Book Value(HK$bn) 15.2 Premium 51.70% Disposal gain(hk$mn) 7,393 Transaction completion

Transkript

1 25 April :32AM HKT Neutral Proven active asset manager; reinstate at Neutral Removing NR designation post completion of 17-asset disposal We are removing our Not Rated designation on Link REIT and reinstating our rating at Neutral. The company completed a 17-asset disposal at HK$23bn by end-february 2018, and the transaction was done at a price that was 52% higher than the original book value of c.hk$15bn. As a result, Link REIT will recognize a HK$7.4bn disposal gain in March-FY18E. Post the transaction, pro-forma gearing (debt/asset) is only 15%, which we believe implies large capacity for de-leveraging as well as the potential for share buybacks (to neutralize revenue loss) and new M&A. Exhibit 1: Details of Link REIT s disposal of 17 malls Disposal of properties No. of properties Aggregate appraised value(hk$bn) Aggregate consideration(hk$bn) Premium to aggregate appraised value Target Group Cheung Hang Kai Yip Kam Tai Lei Cheng Uk H.A.N.D.S Shek Lei Tai Wo Hau Tsz Ching Yung Shing Kwai Fong Kwai Shing East Lai Kok Lee On Shun Tin Tsing Yi Lions Rise note: H.A.N.D.S includes On Ting and Yau Oi Book Value(HK$bn) 15.2 Premium 51.7 Disposal gain(hk$mn) 7,393 Transaction completion 28-Feb-18 Snapshot of Link REIT s portfolio post disposal Link REIT is the largest REIT in Asia by market cap and the only internally managed REIT in the region. Link REIT has 138 properties and c.61,000 car park spaces in Hong Kong (91% of portfolio valuation), plus three properties in China (9% of portfolio valuation). Justin Kwok, CFA justin.kwok@gs.com (Asia) L.L.C. Colin Yao colin.yao@gs.com (Singapore) Pte Key Data GS Forecast GS Factor Profile, Research estimates. See disclosures for details. 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. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to Analysts employed by non-us affiliates are not registered/qualified as research analysts with FINRA in the U.S.

2 Neutral Ratios & Valuation Growth & Margins (%) Price Performance Rating since Apr 25, 2018 Income Statement (HK$ mn) Source: FactSet. Price as of 24 Apr 2018 close. Balance Sheet (HK$ mn) Cash Flow (HK$ mn), Research estimates. 25 April

3 Exhibit 2: Breakdown of Link REIT s 1HFY18 BV 1HFY18 BV was c.hk$190bn Exhibit 3: NAV 10 split among coverage CN Retail HK Office 5% 4% HK CP 17% HK Retail 7 CN Office 4% % ttl GAV % 75% 62% % 3 28% 22% 16% 14% 12% 11% 8% 5% Fortune REIT HK Retail HK Office HK Resi China Prop Others Link REIT MGCCT Wharf REIC Hysan Dev. Sino Land Champion REIT Hang Lung Properties SHK Properties Swire Properties New World Henderson Land Hongkong Land CK Property Kerry Properties, Global Investment Research Active asset manager in finding growth and balance sheet management We believe Link REIT s management has a proven track record in active capital recycling through acquisitions and disposals, and is aiming to enhance its portfolio quality and find new growth drivers. In the past five fiscal years, Link REIT has acquired 8 properties at an aggregate invested cost of HK$31bn, and disposed of 45 properties with aggregate proceeds of HK$35bn. Exhibit 4: Link REIT has more than recovered its gross cost of acquisitions (c.hk$31bn) through disposals (c.hk$35bn) over the past five fiscal years Details of Link s capital recycling in recent years FY11/12 FY14/15 FY15/16 FY16/17 FY17/18 Total Acquisition 2 properties 2 properties 2 properties 1 properties 1 properties 8 properties (HK$bn) Disposal 9 properties 5 properties 14 properties 17 properties 45 properties (HK$bn) Amid active asset recycling, with the help of the recent round of HK$23bn disposal proceeds, Link has proactively managed its balance sheet leverage, bringing its net debt level back down to the pre-china-m&a level of c.hk$15bn. We see this as a positive development, given the outlook for rising rates and the fact that Link, as a REIT, cannot save much ongoing operating cash flow for potential debt management. 25 April

4 Exhibit 5: Post its 17-asset disposal, Link REIT s net debt level has fallen below pre-china M&A levels... Link REIT net debt vs growth trend Exhibit 6:...and we note its pro-active balance sheet management amid risks of higher rates going forward Link REIT net debt vs interest rates trend Link net debt vs yoy growth Net debt(hk$mn) %yoy(lhs) (HK$mn) 30,000 25,000 20,000 15,000 10,000 5, % 8% 7% 6% 5% 4% 3% 2% 1% Link net debt vs blended interst rate Net debt(hk$mn) Blended interest rate(lhs) (HK$mn) 30,000 25,000 20,000 15,000 10,000 5,000 0, Global Investment Research, Global Investment Research High visibility for retail rental growth coming from non-discretionary local spending During Apr-Dec 17, Link REIT s overall tenant sales growth came in at 7.6%, and c.65% of its retail property exposure (by monthly rentals) is in food-related trades, which have historically seen steady growth. Link s occupancy costs are relatively low at c.13%. At the pre-blackout meeting in early April, management guided for the recent pace of the rental reversion rate to remain strong (they reported a 27% reversion rate for the HK retail portfolio in 1H FY18), and we see this as likely to continue amid a better overall retail backdrop (please see our HK Real Estate: Retail sector report here and our HK retail team s sector report here for details). Exhibit 7: Food and related trades account for c.65% of Link REIT s retail rental revenue Link REIT retail portfolio non-discretionary trade mix Valuable goods 1% Others 18% Education/Wel fare and ancillary 1% Personal care/medicine 6% Markets/cooke d food stalls 15% Services Food and beverage 28% Supermarket and foodstuff 22% Exhibit 8: Link had an OCR of 13% as of Apr-Dec 17 Retail occupancy cost ratio comparisons among our coverage (%) 25% 2 15% 5% 23% Time Squares 21% Hysan retail portfolio (ex-apple Store) Harbour City Langham Place Mall Festival Walk 14% SHKP 13% Link REIT FY17 1H CY17 FY17 CY17 Apr-Jun 17 2H CY16 Apr 17 - Dec April

5 Exhibit 9: Link REIT s malls delivered 7.6% yoy tenant sales growth in Apr-Dec 17 Retail prop tenant sales growth comparison % 0.2% 3.9% % 7.6% 2.2% Time Squares Harbour City Pacific Place Citygate Cityplaza Festival Walk Hysan Place Langham Place Mall Link REIT s malls HK overall retail sales Wharf CY2017 Swire Properties 2H CY2017 Apr- Hysan Dec 17 FY2017 CY17 Apr 17 - Dec 17 CY17 Exhibit 10: Link REIT is adding two buildings to its portfolio Details on new growth New projects contributions started to kick-in External growth from M&A continues to kick in, with full-year contributions from the Guangzhou mall in FY18E, new openings of the Mongkok complex in FY19E, and new openings of the Kowloon East office project in FY20E. 700 Nathan Road Tower soft opening End 2017 Podium target opening Mid 2018 LFA(sqft) 283,000 Committed leases as at Feb 2018 Tower 7 Podium 5 The Quayside Target completion date 2019 LFA(mn sqft) 0.9 Committed area as at Feb 2018 (sqft) 250,000 as % of office space 3 More room for share buybacks Given Link s large balance sheet capacity, management has indicated its intention to conduct share buybacks or M&A. Management has said it aims to conduct share buybacks in order to neutralize the DPU loss caused by the 17-asset sale, which we estimate would have a roughly HK$0.05/unit post tax NPI impact, (equal to a c.46.2 mn unit reduction in share count), implying c.hk$3.1 bn of share buybacks at the prevailing share price. 25 April

6 Exhibit 11: Link REIT share price reaction to events Announced completion of 17 malls disposal Share price (HKD) Acquired Lions Rise, a shopping mall in Kowloon East Disposed 4 properties Acquired office develop ment site in Kowloon East, JV with Nan Fung Disposed 5 properties Acquired Corporate Avenue 1&2, an office project in Shanghai Acquired EC Mall in Beijing Fed rate hike Disposed 5 properties Acquired No.700 Nathan Road, an office/retail project in Mong Kok Disposed 9 properties Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18, HKEJ, HKET Exhibit 12: The company last bought back shares in March 2018 Link share buyback history (HK$) Share buyback (RHS) Share price (# of shares, '000) 3,500 3,000 2,500 2,000 1,500 1,000 Brexit Vote Increase DSD Fed rate hike Announced strategic review Fed rate hike Announced will dispose 17 malls /1/2015 6/1/2015 8/1/ /1/ /1/2015 2/1/2016 4/1/2016 6/1/2016 8/1/ /1/ /1/2016 2/1/2017 4/1/2017 6/1/2017 8/1/ /1/ /1/2017 2/1/2018 4/1/2018 Source: HKEX, Datastream A shift of DPU driver from internal to external/corporate actions In FY17-FY18, Link delivered one of the fastest DPU growth rates among REITs in Asia (+13%yoy), and historically its DPU growth has been mainly driven by internal factors including mainly asset enhancement projects (AEIs). We expect a continuation of the ongoing shift of the DPU growth driver toward external (M&A and greenfield development) and corporate actions (share buybacks). We look for a DPU CAGR in 25 April

7 FY17-FY20E, of which we attribute c.6 to organic growth, c.23% to AEIs, and 17% to new additions. Exhibit 13: Link REIT trades at 3.8% forward dividend yield with a 13% DPU growth Asia REITs (under GS coverage) FY+1 dividend yield vs FY+1 DPU growth Exhibit 14: We expect relatively more of the DPU growth to come from new developments going forward Decomposition of DPU growth FY+1 div yield % % 5. CapitaCommercial 4.5% Trust % MGCCT Ascendas REIT Fortune REIT CapitaMall Trust Keppel REIT Champion REIT Mapletree Industrial Trust Mapletree Keppel DC REIT Commercial Trust ANZ-average Japan-average Link REIT FY+1 div growth, Global Investment Research, Datastream Exhibit 15: Our DCF calculation gives a value of HK$75/shr Link REIT DCF calculation DPU (HK$) FY Organic growth Although we expect Link REIT s DPU CAGR to stay in the double digits, its valuation has kept us Neutral We are revising our FY18E/19E/20E EPS by 25/11.2%/5.1%, mainly to factor in the recent disposal gain, and recent share buybacks. We look for a DPU CAGR of c. for the next three years, driven by a c.5% revenue CAGR amid lower financing costs on our estimated c.hk$10bn debt reduction post disposals. Link REIT is trading at 4./4.4% Mar-FY19E/ Mar-FY20E dividend yields (we are 4%/5% above Bloomberg consensus on FY19E/ FY20E DPU), which imply c bps spread on 10YR US Treasury yields, versus its average of 220 bps for the past five years. Our new 12-month DCF based target is set at HK$75, based on a WACC of 7.3% and terminal growth rate of AEI 0.06 New acq./dev Disposal and buyback FY2017 Organic growth, Global Investment Research HK$mn (Mar FY-end) FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E EBIT 8,591 8,983 9,371 9,726 10,093 10,472 10,866 11,275 11,697 12,136 - EBIT x tax rate 1,229 1,285 1,341 1,392 1,444 1,498 1,554 1,613 1,673 1,736 + Depreciation and amortization Increase/(decrease) in net working capital (80) (78) (78) (73) (75) (77) (80) (83) (86) (89) - Increase in capital expenditure Unlevered Free Cash Flow 6,809 7,130 7,449 7,735 8,037 8,351 8,678 9,017 9,367 9,731 PV of FCF 6,573 6,415 6,246 6,043 6,279 5,667 5,488 5,313 5,144 4,980 PV of terminal value 119, AEI 0.13 New acq./dev FY2020E Cost of equity 8.5% Firm value 177,420 Cost of debt (after tax) 2.5% Net (debt) (17,105) Long-run debt-to-capital ratio 20. Equity value 160,315 WACC 7.3% NOSH 2,150 Terminal growth rate 3. Equity per unit (HK$/unit) 75, Global Investment Research 25 April

8 Exhibit 16: We look for c. DPU CAGR for next three years, driven by a c.5% revenue CAGR amid lower finance costs on our estimated c.hk$10bn debt reduction post disposals. Link REIT P&L summary YoY% HK$mn FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY14 FY15 FY16 FY17 FY18E FY19E FY20E HK portfolio 6,506 7,155 7,723 8,319 8,681 9,022 9,163 9, Rental portfolio 4,872 5,326 5,711 6,095 6,352 6,590 6,634 7, Car park 1,315 1,494 1,656 1,846 1,940 2,032 2,129 2, Others China portfolio Total revenue 6,506 7,155 7,723 8,740 9,255 9,810 10,054 10, Opex (1,890) (1,953) (2,054) (2,227) (2,261) (2,363) (2,187) (2,255) (7) 3 NPI 4,616 5,202 5,669 6,513 6,994 7,448 7,867 8, NPI margin G&A and others exp (223) (222) (437) (368) (342) (349) (358) (369) (0) 97 (16) (7) EBIT 4,393 4,980 5,232 6,145 6,652 7,099 7,509 8, Net finance costs (402) (365) (327) (502) (563) (498) (363) (296) (9) (10) (12) (27) (19) Increase/decrease in fair value 17,705 13,445 22,699 11,263 11, Exceptional items, incl. disposal gains ,387 7, PBT 21,696 18,060 28,049 17,302 18,970 14,001 7,146 7,882 Tax (634) (755) (819) (953) (1,057) (945) (1,022) (1,128) Minorities (54) (202) (1) (4) (63) Underlying profit 21,062 17,305 27,230 16,295 17,711 13,055 6,120 6,691 Adjustment to distributions (17,713) (13,475) (23,038) (11,661) (12,636) (7,566) (166) (166) Distributions 3,349 3,830 4,192 4,634 5,075 5,489 5,954 6, DPU (HK$/share) , Global Investment Research Exhibit 17: 12m forward dividend yield banks calculation, based on a 5-year historical trading range Price on 12-mo Potential Base rate: US Yield Implied 12m fwd. Implied Implied Link REIT Apr 20 TP up/dn 10yr T spread: yield DPU valuation up/dn Bull case HKD HKD % -1 s.d. -1 s.d. % HKD HKD +/-% % bps = 3.6% % Avg case HKD HKD % avg avg % HKD HKD +/-% % 2.27% + 219bps = 4.5% % Bear case HKD HKD % +1 s.d. +1 s.d. % HKD HKD +/-% % 2.64% + 273bps = 5.4% % Source: Datastream, Global Investment Research Exhibit 18: Link REIT 12M forward dividend yield implied trading bands (HK$/shr) Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Source: Datastream, Global Investment Research Based on 3.7% div. yield Share price Based on 4.5% div. yield Based on 5.3% div. yield Exhibit 19: Link REIT trades at 3% discount to its FY20 NAV Link REIT disc to NAV Exhibit 20: Link trades at 0.85X P/B Link P/B ratio history 3 share price discount to NAV average +1 std -1 std (X) 1.4 price to last reported book average +1 std -1 std Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18, Global Investment Research 0.7 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Source: Company, Datastream 25 April

9 M&A framework Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring companies under our rated coverage from 1 to 3, with 1 representing high (3-5) probability of the company becoming an acquisition target, 2 representing medium (15%-3) probability and 3 representing low (-15%) probability. For companies ranked 1 or 2, in line with our standard departmental guidelines we incorporate an M&A component into our target price. An M&A rank of 3, which we reinstate for Link REIT, is considered immaterial and therefore does not factor into our target price, and may or may not be discussed in research. For further details on our M&A framework, see report, Hong Kong: Real Estate: EHIC screens as potential M&A target: Introducing Hong Kong property M&A framework, July 1, Key risks n Upside: Further NAV-accretive disposals; DPU-accretive M&A; faster-than-expected n growth in non-discretionary retail sales. Exhibit 21: Link REIT s net financing cost equals c.8% of its EBITDA or c.3% of its total debt Sector net debt % vs finance cost % of EBITDA net finance cost as % of EBITDA finance cost (RHS) 3 4.5% % 25% 4.1% 4.1% 4.5% 3.7% 2 3.5% 3.6% % 3.4% 2.9% 2.7% 2.7% 3.5% 15% % 5% 28% 18% 18% 9% 2% 8% 8% 9% 3% 4% 1% 1% % -5% % 0.5% -15% -11% 0. MGCCT (S$) Fortune REIT Champion Swire Prop Henderson Land Link REIT HKL(US$) Hang Lung Prop Downside: faster-than-expected interest rates that would negatively impact its financing costs and/or the valuation of its investment properties. Hysan Dev SHKP NWD Kerry Prop CKA Sino Land Exhibit 22: Link REIT is having c.19% net gearing and its finance cost is c. 3% of total debt Sector net debt % vs interest cost % Net debt/equity finance cost (RHS) % 4.5% 6 4.1% 4.1% 4.5% 5 3.7% 3.5% 3.6% % 3.4% 4 2.9% 2.7% 2.7% % % 38% 23% 14% 18% 19% 9% 5% 5% 7% 43% 26% 6% MGCCT (S$) Fortune REIT Champion Swire Prop Henderson Land Link REIT HKL(US$) Hang Lung Prop Hysan Dev SHKP NWD Kerry Prop CKA Sino Land -21% 2.5% % % April

10 Disclosure Appendix Reg AC I, Justin Kwok, CFA, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Global Investment Research division. GS Factor Profile The Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may vary depending on the fiscal year, industry and region, but the standard approach is as follows: Growth is based on a stock s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a higher percentile indicating a higher growth company. Financial Returns is based on a stock s forward-looking ROE, ROCE and CROCI (for financial stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock s forward-looking P/E, P/B, price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns percentile and (10 - Multiple percentile). Financial Returns and Multiple use the analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics). For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative. M&A Rank Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring companies under our rated coverage from 1 to 3, with 1 representing high (3-5) probability of the company becoming an acquisition target, 2 representing medium (15%-3) probability and 3 representing low (-15%) probability. For companies ranked 1 or 2, in line with our standard departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not factor into our price target, and may or may not be discussed in research. Quantum Quantum is proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets. GS SUSTAIN GS SUSTAIN is a global investment strategy focused on the generation of long-term alpha through identifying high quality industry leaders. The GS SUSTAIN 50 list includes leaders we believe to be well positioned to deliver long-term outperformance through superior returns on capital, sustainable competitive advantage and effective management of ESG risks vs. global industry peers. Candidates are selected largely on a combination of quantifiable analysis of these three aspects of corporate performance. Disclosures Coverage group(s) of stocks by primary analyst(s) Justin Kwok, CFA: Hong Kong Property. Hong Kong Property: Champion REIT, China Lodging Group, CK Asset Holdings Ltd, ehi Car Services, Fortune REIT (Hong Kong), Hang Lung Properties, Henderson Land, Hongkong Land, Hysan Development, Kerry Properties, Link REIT, Mapletree Greater China Commercial, New World Development, Shangri-La Asia, Sino Land, Sun Hung Kai Properties, Swire Properties, Wharf REIC. Company-specific regulatory disclosures The following disclosures relate to relationships between The Group, Inc. (with its affiliates, ) and companies covered by the Global Investment Research Division of and referred to in this research. expects to receive or intends to seek compensation for investment banking services in the next 3 months: Link REIT (HK$67.40) had an investment banking services client relationship during the past 12 months with: Link REIT (HK$67.40) had a non-securities services client relationship during the past 12 months with: Link REIT (HK$67.40) makes a market in the securities or derivatives thereof: Link REIT (HK$67.40) Distribution of ratings/investment banking relationships Investment Research global Equity coverage universe Rating Distribution Investment Banking Relationships Buy Hold Sell Buy Hold Sell Global 35% 53% 12% 63% 57% 51% As of April 1, 2018, Global Investment Research had investment ratings on 2,896 equity securities. assigns stocks as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for 25 April

11 the purposes of the above disclosure required by the FINRA Rules. See Ratings, Coverage groups and views and related definitions below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom has provided investment banking services within the previous twelve months. Price target and rating history chart(s) Regulatory disclosures Disclosures required by United States laws and regulations See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report. The following are additional required disclosures: Ownership and material conflicts of interest: policy prohibits its analysts, professionals reporting to analysts and members of their households from owning securities of any company in the analyst s area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of, which includes investment banking revenues. Analyst as officer or director: policy generally prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer, director or advisor of any company in the analyst s area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of & Co. LLC and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts. Distribution of ratings: See the distribution of ratings disclosure above. 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12 Kingdom, as such term is defined in the rules of the Financial Conduct Authority, should read this research in conjunction with prior research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by International. A copy of these risks warnings, and a glossary of certain financial terms used in this report, are available from International on request. European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/125/EC is available at which states the European Policy for Managing Conflicts of Interest in Connection with Investment Research. Japan: Japan Co., Ltd. is a Financial Instrument Dealer registered with the Kanto Financial Bureau under registration number Kinsho 69, and a member of Japan Securities Dealers Association, Financial Futures Association of Japan and Type II Financial Instruments Firms Association. 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Each regional Investment Review Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and -15% of stocks as Sell; however, the distribution of Buys and Sells in any particular analyst s coverage group may vary as determined by the regional Investment Review Committee. Additionally, each Investment Review Committee manages Regional Conviction lists, which represent investment recommendations focused on the size of the total return potential and/or the likelihood of the realization of the return across their respective areas of coverage. The addition or removal of stocks from such Conviction lists do not represent a change in the analysts investment rating for such stocks. Total return potential represents the upside or downside differential between the current share price and the price target, including all paid or anticipated dividends, expected during the time horizon associated with the price target. Price targets are required for all covered stocks. The total return potential, price target and associated time horizon are stated in each report adding or reiterating an Investment List membership. Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at The analyst assigns one of the following coverage views which represents the analyst s investment outlook on the coverage group relative to the group s historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12 months is favorable relative to the coverage group s historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12 months is neutral relative to the coverage group s historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage group s historical fundamentals and/or valuation. Not Rated (NR). The investment rating and target price have been removed pursuant to policy when is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). has suspended coverage of this company. Not Covered (NC). does not cover this company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded. 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Other than disclosures relating to, this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst s judgment. conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division. & Co. 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