124.9 3,990.7

EPS Growth [%] 19.6 6.7 43.9 27.7

EBITDA Margin [%] 9.3 8.4 9.5 9.9

DPS [c] 400.0 450.0 525.0 600.0

Payout [%] 19.7 20.7 16.8 15.0

Free CFPS [c] -359.8 -968.8 484.0 1,085.0

P/E 36.7 34.4 23.9 18.7

EV/EBITDA 17.9 17.7 12.8 10.2


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

VATE has consistently earned above the cost of capital since inception, driven by high asset turns relative to peers. Our analyst

estimates within HOLT forecast an 80% upside potential. The market however is pricing in increasing asset efficiency and

margins but also a fall in sales growth to below peer average by 2017.

Economic profit has remained largely flat over the past six

years but ticked up marginally in 2013, driven by growth.

Va Tech Wabag (VATE.BO)


Dave Dai| +852 2101 7358| [email protected]

Long term investment thesis (5 years investment horizon):

We expect increasing supply of natural gas in China over the next five

years, mainly from LNG imports and the new West-East III pipeline

carrying imported gas from Central Asia (2015-16E), as well as Russian

gas imports (2018E). More supply should drive more consumption, but at

lower gas prices. As a result, we expect accelerating gas sales volume for

China Resources Gas (20% CARG for 2015-20E). Dollar margin should

remain stable given the strong track record. We see a multi-year growth

story for the company and value-accretive M&A could serve as an

additional catalyst.

Why buy now?

The recent gas price cut (5% on blended basis) was consistent with our

expectation since November 2014. More importantly, further cut is likely

within the next 12 months if oil price remains weak, which should help

stimulate demand growth. The worst seems over for its Tianjin JV project,

which registered a small profit of HK$3 mn in 2H14 following the pass-

through of the gas price hike (significant improvement vs the HK$92 mn

loss recorded in 1H14), and management believes it should turn profitable

starting 2015. Recently, the company has made good progress in M&A,

including acquisitions of two large prefecture-level projects, i.e. Qingdao

and Qinhuangdao.

Valuation:

Trading at 14x FY15E P/E (in line with past-five-year average) on the back

of 21% FY15-17E CAGR, the stock seems attractive and is one of the

cheapest in the sector.

RATING: OUTPERFROM

PRICE: HK$25.75 (20th APRIL 2015)

TARGET: HK$27.0


Key Financials

China Resources Gas (1193.HK)

Utilities – Gas Utilities

Key chart

China Resources Gas Group Limited (“CR Gas”) is principally engaged in the city gas distribution business, including piped natural or petroleum

gas distribution and operating CNG (compressed natural gas) filling stations in the PRC.


TP Upside vs Share Price 4.9% In HKD mn, unless otherwise stated


Sales revenue [HKD mn] 28,717.0 34,000.3 41,573.0 48,338.5

EBITDA [HKD mn] 5,413.3 6,292.7 7,339.8 8,228.4

EPS (Normalised) [c] 114.2 139.4 175.8 204.3

EPS Growth [%] 14.7 22.1 26.1 16.2

EBITDA Margin [%] 18.9 18.5 17.7 17.0

DPS [c] 25.0 30.7 38.7 44.9

Payout [%] 21.9 22.0 22.0 22.0

Free CFPS [c] 21.1 22.9 108.2 183.7

P/E 22.5 18.5 14.6 12.6

EV/EBITDA 11.5 10.0 8.3 7.1


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

China Resources Gas scores very highly (91st percentile) on operational quality. Its CFROI profile moved above the cost of

capital in 2009 and has steadily increased since then. This has been led by high asset efficiency (above peer group average)

and stable margins. Consensus estimates currently arrive at the market implied scenario.

Economic profit turned positive in 2010 and has since

climbed dramatically, driven largely by growth. The market

cap has closely followed the economic profit trend.

China Resources Gas (1193.HK)


Achal Sultania| +44 20 7883 6884| [email protected]

Source: Company data, Credit Suisse estimates, IDC, TechInsights, 20TH April 2015

Key Financials

Dialog Semiconductor (DLGS.DE)

Information technology- Semiconductors

Key chart: Volume breakdown of iPhone models over time and PMIC ASP

trends

RATING: OUTPERFROM

PRICE: 43.3 EUR (20th APRIL 2015)

TARGET: 50.0 EUR


Dialog Semiconductor is a fabless semi company that designs power management and audio chips for devices such as smartphones and tablet

computers.


We believe iPhone volume outlook is set to increase over the long term,

for which DLG plays an integral role as the sole provider of the power

management chips (PMIC). Apple accounts for c80% of Dialog’s group

revenues. Our proprietary analysis around iPhone/iPad volume

breakdown by model, along with PMIC ASP trends, over time, suggest

that DLG’s Apple-linked sales will continue to grow 21%/9% in

2015E/2016E. Additionally, with the Connectivity segment (c10% of

sales) also likely to see an inflection in 2015 driven by traction in low-

energy Bluetooth, we see potential for a long term growth story. We

forecast top-line growth of 21%/12% in 2015/2016.

In addition, we see upside risk from the potential introduction of a bigger

screen iPad from Apple this year which would require higher ASP PMIC

chips. We estimate this has scope to drive 2%/6% upside to our

published sales/EBIT estimates for 2016.

Why buy now?

Recent evidence of near term strength in iPhone volumes based on

positive feedback from Asia supply chain commentary, potential for Apple

to launch a bigger screen iPad during 2H15 and our expectations for

chip ASP to continue to rise in the next generation of Apple devices

suggest that our 2016 EBIT estimates are c15% above consensus.

Additionally, long term efforts to diversify the company’s portfolio away

from Apple such as sub-PMIC chips for MediaTek and low-energy

Bluetooth chips both look interesting.

Valuation:

We value DLG on 14x P/E on our 2016EPS estimate of $3.60 plus $4.0

of current net cash/share (incl. converts, we assume dilution in our share

count). This drives our TP of $54.5 or €50. Further, our scenario analysis

suggests scope for EPS of $3.80 in 2016, which on the historic average

multiple of 15x implies FV of €56.

TP Upside vs Share Price 15.4% In USD mn, unless otherw ise stated

Key financials 12/14A 12/15E 12/16E

Sales revenue [USD mn] 1,156.1 1,400.4 1,565.9

EBITDA [USD mn] 282.8 358.6 409.2

EPS (Normalised) [c] 223.9 305.3 360.1

EPS Growth [%] 55.3 36.3 17.9

EBITDA Margin [%] 24.5 25.6 26.1

DPS [c] 0.0 0.0 0.0

Payout [%] 0.0 0.0 0.0

Free CFPS [c] 320.8 327.8 395.0

P/E 20.7 15.2 12.9

EV/EBITDA 11.1 7.6 5.9

Dividend Yield 0.0 0.0 0.0

CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Dialog screens as Best in Class in HOLT. Since 2008, Dialog's CFROI level improved rapidly from negative levels as it became

the dominant power chip supplier to Apple. Returns continue to improve on the back of smartphone volumes. CFROI is forecast

by IBES to improve further in the next 2 years via double digit growth, with re-deployment of excess cash providing additional

scope for CFROI improvement.

Economic profit turned postive in 2008 after seven years of

negativity. It has climbed steadily to historic peak values in

2013. This has not been fully replicated by the market cap

movements but has been factpred into TSR.

Dialog Semiconductor (DLGS.DE)



Despite the disappointing 2014 comps, we believe DNKN’s domestic unit

expansion story remains on track. The key to the DNKN investment case

is that franchisees will remain bullish on the brand and continue to build

stores across the US. Our franchisee checks point to very strong demand

for westward expansion, with plenty of room to grow. West of the

Mississippi, Dunkin’ US has a penetration rate of 1 store per 460k people,

compared to 1 store per 13.5k in its “core” and “established” markets.

We expect DNKN’s ROIC (see chart) to continue to improve, and

perhaps accelerate, as DNKN EBITDA grows off a larger basis, while

capex remains relatively flat.

Why buy now?

Most seem skeptical on the name and worried about the weather impact

for Q1. DNKN trading at a rare discount to the sector whereas the stock

has historically traded at a premium.

Investors are also concerned about recent SSS weakness. However, we

see better days ahead, driven by improving macro conditions for low-

income consumers, menu pricing, and continued adoption of mobile pay

and loyalty.

Valuation:

Our $56 TP is primarily derived from our 15-year DCF model, which

builds out the LT store growth opportunity for Dunkin’ US. We assume

~5% LT revenue and 6% EBIT growth, 7% WACC, and 12x terminal

EBITDA multiple.

Our $56 TP also embeds a multiple of 29x NTM EPS, a slight premium to

the industry to reflect DNKN’s long runway for growth and low-risk

franchised model.

Key Financials

Dunkin’ Brands Group (DNKN.OQ)

Consumer Discretionary - Restaurants

Key chart

Jason West| +617 556 5745 | [email protected]

RATING: OUTPERFROM

PRICE: 47.7 USD (20th APRIL 2015)

TARGET: 56.0 USD


Dunkin’ Brands Group, Inc. (DBGI) is a franchisor of quick service restaurants (QSRs) serving hot and cold coffee and baked

goods, as well as hard serve ice cream. The Company franchises restaurants under its Dunkin' Donuts and Baskin-Robbins

brands.




Sales revenue [USD mn] 748.7 784.4 832.8 879.8

EBITDA [USD mn] 384.3 403.7 436.8 470.1

EPS (Normalised) [c] 174.4 187.3 219.2 246.3

EPS Growth [%] 13.9 7.4 17.0 12.3

EBITDA Margin [%] 51.3 51.5 52.4 53.4

DPS [c] 92.0 106.0 121.9 140.2

Payout [%] 52.7 56.6 55.6 56.9

Free CFPS [c] 164.6 190.6 224.5 252.4

P/E 27.4 25.5 21.8 19.4

EV/EBITDA 16.2 16.9 15.8 14.6


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Dunkin’ Brands’ CFROI profile has hovered around 30% since inception and therefore classifies as an eCAP . This is driven by

high operating margins of over 50% and increasing asset efficiency. However IBES consensus estimates currently forecast

c-37% downside. The market is pricing in continued sales growth to historic highs by 2021 and for them to continue until 2024.

Economic profit has remained realtively stable year on year,

with marginal growth recently due to growth in the CFROI

level over the cost of capital.

Dunkin’ Brands Group (DNKN.OQ)


Akshay Saxena| +91 22 6777 3825| [email protected]

Key Financials

Eicher Motors (EICH.BO)

Industrials – Construction machinery & heavy trucks

Key chart Given the aspirational value of owning an RE bike and lower

ownership costs, its addressable customer base has significantly

increased

RATING: OUTPERFROM


TARGET: 18500 Rs


Eicher Motors is the maker of the iconic Royal Enfield motorcycle in India. It is also the third-largest M&HCV manufacturer in India.

0%

5%

10%

15%

By Age By Income (% of middleclass and rich)

First Time Buyers

Traditional Customer Base Enhanched


The 2W business (Royal Enfield) has been in a sweet spot for some time with

demand always running ahead of supply despite continuous capacity

expansion. RE bikes have always had strong aspirational values; over the past

few years, the firm has significantly improved product quality and broadened

its customer base (both in terms of age and income). With a significant

growth in India's youth population and their rising aspiration and growing

income levels, it should see a continued influx of newer buyers.

Even with the recent strong growth, the lifestyle/ cruiser biking segment

(where RE operates) is still at a nascent stage with very low penetration in its

addressable customer base, leaving large headroom for continued high

growth. RE is also positioned uniquely as an entry level cruiser bike at a huge

discount to global brands like Harley Davidson hence can grow unhindered.

The key driver of next growth phase will be product range expansion as RE

greatly lags peers like Harley on a no. of platforms and models. It is

developing two new platforms with 4-5 bikes on each, with different looks and

usage, which will also be used for exports. This also gives existing RE

customers an option to upgrade (which will be an important segment in the

future) – currently just ~7% are repeat customers for RE vs. 60% for Harley

Why buy now?

RE continues to enjoy strong demand, with waiting period of over five months,

despite the gradual increase in production. Other near term growth driver is

expansion of distribution network and growth in high margin spares business.

In the 2W business we expect ~400 bp margin expansion in three years

driven by operating leverage. The CV’s business is also at an inflection point

as the CV cycle recovers and Eicher launches new range of Pro series which

will lead to market share gains in heavy trucks.

Valuation:

The stock is trading at ~24x FY17 earnings - While valuations look stretched,

we believe, given the high growth phase of the company, it is justified. On

PEG basis Eicher is trading at discount to other 2W stocks Source: Company data, Credit Suisse estimates, pricing of close 20th April 2015



Sales revenue [INR mn] 87,383 120,564 155,228 188,478

EBITDA [INR mn] 11,148 19,567 27,878 35,722

EPS (Normalised) [c] 22,707 42,393 60,606 78,652

EPS Growth [%] 55.9 86.7 43.0 29.8

EBITDA Margin [%] 12.8 16.2 18.0 19.0

DPS [c] 5,000 9,000 14,000 18,000

Payout [%] 22.0 21.2 23.1 22.9

Free CFPS [c] 15,155.6 33,860.5 65,188.5 93,414.8

P/E 63.1 33.8 23.6 18.2

EV/EBITDA 33.6 18.9 12.8 9.5


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Eicher scores as quality at any price within the HOLT scorecard; due to strong operational quality (88th percentile) and

momentum (97th percentile). The company’s CFROI profile has trended upwards since 2009, rising above the cost of capital,

due to increasing margins. However, consensus estimates currently price in a potential downside risk of c-40%. Our analyst

estimates on the otherhand a potential upside of 12%.

Economic profit turned positive in 2010 to reach historic

highs in 2014. This has been driven by both growth and

spread changes (CFROI over the cost of capital). TSR and

market cap have followed this trend.

Eicher Motors (EICH.BO)



Within our acquirer universe GPN is uniquely positioned given its above

average exposure to the higher growth VAR channel in the US as well as

its significant international footprint which is unique among public

merchant acquirers. Given the continued migration from paper to plastic,

especially Internationally where 85% of transactions are cash, GPN is

poised to outgrow its domestic only peers for the foreseeable future, with

high-single digit top-line growth and mid-teens EPS growth including

buybacks/M&A. GPN boasts a best-in class management team.

Why buy now?

Despite running ~50% in the trailing twelve months, numerous catalysts

are still in front of the company. Interchange rates (fees earned by banks

on card transactions) in both Europe and Canada are due to decline in

2015 given regulatory pressure. Declining interchange rates typically

create pricing opportunities for merchant acquirers such as GPN. We

note GPN is the only public acquirer with meaningful exposure to Europe

and Canada. In the US, GPN is the #2 player in the integrated payments

(iPOS) channel, a market which is growing in the high-teens vs. a mid-

single digit overall rate of growth in US acquiring. With the migration to

EMV just underway in the US, we believe the growth rate is sustainable

over the intermediate-term. Lastly, we see ample opportunities for M&A

and new JVs in Int’l market – especially Europe.

Valuation:

Our $104 target price is 18x our CY16 EPS, which is at a slight discount

to its peer group.

RATING: OUTPERFROM

PRICE: 100.3 USD (20TH APRIL 2015)

TARGET: 104.0 USD


Key Financials

Global Payments Inc. (GPN.N)

Information tech – Data processing & outsourced services

Key chart

Georgios Mihalos| +212 325 1749| [email protected]

Global Payments Inc. provides electronic transaction processing services for merchants, independent sales organizations (ISO),

financial institutions, government agencies, and multi-national corporations

0%

5%

10%

15%

20%

25%

2012 2013 2014 2015 2016 2017

Ad

j. O

pe

rati

ng

In

co

me




Sales revenue [USD mn] 2,554 2,727 2,960 3,151

EBITDA [USD mn] 521 600 652 709

EPS (Normalised) [c] 412 482 544 603

EPS Growth [%] 13.0 17.1 12.8 10.8

EBITDA Margin [%] 20.4 22.0 22.0 22.5

DPS [c] 0 0 0 0

Payout [%] 0.0 0.0 0.0 0.0

Free CFPS [c] 155.0 469.5 562.8 0.0

P/E 24.3 20.8 18.4 16.6

EV/EBITDA 15.2 13.2 11.6 9.4

Dividend Yield 0 0 0 0

CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Global payments scores highly on both operation and momentum, 71st and 85th percentile respectively. It also classifies as an

eCAP due to sustained high CFROI over the cost of capital. However, margins have been declining since 2005 and now fall

below the peer average. Consensus estimates forecast a c-14% downside despite high sales growth and margins forecasted

to 2023.

Economic profit has grown continuously from inception in

1998. This has been largely due to growth in the asset base

rather than spread change. Economic profit due to goodwill

has also started to increase.

Global Payments Inc. (GPN.N)


The market is pricing in strong sales growth,

however this is only marginally above the peer

average


In the coconut oil category there have been concerns on category

reaching maturity. However , the gap in conversion of loose oil to branded

and the headroom for Marico to gain share within branded is large enough

to sustain 6-8% volume growth for a decade before growth tapers off.

Marico is consciously focusing on shifting its portfolio towards value-added

oils, youth products and foods which should see growth ahead of coconut

oils over the next five years and also structural expansion in margins

We expect Marico's international business to sustain 15-20% organic

constant currency revenue growth over the next 3-5 years, with

acquisitions only being top-ups to the business wherever needed. The

cross pollination of products and an organic entry into new markets should

be the key drivers of the growth.

Why buy now?

We expect EBITDA margins to improve ~200 bps in FY16 as it has multiple

tailwinds from lower prices of crude derivatives such as liquid paraffin and

plastic packaging like HPDE. Also, copra (which is another key raw

material) prices are down about 10% from peak levels

In most of the new segments, Marico has not reached maturity in margins

as they are in an investment phase. As the business matures, we do not

see any reason why margins at the contribution level be similar or higher

than core business. Profitability will improve as theses business achieve

scale in 2-3 years as items like as ad spends form a huge part of the cost

structure, and will gain from scale.

Valuation:

Marico is currently trading at ~29x FY17 earnings. While valuations look

rich, Marico is amongst the cheapest mid-cap consumer stocks in India

and the re-rating in last year or so is in line with the broader market re-

rating.

Key Financials

Marico (MRCO.BO)

Consumer Staples – Personal products

Key chart: Marico investing in non-coconut oil segments which will drive growth

Arnab Mitra| +91 22 6777 3806 | [email protected]

RATING: OUTPERFROM

PRICE: 396.80 Rs (20TH APRIL 2015)

TARGET: 420.0 Rs


Marico is a leading fast moving consumer goods company in India with market leadership in hair oils and edible oils. The

company also draws over 30% of revenues from international markets.

CategoryRevenue share in

domesticGrowth drivers

Value added hair oil ~24%

Populate new need segments,

gradually raise prices in Amla once

market share stabilises

Post-w ash serum ~2% Market development w ith new products

Oats ~2%

Marico has over 50% share of savoury

oats, to grow it outside breakfast to

part day meals

Hair gels ~2%Penetration through single use small

packs

Deodorants ~2%Hold market share, no major

investments likely

Body Lotion ~2% Gain share in a grow ing market




Sales revenue [INR mn] 46,865 58,320 64,523 73,180

EBITDA [INR mn] 7,480 8,630 10,949 12,613

EPS (Normalised) [c] 753 914 1,194 1,404

EPS Growth [%] 33.4 21.4 30.7 17.6

EBITDA Margin [%] 16.0 14.8 17.0 17.2

DPS [c] 350 385 424 466

Payout [%] 46.5 42.1 35.5 33.2

Free CFPS [c] 1,211.4 790.9 1,160.3 1,349.6

P/E 52.7 43.4 33.2 28.3

EV/EBITDA 34.6 29.7 23.1 19.6


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Marico classifies as an eCAP due to its high stable CFROI profile. This has been driven by steadily improving margins.

Additionally, although asset efficiency has been declining since 2006 it still sits significantly above the peer average. IBES

consensus estimates are currently forecasting the market price.

Economic profit initially grew slowly over the past 20 years.

However, from 2011 the rate of growth has increased.

Marico (MRCO.BO)



Rentokil has emerged from 10 years of restructuring as a more focused

business (3 main divisions), materially improved cash generation and a re-

vitalised M&A pipeline. This gives it the opportunity to compound value for

the foreseeable future as excess cash is rotated into Pest Control as it

further builds out its network. Pest Control will move from 22% of

revenues in 2012A to 50% by 2016/17 on our estimates. This will create

an increasingly focused operation based around a stable, high return,

cash generative business. Potential opportunity for a transformational deal

over time if it can sell its lower return textiles division and use the

proceeds to consolidate the Pest market.

Why buy now?

It is still in the early stages of its move to being a more cash generative

and focused business and the market has yet to give it credit for its ability

to compound value creative growth. Trades at 15x 2016E PE compared

to Bunzl at 20x.

Valuation:

On a PE basis trades at 15x 2016E PE. EV/EBITDA of 7x compared to

Bunzl at 14.2x. Dividend yield of 2.3% for 2016E

Key Financials

Rentokil (RTO.L)

Industrials – Environmental & facilities services

Key chart

Andrew Grobler| +44 20 7883 5943 | [email protected]

RATING: OUTPERFROM

PRICE: 138p (20TH APRIL 2015)

TARGET: 141p


Rentokil Initial plc is the holding company. The Company, through its subsidiaries, operating businesses in some 50 countries

provides a range of business to business support services, operating in six segments overall.


TP Upside vs Share Price 2.2% In GBP mn, unless otherwise stated


Sales revenue [GBP mn] 1,740.8 1,791.1 1,840.1 1,894.9

EBITDA [GBP mn] 420.9 429.3 434.2 450.6

EPS (Normalised) [c] 8.2 8.7 9.1 9.6

EPS Growth [%] -2.8 5.9 4.7 6.0

EBITDA Margin [%] 24.2 24.0 23.6 23.8

DPS [c] 2.6 2.8 3.1 3.4

Payout [%] 31.6 32.9 34.5 35.8

Free CFPS [c] 5.2 7.3 7.0 7.7

P/E 16.9 15.9 15.2 14.3

EV/EBITDA 7.6 7.3 7.0 6.6


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Rentokil’s CFROI profile has changed dramatically over the past 20 years. Despite it almost halving, it still qualifies as an eCAP

as although CFROI levels have dropped they still remain realtively high versus the market. The falling returns have been largely

due to declining margins, which more recently have started to pick up again. Consensus estimates currently forecast c-31%

downside risk.

Rentokil’s economic profit fell significantly between 1999

and 2008, however more recently this trend has reversed

and economic profit has started to improve over the past

three years. The large falls in economic profit have been

mostly due to decreasing CFROI over cost of capital.

Rentokil (RTO.L)


Sales growth is expected

to converge to sector

median of c5%

The market is forecasting

historic EBITDA margins

Zen Zhou| +852 2101 7640| [email protected]


Salubris is the leader in the niche Percutaneous Coronary Intervention

(PCI) related drug segment. Its blockbuster Taijia (泰嘉, Clopidogrel)

recorded sales of Rmb1.5 bn in 2013 with 36% market share. We believe

Taijia will grow 20%/20%/25% YoY in 2015/16/17, driven by: 1) the

likelihood of PCI surgery registering a 10% CAGR due to increasing

penetration rate, and 2) the possibility of Salubris's Taijia cornering market

share from Sanofi's Plavix due to better cost performance ratio.

In 2012, Salubris acquired Allisartan Isoproxil, an innovative anti-

hypertension drug with patent protection until 2026. We believe the

product has the potential to become an Rmb1 bn worth blockbuster and

turn into a new growth driver. 1) The company targets an Rmb20 bn

market with five billion-worth blockbusters, 2) As per clinical data, the new

drug shows better efficacy compared with Losartan Potassium (氯沙坦钾),

3) The product can leverage on Salubris' strong academic promotion team

in the cardiovascular space.

Why buy now?

We have seen evidence of accelerating drug tenders in 1H15. We believe

the company's Taijia would benefit from this round of drug tender by

taking market share from MNCs, while its potential blockbuster, Allisartan,

is likely to benefit from the upcoming adjustment of national

reimbursement drug list.

Valuation:

Our target price of Rmb55 is based on 28x 2015E P/E, ~20% discount

the chemical drug sector average, which can be seen as a safety margin

for investors. Salubris has also been registering a decent growth rate and

high ROE, with plenty of cash in hand.

Key Financials

Shenzhen Salubris Pharmaceuticals Co. (002294.SZ)

Health care – pharmaceuticals

Key chart

RATING: OUTPERFROM

PRICE: 52.3 Rmb (20TH APRIL 2015)

TARGET: 60.0 Rmb


Shenzhen Salubris Pharmaceuticals Co., Ltd. develops, manufactures, and distributes anti-infective and cardiovascular

medicine as well as pharmaceutical ingredients.

Increasing market share of Taijia Figure 1: Increasing market sha

18% 21% 27% 30%36% 37%

82% 79% 73% 70%64% 62%

2009 2010 2011 2012 2013 2014

Taijia (Salubris) Plavix (Sanofi)

Clopidogrel domestic market share (in terms of sales)

18% 21%27% 30%

36%

82% 79%73% 70%

64%

2009 2010 2011 2012 2013

Taijia (Salubris) Plavix (Sanofi)

Clopidogrel domestic market share (in terms of sales)

Source: Menet, Credit Suisse research Source: Menet, Company data, Credit Suisse research


TP Upside vs Share Price 14.8% In CNY mn, unless otherwise stated


Sales revenue [CNY mn] 2,883 3,527 4,205 5,172

EBITDA [CNY mn] 1,282 1,594 1,923 2,306

EPS (Normalised) [c] 159 197 241 301

EPS Growth [%] 25.5 23.7 22.0 25.1

EBITDA Margin [%] 44.5 45.2 45.7 44.6

DPS [c] 70 79 96 120

Payout [%] 43.9 40.0 40.0 40.0

Free CFPS [c] 111.4 106.1 231.4 154.8

P/E 32.8 26.5 21.7 17.4

EV/EBITDA 26.0 20.7 16.7 13.8


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

This company scores extremely high on operational quality and valuation, 94th and 75th percentile respectively. Its CFROI profile

has grown quickly since inception, due to improving margins and asset efficiency. IBES consensus estimates currently forecast

a potential upside of 89%, while CS analyst forecasts in HOLT produce over 100% upside.

Economic profit has tripped since 2010 due to growth and

more recently improving CFROI over the cost of capital

(spread). This has largely correlated with increasing market

cap and TSR.

Shenzhen Salubris Pharmaceuticals Co. (002294.SZ)


The market is pricing in a

significant delcine in sales

growth

Stable but high margins

are expected

94%

94%

93%

89%

87%

78%

69%

68%

67%

67%

66%

65%

49%

45%

37%

30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Seni

or

Spec

tris

Hal

ma

Body

cote

Rot

ork

IMI

Spira

x

Fenn

er

Smith

s

Mel

rose

Ren

isha

w

Wei

r

Laird

Mor

gan

Adva

nced

…

Vesu

vius

GKN

Average Cum. Cash Conversion from 2004 Sector Average

Jonathan Hurn | +44 20 7883 4532 | [email protected]

Long term investment thesis (5 years):

Upper sector quartile cash conversion combined with healthy Credit

Suisse adjusted ROIC. We see this trend continuing.

c.28% of group sales come from automation (on our estimates) making

Spectris one of the most attractive ways to gain exposure to this ongoing

secular growth theme.

Balance Sheet optionality with FY15E net debt / EBITDA of 0.2x. Allows

scope for a large acquisition (c£400m+) providing another potential leg to

the equity story.

Potential group margin upside underpinned by a recovery in the Material

Analysis division. We believe operating margins over the medium to long

term can approach c25%

Why buy now?

We see two positive trends benefiting group EBITA in FY15.

First is improving profitability at Material Analysis where margins are

currently 280bp below peak and we believe over the medium term they

can exceed the previous high of 18.1%. Part of this will come from

growth in markets (ex-mining) and associated operational gearing, but

also the payback on R&D spend (including customer specific), which has

been taken above the line and equates to c8-9% of divisional sales. We

expect this payback to start in H2 2015 and help push Material Analysis

FY15 margins to 17.6% vs. 15.3% in FY14.

Second is improving mix at In-line Instrumentation which will also benefit

FY15 margin (particularly H2) as consumables in Pulp & Paper are

expected to move back in favour of coated blades vs. lower margin rods.

For FY15 our Group EBITA margin forecast is 17.9% vs. 16.9% in FY14

and FY15 consensus of 17.0% (pre results).

M&A: Spectris could be a target for a US multinational (e.g. Danaher)

Valuation:

15.7x PE vs. UK sector average of 16.6x. At 2164p, Spectris is trading at

a 26% discount to its global SOTP, vs. c15%+ historically.

RATING: OUTPERFORM

PRICE: 2287p (20TH APRIL 2015)

TARGET: 2310p


Key Financials

Spectris Plc (SXS.L)

Capital Goods – Electrical Equipment

Key chart

Spectris plc designs, develops and markets instrumentation and controls. The company operates in four segments: Materials Analysis, Test and Measurement, In-line

Instrumentation, and Industrial Controls.


TP Upside vs Share Price 1.0% In GBP mn, unless otherwise stated


Sales revenue [GBP mn] 1,174 1,251 1,299 1,354

EBITDA [GBP mn] 216 242 256 268

EPS (Normalised) [c] 139 139 148 155

EPS Growth [%] 4.5 -0.1 6.5 5.3

EBITDA Margin [%] 18.4 19.3 19.7 19.8

DPS [c] 47 51 56 62

Payout [%] 33.5 36.9 38.1 39.8

Free CFPS [c] 104.0 119.7 139.6 146.3

P/E 16.5 16.5 15.5 14.7

EV/EBITDA 13.2 11.4 10.3 9.3


Spectris Plc (SXS.L)


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Consensus estimates and Credit Suisse Analyst Estimates (EARL) price in 14% and 10% upside respectively. The stock saw a

significant jump in CFROI in 2010 and remained substantially above its cost of capital due to increasing asset efficiency. The

market is currently pricing in a fall in sales but sustained high margins. Spectris is also an eCap.

Economic profit has trended upwards since 2009, but did

suffer a marginal decline in 2013 due to declining CFROI.

< FY3/14 >

* Including guest purchaser

< Mid to long term outlook (in 4-5 years) >

¥100,000-¥150,000 40-50% ¥0.4-0.5bn per year

× × ×

Avg annual spending per customer ZOZOTOWN's market share Average sales per shop

approx. ¥44,000 approx. 50% ¥0.21bn per year

Transaction value

¥300bn - ¥350bn

Active members* Average shops in operationE-commerce accounts for over 15% of Japan’s

apparel market (est.total market value of ¥4.5tn)3.0-3.5mn 800

× × ×

Avg annual spending per customer ZOZOTOWN's market share Average sales per shop

Transaction value

¥115.0bn

Active members* Average shops in operationE-commerce accounts for over 4% of Japan’s

apparel market (est.total market value of ¥5tn)2.03mn 580


Start Today operates ZOZOTOWN, an e-commerce site that specializes

in Japanese fashion. The business model involves commissioned sales

(product delivery and promotion) of products from around 700 fashion

brands in exchange for sales commission fees. The site had 2.23mn

active users in 3Q FY14 and user numbers and merchandise transaction

value continue to grow today at 10–15% YoY. Operating margin is high at

11% and Start Today has the financial reserves to develop new services.

One new service started in fall 2014 is free, same-day delivery in the

Tokyo and Osaka metropolitan areas. The company is also building up its

ZOZOUSED business that buys second-hand brand clothing and takes

on inventory risk for clothing sales. In 2013, Start Today launched the

social networking site WEAR that allows users to share fashion

information; this service now has over 4mn users. The long-term strategy

is to generate earnings through increased customer traffic on

ZOZOTOWN via WEAR or affiliated e-commerce sites operated by other

companies. We expect Start Today’s merchandise transaction value to

increase over the next four or five years to around ¥300bn (we estimate

around ¥130bn in FY3/15).

Why buy now?

We expect personal consumption in Japan to improve in 2015 due to

higher employment in younger age brackets and higher wages as

corporate earnings recover. There may be a particularly strong recovery in

consumption by consumers in their 20s and 30s (Start Today’s main

customer segment), which could boost Start Today’s earnings.

Valuation:

We calculate our ¥3,000 target price by applying a P/E of 30x

(referencing the average for Internet stocks including Rakuten,

Kakaku.com, and Askul; equates to 1.5x PEG) to FY3/15E EPS and then

adding WEAR's business value (¥330/share by our estimate).

Key Financials

Start Today (3092.T)

Consumer Discretionary – Internet Retail

Key chart : 5 years outlook of ZOZOTOWN transaction value

Taketo Yamate| +81 3 4550 9963 | [email protected]

RATING: OUTPERFROM

PRICE: 3010 YEN (20TH APRIL 2015)

TARGET: 3000 YEN


START TODAY CO., LTD. is a Japan-based company engaged in the E-commerce (EC) business which operates Internet

shopping site under the name of ZOZORESORT, as well as the provision of other related services.


TP Upside vs Share Price -0.3% In JPY mn, unless otherwise stated


Sales revenue [JPY mn] 38,581 41,060 48,750 56,650

EBITDA [JPY mn] 13,218 15,830 19,180 22,650

EPS (Normalised) [c] 7,293 8,909 10,879 12,905

EPS Growth [%] 46.4 22.2 22.1 18.6

EBITDA Margin [%] 34.3 38.6 39.3 40.0

DPS [c] 2,500 3,000 4,200 4,800

Payout [%] 34.3 33.7 38.6 37.2

Free CFPS [c] 7,450.0 9,693.1 9,833.2 10,739.0

P/E 41.3 33.8 27.7 23.3

EV/EBITDA 23.7 19.3 15.6 12.9


CFROI Sales Growth

EBITDA Margins

Asset Turns

Economic Profit

Start Today’s CFROI profile reached peak levels in 2012 at c43%. Margins have improved continuously since inceptions, while

asset efficiency has remained stable. Consensus estiamates currently price in c-38% downside. The market is currently pricing

in increasing margins (to all time highs), and high sales growth.

Economic profit has doubled since 2011 driven largely by

substantial asset growth.

Start Today (3092.T)


Companies Mentioned (Price as of 20-Apr-2015)

ASKUL (2678.T, ¥2,800) Bunzl (BNZL.L, 1850.0p) China Distance Education Holdings Limited (DL.N, $19.3) China Resources Gas (1193.HK, HK$25.2) Danaher Corporation (DHR.N, $84.92) Dialog Semiconductor (DLGS.DE, €42.25) Dunkin' Brands Group (DNKN.OQ, $47.72) Eicher Motors (EICH.BO, Rs14762.5) Global Payments, Inc. (GPN.N, $100.29) Kaveri Seed (KVRI.NS, Rs959.15) Kforce Inc. (KFRC.OQ, $22.49) Marico Ltd (MRCO.BO, Rs393.2) PT PP (Persero) (PTPP.JK, Rp4,000) Rentokil (RTO.L, 137.6p) SThree (STHR.L, 356.75p) Shenzhen Salubris Pharmaceuticals Co Ltd (002294.SZ, Rmb47.52) Spectris (SXS.L, 2233.0p) Start Today (3092.T, ¥2,992) Sumitomo Osaka Cement (5232.T, ¥397) VA Tech Wabag (VATE.BO, Rs746.45)

Disclosure Appendix

Important Global Disclosures

I, Eugene Klerk, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For La tin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating defin ition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 43% (53% banking clients)

Neutral/Hold* 38% (50% banking clients)

Underperform/Sell* 16% (44% banking clients)

Restricted 3%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

See the Companies Mentioned section for full company names

The subject company (KFRC.OQ, GPN.N, PTPP.JK, RTO.L, 3092.T, DL.N, DHR.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (PTPP.JK, 3092.T, DL.N, DHR.N) within the past 12 months.

Credit Suisse has managed or co-managed a public offering of securities for the subject company (PTPP.JK) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (PTPP.JK, 3092.T, DL.N, DHR.N) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (KFRC.OQ, GPN.N, VATE.BO, PTPP.JK, DNKN.OQ, 3092.T, SXS.L, 1193.HK, 5232.T, DL.N, DHR.N) within the next 3 months.

As of the date of this report, Credit Suisse makes a market in the following subject companies (GPN.N, DNKN.OQ, DHR.N).

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (DLGS.DE).

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (KFRC.OQ, GPN.N, EICH.BO, VATE.BO, PTPP.JK, 002294.SZ, DNKN.OQ, DLGS.DE, MRCO.BO, RTO.L, 3092.T, SXS.L, 1193.HK, STHR.L, 5232.T, DL.N, BNZL.L, DHR.N) within the past 12 months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.

The following disclosed European company/ies have estimates that comply with IFRS: (RTO.L, BNZL.L).

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (PTPP.JK, DL.N) within the past 3 years.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Securities (Europe) Limited............................................................................................................ Eugene Klerk ; Catherine Tillson

Important MSCI Disclosures

The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create and financial products, including any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.

The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by Credit Suisse.

Important Credit Suisse HOLT Disclosures

With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be directly related to the specific views disclosed in this report.

The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. The adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur.

Additional information about the Credit Suisse HOLT methodology is available on request.

The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variable may also be adjusted to produce alternative warranted prices, any of which could occur.

CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks or registered service marks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse.

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited (CIN no. U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. This information is being distributed by Credit Suisse AG, Dubai Branch, duly licensed and regulated by the Dubai Financial Services Authority (DFSA), and is directed at Professional Clients or Market Counterparties only, as defined by the DFSA. The financial products or financial services to which the information relates will only be made available to a client who meets the regulatory criteria to be a Professional Client or Market Counterparty only, as defined by the DFSA, and is not intended for any other person. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Copyright © 2015 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only

global small cap update - credit suisse

Documents