EQUITY RESEARCH
CANADIAN RESEARCH AT A GLANCE
October 8, 2014
Price Target Revisions
! RONA Inc.
Summary
Building a better box: Réno-Dépôt store tour highlights back to basics approach
Summary
Capstone reports third quarter production results; full-year guidance maintained
Summary
State permit a key step towards federal permits in November
Summary
One step closer to the target
Summary
2014 guidance boosted as activity levels remain high; Increasing estimates
Summary
Iron ore prices rebound around Chinese holidays
Summary
Australian Nickel: Outlook still strong - Time to get exposure
First Glance Notes
! Capstone Mining Corp.
! Romarco Minerals Inc.
Company Comments
! High Liner Foods Inc.
! Peyto Exploration & Development
Industry Comments
! Bulking Up - RBC's Weekly Review
! Diversified Metals & Mining
! Global Mining Trends & Values
! North American Gold Equities:
!
Summary
Summary
Reviewing Capital and Operating Cost
Expectations
Q4/14 Global Mining Best Ideas
Summary
Portfolio
RBC International E&P Daily
Summary
!
! Uranium Weekly
Summary
Capital Punishment Part VI: "Squeezing costs from a stone"
CNE; GTE; PXT
Ux spot price up $0.15 to $35.65/lb; TradeTech down $0.30 to $35.30/lb
In-Depth Reports
! RBC Canadian Airline Primer
Summary
Priced as of prior day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see Page 11.
EQUITY RESEARCH
U.S. RESEARCH AT A GLANCE
October 8, 2014
Price Target Revisions
! AGCO Corporation
! Becton, Dickinson and Co.
! Delphi Automotive PLC
! Man Group Plc
! Qualcomm Incorporated
! The Pantry, Inc.
! United Therapeutics Corp.
Summary
Reducing estimates and price target
Summary
Raising PT. A Financially Attractive Deal That Fits Well Within BDX Medical
Summary
Takeaways from Management Meetings
Summary
Q3/14 IMS preview: we expect FUM around $72B
Summary
A Little Off the Sides
Summary
Peeking at the shelves: Pre-released Q4/F14 metrics essentially in line
Summary
Debate on high pricing, competition, cannibalization, valuation keeps us neutral
Summary
Iron ore expansion to 290mt front and centre
Summary
China sales shock weighs on margins
Summary
Analyst Day Focused on Sustainable Relevant Growth
Summary
Updating For $75MM Note Offering
Summary
Hosted Meetings With Senior Management
Summary
Highlights from Management Meetings
First Glance Notes
! BHP Billiton
! Yum! Brands, Inc.
Company Comments
! Accenture plc
! Atlas Resource Partners L.P.
! CarMax, Inc.
! Oil States International
Industry Comments
! 3Q14 Central U.S. Commercial Bank
Expect consistently strong loan growth and strict expense management.
!
EPS Estimates, Reporting Dates, and Conference Call Numbers
!
Summary
Earnings Preview
3Q14 East Coast Earnings
Summary
Expectations
Autos & Auto Parts: September used Summary
vehicle pricing declines slightly m/m
Bulking Up - RBC's Weekly Review
Summary
!
! Diversified Metals & Mining
! Global Aerospace & Defense
! Housing Market Monthly
! HPC, Beverages and Tobacco
! Nexus.One
! North American Gold Equities:
Summary
Australian Nickel: Outlook still strong - Time to get exposure
Summary
Macro Macro Man
Summary
Key trends in the housing market
Summary
Making money amid the global unrest this earnings season
Summary
Through October 07, 2014
Summary
Reviewing Capital and Operating Cost
Expectations
RBC Food Trends Takeaways
Summary
!
! RBC International E&P Daily
! Western Banks 3Q14 Earnings
Iron ore prices rebound around Chinese holidays
Capital Punishment Part VI: "Squeezing costs from a stone"
Slowly getting better...
Summary
CNE; GTE; PXT
Summary
Investors are looking for banks that can deliver superior loan growth
Summary
Diamonds on the soles of its shoes
Preview
In-Depth Reports
! Anglo American plc
2
3
EQUITY RESEARCH
EQUITY RESEARCH
UK & European Research at a Glance
October 8, 2014
Price Target Revisions
! Delphi Automotive PLC
! National Express Group PLC
Summary
Takeaways from Management Meetings
Summary
Earnings slippage on bus yield and (more) currency effects
Summary
Iron ore expansion to 290mt front and centre
! Diversified Metals & Mining
! German Telecoms: Navigating the
Summary
Australian Nickel: Outlook still strong - Time to get exposure
!
! North American Gold Equities:
Summary
First Glance Notes
! BHP Billiton
Industry Comments
new pricing
Global Aerospace & Defense
!
Summary
Summary
Reviewing Capital and Operating Cost
Expectations
Q4/14 Global Mining Best Ideas
Summary
Portfolio
Macro Macro Man
Capital Punishment Part VI: "Squeezing costs from a stone"
Find our Research at:
RBC Insight (www.rbcinsight.com): RBC's global research destination on the web. Contact your RBC Capital Markets' sales representative to
access our global research site, or use our iPad App "RBC Research"
Thomson Reuters (www.thomsononeanalytics.com)
Bloomberg (RBCR GO)
SNL Financial (www.snl.com)
FactSet (www.factset.com)
4
Price Target Revisions
RONA Inc.(TSX: RON; 13.77)
Irene Nattel (Analyst)
(514) 878-7262; [email protected]
Martin Gravel, CFA (Associate)
(514) 878-7264; [email protected]
Alex Carette (Associate)
514 878 7254; [email protected]
Rating:
Price Target:
Sector Perform
15.00 ▲ 13.00
Building a better box: Réno-Dépôt store tour highlights back to basics approach
52 WEEKS
18OCT13 - 07OCT14
14.00
13.00
12.00
11.00
A recent Réno-Dépôt store tour and discussion with management highlighted
RON's back to basics approach in its first banner re-positioning. RON will test
similarly formatted stores outside Quebec in 2015, but elements of the repositioning should be transferable to RON's corporate stores. RON is doing the
right things in-store, but macro headwinds are likely to moderate pace of financial
recovery.
Building a competitive banner that could become model for big box stores across
the country
2000
1000
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Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
EPS, Ops Diluted
2013A
0.41
2014E
0.73
2015E
1.05
2016E
1.19
P/E
33.6x
18.9x
13.1x
11.6x
All values in CAD unless otherwise noted.
• Re-positioned Réno-Dépôt focuses on getting the basics right: i) ensure instock positions, ii) ensure product ease of access for all presentations , and iii)
regain dominance in key categories. Learnings from the remerchandised RénoDépôt stores in Quebec could become the blueprint for big box stores across
Canada, and RONA plans to test the remerchandising at two big box stores
outside Quebec next year. As part of the remerchandising effort, Réno-Dépôt
also introduced a limited assortment of competitively priced consumables, and
seasonal items, with pricing on par with Wal-Mart and Costco.
Rebuilding margins also contingent on traction in SSS
• Management acknowledges that rebuilding profitability is also contingent
upon a meaningful and sustained recovery in same-store sales. With EBITDA
margin sensitivity estimated at 15-25 bps for each 100 bps increase in SSS,
traction on top line growth would need to accelerate meaningfully to return
to historical levels of profitability. However, we reiterate our thesis that the
correlation between Canadian residential investment and RON SSS suggests
RONA could struggle to generate a meaningful recovery in SSS growth over our
forecast horizon.
Multiple expansion drives price target to $15
• We are raising our valuation multiples on RON from 13x/6x to 14x/7x mid-2016E
EPS/EBITDA respectively, driving a $2 increase in our price target to $15.
First Glance Notes
Capstone Mining Corp.(TSX: CS; 2.16)
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Melissa Oliphant (Associate)
416 842 4126; [email protected]
Rating:
52 WEEKS
18OCT13 - 07OCT14
3.20
3.00
2.80
2.60
2.40
2.20
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Sector Perform
Capstone reports third quarter production results; full-year guidance
maintained
• Capstone's overall Q3/14 copper production in line with expectations:
Capstone produced 57.7Mlbs of copper in Q3/14, down 6% QoQ but 4%
above our estimate as production at Pinto Valley came in 11% higher than we
anticipated. See page 2 for an overview of Q3/14 production vs. past quarters
and RBC estimates.
• At Pinto Valley, an improvement in throughput partially offset the anticipated
decline in grades for production of 36Mlbs, 5% below last quarter but 11% above
our estimate. Throughput fell short of company expectations but improved by
8% QoQ; throughput was hindered by heavy rains in September that caused wet
ore to slow the crushing circuit.
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
5
All market data in CAD; all financial data in USD.
• Shortfall in production at Cozamin: Despite an improvement in recoveries QoQ,
zinc production declined by 12% to 3.3Mlbs due to lower grades of 0.78%
vs. 0.94% last quarter. Copper grades and throughput declined slightly for
production of 10.9Mlbs, 5% below Q2 production and our estimate. Capstone
reported that copper grades improved in September, later than expected due to
an installation of ground support that impacted the release of new mining areas.
• At Minto, the processing of lower-grade stockpile to maximize throughput
resulted in grades 3% below last quarter for copper production of 10.5Mlbs,
7% lower than Q2/14 and our expectation. In September it was announced that
Minto North will not come into production until late 2015 due to permitting
delays.
• Capstone maintained production guidance of 225Mlbs copper in concentrate at
cash costs of US$1.90 to $2.00/lb.
Sam Crittenden, P.Eng., CFA (Analyst)
(416) 842-7886; [email protected]
Akbar Badri (Associate)
416 842 7840; [email protected]
Romarco Minerals Inc.(TSX: R; 0.63)
Rating:
Outperform
Risk Qualifier: Speculative Risk
52 WEEKS
18OCT13 - 07OCT14
0.80
0.60
0.40
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State permit a key step towards federal permits in November
• Romarco has received the state 401 Water permit which is a pre-requisite and
a key step towards receiving the federal 404 Wetlands permit that is expected
in November.
• A positive permitting decision together with project financing could allow for
construction to start in early 2015, with first production in late 2016.
• The state permit could be appealed; however, we do not foresee this causing
a significant delay given the thoroughness of the permitting process and
engagement of all stakeholders.
• Romarco continues to work with three financial institutions to secure $200MM
of project debt and they expect to have this completed in November.
Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
All market data in CAD; all financial data in USD.
Company Comments
High Liner Foods Inc.(TSX: HLF; 20.00)
Sabahat Khan (Analyst)
(416) 842-7880; [email protected]
52 WEEKS
18OCT13 - 07OCT14
25.00
Rating:
Price Target:
Outperform
26.00
One step closer to the target
24.00
High Liner Foods ("HLF") is currently executing on a growth plan to achieve EBITDA
of $150MM by 2016. We have a high degree of confidence in management's
ability to achieve this target, which offers investors a 3-year EBITDA CAGR of ~21%.
The acquisition of Atlantic Trading Company ("ATC") gets HLF one step closer to
achieving this goal.
23.00
22.00
21.00
20.00
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400
200
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M
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Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
EPS, Adj Diluted Prev.
2012A
1.23
2013A
1.32
2014E
1.33↑
1.31
2015E
1.69↑
1.59
All market data in CAD; all financial data in USD; dividends paid in
CAD.
• Acquisition is in line with HLF's growth strategy. The acquisition of ATC is in
line with our expectations as it increases HLF's penetration in the U.S. retail
channel, significantly expands the company's salmon business, and adds another
strong brand to HLF's platform. ATC's "C. Wirthy & Co." brand is only available at
Walmart and Sam's Club.
• Preliminary estimate revisions. We have made preliminary revisions to our
forecasts based on a number of assumptions. We now expect 2014 and 2015 EPS
of $1.33 and $1.69, respectively, versus 1.31 and $1.59 previously. We will revisit
our forecasts at Q3 reporting when we expect the company to provide additional
financial details.
• Leverage appears manageable, in our view. Based on our assumed purchase
price of ~$50M, we estimate net debt/EBITDA of 4.2x by year-end 2014, which
is manageable, in our view. HLF has a strong track record of reducing leverage
6
following acquisitions, and we expect that trend to continue. We expect leverage
to decrease to 3.3x by year-end 2015.
• Annual EBITDA growth could be ~21% over three years. HLF's 2016 EBITDA
target implies a three-year CAGR of ~21%, from a base of $85.3MM in 2013. If
HLF achieves this target, we estimate a share price in the range of $35-40, based
on our current valuation multiple of 10x EBITDA.
Peyto Exploration & Development(TSX: PEY; 34.37)
Michael Harvey, P.Eng. (Analyst)
403 299 6998; [email protected]
Eric Gallie (Associate)
(403) 299-7434; [email protected]
Rating:
Price Target:
52 WEEKS
18OCT13 - 07OCT14
Sector Perform
43.00
2014 guidance boosted as activity levels remain high; Increasing estimates
With 2014 exit volumes achieved earlier than expected, Peyto boosted both 2014
capital investment levels (+10%) and exit volumes (+4%) for the year. While a
capex bump was partially expected, we view this announcement positively and
have increased our production and cash flow estimates for both the 2014 and
2015 years.
40.00
38.00
36.00
34.00
32.00
4500
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2012A
2013A
2014E
2015E
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Rel. S&P/TSX COMPOSITE INDEXMA 40 weeks
CFPS Diluted Prev.
2.19
2.94
4.35↑
4.24
5.17↑
4.93
P/CFPS
15.7x
11.7x
7.9x
6.6x
All values in CAD unless otherwise noted.
O
2014 budget increased to $690 million with exit production now forecasted
to be 85,000 boe/d. Peyto has increased their 2014 capital program by 10% to
$690 million, which will allow PEY to continue to run 9 rigs through Q4/14. The
company now expects to drill 125 wells in 2014 with exit production to reach 85,000
boe/d (previous exit rate of 81,500 boe/d has already been obtained due to the
accelerated program that started in Q2/14). PEY has also completed the 4 facility
projects slated for 2014 with processing capacity now at 630 mmcf/d (611 net to
Peyto).
Increasing estimates; capital efficiencies remain below $20,000/boe/d. We have
increased our estimates to take into account the company's adjusted 2014 program
with CFPS increasing by 3% in 2014 and 5% in 2015. Peyto remains one of the most
efficient producers in the basin with capital efficiencies remaining sub $20,000/
boe/d (on track with previous years).
Industry Comments
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Bulking Up - RBC's Weekly Review
Melissa Oliphant (Associate)
416 842 4126; [email protected]
• What's Hot: Iron ore prices recovered some recent losses this week, with IODEX
up 3.5% to $80.50/t.
• What's Not: Metallurgical coal prices were little changed amid quiet trading
during holidays in Asia-Pacific.
• Our View: While we continue to expect a seasonal rebound in iron ore prices
this year, they are likely to remain under pressure beyond that. A withdrawal of
Chinese domestic production combined with modest Chinese steel production
growth should see prices supported above current levels.
• The World Steel Association announced updated steel consumption outlook,
forecasting global growth of 2% YoY in 2014 and 2015, below the 3.8% seen last
year.
• Australian exports of iron ore to China declined in September, with shipments
from Port Hedland down 7% from a record high in August.
• Metallurgical coal: Prices in Asia-Pacific were stable while prices in the Atlantic
Basin saw minor gains.
• Thermal coal: South African prices rose on a rally in swaps as well as buying by
traders and end-users, while European prices were boosted by strength in the
paper market.
• Iron ore: IODEX was up $2.75/t on the week to $80.50/t on buying by traders and
some unexpected mill restocking during Chinese holidays. Platts reported that a
brief rise in demand is expected as holidays ended today, which should support
another uptick although market fundamentals have not changed.
Chris Drew, CFA (Analyst)
+61 2 9033 3060; [email protected]
Ken Tham, CFA (Analyst)
+61 2 9033 3064; [email protected]
All values in USD unless otherwise noted.
Iron ore prices rebound around Chinese holidays
7
• Steel prices fell in North America and Europe. There were no Platts assessments
in China this week.
Chris Drew, CFA (Analyst)
+61 2 9033 3060; [email protected]
Diversified Metals & Mining
Ken Tham, CFA (Analyst)
+61 2 9033 3064; [email protected]
• We have recently seen cracks start to appear in the bullish nickel outlook.
Philippine ore export volumes have surprised us, this has supported ongoing NPI
production in China. In addition, we have seen the emergence of "hidden" nickel
stocks coming on to the market, boosting LME inventories. Consequently, the
supply squeeze anticipated from the second half of 2014 has been delayed, the
nickel price has weakened, and we have seen more cautious market sentiment
towards nickel equities. Despite this, we are maintaining our positive outlook on
nickel. We continue to anticipate a drop off in Chinese NPI production to drive
prices higher through 2015. Given this, we see current price levels as an attractive
entry point to our two preferred nickel exposures Western Areas and Sirius.
• In this note we assess what operational impact a stronger nickel price outlook
could have on ASX listed nickel producers. We look at the potential production
response and we also review the exploration programs that are now ramping
back up. We examine how Nickel West could also impact the junior producers,
with its shortage of high quality concentrate the key consideration. We also
provide a review of the WA nickel landscape, looking at who remains active.
All values in AUD unless otherwise noted.
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Chris Drew, CFA (Analyst)
+61 2 9033 3060; [email protected]
Timothy Huff (Analyst)
+44 20 7653 4866; [email protected]
Des Kilalea (Analyst)
+44 20 7653 4538; [email protected]
Ken Tham, CFA (Analyst)
+61 2 9033 3064; [email protected]
Australian Nickel: Outlook still strong - Time to get exposure
Global Mining Trends & Values
Commodity Price Performance:
• Metal prices were down on average 2.6% last week. Iron Ore was the best
performer up 0.3%, followed by lead up 0.2%. Moly was the worst performer
down 10.1%, followed by nickel down 5.8%, silver down 4.5%, uranium down
2.7%, gold down 2.3%, aluminium down 2.2%, copper down 1.6%, thermal coal
down 1.1%, zinc down 0.9%, and coking coal down 0.1%.
Mining Share Price Performance:
• Mining shares were down on average 8.6% last week. The best performing group
was coal up 4.8%, followed by aluminium down 3.6%, the diversified group down
5.6%, uranium down 5.6%, copper down 6.9%, mineral sands down 7.6%, nickel
down 8.1%, miscellaneous down 10.5%, and iron ore down 19.9%.
Valuation:
• Mining shares are now trading at a 11.8% discount to NAV at forward curve
prices, versus an 8.4% discount one week ago.
Long/Short Metal Positions:
• RBC CM's proprietary data for the LME shows that the net long positions in
aluminium decreased last week, while net short positions in copper, zinc, nickel,
and lead increased last week.
Exchange Inventories:
• Total exchange inventories of aluminium and zinc decreased last week, while
total inventories of copper and nickel increased last week.
Sam Crittenden, P.Eng., CFA (Analyst)
(416) 842-7886; [email protected]
North American Gold Equities: Reviewing Capital and Operating
Cost Expectations
Akbar Badri (Associate)
416 842 7840; [email protected]
Capital Punishment Part VI: "Squeezing costs from a stone"
Stephen D. Walker (Analyst)
(416) 842-4120; [email protected]
Dan Rollins, CFA (Analyst)
(416) 842-9893; [email protected]
• We remain cautious on the gold sector as free cash flow remains limited
despite significant cost and capital reductions. However, valuations now appear
favourable following the recent gold price correction and we believe stocks
should rally once the gold price finds a bottom. This is the sixth edition in our
8
All values in USD unless otherwise noted.
Stephen D. Walker (Analyst)
(416) 842-4120; [email protected]
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Capital Punishment series started in 2008, in which we examine capital and
operating cost trends for our North American gold companies.
• We would focus on gold producers with strong balance sheets, low cost
operations, and achievable growth plans which include: Goldcorp, Agnico
Eagle, Eldorado, B2 Gold, New Gold and Klondex.
• The royalty companies are less exposed to cost pressures and our preferred
names are Royal Gold, Silver Wheaton, and Franco Nevada. See our royalty
primer for further details.
• Pre-production names we prefer have above average grades such as
Continental Gold (10.4g/t), Torex (2.7g/t), Guyana Goldfields (3.2g/t),
Romarco (1.8g/t), and Premier Gold (1.7g/t) (grades are M&I resource
grades), or low capital intensity heap leach projects such as Midway.
Q4/14 Global Mining Best Ideas Portfolio
• We are publishing our weekly update to our Global Mining Best Ideas portfolio.
For the quarter-to-date, the Q4/14 Global Mining Best Ideas List is down 3%
compared to the MSCI World Metals & Mining Index, which is down 3%.
Dan Rollins, CFA (Analyst)
(416) 842-9893; [email protected]
Sam Crittenden, P.Eng., CFA (Analyst)
(416) 842-7886; [email protected]
Timothy Huff (Analyst)
+44 20 7653 4866; [email protected]
Des Kilalea (Analyst)
+44 20 7653 4538; [email protected]
Chris Drew, CFA (Analyst)
+61 2 9033 3060; [email protected]
Jonathan Guy (Analyst)
+44 20 7653 4603; [email protected]
Andrew D. Wong (Analyst)
(416) 842-7830; [email protected]
All values in USD unless otherwise noted.
Nathan Piper (Analyst)
+44 131 222 3649; [email protected]
RBC International E&P Daily
Al Stanton (Analyst)
+44 131 222 3638; [email protected]
CNE.L: Join the FANclub; RBC to Host Far Ltd Conference Call; RBC International E&P
Conference – Poll Results; RBC International O&G Conference – GTE; PXT
CNE; GTE; PXT
Victoria McCulloch, CA (Analyst)
+44 131 222 4909; [email protected]
Haydn Rodgers, CA (Associate)
+44 131 222 4911; [email protected]
All values in USD unless otherwise noted.
Fraser Phillips, P.Eng. (Analyst)
(416) 842-7859; [email protected]
Uranium Weekly
Steve Bristo, CFA (Associate)
(416) 842-7826; [email protected]
• Ux spot price indicator was up $0.15 to $35.65/lb and TradeTech was down $0.30
to $35.30/lb.
• Ux term price indicator was unchanged at $45.00/lb, and TradeTech was
unchanged at $45.00/lb (quoted monthly at month-end).
• Uranium Participation Corp. (UPC) traded down 0.2% over the past week to close
at C$5.07 per share (vs. S&P/TSX -1.6%).
• We estimate UPC is discounting a uranium price of $34.16/lb, a 4.2% discount to
spot. Last week we estimated that UPC discounted a uranium price of $34.18/lb,
a 3.7% discount to the then-prevailing spot price.
Thomas Klein (Associate)
416 842 5339; [email protected]
All values in USD unless otherwise noted.
Ux spot price up $0.15 to $35.65/lb; TradeTech down $0.30 to $35.30/lb
9
• We rate Uranium Participation Corp. Outperform with a target price of C$5.75
per share.
In-Depth Reports
Walter Spracklin, CFA (Analyst)
(416) 842-7877; [email protected]
Derek Spronck (Analyst)
(416) 842-7833; [email protected]
RBC Canadian Airline Primer
An investment opportunity spawned by transformational change. We believe
we are in the early stages of significant and structural change within the airline
sector - and like any early stage shift, the investment opportunity is very attractive.
What was once a dysfunctional duopoly is now a rational one. Stifling labour terms
have been broken. Management focus is now on profit and return on invested
capital, not growth for growth’s sake. Again, the playing field has changed, and
understanding this change is the key objective of this primer.
But expect turbulence. We believe the industry today is now an "investable one"
- but by no means a slam dunk. Therefore, anticipating shifts in fundamentals,
knowing the risks, understanding the opportunity - and simply having a reference
manual for the myriad of terms and formulas is essential.
Something for everyone. Our preference today is for Air Canada (rated
Outperform) but that is entirely a relative call, not an absolute one, WestJet on the
other hand, while the upside in our view is not as significant, it comes with lower
risk. As a result, more risk averse investors can play this upside through the WJA
shares - and we would not argue with that despite our Sector Perform rating. In the
end, we see this opportunity as a growing pie where both airlines are likely to see
upside as investors recalibrate their views on the airline sector.
10
Required disclosures
Non-U.S. analyst disclosure
Nathan Piper;Al Stanton;Victoria McCulloch;Haydn Rodgers;Fraser Phillips;Melissa Oliphant;Chris Drew;Ken Tham;Sabahat
Khan;Michael Harvey;Eric Gallie;Sam Crittenden;Akbar Badri;Dan Rollins;Timothy Huff;Des Kilalea;Jonathan Guy;Andrew D.
Wong;Irene Nattel;Martin Gravel;Alex Carette;Walter Spracklin;Derek Spronck;Steve Bristo;Thomas Klein (i) are not registered/
qualified as research analysts with the NYSE and/or FINRA and (ii) may not be associated persons of the RBC Capital Markets, LLC
and therefore may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company,
public appearances and trading securities held by a research analyst account.
Conflicts disclosures
This product constitutes a compendium report (covers six or more subject companies). As such, RBC Capital Markets chooses
to provide specific disclosures for the subject companies by reference. To access current disclosures for the subject companies,
clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/DisclosureLookup.aspx?entityId=1 or send a request to
RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7.
Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in, this report.
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including
total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated
by investment banking activities of the member companies of RBC Capital Markets and its affiliates.
Distribution of ratings
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories
- Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Top Pick(TP)/
Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively,
the meanings are not the same because our ratings are determined on a relative basis (as described below).
Distribution of ratings
RBC Capital Markets, Equity Research
As of 30-Sep-2014
Rating
BUY [Top Pick & Outperform]
HOLD [Sector Perform]
SELL [Underperform]
Count
858
683
98
Percent
52.35
41.67
5.98
Investment Banking
Serv./Past 12 Mos.
Count
Percent
308
35.90
151
22.11
8
8.16
Conflicts policy
RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request.
To access our current policy, clients should refer to
https://www.rbccm.com/global/file-414164.pdf
or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South
Tower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.
Dissemination of research and short-term trade ideas
RBC Capital Markets endeavours to make all reasonable efforts to provide research simultaneously to all eligible clients, having
regard to local time zones in overseas jurisdictions. Subject to any applicable regulatory considerations, "eligible clients" may
include RBC Capital Markets institutional clients globally, the retail divisions of RBC Dominion Securities Inc. and RBC Capital
Markets LLC, and affiliates. RBC Capital Markets' equity research is posted to our proprietary websites to ensure eligible clients
receive coverage initiations and changes in rating, targets and opinions in a timely manner. Additional distribution may be done
by the sales personnel via email, fax or regular mail. Clients may also receive our research via third party vendors. Please contact
your investment advisor or institutional salesperson for more information regarding RBC Capital Markets research. RBC Capital
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Markets also provides eligible clients with access to SPARC on its proprietary INSIGHT website. SPARC contains market color and
commentary, and may also contain Short-Term Trade Ideas regarding the securities of subject companies discussed in this or
other research reports. SPARC may be accessed via the following hyperlink: https://www.rbcinsight.com. A Short-Term Trade Idea
reflects the research analyst's directional view regarding the price of the security of a subject company in the coming days or weeks,
based on market and trading events. A Short-Term Trade Idea may differ from the price targets and/or recommendations in our
published research reports reflecting the research analyst's views of the longer-term (one year) prospects of the subject company,
as a result of the differing time horizons, methodologies and/or other factors. Thus, it is possible that the security of a subject
company that is considered a long-term 'Sector Perform' or even an 'Underperform' might be a short-term buying opportunity
as a result of temporary selling pressure in the market; conversely, the security of a subject company that is rated a long-term
'Outperform' could be considered susceptible to a short-term downward price correction. Short-Term Trade Ideas are not ratings,
nor are they part of any ratings system, and RBC Capital Markets generally does not intend, nor undertakes any obligation, to
maintain or update Short-Term Trade Ideas. Short-Term Trade Ideas discussed in SPARC may not be suitable for all investors and
have not been tailored to individual investor circumstances and objectives, and investors should make their own independent
decisions regarding any Short-Term Trade Ideas discussed therein.
Analyst certification
All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of
the subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or
indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report.
Disclaimer
RBC Capital Markets is the business name used by certain branches and subsidiaries of the Royal Bank of Canada, including RBC Dominion Securities Inc., RBC
Capital Markets, LLC, RBC Europe Limited, RBC Capital Markets (Hong Kong) Limited, Royal Bank of Canada, Hong Kong Branch and Royal Bank of Canada, Sydney
Branch. The information contained in this report has been compiled by RBC Capital Markets from sources believed to be reliable, but no representation or warranty,
express or implied, is made by Royal Bank of Canada, RBC Capital Markets, its affiliates or any other person as to its accuracy, completeness or correctness. All
opinions and estimates contained in this report constitute RBC Capital Markets' judgement as of the date of this report, are subject to change without notice and
are provided in good faith but without legal responsibility. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investment
advice. This material is prepared for general circulation to clients and has been prepared without regard to the individual financial circumstances and objectives of
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any securities. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. RBC Capital
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Additional information is available on request.
To U.S. Residents:
This publication has been approved by RBC Capital Markets, LLC (member FINRA, NYSE, SIPC), which is a U.S. registered broker-dealer and which accepts
responsibility for this report and its dissemination in the United States. Any U.S. recipient of this report that is not a registered broker-dealer or a bank acting in
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To Canadian Residents:
This publication has been approved by RBC Dominion Securities Inc.(member IIROC). Any Canadian recipient of this report that is not a Designated Institution in
Ontario, an Accredited Investor in British Columbia or Alberta or a Sophisticated Purchaser in Quebec (or similar permitted purchaser in any other province) and
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Dominion Securities Inc., which, without in any way limiting the foregoing, accepts responsibility for this report and its dissemination in Canada.
To U.K. Residents:
This publication has been approved by RBC Europe Limited ('RBCEL') which is authorized by the Prudential Regulation Authority and regulated by the Financial
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RBC and its affiliates. RBCEL accepts responsibility for this report and its dissemination in the United Kingdom.
To Persons Receiving This Advice in Australia:
This material has been distributed in Australia by Royal Bank of Canada - Sydney Branch (ABN 86 076 940 880, AFSL No. 246521). This material has been prepared
for general circulation and does not take into account the objectives, financial situation or needs of any recipient. Accordingly, any recipient should, before acting on
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this material, consider the appropriateness of this material having regard to their objectives, financial situation and needs. If this material relates to the acquisition
or possible acquisition of a particular financial product, a recipient in Australia should obtain any relevant disclosure document prepared in respect of that product
and consider that document before making any decision about whether to acquire the product. This research report is not for retail investors as defined in section
761G of the Corporations Act.
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of Canada's Australian Financial Services Licence ('AFSL') (No. 246521). RBC Capital Markets (Hong Kong) Limited is exempt from the requirement to hold an AFSL
under the Corporations Act 2001 in respect of the provision of such financial services. RBC Capital Markets (Hong Kong) Limited is regulated by the Hong Kong
Monetary Authority and the SFC under the laws of Hong Kong, which differ from Australian laws.
To Singapore Residents:
This publication is distributed in Singapore by the Royal Bank of Canada, Singapore Branch and Royal Bank of Canada (Asia) Limited, registered entities granted
offshore bank and merchant bank status by the Monetary Authority of Singapore, respectively. This material has been prepared for general circulation and does
not take into account the objectives, financial situation, or needs of any recipient. You are advised to seek independent advice from a financial adviser before
purchasing any product. If you do not obtain independent advice, you should consider whether the product is suitable for you. Past performance is not indicative
of future performance. If you have any questions related to this publication, please contact the Royal Bank of Canada, Singapore Branch or Royal Bank of Canada
(Asia) Limited.
To Japanese Residents:
Unless otherwise exempted by Japanese law, this publication is distributed in Japan by or through RBC Capital Markets (Japan) Ltd., a registered type one financial
instruments firm and/or Royal Bank of Canada, Tokyo Branch, a licensed foreign bank.
.® Registered trademark of Royal Bank of Canada. RBC Capital Markets is a trademark of Royal Bank of Canada. Used under license.
Copyright © RBC Capital Markets, LLC 2014 - Member SIPC
Copyright © RBC Dominion Securities Inc. 2014 - Member CIPF
Copyright © RBC Europe Limited 2014
Copyright © Royal Bank of Canada 2014
All rights reserved
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