You are on page 1of 13

Company

Australasia Australia Strategy Update

8 November 2011

Australian Equity Strategy


Global Markets Research

Be selective with consumer exposure


Even with the RBA cut & low valuations, we are wary of domestic cyclicals Previous rate-cutting cycles have been 200bp+, but even the most dovish forecasts are for only half of that. The risk is of fewer cuts (DB expects another 25bp), which is unlikely to spark a surge in household spending. Households seem more interested in spending on services than goods. Unfortunately, the market has more exposure to goods (retail,transport,media). Areas of opportunity amongst domestic cyclicals/consumer exposure 1. Get exposure to services spending. Air travel is growing solidly, and fares are rising domestically. Casino spending is also growing at a good pace. 2. Retailers with exposure to recreational activity and home improvement are seeing considerably more momentum than clothing/footwear/electrical retail. 3. Food retailers look attractive. Defensiveness seems prudent in the current environment, and our analysis suggests food inflation could pick up. 4. Buy stocks with exposure to the whole economy, rather than specific sectors, given growth overall is solid. SEK and the banks fall into this category. Our model portfolio contains Virgin, Crown, Seek, Woolworths & Wesfarmers. DB analysts also like Flight Centre, Qantas, Kathmandu, Premier, Dominos, Collins, Tatts. Figure 1: Growth in services & recreational goods, clothing/fwear lagging
Retail trade, values
Sporting/toys/media Cafes/restaurants Specialised food Liquor Furniture Hardware Personal goods O/S tourism Food Total Electrical Takeaway food Dept stores Newspaper/books Clothing -13 Footwear -15 15 8 6 6 4 4 4 -5 -7 2 2 7 9 10

DB forecasts
8-Nov Dec-11 Jun-12 ASX200 index RBA cash rate 10-year bond yield 4294 4.50 4.22 4550 4.50 3.75 4950 4.25 4.50

mom% trend, annualised

-15

-10

-5

10

15

Note: Data is Henderson trend, as calculated by the ABS, which is a moving average process. Specialised food is fruit stores, butchers, bakers etc. Overseas tourism spend is from trade data, not retail trade survey Source: ABS, Deutsche Bank

Tim Baker
Strategist (+61) 2 8258-1376 tim.baker@db.com

David Jennings
Strategist (+61) 2 8258-1630 david.jennings@db.com

Deutsche Bank AG/Sydney All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, 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. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 146/04/2011.

8 November 2011

Strategy Australian Equity Strategy

Domestic cyclicals are trading cheaply relative to history


Domestic cyclicals (ie, retailing, transport, media, gaming, building materials) are trading very cheaply, on a median PE of ~11x. This is on par with the depths of the financial crisis, and they appear quite cheap relative to defensives. Still, the relative valuation case rests upon the reliability of forecast earnings, and recent data raises concerns that an earnings rebound may remain elusive. Figure 2: Domestic cyclicals are as cheap as they were in the financial crisis
20 18 16 14 12 10 8 03 04 05 06 07 08 09 10 11 x PE ratios on 12m forward earnings* Domestic cyclicals Defensives Banks 20 18 16 14 12 10 8

*Domestic cyclicals is the median of TAH, TTS, EGP, CWN, CSR, BLD, HVN, DJS, MYR, JBH, SWM, FXJ, AUN, SXL, TEN, APN, SEK, AIO, TOL, VBA, QAN. Defensives is the median of stocks in the consumer staples, healthcare, telcos, utilities, property and general insurance sectors Source: IBES, Datastream, Deutsche Bank

Non-discretionary spending (eg, housing, food, utilities) has far exceeded growth in discretionary spend (7% on pcp, vs 4%), due to inflation. Further, on a volume basis discretionary spend has been quite solid; 4.4% growth on pcp, compared to historical average of 4.8%, and non-discretionary spend at 2.4%. This suggests that price deflation has hurt companies, rather than the actual volume growth of purchases. Figure 3: Discretionary spending is certainly lagging non-discretionary spend, but this is largely a deflation story
12 9 6 3 0 -3 90 92 94 96 98 00 02 04 06 08 10 Non-discretionary household spending yoy% Prices Volumes Value 12 9 6 3 0 -3 12 9 6 3 0 -3 90 92 94 96 98 00 02 04 06 08 10 yoy% Discretionary household spending Prices Volumes Value 12 9 6 3 0 -3

Note: Non-discretionary spending comprises food, tobacco, alcohol, housing costs, utilities, healthcare, operation of vehicles, communications, education & financial services. Discretionary spending comprises clothing & footwear, furnishings & household equipment, vehicle purchases, transport services, recreation & culture, cafes & restaurants and other Source: ABS, Deutsche Bank

Page 2

Deutsche Bank AG/Sydney

8 November 2011

Strategy Australian Equity Strategy

Households preference for services over goods is not helping a range of listed companies
Looking in more detail at discretionary spending, there is a further problem for domestic cyclicals. Spending on discretionary goods, where listed companies have more exposure, has been quite poor, falling 3% over the year to June. All of the strength has been concentrated in services, where the equity market has comparatively less exposure (eg, household spending money overseas on holidays, spending at cafes/restaurants that arent listed). Figure 4: Spending on discretionary services has been very strong, while spending on goods is going backwards
12 8 4 0 -4 -8 90 92 94 96 98 00 02 04 06 08 10 12
Note: Discretionary spending comprises clothing & footwear, furnishings & household equipment, vehicle purchases, transport services, recreation & culture, cafes & restaurants and other Source: ABS, Deutsche Bank

Discretionary household spending - values yoy%

12 8 4 0

10 8 6 4 2 0 -2 -4 -6

%, Discretionary household spending - values pcp FY10 FY11

Goods Services

-4 -8

This is also evident in the NAB survey, where in the September quarter retailers reported conditions to be not much better than in the financial crisis, while companies in recreation reported above average conditions. The survey suggests that companies expect these conditions to persist. Figure 5: The Sept qtr NAB survey shows retailers continue to find it tough, while the recreation sector is doing well
30 20 10 0 -10 -20 -30 -40
Source: NAB, Datastream, Deutsche Bank

Dev from LR avg

Business conditions - NAB survey

30 20 10 0 -10 -20

30 20 10 0 -10 -20 -30 -40

Dev from LR avg

Expected profitability - NAB survey

30 20 10 0 -10 -20

Recreation industry Retail industry 90 92 94 96 98 00 02 04 06 08 10 12

-30 -40

Recreation industry Retail industry 90 92 94 96 98 00 02 04 06 08 10 12

-30 -40

Deutsche Bank AG/Sydney

Page 3

8 November 2011

Strategy Australian Equity Strategy

Households still choosing services/experiences over goods in the September quarter


While the national accounts data is only up until June, more recent data from the retail trade survey suggests these trends are continuing. The chart below shows strength in cafes/restaurants and tourism. There is also strength in areas of retail with exposure to people doing things, whether recreation or home improvement. In contrast, clothing, footwear and electrical are performing poorly, through a combination of household preference for services, price deflation and overseas competition. Figure 6: Good growth in services & recreational goods, clothing/footwear lagging
Retail trade, values Sporting/toys/media Cafes/restaurants Specialised food Liquor Furniture Hardware Personal goods O/S tourism Food Total Electrical Takeaway food Dept stores Newspaper/books Clothing Footwear
15 10 9 8 7 6 6 4 4 4 2 2 -5 -7 -13 -15 mom% trend, annualised

-15

-10

-5

10

15

Note: Data on overseas tourism are not from the retail trade survey, but sourced from the ABS trade data

Source: ABS, Deutsche Bank

These trends are quite consistent with recent reports from listed retailers. The larger retailers who sell clothing and electrical items are struggling, but those with exposure to households activities (eg, KMD, Super Cheaps stores, Bunnings) are reporting good growth. Figure 7: Retailers with exposure to consumers outdoor activities are doing best

Retailer comparable store sales, latest data* Kathmandu Bunnings Super Cheap auto Super Cheap's outdoor Premier Kmart Specialty Fashion JB Hi-Fi Harvey Norman Target Big W David Jones Myer -12
15.8 6.3 5.3 3.0 0.9 0.5 0.0 -1.0 -2.8 -4.1 -4.2 -7.9 -10.0 %, pcp

-8

-4

12

16

*September quarter for Big W, Target, Harvey Norman, Kmart, Bunnings. July quarter for Myer, David Jones. June half for JB Hi-Fi, Specialty Fashion. July half for Kathmandu, Premier.15 weeks to mid-October for Super Cheaps 2 divisions. Super Cheaps outdoor division comprises Rays Outdoor and BCF Source: Company data, Deutsche Bank

Page 4

Deutsche Bank AG/Sydney

8 November 2011

Strategy Australian Equity Strategy

Growth in overseas travel remains very strong


Overseas travel remains very popular with Australians, with departures growing 10% over the past year. Tourists are increasingly opting for South-east Asia (largely Thailand and Indonesia), and North America is getting more popular. Clearly the stronger AUD has been a contributor, and this is also having the effect of dampening arrivals into Australia. Until 2007 had always had a surplus of travelers (ie, inbound tourists exceed outbound tourists), but this has changed significantly in recent years. Figure 8: Growth in overseas travel has ramped up, with South-east Asia a particularly popular destination
600 500 400 300 200 100 91 93 95 97 99 01 03 05 07 09 11
*Leisure travel is the sum of holiday and visiting friends and relatives

000s

Overseas leisure travel* Australians going overseas Foreigners visiting Australia

600 500 400

2.4 2.0 1.6 1.2 0.8

million

Australian overseas short-term departures 2006 2007 2008 2009 2010 2011 ytd

300 200 100


Source:ABS, Deutsche Bank

0.4 0.0

The scale of this turnaround has been quite striking. Through much of the 1990s and last decade, in a given quarter arrivals amounted to 1-2% of the Australian resident population. And since people tend to spend more while travelling, this represented a non-trivial boost to growth for Australian companies. But now this has swung around, with implications for a range of sectors exposed to tourism spend. Figure 9: Tourism used to provide Australia with a net boost, but this has reversed

3 2 1 0

Tourism balance as % of Australian population Arrivals less departures as % of total population

3 2 1 0

` -1 -2 -3 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: ABS, Deutsche Bank

-1
Australians going offshore exceeding foreigners visting Australia

-2 -3

Deutsche Bank AG/Sydney

Page 5

8 November 2011

Strategy Australian Equity Strategy

Domestic airline activity is solid also


Even with Australians increasingly opting for overseas holidays, domestic air travel is growing solidly. This partly reflects the resilience of business travel, but also an ongoing shift by households toward air travel and away from car travel. Both Virgin and Qantas have grown revenue passenger kilometers by ~5% over the past year. Figure 10: Domestic airline activity is growing a solid pace for both major airlines

15 12 9 6 3 0 -3 -6

% yoy

Domestic airline activity (revenue passenger kilometres) Qantas (incl. Jetstar) Virgin

15 12 9 6 3 0 -3 -6

05

06

07

08

09

10

11

Source: Company data, Deutsche Bank

The issues with a smaller discount competitor have helped the listed airlines gain share, and this has also contributed to growing yields. Discount airfares have increased by almost 30% over the past year, while business-class fares have grown by 15%. Figure 11: Airfares have grown strongly over the past year, particularly discount

30 20 10 0 -10 -20 -30

yoy%

Domestic airfares
Best discount Business Full economy

30 20 10 0 -10 -20 -30

03

04

05

06

07

08

09

10

11

Source: BITRE, Deutsche Bank

Page 6

Deutsche Bank AG/Sydney

8 November 2011

Strategy Australian Equity Strategy

Gambling spend is growing at a decent pace


Households are also growing spending on gambling at a moderate rate, highlighting a preference for experiences over goods. For example, our analysts forecast December half main gaming floor revenue to at Crown to be up ~5% on pcp, and the recent AGM commentary delivered comfort around this forecast (management pointing to 3.5% growth on pcp in the half thus far). In contrast, retail sales ex food in the September quarter was flat on pcp. Further, spending on gaming machines in Victoria and Queensland is growing broadly in line with historical rates. Figure 12: Casino spending is growing at a faster rate than discretionary retail
10 8 6 4 2 0

% pcp

Casino spending vs discretionary retail Retail sales ex food Crown Melbourne & Burswood

10 8 6 4 2 0

15 12 9 6 3 0 -3 -6 -9

yoy%

Electronic gaming machine expenditure Victoria Queensland

15 12 9 6 3 0 -3 -6 -9

04
Note: Casino spending for Dec-11 is DB forecast, while retail trade is September quarter on pcp.

05

06

07

08

09

10

11

Source: VCGR, Qld Office of Gaming, Company data, ABS, Deutsche Bank

While some sectors of the economy are clearly under pressure, others are quite strong, and thus on average the economy is tracking reasonably well. As a result, stocks that have broad exposure across sectors and regions should perform, such as Seek and the banks. There has been concern recently around a slowing labour market, and the limited growth in job ads. However, the NAB business survey suggests that the underlying pulse of labour demand is holding up better than suggested by official data. Further, our analysts do not have any volume growth for SEK in their forecasts, but earnings are nonetheless yet expected to grow strongly in part due to higher prices. Figure 13: Internet job ads havent grown much recently, but the NAB survey still suggests a solid jobs outlook
300 250 200 150 100 50 0 00 02 04 06 08 10 12
Source: Datastream, ABS, Deutsche Bank

Internet Job Advertisements 000s Number (lhs) Growth on pcp (rhs) %

80 60 40 20 0 -20 -40 -60

NAB survey and employment 7 6 5 4 3 2 1 0 -1 -2 -3 -4 89 qoq% annual. Employment (lhs) Index NAB employment index (rhs) 40 30 20 10 0 -10 -20 -30 -40 -50 91 93 95 97 99 01 03 05 07 09 11

Deutsche Bank AG/Sydney

Page 7

8 November 2011

Strategy Australian Equity Strategy

The Masterchef effect? Households eating higher quality food.


Another interesting development in household spending has been a recent preference for higher quality food. This is evident in the outperformance of the cafes & restaurants sector relative to takeaway food sales, as well as specialized food retailers relative to supermarkets. There has been some suggestion that this can be traced to the popular cooking show Masterchef, but clearly this is difficult to quantify. Figure 14: Households are growing spending on higher quality food, both to eat at home and when going out
25 20 15 10 5 0 -5 -10 -15 -20 05 06
Source: ABS, Deutsche Bank

mom %, trend annual.

Retail sales

25 20 15 10 5 0 -5 -10

30 25 20 15 10 5 0 -5 -10 -15 -20 -25

mom %, trend annual.

Retail sales Specialised food* Supermarkets

30 25 20 15 10 5 0 -5 -10 -15 -20 -25 11

Cafes & restaurants Takeaway food 07 08 09 10 11

-15 -20

*Specialised food includes fruit shops, butchers, bakers etc

05

06

07

08

09

10

Still, spending at supermarkets continues to grow around mid-single digits, reflecting the underlying defensiveness of the business. There is also the prospect of food inflation in the near future. The chart below suggests that food inflation in Australia tends to emerge around 3 quarters after inflation has picked up globally, and suggest upside over the remainder of FY12. (Note that for the Australian measures we use Woolworths reported inflation, and the food deflator from the retail trade survey. The latter measure reflects what is actually spent on food, in contrast to the food component of the CPI which is a fixed weight over time). Figure 15: High global food inflation should begin to feed into domestic inflation

Global and Australian food price inflation 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 96 % yoy Global food inflation (AUD, 3 qtr lead, lhs) Australian food prices* (rhs) Woolworths inflation 8 7 6 5 4 3 2 1 0 -1 98 00 02 04 06 08 10 12

*Australian food prices is calculated as the implied price deflator of food retailing in the retail trade survey, and thus reflects actual food purchases, unlike the CPI Source: UN, Company data, ABS, IRESS, Deutsche Bank

Page 8

Deutsche Bank AG/Sydney

8 November 2011

Strategy Australian Equity Strategy

Deutsche Banks preferred consumer exposures

Figure 16: Metrics for Deutsche Banks preferred stocks with consumer exposure (DB analyst numbers)
EPS growth FY10 FY11F FY12F FY13F 12m fwd PE PE ratio FY11F FY12F FY13F 12m fwd DY Dividend yield FY11F FY12F FY13F

AIO CCL CKF CWN DMP FLT KMD PMV QAN SEK TTS VBA WES

Asciano Coca-Cola Amatil Collins Foods Crown Domino's Pizza Flight Centre Kathmandu Premier Qantas Seek Tatts Virgin Blue Wesfarmers

na 11% na -3% 15% 74% 64% -24% 144% 31% 1% na -14% 9% -3%

658% 5% na 17% 19% 22% 49% -37% 40% 26% -5% na 23% 6% 0%

9% 11% -20% 23% 15% 11% 17% 21% -4% 29% 15% na 30% 4% 11%

28% 8% 28% 24% 12% 9% 17% 15% 52% 22% -32% 60% 12% 10% 13%

17.2x 16.2x 5.2x 13.9x 19.3x 10.1x 10.5x 12.8x 7.8x 13.8x 11.2x 12.7x 14.5x 13.2x 12.3x

20.4x 17.3x 4.9x 18.2x 23.3x 11.7x 12.7x 15.9x 8.5x 19.2x 11.0x -21.4x 19.4x 14.2x 14.4x

18.7x 15.7x 6.2x 14.8x 20.3x 10.5x 10.9x 13.2x 8.9x 14.9x 9.6x 14.7x 15.0x 13.6x 12.9x

14.6x 14.5x 4.9x 11.9x 18.1x 9.7x 9.3x 11.5x 5.8x 12.2x 14.0x 9.2x 13.4x 12.4x 11.4x

1.8% 4.4% 7.6% 4.5% 3.6% 5.0% 4.9% 6.8% 3.7% 3.7% 9.0% 1.8% 5.6% 5.4% 5.2%

1.3% 4.1% 0.0% 4.6% 3.0% 4.2% 4.0% 6.8% 0.0% 2.4% 9.2% 0.0% 4.6% 5.0% 5.2%

1.7% 4.6% 4.1% 4.6% 3.4% 4.9% 4.7% 6.8% 3.1% 3.3% 10.1% 0.0% 5.4% 5.2% 5.0%

2.0% 5.0% 9.9% 4.6% 3.8% 5.1% 5.3% 6.8% 4.6% 4.1% 7.3% 5.2% 6.0% 5.7% 5.5%

WOW Woolworths XAIXB Industrials ex banks

Note: Equity strategy teams model portfolio includes CWN, SEK, VBA, WES, WOW. All stocks in the table are rated a BUY by DB analysts, with the exception of WES.

Source: Deutsche Bank

Deutsche Bank AG/Sydney

Page 9

8 November 2011

Strategy Australian Equity Strategy

COMPANIES MENTIONED LIST Code Stock n am e


AIO APN AUN BLD CCL CKF CSR CWN DJS DMP EGP FLT FXJ HVN JBH KMD MYR PMV QAN SEK SFH SUL SWM SXL TAH TEN TOL TTS VBA WES WOW
Source: Deutsche Bank

L ast pri ce 1.50 0.88 1.16 3.63 12.20 1.21 2.36 8.09 3.14 7.21 3.78 19.80 0.90 2.12 15.15 1.90 2.33 5.30 1.62 5.95 0.58 5.51 3.25 1.19 2.90 0.92 4.74 2.33 0.39 32.32 24.60

Asciano Ltd APN News & Media Ltd AUSTAR United Communications Ltd Boral Ltd Coca-Cola Amatil Ltd Collins Foods Ltd CSR Ltd Crown Ltd David Jones Ltd Domino's Pizza Enterprises Limited Echo Entertainment Group Ltd Flight Centre Ltd Fairfax Media Ltd Harvey Norman Holdings Ltd JB Hi-Fi Ltd Kathmandu Holdings Ltd Myer Holdings Ltd Premier Investments Ltd Qantas Airways Ltd Seek Ltd Specialty Fashion Group Ltd Super Retail Group Ltd Seven West Media Ltd Southern Cross Media Group Ltd Tabcorp Holdings Ltd Ten Network Holdings Ltd Toll Holdings Ltd Tatts Group Limited Virgin Blue Holdings Ltd Wesfarmers Ltd Woolworths Ltd

Page 10

Deutsche Bank AG/Sydney

8 November 2011

Strategy Australian Equity Strategy

Appendix 1
Important Disclosures Additional information available upon request
For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr.

Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Tim Baker

Equity rating key Buy: Based on a current 12- month view of total shareholder return (TSR = percentage change in share price from current price to projected target price plus projected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes: 1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were: Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of 10% or worse over a 12-month period

Equity rating dispersion and banking relationships

Deutsche Bank AG/Sydney

Page 11

8 November 2011

Strategy Australian Equity Strategy

Regulatory Disclosures 1. Important Additional Conflict Disclosures


Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

2. Short-Term Trade Ideas


Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

3. Country-Specific Disclosures
Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. EU countries: Disclosures relating to our obligations under MiFiD can be found at http://www.globalmarkets.db.com/riskdisclosures. Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless Japan is specifically designated in the name of the entity. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation.

Page 12

Deutsche Bank AG/Sydney

Deutsche Bank AG/Sydney International locations


Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005 United States of America Tel: (1) 212 250 2500 Deutsche Bank AG London 1 Great Winchester Street London EC2N 2EQ United Kingdom Tel: (44) 20 7545 8000 Deutsche Bank AG Groe Gallusstrae 10-14 60272 Frankfurt am Main Germany Tel: (49) 69 910 00 Deutsche Bank AG Deutsche Bank Place Level 16 Corner of Hunter & Phillip Streets Sydney, NSW 2000 Australia Tel: (61) 2 8258 1234

Deutsche Bank AG Filiale Hongkong International Commerce Centre, 1 Austin Road West,Kowloon, Hong Kong Tel: (852) 2203 8888

Deutsche Securities Inc. 2-11-1 Nagatacho Sanno Park Tower Chiyoda-ku, Tokyo 100-6171 Japan Tel: (81) 3 5156 6770

Global Disclaimer
The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Deutsche Bank makes no representation as to the accuracy or completeness of such information. Deutsche Bank may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Deutsche Bank, including strategists and sales staff, may take a view that is inconsistent with that taken in this research report. Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst judgement. As a result of Deutsche Banks March 2010 acquisition of BHF-Bank AG, a security may be covered by more than one analyst within the Deutsche Bank group. Each of these analysts may use differing methodologies to value the security; as a result, the recommendations may differ and the price targets and estimates of each may vary widely. In August 2009, Deutsche Bank instituted a new policy whereby analysts may choose not to set or maintain a target price of certain issuers under coverage with a Hold rating. In particular, this will typically occur for "Hold" rated stocks having a market cap smaller than most other companies in its sector or region. We believe that such policy will allow us to make best use of our resources. Please visit our website at http://gm.db.com to determine the target price of any stock. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Stock transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Deutsche Bank may with respect to securities covered by this report, sell to or buy from customers on a principal basis, and consider this report in deciding to trade on a proprietary basis. Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorized by the BaFin. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange and regulated by the Financial Services Authority for the conduct of investment business in the UK and authorized by the BaFin. This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapore Branch, and recipients in Singapore of this report are to contact Deutsche Bank AG, Singapore Branch in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch accepts legal responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision of investment advice. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting. Copyright 2011 Deutsche Bank AG