UK Small

Europe Equity Research
02 January 2014
UK Small and Mid Caps

Annual Directory 2014
The United Kingdom is the third largest economy in Europe, and the sixth UK Small and Mid Caps
largest in the world. A country of 63m people, the UK exhibits Alexander Mees
AC
considerable diversity in its economic activities. The services sector is (44-20) 7742-3681
particularly important, contributing more than three quarters of GDP. The alexander.c.mees@jpmorgan.com
UK still has a meaningful industrial economy, although this has declined Bloomberg JPMA MEES <GO>
in importance over the years. Victoria Prior, CFA

(44-20) 7134-5912
victoria.prior@jpmorgan.com
The diversity of the British economy is reflected in this, J.P. Morgan
Cazenove’s eighteenth Annual Directory of UK Small and Mid Cap Andrew J Wilson
(44-20) 7742-6332
stocks. This Directory includes profiles of 125 UK-listed companies drawn andrew.j.wilson@jpmorgan.com
from our coverage of stocks below a market capitalisation of £2.0 billion. Jolyon S Wellington
Every major sector, from construction to telecommunications, is (44-20) 7134-5913
represented. We present a background for each stock including an jolyon.s.wellington@jpmorgan.com
operational overview, brief history and our outlook over the next twelve Smid-Cap Strategy
*
months. We also identify major holders and key management and include Eduardo Lecubarri
charts showing earnings progression and segmentation. (44-20) 7134-5916
eduardo.lecubarri@jpmorgan.com
Patrick J Pitcaithly
(44-20) 7134-8451
patrick.j.pitcaithly@jpmorgan.com
J.P. Morgan Securities plc
* Registered/qualified as a research analyst under NYSE/FINRA rules.

See page 307 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan 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.
www.jpmorganmarkets.com
Alexander Mees Europe Equity Research
(44-20) 7742-3681 02 January 2014
alexander.c.mees@jpmorgan.com
The Team
UK Small and Mid Cap Team
UK Small and Mid Cap Research
Alexander Mees alexander.c.mees@jpmorgan.com +44 207 7423681
Victoria Prior victoria.prior@jpmorgan.com +44 207 1345912
Andrew Wilson andrew.j.wilson@jpmorgan.com +44 207 7426332
Jolyon Wellington jolyon.s.wellington@jpmorgan.com +44 207 1345913
European SMID Strategy
Eduardo Lecubarri eduardo.lecubarri@jpmorgan.com +44 207 1345916
Patrick Pitcaithly patrick.j.pitcaithly@jpmorgan.com +44 207 1348451
UK Small and Mid Cap Sales
James Deal james.deal@jpmorgan.com +44 207 1341945
David Marshall david.m.marshall@jpmorgan.com +44 207 1341931
Jason Trill jason.trill@jpmorgan.com +44 207 1341944
Sales Trading
AJ Rhodes aj.rhodes@jpmorgan.com +44 207 1341858
Ashley Bazely ashley.bazely@jpmorgan.com +44 207 1341871
Cameron Beale cameron.beale@jpmorgan.com +44 207 1341865
Richard Hough richard.hough@jpmorgan.com +44 207 1341874
Joseph Garvey joseph.b.garvey@jpmorgan.com +44 207 1340589
Trading
Stuart Williams stuart.williams@jpmorgan.com +44 207 1341885
Lee Willis lee.willis@jpmorgan.com +44 207 1341897
Bradley Jones bradley.d.jones@jpmorgan.com +44 207 1342342
Contributing Analysts
Name Sector Email
Roger Bell Metals, Mining & Steel roger.m.bell@jpmorgan.com
Emily Biddulph Construction & Building Materials emily.biddulph@jpmorgan.com
Christopher G Combe Transportation & Logistics christoper.g.combe@jpmorgan.com
Benjamin Defay Metals, Mining & Steel ben.defay@jpmorgan.com
Sandeep S Deshpande Semiconductors sandeep.s.deshpande@jpmorgan.com
Andrew Dobbing Oil & Gas andrew.dobbing@jpmorgan.com
Nicolas J Dubourg Media & Internet nicolas.j.dubourg@jpmorgan.com
Andreas Van Embden Insurance andreas.vanembden@jpmorgan.com
Martin Evans Chemicals martin.evans@jpmorgan.com
Filippo Pietro Lo Franco Media & Internet filippo.p.lofranco@jpmorgan.com
James D Gordon Healthcare james.d.gordon@jpmorgan.com
Neil Green Property neil.d.green@jpmorgan.com
Victoria A Greer Beverages, Hotels & Leisure victoria.greer@jpmorgan.com
Fraser Jamieson Metals, Mining & Steel fraser.jamieson@jpmorgan.com
Georgina Johanan Retail georgina.s.johanan@jpmorgan.com
Tim Leckie Property timothy.leckie@jpmorgan.com
Glen H Liddy Capital Goods glen.liddy@jpmorgan.com
Wenchang Ma Transportation & Logistics wenchang.ma@jpmorgan.com
Rae Maile Tobacco & Financials rae.maile@jpmorgan.com
Alexander Mees UK Small and Mid Caps alexander.c.mees@jpmorgan.com
Carl Murdock-Smith Telecoms carl.murdocksmith@jpmorgan.com
Ashik Musaddi Insurance ashik.x.mushaddi@jpmorgan.com
Dominic O'Kane Metals, Mining & Steel dominic.j.okane@jpmorgan.com
Celine Pannuti Consumer Goods celine.pannuti@jpmorgan.com
David H Perry Aerospace & Defense david.h.perry@jpmorgan.com
Robert Plant Business Services robert.plant@jpmorgan.com
Stacy E Pollard Software stacy.pollard@jpmorgan.com
Victoria Prior UK Small and Mid Caps victoria.prior@jpmorgan.com
Ben Scarlett Chemicals ben.scarlett@jpmorgan.com
Nitin Sharma Oil & Gas nitin.sharma@jpmorgan.com
James Thompson Oil & Gas james.a.thompson1@jpmorgan.com
Andrew J Wilson UK Small and Mid Caps andrew.j.wilson@jpmorgan.com
2
(44-20) 7742-3681 02 January 2014
Table of Contents
The Team...................................................................................2
Introduction ..............................................................................4
Constituents..............................................................................7
Company Profiles .....................................................................9
Investment Thesis, Valuation and Risks ............................260
Note: The pricing and valuations for the companies in this report was close of
business on 17 December 2013 unless otherwise stated (see individual company
pages).
3
(44-20) 7742-3681 02 January 2014
Introduction
Welcome to the eighteenth edition of our UK Small and Mid Caps Annual Directory.
This document is intended to act as a reference guide for investors to 125 companies
drawn from our UK Small and Mid Caps coverage universe.
Constituents
Figure 1 and Figure 2 show analysis of these 125 companies, by sector and market
cap respectively.
Figure 1: Sector distribution of the 2014 Annual Directory constituents

6
9 Financials
28
TMT
10
Consumer discretionary
Support services
10
Energy
17 Industrials
11 Mining
Chemicals & construction
15 19 Staples & biotech
Source: J.P. Morgan.
Figure 2: Market cap dispersion of the 2014 Annual Directory constituents

18 19
17 17 17
14
12
11
< £250m £250-500m £500-750m £750m-1bn £1-1.25bn £1.25-1.5bn £1.5-1.75bn > £1.75bn
Source: J.P. Morgan.
4
(44-20) 7742-3681 02 January 2014
How to use this directory

Stock profiles
This Directory includes a profile of 125 UK Small and Mid Cap companies. We have
established an upper market capitalisation limit of £2.0 billion. There is no lower
limit. We exclude companies subject to research restriction. The stock profiles,
which are arranged alphabetically, each comprise the following information:
 Business activities. Brief description of the business and its markets.

 History. Summary of the key events in company’s development.
 Operational overview. Status of the company’s trading and strategic initiatives.
 Outlook. Overview of our expectations for the year ahead.
 Company address.
 Management team. Names of the Chairman, CEO, Finance Director and, where
applicable, investor relations contact.
 Trading data. Key information on the company’s capital structure, market
capitalisation and average daily volume.
 Earnings estimates. Our key earnings estimates are presented, along with the
key trading ratios based on our estimates.
 Investment case. Investment rating and price target.
Investment thesis, valuation and risks

We include a summary of the investment thesis, valuation and risks for each stock at
the end of the Directory.
J.P. Morgan Cazenove in UK small and mid caps

Heritage
J.P. Morgan Cazenove and heritage firm Cazenove & Co. have a long history in UK
small and mid cap equities that stretches back nearly 200 years. It is a part of the
market that continues to occupy an important position in our business.
Scale
We have a team of 17 within Equities dedicated to providing excellence of service to
investors in UK Small and Mid Caps. The team spans research, strategy, sales, sales
trading and market making. In addition, many of our European Equities team are
involved in UK Small and Mid Caps as an important part of their responsibilities.
This document includes stock profiles written by 29 different sector analysts in
addition to those prepared by our team of five dedicated UK Small and Mid Caps
analysts.
5
(44-20) 7742-3681 02 January 2014
Relationships
We take pride in our long established relationships with the companies we cover.
The following table shows those companies outside the FTSE 100 for which J.P.
Morgan Cazenove acts as corporate broker.
Table 1: A selection of our corporate brokerships outside the FTSE 100

3i Infrastructure Interserve
African Barrick Gold Invensys
APR Energy Jardine Lloyd Thompson
ASOS John Laing
Atkins Jupiter Fund Management
Avocet Mining Kazakhmys
BBA Aviation Kier Group
Beazley Laird
Berendsen Lamprell
Big Yellow Group Lancashire
Booker Local Shopping REIT
BTG London Mining
Bumi Lonmin
Cable & Wireless LXB Retail
Cape Marston's
Capital & Regional Mecom Group
Catlin Group LondonMetric
Chemring Mitchells & Butlers
Cineworld Morgan Advanced Materials
Clarkson Mothercare
Close Brothers New World Resources
Coal of Africa Ophir Energy
CPPGroup Oxford Instruments
CSR Pace
Dairy Crest PayPoint
DCC Phoenix Group
De La Rue Promethean
Derwent London Provident Financial
DS Smith PZ Cussons
Entertainment One QinetiQ
EnQuest Quintain Estates
Essar Energy Record
Esure Group Serco
F&C Asset Management Shaftesbury
Ferrexpo Smiths News
FirstGroup Songbird Estates
GCM Resources Spectris
Gem Diamonds St. Modwen Properties
Gemfields St. James's Place
Genel Energy Stock Spirits
Grainger Talvivaara Mining
Great Portland Estates Taylor Wimpey
Halfords Restaurant Group
Helical Bar UBM
HellermannTyton Ultra Electronics
Heritage Oil UNITE Group
Hochschild Mining Vectura Group
HomeServe Vesuvius
Howden Joinery Victrex
Imagination Technologies WH Smith
Imperial Innovations Wincanton
Inchcape Wolfson Micro
Inmarsat Wood Group
Intermediate Capital Group Young & Co's
Source: J.P. Morgan. Excludes certain investment trusts.
6
(44-20) 7742-3681 02 January 2014
Constituents
< £500m £500m - £1bn £1 - 1.5bn > £1.5bn
Chemicals & Synthomer Bovis Homes Balfour Beatty
construction Carillion Bellway
Elementis
Kier Group
Redrow
Victrex
Consumer Mothercare Cineworld Betfair Dixons Retail
discretionary Young & Co.'s Brewery Darty Debenhams Dunelm Group
Go-Ahead FirstGroup Greene King
Halfords National Express Ladbrokes
Marston's Restaurant Group Mitchells & Butlers
WH Smith Stagecoach
Energy Cape Essar Energy EnQuest Afren
Heritage Oil Hunting Cairn Energy
Lamprell Soco International Ophir Energy
Serica Energy
Financials Capital & Regional Big Yellow Group Beazley Catlin
Charlemagne Capital esure International Personal Finance Close Brothers
Development Securities F&C Asset Management Lancashire Holdings Intermediate Capital Group
Helical Bar Grainger Man Group Jupiter Fund Management
Liontrust Asset Management Londonmetric Paragon Phoenix Group
LXB Retail Properties Quintain Estates Songbird Estates Shaftesbury
Record St. Modwen Properties
Unite Group
Workspace
Industrials Chemring Fenner Bodycote
Clarkson Hellermanntyton QinetiQ Group
Morgan Advanced Materials Ultra Electronics
RPC Group Vesuvius
Mining Gem Diamonds African Barrick Gold Ferrexpo
Gemfields Kazakhmys
Hochschild Mining Kenmare Resources
London Mining
New World Resources
Petropavlovsk
Staples & biotech Devro Dairy Crest BTG
Imperial Innovations PZ Cussons
Vectura Group
Support services John Menzies APR Energy Atkins BBA Aviation
Smiths News De La Rue Michael Page Berendsen
Wincanton HomeServe Essentra
Interserve Hays
Paypoint
RPS Group
TMT Daisy Group Computacenter Aveva
Imagination Technologies Entertainment One Cable & Wireless
Mecom KCOM Group Colt
Promethean Laird CSR
Wolfson Micro. Moneysupermarket Micro Focus
Pace Telecity
7
(44-20) 7742-3681 02 January 2014
This page is intentionally left blank
8
(44-20) 7742-3681 02 January 2014
Company Profiles
Afren PLC ......................................................................10 Interserve............................................................................. 140
African Barrick Gold.....................................................12 John Menzies...................................................................... 142
APR Energy ...................................................................14 Jupiter.................................................................................. 144
Atkins (WS)....................................................................16 Kazakhmys Plc ................................................................... 146
Aveva Plc.......................................................................18 KCOM................................................................................... 148
Balfour Beatty ...............................................................20 Kenmare Resources........................................................... 150
BBA Aviation.................................................................22 Kier Group........................................................................... 152
Beazley Plc ....................................................................24 Ladbrokes ........................................................................... 154
Bellway...........................................................................26 Laird ..................................................................................... 156
Berendsen Plc...............................................................28 Lamprell PLC ...................................................................... 158
Betfair.............................................................................30 Lancashire........................................................................... 160
Big Yellow Group Plc ...................................................32 Liontrust Asset Management............................................ 162
Bodycote Plc .................................................................34 London Mining.................................................................... 164
Bovis Homes .................................................................36 LondonMetric...................................................................... 166
BTG Plc..........................................................................38 LXB Retail Properties......................................................... 168
C&W Communications.................................................40 Man Group........................................................................... 170
Cairn Energy .................................................................42 Marston's............................................................................. 172
Cape ...............................................................................44 Mecom ................................................................................. 174
Capital & Regional........................................................46 Michael Page....................................................................... 176
Carillion .........................................................................48 Micro Focus ........................................................................ 178
Catlin ..............................................................................50 Mitchells & Butlers ............................................................. 180
Charlemagne Capital....................................................52 Moneysupermarket ............................................................ 182
Chemring .......................................................................54 Morgan Advanced Materials PLC ..................................... 184
Cineworld ......................................................................56 Mothercare .......................................................................... 186
Clarkson ........................................................................58 National Express ................................................................ 188
Close Brothers..............................................................60 New World Resources ....................................................... 190
Colt .................................................................................62 Ophir Energy....................................................................... 192
Computacenter .............................................................64 Pace ..................................................................................... 194
CSR Plc..........................................................................66 Paragon Group ................................................................... 196
Dairy Crest.....................................................................68 PayPoint .............................................................................. 198
Daisy ..............................................................................70 Petropavlovsk ..................................................................... 200
Darty Plc ........................................................................72 Phoenix Group.................................................................... 202
De La Rue ......................................................................74 Promethean......................................................................... 204
Debenhams ...................................................................76 PZ Cussons......................................................................... 206
Development Securities...............................................78 QinetiQ................................................................................. 208
Devro..............................................................................80 Quintain Estates & Development ..................................... 210
Dixons Retail Plc ..........................................................82 Record Plc........................................................................... 212
Dunelm Group plc ........................................................84 Redrow................................................................................. 214
Elementis.......................................................................86 Restaurant Group............................................................... 216
EnQuest .........................................................................88 RPC Group .......................................................................... 218
Company Profiles
Entertainment One .......................................................90 RPS Group .......................................................................... 220
Essar Energy.................................................................92 Serica Energy...................................................................... 222
Essentra.........................................................................94 Shaftesbury......................................................................... 224
esure ..............................................................................96 Smiths News ....................................................................... 226
F&C Asset Management ..............................................98 SOCO International ............................................................ 228
Fenner..........................................................................100 Songbird Estates................................................................ 230
Ferrexpo Plc................................................................102 St. Modwen Pr..................................................................... 232
FirstGroup ...................................................................104 Stagecoach ......................................................................... 234
Gem Diamonds Ltd.....................................................106 Synthomer Plc .................................................................... 236
Gemfields ....................................................................108 Telecity ................................................................................ 238
Go-Ahead.....................................................................110 Ultra Electronics................................................................. 240
Grainger.......................................................................112 Unite Group......................................................................... 242
Greene King ................................................................114 Vectura................................................................................. 244
Halfords .......................................................................116 Vesuvius.............................................................................. 246
Hays .............................................................................118 Victrex.................................................................................. 248
Helical Bar ...................................................................120 WH Smith............................................................................. 250
HellermannTyton ........................................................122 Wincanton ........................................................................... 252
Heritage Oil..................................................................124 Wolfson Micro..................................................................... 254
Hochschild ..................................................................126 Workspace .......................................................................... 256
Homeserve ..................................................................128 Young & Co.'s Brewery A .................................................. 258
Hunting ........................................................................130
Imagination Technologies.........................................132
Imperial Innovations...................................................134
Intermediate Capital Group .......................................136
International Personal Finance.................................138
9
(44-20) 7742-3681 02 January 2014
Afren PLC
Underweight
Kinnaird House, 1 Pall Mall East, London SW1Y 5AU. T: 0207 864 3700
AFR.L,AFR LN Business activities
Price: 162p Afren is a full cycle exploration and production company which has operations
Price Target: 180p across Africa and the Kurdistan Region of Iraq. Afren both explores for and develops
oil and gas fields. It has above average exposure to regions bearing elevated levels of
geo-political risk, but with proven hydrocarbon resources, Afren believes that it can
United Kingdom
excel in these environments.
European Oil & Gas
AC
James Thompson
History
(44-20) 7134-5942
james.a.thompson1@jpmorgan.com As its name suggests Afren’s heritage is in Africa, founded in 2004 by Ethelbert
Bloomberg JPMA THOMPSON <GO> Cooper. The company has participated in licenses in Nigeria, Angola, Ghana and Cote
J.P. Morgan Securities plc d’Ivoire amongst others. It has built a production core in Nigeria, from Okoro-setu and
Ebok fields. In 2010 Afren acquired Black Marlin Energy gaining a foothold in East
Price Performance African exploration and in 2011 the company ventured out of Africa by farming into
170
the Kurdistan region of Iraq. In the same year it entered onshore Nigeria through
150 acquisition of an interest in OML26 through Nigeria vehicle First Hydrocarbon
p Nigeria.
130
110 Operational overview

Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
AFR.L share price (p)

2013 has been characterised by excellent production on the Ebok field, which
MSCI-Eu (rebased) accounts for the majority of Afren production, and has enabled Afren to stay right at
YTD 1m 3m 12m
Abs 17.2% 8.4% 12.4% 26.7%
the upper limit of its FY13 production guidance. As this field reaches its cost
Rel 6.8% 12.7% 12.7% 16.1% recovery limit the company will be looking to replace the cash flows with production
from its other fields, principally in Nigeria and Kurdistan. With the drill-bit, the Ogo
discovery offshore Nigeria came in almost 3x the original company guidance.
Management
Chairman Egbert Imomoh Outlook
CEO Osman Shahenshah
CFO Darra Comyn Attention turns back to Kurdistan in the near future for Afren, with results expected
IR Simon Hawkins from the Maqlub-1 exploration well and perhaps more importantly the first resource
estimate for the Ain Sifni structure. This could be another 1bn barrel discovery in
Major Shareholders
Standard Life 8%
Kuridstan. In Nigeria, we look to the results of the Ufon-1 well which is located
Skagen Funds 6% close to Ebok. We also look to the plan to appraise the Ogo oil discoveries, which is
Van Eck Associates 4% scheduled to commence in H2 2014, although given the size of the discovery, could
Delivery by Value 3% be earlier.
Legal & General 3%
Underweight
Afren PLC (AFR.L;AFR LN)
Company Data FYE Dec 2011A 2012A 2013E 2014E 2015E
Price (p) 162 Revenue FY ($ mn) 597 1,499 1,522 1,469 1,897
Date Of Price 17 Dec 13 Net Profit FY ($ mn) 122 201 243 243 398
Price Target (p) 180 EPS FY ($) 0.12 0.18 0.21 0.21 0.35
Price Target End Date 31-Dec-14 P/E (x) FY 22.9 14.8 12.3 12.3 7.5
52-week Range (p) 168-118 Debt adj. CF FY ($ mn) 338 929 612 548 850
Market Cap (£ bn) 1.75 EV/DACF (x) FY 10.2 3.6 5.8 7.1 4.5
Shares O/S (mn) 1,081 Net debt / (cash) FY ($ mn) 548 489 667 1,022 902
Ave. Prod. (kboepd) FY 16 42 47 50 59
(mn)
Source: Company data, Bloomberg, J.P. Morgan estimates.
10
(44-20) 7742-3681 02 January 2014
Afren Plc
Figure 3: Core NAV by business division Figure 4: Revenue by geography
Last full year reported Last full year reported
11% 2% 1%
Nigeria Nigeria
17%
Cote d'Ivoire Cote d'Ivoire
Kurdistan Kurdistan
72%
97%
Source: J.P. Morgan estimates, Company data. Source: J.P. Morgan estimates, Company data.
Figure 5: Revenue Figure 6: Operating margin

$ in millions
2,500 60.0% 44.9% 44.7% 48.4% 40.0% 44.7% 45.6%

2,103 40.0% 27.9%
1,897 13.1%
2,000 20.0%
1,499 1,522 1,469 0.0%
1,500
(20.0)%
(40.0)%
1,000
597 (60.0)%
500 336 319 (80.0)% (104.7)%
(100.0)%
0 (120.0)%
FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
Figure 7: NAV tracker Figure 8: ND/EBITDA

180 60%
160 1.4x 1.3x 1.1x
40% 2.0x 0.7x
140 0.5x 0.6x 0.3x
1.0x (0.2)x
120 20%
0.0x
100
0% (1.0x)
80
(2.0x)
60 -20%
(3.0x)
40
-40% (4.0x)
20
(5.0x)
0 -60% (6.5)x
(6.0x)
(7.0x)
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
Core NAV (p/share) LHA
Share price premium/(discount) to NAV RHA
Source: J.P. Morgan estimates, Company data.
11
(44-20) 7742-3681 02 January 2014
African Barrick Gold

Neutral
6 St James’s Place, London SW1A 1NP. T: 020 7861 3800
ABGL.L,ABG LN
Price: 161p
Business activities
African Barrick Gold is the largest gold producer in Tanzania and one of the top five
Price Target: 170p
producers in Africa with three operating mines (Bulyanhulu, Buzwagi and North
Mara) and attributable production of 626koz in FY12. ABG is UK public company
United Kingdom headquartered in London and is listed on the main market of the London Stock
European Metals, Mining & Steel Exchange with a secondary listing on the Tanzanian Stock Exchange.
AC
Dominic O'Kane
(44-20) 7742-6729 History
dominic.j.okane@jpmorgan.com Prior to 2010, ABG comprised the Tanzanian gold operations of Barrick Gold
Bloomberg JPMA OKANE <GO>
Corporation, its current majority shareholder. African Barrick Corporation started
production in Tanzania in 2001 at Bulyanhulu, its only underground mine in the
Price Performance
country. In 2002 production started at North Mara. In 2004 open pit operations
started at Tulawaka (divested in 2013). In 2009 production commenced at Buzwagi.
450 ABG was listed on the LSE in an initial public offering in 2010 with Barrick Gold
350 Corporation retaining just under 74% of the shares.
p
250
150
Operational overview
ABG announced an operational review of its assets in January 2013 in order to
50
optimise free cash flow generation through a reduction in operating costs, improved
YTD 1m 3m 12m mine plans, a leaner organisational structure and increased capital discipline. The
Abs -64.9% -17.4% 13.2% -63.7% review identified $95m in savings with 30% to be realised in FY13E, 20% labour
costs cuts and $50m in capex cuts in FY13E. We forecast ABG will produce 616koz
Management in FY13E (-2% YoY) with average cash costs of $808/oz (-15% YoY).
Chairman Kelvin Dushnisky
CEO Bradley Gordon Outlook
CFO Andrew Wray
We estimate ABG would be modestly loss-making at spot gold prices in FY14E, but
IR Giles Blackham
the company has a solid balance sheet with a $163m net cash position at YE13E. We
Major Shareholders believe ABG would generate modestly positive FCF at spot prices (3% of market cap
Barrick Group 74% in FY14-16E), which is superior to much of its peer group. ABG’s three relatively
Vanguard Group 5% high grade mines give it a competitive advantage to peers, affording it operational
flexibility to adapt to lower gold prices and maintain cash generation in our view.
With the shares trading at a P/NPV of 0.97x, we maintain a Neutral recommendation.
Neutral
African Barrick Gold (ABGL.L;ABG LN)
Company Data FYE Dec 2011A 2012A 2013E 2014E
Price (p) 161 Adj. EPS FY ($) 0.67 0.19 0.14 (0.03)
Date Of Price 17 Dec 13 Bloomberg EPS FY ($) 0.69 0.36 0.05 0.15
Price Target (p) 170 Adjusted P/E FY 3.9 13.9 19.0 NM
Price Target End Date 31-Dec-14 Revenue FY ($ mn) 1,218 1,087 916 850
52-week Range (p) 464-94 EBITDA FY ($ mn) 542 327 265 180
Market Cap (£ mn) 659.42 EBITDA Margin FY 44.5% 30.1% 28.9% 21.1%
Shares O/S (mn) 410 EV/EBITDA FY 1.2 2.0 3.2 5.4
FCFF Yield FY 72.8% 26.6% 9.4% 18.9%
12
(44-20) 7742-3681 02 January 2014
African Barrick Gold

Figure 9: Revenue by business division Figure 10: Revenue by geography
4%
22%
Switzerland Germany
Gold Other 52%

15%
China Other Asia
11%
96%
Figure 11: Revenue Figure 12: EBITDA margin

$ in millions
1,400 50.0%
1,218 42.7% 44.5%
45.0%
1,200 1,087
975 40.0% 35.6%
916 964
1,000 850 902 35.0% 30.1% 28.9% 28.3%
800 693 30.0% 26.3% 23.7%
25.0% 21.1%
600 541
20.0%
400 15.0%
10.0%
200
5.0%
0 0.0%
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
Figure 13: Adjusted EPS Figure 14: ND/EBITDA

$ cents
80.0 0.6x 0.4x

67.0 0.4x
70.0
60.0 53.3 0.2x
0.0x (0.3)x
50.0
(0.2x)
40.0 (0.4x) (0.6)x
30.0 (0.6x) (0.8)x (0.8)x (0.8)x
18.9 (1.0)x (1.0)x
20.0 13.8 12.1 (0.8x)
14.3
10.0 7.1 2.8 (1.0x) (1.2)x
(1.2x)
0.0
(1.4x)
(10.0) (2.5) FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
13
(44-20) 7742-3681 02 January 2014
APR Energy
Neutral
3600 Port Jacksonville Pkwy, Jacksonville, FL 32226, USA. T: +1 904 223 8488
APREN.L,APR LN Business activities
Price: 965p APR is one of the leading global suppliers of temporary power. Customers use
Price Target: 1,150p temporary power when there is a gap between electricity supply and demand.
Applications include supplemental base load capacity, disaster relief, seasonal peak
shaving, backup for scheduled or unscheduled outages, dedicated industrial power,
United Kingdom
and grid stability and support
European Business Services
AC
Robert Plant
History
(44-20) 7134-5922
robert.plant@jpmorgan.com APR Energy became an independent company in March 2004, when co-founders
Bloomberg JPMA PLANT <GO> John Campion and Laurence Anderson bought the ALSTOM Power Rentals division
J.P. Morgan Securities plc from ALSTOM Power. Messrs Campion and Anderson continued to operate with a
licensing agreement under the ALSTOM brand until June 2008, when it was
Price Performance rebranded as APR Energy. In June of 2011, Horizon Acquisition Company acquired
1,200
APR Energy, subsequently changing its name to APR Energy plc, and in September
1,100
2011 re-listed the new entity on the London Stock Exchange. In October 2013, APR
1,000
made its largest ever acquisition when it spent $314m to acquire GE’s Power Rental
p 900
800
business.
700
APR supplies temporary power, in the form of turbines and diesel power generators,
YTD 1m 3m 12m
Abs 23.7% -8.3% -7.0% 35.0%
to customers around the world, especially utility and mining companies. APR can
provide power plants scalable up to 400MW. Currently, APR has a fleet of
1,311MW. APR operates out of four hub facilities (Panama, Malaysia, UAE and the
Management USA). Contracts typically run from 12 months to three years. Libya is currently the
Chairman Mike Fairey
CEO John Campion
country to which APR is most exposed, comprising 21% of revenues.
CFO Andrew Martinez
IR Karen Menzel Outlook
Major Shareholders
APR has performed well in 2013. At the time of the Q3 trading statement, in
JP Morgan 12% October, APR had won 740MW of contract, twice the 369MW won last year. We
SSP Energy 12% believe that the temporary power market is attractive as it is benefitting from a
ACM Energy 11% growing imbalance between global electricity supply and demand particularly in
JCLA Cayman Ltd 5%
Oppenheimer 7%
emerging markets. The acquisition of the GE Power Rental business could also offer
upside, especially if APR can deploy the non-contracted turbines acquired with the
deal and benefits from the marketing deal that it has signed with GE.
Neutral
APR Energy Plc (APREN.L;APR LN)
Price (p) 965 Adj. EPS FY ($) 0.52 0.68 0.63 1.19
Date Of Price 17 Dec 13 Adj P/E FY 30.4 23.1 24.8 13.3
Price Target (p) 1,150 Revenue FY ($ mn) 213 266 310 500
Price Target End Date 31-Dec-14 Operating profit FY ($ mn) 61 67 77 158
52-week Range (p) 1,177-621 Operating margin FY 28.5% 25.3% 24.9% 31.5%
Market Cap (£ bn) 0.75 Pretax Profit Adjusted FY 57 63 56 133
Shares O/S (mn) 78 ($ mn)
Div Yield FY 1.0% 1.0% 1.0% 1.0%
Bloomberg EPS FY ($) - 0.65 0.63 1.14
14
(44-20) 7742-3681 02 January 2014
APR Energy
5% 14%
Africa
Turbines
41%
Americas
19%
40% Diesel recip
55% Asia
Gas recip Middle East
26%

$ in millions
600 35.0% 31.5%

500 27.3% 28.5%
500 30.0% 25.3% 24.9%
25.0% 22.7%
400
310 20.0%
300 266
213 15.0%
200
126 10.0%
100 62 5.0%
0 0.0%
FY09 FY10 FY11 FY12 FY13E FY14E FY09 FY10 FY11 FY12 FY13E FY14E

$ cents
140.0 3.0x 2.5x

118.6
120.0 2.5x
2.0x 1.5x 1.6x
100.0
1.5x 1.1x
80.0 68.1 1.0x
63.4 0.4x
60.0 51.7 0.5x
40.0 0.0x (0.6)x
(0.5x)
20.0 12.2
4.7 (1.0x)
0.0 FY09 FY10 FY11 FY12 FY13E FY14E
FY09 FY10 FY11 FY12 FY13E FY14E
15
(44-20) 7742-3681 02 January 2014
Atkins (WS)
Overweight
Woodcote Grove, Ashley Road, Epsom, KT18 5UZ. T: 01372 726 140
ATKW.L,ATK LN Business activities
Price: 1,370p Atkins is a global engineering and design consultancy. Its range of services includes
Price Target: 1,390p infrastructure project planning, design and management.
United Kingdom
History
UK Small and Mid Caps The group was established in 1938 by Sir William Atkins and specialised in civil and
Victoria Prior, CFA
AC structural engineering design work. It began trading as a public company in 1996 as
(44-20) 7134-5912
WS Atkins plc. Since then the group has grown rapidly both organically and through
victoria.prior@jpmorgan.com bolt-on acquisitions (expanding into the US with the acquisition of PBSJ). Under the
Bloomberg JPMA PRIOR <GO> current CEO, the business has been restructured to focus on higher growth/higher
J.P. Morgan Securities plc margin markets which led to the disposals of Peter Brown in the US and the UK
Highways Maintenance activities in 2013.
Price Performance
1,300
The group has five principal divisions based on geographic location. The UK &
p
1,100 Europe business (51% FY14E group revenue) offers the group's most diverse range
900
of services with strengths in the Transport, Water, Aerospace, Defence, Education,
and Infrastructure design consultancy markets. North America (23% group revenue)
700 provides infrastructure planning, engineering environmental consulting and project
management services. Middle East (10% group revenue) provides design,
YTD 1m 3m 12m
Abs 76.1% 4.3% 15.1% 85.0%
engineering and project management services for buildings, transportation and other
infrastructure. Asia Pacific (6% group revenue) is one of the group's fastest growing
markets with particular strengths in rail and urban planning, complemented by the
Management recently acquired Confluence business which specialises in project management. The
Chairman Allan Cook final division, Energy (10% group revenue) has operations across the globe with
CEO Uwe Krueger
CFO Heath Drewett
expertise in the nuclear, traditional, oil & gas and renewable markets.
IR Kate Moy
Outlook
Major Shareholders
Schroders 11%
Atkins should achieve solid earnings momentum, in our view, as having largely
Threadneedle 10% completed the restructuring of the group's portfolio of businesses, the focus is now
Standard Life 8% on top line growth. The emphasis remains on expanding within the growth markets
Newton 4% of Asia Pacific, Energy, Aerospace and Security, which, along with restructuring
Norges Bank 4%
benefits driving operational efficiency, should help the group achieve its 8% EBIT
margin target by FY2016E.
Overweight
WS Atkins Plc (ATKW.L;ATK LN)
Company Data FYE Mar 2012A 2013A 2014E 2015E 2016E
Price (p) 1,370 Adj. EPS FY (p) 80.8 88.9 85.8 94.3 105.3
Date Of Price 17 Dec 13 Revenue FY (£ mn) 1,711 1,705 1,674 1,677 1,754
Price Target (p) 1,390 Adjusted EBIT FY (£ mn) 110 110 115 125 138
Price Target End Date 31-Dec-14 EBIT Margin FY 6.5% 6.4% 6.8% 7.5% 7.9%
52-week Range (p) 1,383-734 Pretax Profit Adjusted FY 102 105 104 115 128
Market Cap (£ mn) 1,094.63 (£ mn)
Shares O/S (mn) 80 DPS (Net) FY (p) 30.5 33.6 35.2 37.0 38.8
EV/EBITDA (x) FY 10.9 11.6 11.2 10.4 9.6
Adj. P/E FY 17.0 15.4 16.0 14.5 13.0
Net Yield FY 2.2% 2.4% 2.6% 2.7% 2.8%
16
(44-20) 7742-3681 02 January 2014
Atkins (WS)
9% 23%
9% UK UK
North America
9% US
51% Middle East 54%
Asia Pacific and Europe Other

23%
Energy
22%

£ in millions 9.0% 8.0%
7.6% 7.9%
7.5%
8.0%
2,000
1,711 1,705 1,674 1,677 1,754 6.6% 6.9% 6.5% 6.4%
6.8%
1,800 7.0%
1,564
1,600 1,487 6.0%
1,314 1,388
1,400 5.0%
1,200 4.0%
1,000 3.0%
800
2.0%
600
1.0%
400
200 0.0%
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
0
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E Source: J.P. Morgan estimates, Company data.

Pence 0.0x
120.0 (0.5)x (0.4)x
105.3 (0.7)x
(0.5x) (0.9)x
100.0 88.9 94.3
83.5 81.0 85.8 (1.0)x
79.5 80.8 (1.2)x
80.0 (1.0x) (1.3)x
67.9
60.0 (1.7)x
(1.5x)
40.0 (2.0)x
(2.0x)
20.0
0.0 (2.5x)
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
17
(44-20) 7742-3681 02 January 2014
Aveva Plc
Neutral
Madingley Road, Cambridge, CB3 0HB. T: 01223 556 655`
AVV.L,AVV LN Business activities

Price: 2,079p AVEVA is a UK software company providing design software products for the
Price Target: 2,450p erection of large capital assets in the Oil & Gas, Power, and Marine markets.
History
United Kingdom AVEVA (then CADCentre) was spun out of Cambridge University in 1967 with
European Software & IT Services government funding to introduce and promote the use of computing technology in
Stacy Pollard
AC engineering. In 1976 the company released the world’s first 3D plant design system
(44-20) 7134-5420
(PDMS) with an object-based engineering database. It became a private limited
stacy.pollard@jpmorgan.com company in 1983, followed by an MBO in 1994 and flotation on the LSE in 1996.
Bloomberg JPMA POLLARD <GO> Richard Longdon was appointed CEO in 1999, and the company changed its name to
J.P. Morgan Securities plc AVEVA in 2001. In 2004 AVEVA acquired Tribon Solutions, expanding into the
marine industry. AVEVA continued to grow internationally in China and Latin
Price Performance America, and made several other acquisitions along the way (including Vizstream,
2,800
iDesignOffice, Logimatic, bocad, and Global Majic). The company introduced
2,600 AVEVA NET PLM software, and its most recent R&D innovation is Everything 3D,
p 2,400
a next-generation plant design solution that enables Lean Construction.
2,200 Operational overview

AVEVA operates via mainly a direct sales model (c. 95% of revenues), and has
2,000
offices or representatives in over 30 countries. Nearly half of FY13 revenues were in
YTD 1m 3m 12m EMEA, and 33% came from Asia Pacific, predominantly from marine customers in
Abs -9.3% -19.0% -19.1% -7.0% Korea and China, as well as robust power generation and oil & gas asset demand in
China. The remaining 18% of revenue came from Americas (esp. US, Canada and
Brazil) where shale gas and O&G exploration continue to show good prospects.
Management
Recurring revenues are around 70% of the total.
Chairman Philip Aiken
CEO Richard Longdon
Outlook
CFO James Kidd At H1 results on 18th November 2013, AVEVA reported revenue growth of 11%
IR Derek Brown yoy, but it was a little light of expectations, with the weakness coming from the
Enterprise Solutions division (and issues with two existing clients, in particular). We
Major Shareholders
Blackrock 14% lowered our full year revenue estimates after fiscal H1 results to account for the
Standard Life 5% weakness relative to consensus, but profits were less impacted (reduced by just 1% at
Old Mutual 4% the EPS level), and we actually raised our 2015 EPS estimates to account for the
Capital Group 4%
Oppenheimer Funds 3%
lower expected UK tax rates. AVEVA shares have declined since H1 results, and
now looks more attractive at this level (18% to our price target), with possible upside
once AVEVANET recovers and E3D revenues start hitting the P&L with more force.
Our price target is 2450p for September 2014.
Neutral
AVEVA Plc (AVV.L;AVV LN)
Company Data FYE Mar 2013A 2014E 2015E 2016E
Price (p) 2,079 Adj.EPS FY (p) 74.70 88.99 108.21 123.22
Date Of Price 17 Dec 13 Adj.P/E FY 27.8 23.4 19.2 16.9
Price Target (p) 2,450 Bloomberg EPS FY (p) 79.90 87.70 103.20 -
Price Target End Date 30-Sep-14 Revenue FY (£ mn) 220 241 270 303
52-week Range (p) 2,668-2,033 EBIT FY (£ mn) 62 70 85 96
Market Cap (£ bn) 1.42 Adjusted PBT FY (£ mn) 71 80 93 105
Shares O/S (mn) 68 Net debt FY (£ mn) (190) (131) (183) (242)
DPS (Net) FY (p) 24.00 28.58 34.75 39.57
18
(44-20) 7742-3681 02 January 2014
AVEVA Plc
14% 18%
Engineering & Design EMEA

Systems
49% Asia Pacific
Enterprise Solutions
33% Americas
86%
Figure 29: Revenue Figure 30: PBT margin

£ millions £ in millions
350 45.0%
303 38.4%
300 40.0% 35.3%
270 33.4%
35.0% 31.8% 32.2%
241 28.6% 29.5% 28.9% 29.5%
250 220
196 30.0%
200 164 174 25.0%
148
150 128 20.0%
15.0%
100
10.0%
50 5.0%
0 0.0%
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E

Pence £ in millions
140.0 0.0x (0.1)x

123.2
120.0 108.2 (0.5x)
100.0 89.0 (1.0x)

(1.7)x
72.5 74.7 (1.5x) (2.0)x
80.0 (2.0)x
63.7
54.9 55.8 (2.0x) (2.3)x
60.0 50.8
(2.5x) (2.8)x (2.8)x (2.9)x (2.7)x
40.0
(3.0x)
20.0
(3.5x)
0.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
19
(44-20) 7742-3681 02 January 2014
Balfour Beatty
Underweight
130 Wilton Road, London, SW1 1LQ. T: 0207 216 6800
BALF.L,BBY LN Business activities
Price: 274p Balfour Beatty is an international construction, engineering and support services
Price Target: 180p group.
United Kingdom
History
European Construction, Building Balfour Beatty was formed in 1909. In 1969 Power Securities, which at the time
Materials & Infrastructure owned Balfour Beatty, was acquired by cable manufacturer BICC. In 2000 BICC, on
Emily Biddulph
AC the disposal of its cable operations, renamed itself Balfour Beatty. Through the
(44-20) 7134-5906 2000s Balfour Beatty embarked on a series of acquisitions including Mansell
emily.biddulph@jpmorgan.com (another UK construction company, for £42m, in 2003), Centex Construction (the
Bloomberg JPMA BIDDULPH <GO> commercial construction division of the US builder Centex, for £180m, in 2007) and
J.P. Morgan Securities plc more recently Parsons Brinkerhoff (the US-based professional services firm for
$626m, in 2009).
Price Performance
320
p
280
The Group is a construction contractor, predominantly in the UK and US, with
240 exposure to major economic and social infrastructure projects as well as general
commercial construction. Its Professional Services division provides civil and
200
specialist engineering, and design and management services for businesses in the
BALF.L share price (p) transport and energy sectors. In addition, the group provides support services
MSCI-Eu (rebased)
(largely UK) where it provides facilities maintenance and highways, rail and
YTD 1m 3m 12m
Abs -2.5% 2.7% -1.1% 2.5% highways and utilities maintenance. The group also invests in a number of privately
Rel -12.9% 7.0% -0.8% -8.1% funded infrastructure projects and developments in the UK and overseas
Outlook
Management
Chairman Steve Marshall Earnings revisions have been materially negative over the last 12 months. However,
CEO Andrew McNaughton we continue to see some risk to consensus estimates. While the outlook for UK
CFO Duncan Magrath construction is in our view, slightly more positive than it has been for some time, we
Major Shareholders believe negative mix effects and competitive tendering pressures could still mean
Causeway Capital 5% that 2014 margins recover only modestly. In addition, we see ongoing risks to
Blackrock 5% earnings in Australia (where the infrastructure and mining capex markets are
Standard Life 4% increasingly difficult). Cash will remain a focus for 2014, although we expect the
Newton 4%
Legal & General 3% negative cash flows of recent years to neutralise.
Underweight
Balfour Beatty (BALF.L;BBY LN)
Price (p) 274 Adj. EPS FY (p) 35.50 35.00 22.01 24.00
Date Of Price 17 Dec 13 Revenue FY (£ mn) 9,494 9,483 8,420 8,135
Price Target (p) 180 EBIT FY (£ mn) 331 309 202 229
Price Target End Date 30-Jun-14 Pretax Profit Adj FY (£ mn) 334 310 187 214
52-week Range (p) 297-207 Adj P/E FY 6.6 6.7 10.6 9.7
Market Cap (£ mn) 1,885.05 DPS (Net) FY (p) 13.8 14.1 14.1 14.1
Shares O/S (mn) - Net Yield FY 5.9% 6.0% 6.0% 6.0%
Bloomberg EPS FY (p) 35.30 34.70 23.10 26.80
20
(44-20) 7742-3681 02 January 2014
Balfour Beatty
2%
16% 17%
Construction Services
Professional Services
48%
UK US RoW
17%
Support Services
65%
Infrastructure Investments 35%
Figure 35: Revenue Figure 36: Adjusted operating margin

£ in millions £ in millions
10,000 4.0% 3.5%

9,494 9,483 3.3% 3.3%
3.5% 3.0%
9,500 9,235 2.8%
8,954 3.0%
9,000 2.4%
2.5% 2.2%
8,420
8,500 8,261 2.0%
8,135
1.5%
8,000
1.0%
7,500
0.5%
7,000 0.0%
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY08 FY09 FY10 FY11 FY12 FY13E FY14E

40.0 £ in millions
34.7 34.7 34.7 35.5 35.0
35.0 2.0x
1.3x 1.5x
30.0 1.5x 1.2x
24.0 0.7x
25.0 22.0 1.0x
20.0 0.5x 0.1x
15.0 0.0x
10.0 (0.5x)
(1.0)x (1.1)x
5.0 (1.0x)
0.0
(1.5x)
FY08 FY09 FY10 FY11 FY12 FY13E FY14E
21
(44-20) 7742-3681 02 January 2014
BBA Aviation
Overweight
20 Balderton Street, London W1K 6TL. T: 0207 514 3999
BBA.L,BBA LN Business activities
Price: 313p BBA Aviation is a global aviation support and aftermarket services provider.
Price Target: 356p
History
United Kingdom Over the past 20 years, BBA has been transformed from an industrial conglomerate
UK Small and Mid Caps into a focused aviation services and system support group. The final element of this
Victoria Prior, CFA
AC long transformation was completed in November 2006 with the demerger of
(44-20) 7134-5912
Fiberweb. Since then the group has made a number of acquisitions expanding its
victoria.prior@jpmorgan.com footprint in a number of aviation markets. Simon Pryce, was appointed as CEO in
Bloomberg JPMA PRIOR <GO> June 2007, taking over from Michael Harper, currently Non-Executive Chairman.
J.P. Morgan Securities plc Mark Hoad was appointed Group Finance Director in July 2010.
Price Performance
340
BBA’s operations are spread across the Business & General Aviation (B&GA),
Commercial and Military markets. The largest exposure remains B&GA which
p
300 represented 67% of group revenue in 2012 while Commercial and Military
260
represented 27% and 6% respectively. The group has two principal divisions Flight
Support and Aftermarket Services and Systems (which includes Legacy, ERO and
220 APPH). Within Flight Support there are two businesses, Signature (44% revenue)
and ASIG (17% revenue) both of which offer services such as re-fuelling, de-icing
YTD 1m 3m 12m
Abs 38.1% -3.5% -2.4% 39.9%
and ground handling; Signature for business aircraft and ASIG for commercial
aircraft. Within ASS, Legacy (29% revenue) offers manufacturing of aerospace sub-
systems and components; ERO (7% revenue) offers engine maintenance and
Management servicing and APPH (3% revenue) designs and manufactures landing gear and
Chairman Michael Harper hydraulics systems.
CEO Simon Pryce
CFO Mark Hoad
IR Jemma Spalton Outlook
Towards the end of 2013 we saw a tentative return to growth in the US B&GA
Major Shareholders market. With B&GA driving 65-70% of the group’s business, we believe the group is
Tiger Global Mgmt 11%
Aviva 8% well placed for any pick up in market activity which is not in current estimates. In
Cascade 6% addition, the group has a strong balance sheet with potential for bolt-on acquisitions
M&G 6% to further drive earnings. Management is targeting a ROIC of 12% through the cycle
AXA 4% with returns of 14% already achieved on recent acquisitions.
Overweight
BBA Aviation (BBA.L;BBA LN)
Price (p) 313 Adj. EPS FY ($) 0.29 0.28 0.30 0.32 0.34
Date Of Price 17 Dec 13 Revenue FY ($ mn) 2,137 2,179 2,198 2,320 2,368
Price Target (p) 356 EBIT FY ($ mn) 199 193 201 220 229
52-week Range (p) 346-219 Pretax Profit Adjusted FY 170 158 171 189 202
Market Cap (£ mn) 1,473.92 ($ mn)
Shares O/S (mn) 471 DPS (Net) FY ($) 0.09 0.09 0.10 0.10 0.10
EV/EBITDA (x) FY 10.4 10.9 10.7 9.6 8.9
Adj. P/E FY 17.6 18.3 17.2 15.9 14.9
Net Yield FY 1.7% 1.8% 1.9% 2.0% 2.0%
22
(44-20) 7742-3681 02 January 2014
BBA Aviation
7% 3% 5% 13%
Signature Flight Support United Kingdom
6%
ASIG
44% Mainland Europe
29% Engine Repair & Overhaul
North America
Legacy Support
APPH Rest of World
17% 76%

$ in millions 9.8% 9.7%
2,500 2,320 2,368
2,179 2,198 9.6% 9.5%
2,137
9.3% 9.3% 9.3%
2,000 1,834 9.4%
1,686 9.2%
9.2%
1,500
9.0% 8.8%
1,000 8.8%
8.6%
500
8.4%
0 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
FY09 FY10 FY11 FY12 FY13E FY14E FY15E Source: J.P. Morgan estimates, Company data.

$ cents 3.5x
2.9x
40.0 3.0x
34.2
35.0 32.0
29.0 27.9 29.6 2.5x 2.1x 2.1x
30.0 27.2
1.6x 1.8x 1.7x
25.0 22.8 2.0x
1.3x
20.0 1.5x
15.0 1.0x
10.0
0.5x
5.0
0.0 0.0x
FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY09 FY10 FY11 FY12 FY13E FY14E FY15E

23
(44-20) 7742-3681 02 January 2014
Beazley Plc
Neutral
60 Great Tower Street, London EC3R 5AD. T: 020 7674 7291
BEZG.L,BEZ LN Business activities
Price: 247p Beazley is one of the leading specialty underwriters in the London market
Price Target: 236p underwriting a diversified portfolio with strong position in specialty casualty lines.
Beazley underwrites Reinsurance, Property, Specialty Casualty, Energy, and Marine
lines.
United Kingdom
European Insurance
AC History
Andreas van Embden
(44-20) 7134-4574
Beazley was established at Lloyd’s in 1986 and has grown into one of the leading
andreas.vanembden@jpmorgan.com underwriters at Lloyd’s with a particular focus on specialty casualty lines. Beazley
Bloomberg JPMA VANEMBDEN <GO> floated on the London Stock Exchange in 2002. The company established a presence
J.P. Morgan Securities plc in the US in 2005.
Price Performance
250 Beazley is well positioned, despite the increased competitive environment, to
230
continue a selective growth strategy across specialty casualty and reinsurance lines.
p The company is less sensitive to rate pressure in US cat lines than some peers and we
210
believe rate increases in casualty lines will help mitigate softening elsewhere. We
190 think Beazley will be able to continue to grow premiums by c.5% thanks to its niche
170 strategy in casualty lines and expansion in reinsurance. Whilst rates will become
more of a headwind in 2014, we believe that the company’s portfolio isolates it to a
YTD 1m 3m 12m
Abs 37.7% 4.1% 10.8% 40.3%
certain extent from the market softening. This is partly thanks to continued mid
single digit rate increases in US casualty lines.
Management
Outlook
Chairman Dennis Holt Underwriting experience has been benign in 2013 thanks to lower attritional claims
CEO Andrew Horton and the lack of any major cat losses. This should allow the company to fully release
CFO Martin Bride the '12 cat budget and lead to an attractive ‘13e combined ratio of 86% vs 90.8% in
2012. Whilst this benign environment will partly unwind in 2014/15 we see some
Major Shareholders benefits still being earned through next year. A benign attritional loss experience
Invesco 19.8% during ‘13H2 will boost Beazley’s profits for 2013e and set the stage for a potential
Jupiter 7.2% special dividend of 8pps. Combined with a final DPS of 6pps, the final yield is an
MFS 4.8%
Dimensional 4.2% estimated 5.6%.
L&G 4.0%
Neutral
Beazley Plc (BEZG.L;BEZ LN)
Price (p) 247 Adj. EPS FY ($) 0.12 0.41 0.43 0.39 0.40
Date Of Price 17 Dec 13 P/E (x) FY 32.3 9.7 9.3 10.2 10.2
Price Target (p) 236 Dividend (Gross) FY ($) 0.13 0.27 0.14 0.15 0.16
Price Target End Date 30-Jun-14 Gross Yield FY 3.2% 6.7% 3.5% 3.8% 4.0%
52-week Range (p) 254-163 NAV/Sh FY ($) 1.84 2.19 2.35 2.61 2.87
Market Cap (£ bn) 1.24 P/NAV FY 2.2 1.8 1.7 1.5 1.4
Shares O/S (mn) 501 ROE FY 6.1% 18.8% 17.9% 15.0% 13.9%
Combined ratio FY 98.8% 90.8% 86.0% 88.9% 89.4%
24
(44-20) 7742-3681 02 January 2014
Beazley Plc
12% 8%
Reinsurance 31%
19%
18% Property
Casulaty US Europe International

54%
Marine/Energy
Specialty other
15%
43%
Figure 47: Net Earned Premium Figure 48: PBT margin

$ in millions
1,800 1,669 20.0% 17.8%

1,580 1,611 17.0% 16.6%
1,600 1,479 18.0%
1,405 1,385 15.0% 14.6%
1,314 16.0%
1,400
14.0% 12.0%
1,200
12.0%
1,000 10.0%
800 8.0%
600 6.0% 4.5%
400 4.0%
200 2.0%
0 0.0%
FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY09 FY10 FY11 FY12 FY13E FY14E FY15E
Figure 49: Adjusted NAV Figure 50: Combined ratio

$ cents
350.0 100.0% 98.8%

286.7
300.0 261.3 95.0%
250.0 235.5 90.5% 90.8%
218.9 88.9% 89.4%
90.0% 88.3%
200.0 191.4 184.5
169.8 86.0%
150.0 85.0%
100.0
80.0%
50.0
0.0 75.0%
25
(44-20) 7742-3681 02 January 2014
Bellway
Overweight
Seaton Burn House, Dudley Lane, Newcastle Upon Tyne NE13 6BE. T: 0191 217 0717
BWY.L,BWY LN Business activities
Price: 1,472p Bellway is a UK housebuilder. In FY2013, the group sold 5,652 homes, making it
Price Target: 1,450p the 4th largest UK builder by volume. In FY2013 the group’s average selling price
(‘ASP’) was £193,000. Operations are relatively evenly split between Northern and
Southern markets and 15% of homes sold in FY2013 were in London, where the
United Kingdom
group operates in a relatively affordable segment of the market (London ASP:
European Construction, Building
Materials & Infrastructure £240K). Around one third of sales relate to apartments (half of which are in
AC London).
Emily Biddulph
(44-20) 7134-5906
emily.biddulph@jpmorgan.com History
Bloomberg JPMA BIDDULPH <GO> The group was established in 1946 by the Bell family and listed in 1963. The Bell
J.P. Morgan Securities plc family retained some involvement in running the group until 1997. The group was
relatively financially robust through the last downturn, it continued to pay a
Price Performance
dividend, a relatively modest £45m rights issue in 2009 raised funds to buy land
1,600
rather than pay down debt. For almost ten years, from 2002, the group was run by
1,500
1,400
CEO John Watson and FD Alistair Leitch. On Alistair’s retirement in 2012, Keith
p 1,300
Adey, former group accountant was appointed FD. In 2012, John Watson became
1,200 Chairman, and Ted Ayres was promoted from COO to Chief Executive.
1,100
1,000 Operational overview
Bellway is currently pursuing a strategy balanced between material sales volume
YTD 1m 3m 12m
Abs 41.0% 4.7% 7.2% 43.8% growth and dividend growth (there is a progressive dividend policy). Management
sees scope to increase its total sales capacity more than 7,500 units. The group has
Management recently added two new regional divisions to its national network, adding to overall
Chairman John Watson capacity. The group is currently reviewing the possibility of introducing national
CEO Ted Ayres
house-types, which could be margin accretive over the medium term, in our view.
CFO Keith Adey
Major Shareholders Outlook

Fidelity (FIL) 13%
Blackrock 13%
We expect the group to grow volumes, driven by increases in development outlet
JP Morgan 10% numbers as well a higher number of transactions in the wider market. We also expect
MFS 9% margin growth, driven by a smaller percentage of sales relating to old land, operating
Fidelity (FMR) 6% leverage and house price inflation. Longer-term, we see scope for more
standardisation in house types to result in further margin expansion. We expect
earnings growth to be accompanied by a progressive dividend policy.
Overweight
Bellway (BWY.L;BWY LN)
Company Data FYE Jul 2011A 2012A 2013E 2014E 2015E
Date Of Price 17 Dec 13 Revenue FY (£ mn) 886 1,004 1,104 1,251 1,409
Price Target (p) 1,450 Gross Profit FY (£ mn) 119 162 199 240 309
Price Target End Date 1-Oct-14 Gross Margin FY 13.5% 16.1% 18.0% 19.2% 21.9%
52-week Range (p) 1,551-1,007 EBIT FY (£ mn) 75 115 150 188 253
Market Cap (£ bn) 1.78 EBIT margin FY 8.5% 11.4% 13.6% 15.0% 18.0%
Shares O/S (mn) 121 Pre Tax Income FY (£ mn) 67 105 140 179 250
P/E (x) FY 35.4 22.5 16.8 13.1 9.3
Net debt / (cash) FY (£ mn) 17 61 (13) (46) (153)
26
(44-20) 7742-3681 02 January 2014
Bellway
Housebuilding UK
100% 100%

£ millions 20.0% 18.0% 18.7%
1,800 15.0%
1,540 13.6%
1,600 15.0%
1,409 11.4%
1,400 1,251 8.5%
1,150 1,104 10.0% 6.7%
1,200 1,004
886 4.7%
1,000
768 5.0%
800 684
600 0.0% (3.0)%
400
200 -5.0%
0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E Source: J.P. Morgan estimates, Company data.
Figure 55: Adjusted tangible NAV Figure 56: ND/EBITDA

1400.0 4.0x 3.3x

1202.7
1200.0 1080.9 3.0x
998.5 2.0x
1000.0 889.1 936.2
873.5 842.1 857.9 0.5x
1.0x 0.2x (0.1)x (0.2)x
800.0 0.0x (0.9)x (0.6)x
(1.0)x
600.0 (1.0x)
400.0 (2.0x) (3.1)x
(3.0x)
200.0
(4.0x)
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E
27
(44-20) 7742-3681 02 January 2014
Berendsen Plc
Overweight
4 Grosvenor Place, London, SW1X 7DL. T: 0207 259 6663
BRSN.L,BRSN LN Business activities
Price: 933p Berendsen is a European textile service business providing solutions to source, clean
Price Target: 1,023p and maintain textiles and allow customers to keep operations running. The group is a
market leader in the majority of countries in which it operates.
United Kingdom
History
Victoria Prior, CFA
AC Berendsen (formerly known as Davis Service Group) was formed following the
(44-20) 7134-5912
merger of The Sunlight Service Group and Godfrey Davis in 1987. In 2002, the
victoria.prior@jpmorgan.com group acquired the European business, Sophus Berendsen which, like Sunlight, was
Bloomberg JPMA PRIOR <GO> the market leader in its geographical area. At the time, Berendsen had operations in
J.P. Morgan Securities plc Denmark, Sweden, Norway, Austria, the Netherlands, Poland and Germany.
Price Performance
950 The group has three core divisions Workwear, Facilities and UK Flat Linen as well
850
as a division called ‘Manage for Value’ which includes Flat Linen outside of the UK
p and the group’s UK sterile consumables and decontamination operations. Workwear
750
(29% group revenue) provides garment rental for industrial and service sector clients
650 across Europe, Facilities (22%) provides washroom services and rental mats as well
550 as cleanroom services which are managed to a high level of hygiene, UK Flat Linen
(20%) includes the provision of bedlinen, towels and other items to UK hotels and
YTD 1m 3m 12m
Abs 50.6% -1.7% 2.9% 58.5%
healthcare providers.
Outlook
Management
Chairman Iain Ferguson Near-term growth is expected to be positive. A recovery in Europe would be very
CEO Peter Ventress helpful to the investment case, in our view, with good operating leverage on
CFO Kevin Quinn incremental volumes. Management has a clear strategy that they are delivering
IR David Lawler against with improving margins (both from operational improvements as well as
Major Shareholders operational leverage) as well as a better outlook for the top line, which should lead to
Silchester 12% earnings growth in the high single digits, in our view. The group’s medium-term
M&G 9% targets are organic revenue growth of GDP +1-2%, underlying EPS growth in high
Sanderson 6% single digits, cash conversion of at least 100% and post tax ROIC towards double
Threadneedle 5%
Legal & General 3% digits, a progressive dividend policy and to seek expansion in new higher growth
markets.
Overweight
Berendsen Plc (BRSN.L;BRSN LN)
Price (p) 933 Adj. EPS FY (p) 48 52 56 58 61
Date Of Price 17 Dec 13 Revenue FY (£ mn) 992 985 1,034 1,059 1,085
Price Target (p) 1,023 EBIT FY (£ mn) 140 146 154 161 167
Market Cap (£ mn) 1,588.88 (£ mn)
EV/EBITDA (x) FY 6.5 6.2 5.9 5.6 5.4
Adj P/E FY 19.3 18.0 16.7 16.0 15.4
Net Yield FY 2.5% 2.7% 2.8% 3.0% 3.1%
28
(44-20) 7742-3681 02 January 2014
Berendsen Plc
7% 7%
6% UK
29% Workwear Sweden
7%
22% 39%
Facility Germany
UK Flat Linen Denmark

13%
Flat Linen Outside UK Holland
Clinical Solutions & Decont. Norway

20% 22% 13%
15% Other

1,100 1,085 18.0%

1,059 16.0% 14.8% 14.9% 15.2% 15.4%
14.1%
1,050 1,034 14.0% 12.2% 11.9% 12.6%
992 12.0%
1,000 986 985
971 10.0%
954
8.0%
950
6.0%
900 4.0%
2.0%
850 0.0%
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E

70.0 2.0x 1.8x

58.4 60.6 1.7x
60.0 55.8 1.8x 1.6x 1.5x
51.8 1.6x
48.3 1.3x
50.0 41.7 1.4x
39.2 39.4 1.2x
40.0 1.2x 1.0x
1.0x 0.9x
30.0
0.8x
20.0
0.6x
10.0 0.4x
0.0 0.2x
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E 0.0x
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
29
(44-20) 7742-3681 02 January 2014
Betfair
Neutral
Waterfront, Hammersmith Embankment, London W6 9HP. T: 0208 834 8000
BET.L,BET LN Business activities
Price: 1,078p ‘Core’ Betfair (95% of group EBITDA) consists of Betfair's European online
Price Target: 975p gambling operation. The betting exchange contributes c.70% of revenue (with the
remainder from fixed odds sports, casino and poker). The betting exchange is the
global leader in this market by some distance, with Betfair's first-mover advantage
United Kingdom
(and therefore liquidity) making it extremely difficult for a competitor to challenge
European Beverages, Hotels &
Leisure directly. BET’s largest market is the UK, where it has 11% share of the online
AC gambling market. It also operates a sportsbetting business in the US (TVG).
Victoria A Greer
(44-20) 7742-2509
victoria.a.greer@jpmorgan.com History
Bloomberg JPMA GREER <GO> Betfair was founded in 1999 and has since been developing its proprietary betting
J.P. Morgan Securities plc exchange technology and adding fixed-odds sports betting and gaming products. The
company floated on the London Stock Exchange in 2010. Following a change of
Price Performance
management in 2012, there was an unsuccessful private equity bid in early 2013.
1,200
1,100
1,000
p 900 Since the arrival of Chief Executive Breon Corcoran in 2012, Betfair's strategy has
800 been to focus on growth in "sustainable" markets (where online gambling is
700 regulated, consisting of the UK, Ireland, Denmark, Malta, Gibraltar and its US
600 business). In these sustainable markets, Betfair is working to broaden its appeal to
more recreational customers (as well as the more sophisticated customers that are
YTD 1m 3m 12m
Abs 56.0% 7.7% 0.3% 49.1% naturally drawn to the exchange). In "other" markets (where there is uncertainty
about regulation, including Russia, Canada and Norway), Betfair has stopped
investing. It has now exited the German and Greek markets altogether.
Management
Chairman Gerald Corbett Outlook
CEO Breon Corcoran Betfair offers potentially significant optionality on accelerated growth on the
CFO Alexander Gersh exchange, in our view, as well as M&A as it uses its c.£190m of surplus cash.
IR Paul Rushton
However, the stock trades on 24x CY14E PE (20x ex-cash), a substantial premium to
Major Shareholders the sector, despite offering EPS growth (on our forecasts) only in line with peers
Edward Wray 11% William Hill and Paddy Power on a five-year view. In the absence of more clarity
Le Peigne 9% around long-term targets for the business, we see this as a full valuation.
CVC Capital 7%
Kames 4%
Blackrock 4%
Neutral
Betfair Group plc (BET.L;BET LN)
Company Data FYE Apr 2013A 2014E 2015E 2016E
Price (p) 1,078 Adj. EPS FY (p) 31.22 46.26 43.19 36.95
Date Of Price 17 Dec 13 Bloomberg EPS FY (p) 33.50 46.00 47.10 -
Price Target (p) 975 Adj P/E FY 34.5 23.3 25.0 29.2
Price Target End Date 31-Dec-14 Revenue FY (£ mn) 387 377 402 422
52-week Range (p) 1,118-644 EBIT FY (£ mn) 36 55 51 43
Market Cap (£ bn) 1.10 Net Income adjusted FY (£ 32 47 45 38
Shares O/S (mn) 102 mn)
DPS FY (p) 13.00 18.00 19.00 20.00
Div Yield FY 1.2% 1.7% 1.8% 1.9%
30
(44-20) 7742-3681 02 January 2014
Betfair
9%
23%
Exchange
17% Sustainable markets
(mainly UK)
Sports
57% Gaming
Other markets
17% Betfair US
77%
Source: Company data. Source: J.P. Morgan estimates, Company data.

450 422 25.0% 23.3%

393 393 402 21.9% 21.4%
387 377 20.4%
400 19.8% 18.9%
341 20.0%
350 17.0% 17.4%
301
300 14.5%
242 15.0%
250
200
10.0%
150
100 5.0%
50
0 0.0%

50.0 46.3 0.0x

43.2
45.0 39.3 (0.5x)
40.0 37.7 36.9 (1.0x)
32.5 31.2 (1.7)x
35.0 (1.5x) (2.0)x
27.9 (2.2)x (2.3)x (2.3)x (2.3)x
30.0 (2.0x)
25.0 (2.5x) (2.9)x
19.0 (3.1)x
20.0 (3.0x)
15.0 (3.5x) (3.8)x
10.0 (4.0x)
5.0 (4.5x)
31
(44-20) 7742-3681 02 January 2014
Big Yellow Group Plc

Overweight
2 The Deans, Bridge Road, Bagshot, Surrey, GU19 5AT. T: 01276 470190
BYG.L,BYG LN Business activities
Price: 469p Big Yellow provides self-storage accommodation across the UK. It holds a 54 store
Price Target: 475p portfolio (32 established and 22 lease-up), as well as 12 stores within the Big Yellow
Limited Partnership (JV with Pramerica), with a total capacity of 4.2m sq ft. As of
September 2013 the wholly owned portfolio was 70.5% let off a net rent/sq ft of
United Kingdom
£25.36.
European Property
AC
Tim Leckie, CFA History
(44-20) 7134-4477 Big Yellow was founded in September 1998 by Nicholas Vetch (Executive
timothy.leckie@jpmorgan.com Chairman), Philip Burks, and James Gibson (CEO) and listed on AIM in May 2000,
Bloomberg JPMA LECKIE <GO>
before moving to the Official List of the London Stock Exchange in June 2002.
Price Performance
Big Yellow operates from 66 stores, 58 in London and the South, two in Sheffield,
500
and one each in Birmingham, Edinburgh, Leeds, Liverpool, Nottingham and
460 Stockport. The company owns a further four development sites, of which three have
p 420
planning. All the stores have distinct yellow branding, with the majority being within
the M25 or in strong urban conurbations. The Group currently operates from a
380
platform of 4.2m sq ft. When fully built out the portfolio will provide approximately
340 4.4m sq ft of flexible storage space. At an average size of 63,000 sq ft, Big Yellow
stores are larger than their UK competitors' stores which average 40,000 sq ft.
YTD 1m 3m 12m
Abs 29.2% 0.0% 11.8% 37.1% Big Yellow’s recent 1H14 results were slightly better than expected, driven by strong
occupancy growth (+5.7% to 70.5%) and rental growth (+2.9%). Big Yellow’s 32
established stores reported 77.1% occupancy as at 30 September 2013, up from
72.8% at March 2013, while the 22 lease-up stores saw occupancy growth from
Management 54.3% as Mar-13 to 61.9%. The investment portfolio saw +2.4% revaluation, and we
Chairman Nicholas Vetch believe the 6.3% net initial yield on the portfolio, rising to a 7.8% stabilised yield
CEO James Gibson still looks very attractive.
CFO John Trotman

FMR 12%
We believe Big Yellow remains well positioned to benefit from a potential UK
Directors 12%
Old Mutual 5% recovery. At the recent 1H results, like-for-like revenue growth was 5.1% in October,
AXA 5% implying the VAT impact is now behind us, and Big Yellow’s outlook was (again) a
Morgan Stanley IM 4% bit more positive, finding “cautious grounds for optimism justified”. The company’s
confidence in this outlook is reinforced by the power of the brand, the strong
operating platform and the exposure to London and the South East. The stock
remains one of our preferred Overweights.
Overweight
Big Yellow Group Plc (BYG.L;BYG LN)
Company Data FYE Mar 2012A 2013A 2014E 2015E
Price Target (p) 475 DPS FY (p) 10.00 11.00 15.77 17.25
Price Target End Date 30-Sep-14 Dividend Yield FY 2.1% 2.3% 3.4% 3.7%
52-week Range (p) 491-339 Adjusted NAV ps FY (p) 391.3 394.1 412.7 439.9
Market Cap (£ bn) 0.66 ROIC FY (1.1%) 5.7% 6.7% 8.8%
Shares O/S (mn) 140 NAV premium (discount) 12.0% 11.2% 6.2% (0.4%)
FY
ROE FY 4.5% 4.9% 4.9% 5.1%
32
(44-20) 7742-3681 02 January 2014
Big Yellow Group Plc

Self storage real estate UK
100% 100%

80 75 70.0% 64.9%
70 71
70 65 53.1% 51.0% 51.3% 53.2% 54.1% 54.8% 55.1%
61 60.0%
59 56
60 50.0%
50 46
40.0%
40
30.0%
30
20 20.0%
10 10.0%
0 0.0%
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E

25.0 12.0x
21.6 9.8x
19.7 9.4x
19.3 10.0x 8.4x
20.0 18.2 7.8x
15.5 8.0x
6.0x 5.6x
15.0 13.0 5.3x
11.9 6.0x
10.0 4.0x
5.0 2.0x
0.0x
0.0 FY09 FY10 FY11 FY12 FY13 FY14E FY15E
33
(44-20) 7742-3681 02 January 2014
Bodycote Plc
Underweight
Tytherington Business Park, Macclesfield, Cheshire, SK10 2X. T: 01625 501 888
BOY.L,BOY LN Business activities
Price: 629p Bodycote is the world leading provider of thermal processing services which
Price Target: 540p improve material properties such as strength, durability and corrosion. Services
provided include heat treatment, metal joining, surface technology and hot isostatic
pressing. Within these, the group has a number of proprietary technologies.
United Kingdom
AC History
Andrew J Wilson
(44-20) 7742-6332
Founded by the Bodycote family in the early 1900s, the business was acquired by
andrew.j.wilson@jpmorgan.com Slater Walker but then demerged in the 1970s. From the late 1970s the group made a
Bloomberg JPMA AWILSON <GO> series of acquisitions which began to focus the group on its present day activities
J.P. Morgan Securities plc including Blandburgh, Zinc Alloy Rust Proofing Ltd, Lindberg Corporation and HIP
Ltd. It also acquired Metallurgical Testing Service Ltd, the business that formed the
Price Performance basis for the group’s Testing business that was subsequently sold in 2008.
700
650
600
p 550 The group has established customer relationships on a global and local basis and sells
500 across a broad range of end markets. The group operates from over 190 sites in 26
450 countries. Following a challenging downturn the group's financial performance has
400 markedly improved as volumes have recovered and management has proactively
managed the cost base. The business reports in two divisions, Aerospace, Defence &
YTD 1m 3m 12m
Abs 33.0% -2.4% -6.1% 46.8%
Energy and Automotive & General Industrial.
Outlook
We believe the group is better managed than previously, especially in terms of
Management margin protection in all but the worst downturns, and is well positioned to benefit
Chairman Alan Thomson
CEO Stephen Harris from future volume growth given its high level of operational gearing. However, at
CFO David Landless present, a number of end markets are continuing to decline and /or remain weak and
organic revenue is still negative. With financial performance still largely macro
Major Shareholders dependent, we expect only modest growth until end markets improve.
Standard Life 15%
Old Mutual 8%
Schroders 6%
Mondrian 6%
Franklin 5%
Underweight
Bodycote Plc (BOY.L;BOY LN)
Date Of Price 17 Dec 13 Revenue FY (£ mn) 571 588 621 623
Price Target (p) 540 Adjusted EBITA FY (£ mn) 86 98 103 108
Price Target End Date 31-Dec-14 EBITA Margin FY 15.0% 16.6% 16.6% 17.4%
52-week Range (p) 691-426 DPS (net) FY (p) 10.90 12.30 13.40 14.50
Market Cap (£ mn) 1,200.44 EV/EBITA FY 13.6 12.3 11.3 10.3
Shares O/S (mn) 191 Adj. P/E FY 19.2 16.7 16.1 15.3
Div Yield FY 1.7% 2.0% 2.1% 2.3%
34
(44-20) 7742-3681 02 January 2014
Bodycote Plc
8%
Aerospace, Defence and

Energy Western Europe
44%
56% 34% North America

Automotive & General
Industrial 58%
Emerging Markets

700 640 653 20.0%

621 623 17.4% 17.6% 17.8%
571 588 18.0% 16.6% 16.6%
600 552 15.0%
500 16.0%
500 12.9%
436 14.0%
12.0% 10.4%
400
10.0%
300 8.0%
200 6.0%
4.0%
100
2.0%
1.8%
0 0.0%

50.0 44.5 2.0x 1.5x

43.1
45.0 41.2 1.5x
37.5 38.9
40.0
35.0 32.1 1.0x 0.5x 0.5x
30.0 0.5x 0.2x
(0.0)x (0.1)x
25.0 0.0x (0.3)x
17.4 18.3 (0.6)x
20.0
15.0 (0.5x) (0.9)x
10.0 (1.0x)
5.0 0.4 (1.5x)
0.0 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
35
(44-20) 7742-3681 02 January 2014
Bovis Homes
Underweight
Manor House, North Ash Road, New Ash Green, Kent, DA3 8HQ. T: 01474 876 200
BVS.L,BVS LN Business activities
Price: 756p Bovis Homes is a house builder operating nationally in the UK. In 2012, the group
Price Target: 700p sold 2,775 homes, making it the seventh largest UK builder by volume. The group’s
average selling price was £170,000. Since 2009, the group has focused its land
buying in the south of England and the Midlands, meaning that more than two thirds
United Kingdom
of developments are now in the south of England.
Materials & Infrastructure
Emily Biddulph
AC History
(44-20) 7134-5906 The Group’s history can be traced back to 1885 when Charles William Bovis
emily.biddulph@jpmorgan.com founded CW Bovis & Co. The group was listed in 1997. It entered the last downturn
Bloomberg JPMA BIDDULPH <GO> with relatively little debt, meaning it weathered the recession well, in relative terms.
J.P. Morgan Securities plc The group raised £60m in September 2009 via a 10% placing, which was used to
invest in new land. David Richie became CEO in 2008, prior to which he served as
Price Performance
Group MD from 2007-8 and Finance Director from 2002 to 2006.
850
p
750
We expect Bovis to continue focusing on sales volume growth in the South of
650
England, on smaller sites that drive a higher ROCE (which has historically been a
laggard of the sector).
550
YTD 1m 3m 12m
Outlook
Abs 29.5% 0.7% -0.1% 36.1% We expect material earnings growth for Bovis in the coming year driven by volume
growth, margin expansion driven by both house price inflation and less old land in
the mix. We see scope for the group to continue growing site numbers and sales
Management
volumes beyond 2014. We expect positive trends in the UK housing market beyond
Chairman Ian Tyler 2014, partly driven by the continuation of the government’s help to buy scheme, but
CEO David Richie moreover driven by a UK economic recovery, improved consumer confidence
CFO Jonathan Hill around housing and better mortgage availability.
Major Shareholders
Blackrock 14%
JP Morgan 11%
Schroders 10%
Franklin 5%
Standard Life 5%
Underweight
Bovis Homes Group (BVS.L;BVS LN)
Price (p) 756 Adj. EPS FY (p) 17.50 30.60 41.91 60.59 80.53
Date Of Price 17 Dec 13 Revenue FY (£ mn) 365 426 528 595 727
Price Target (p) 700 Gross Profit FY (£ mn) 70 92 117 152 188
52-week Range (p) 859-541 EBIT FY (£ mn) 36 57 77 108 142
P/E (x) FY 40.6 24.7 18.0 12.5 9.4
Net debt / (cash) FY (£ mn) (50) (2) 6 (11) (85)
36
(44-20) 7742-3681 02 January 2014
Bovis Homes
Housebuilding UK
100% 100%

900 845 25.0%

800 727 19.5%
20.0% 18.2% 17.6%
700 595
600 528 14.6%
15.0% 13.3%
500 426
365 10.0%
400 299
282 282 10.0% 7.5% 7.2%
300 6.2%
200 5.0%
100
0 0.0%

£ in millions
90.0 83.5 6.0x 4.5x

80.5
80.0 4.0x
70.0 60.6 2.0x (0.0)x 0.1x (0.1)x (0.6)x
60.0 (1.3)x (0.9)x
0.0x
50.0 41.9 (2.3)x
(2.0x)
40.0 30.6
30.0 (4.0x)
17.5 (6.2)x
20.0 10.6 (6.0x)
9.2
10.0 4.4
(8.0x)
37
(44-20) 7742-3681 02 January 2014
BTG Plc
Overweight
5 Fleet Place, London EC4M 7RD. T: 0207 575 0000
BTG.L,BTG LN Business activities
Price: 568p BTG is a specialist healthcare company, developing and commercialising a range of
Price Target: 510p products targeting cancer, toxicity and Varicose veins. It focuses on three business
areas: Interventional Medicine, Specialty Pharmaceuticals and Licensing &
Biotechnology. The company continues to receive royalties from a number of large
United Kingdom
cap pharma partners, in addition to direction sales of the company's own Specialty
European Healthcare (Pharma,
Biotech) Pharma and Interventional Medicine assets.
AC
James D Gordon
(44-20) 7742-6654
History
james.d.gordon@jpmorgan.com BTG in its present form came about from the late 2008 merger of two UK companies
Bloomberg JPMA GORDON1 <GO> “Old BTG” and Protherics. “Old BTG” contributed royalty streams from products
J.P. Morgan Securities plc marketed by BTG partners, a number of partnered pipeline projects, and Varisolve, a
developmental treatment for Varicose Veins. With the incorporation of Protherics,
Price Performance
BTG gained the antidotes CroFab and DigiFab along with a number of pipeline
600
projects. This was supplemented in 2011 by the purchase of Biocompatibles,
550
500
bringing Oncology Beads, and the purchases of TheraSphere and Ekosonic in 2013,
p 450
adding Oncology Seeds, and a clot busting product.
400

300 BTG’s transition into an integrated specialty pharma company, with superior
economics, combined with strong topline growth, has driven margin expansion and
YTD 1m 3m 12m
Abs 64.6% 30.9% 50.5% 69.6% cash generation. The company is currently expanding use of Oncology beads for
liver cancer, integrating the recent TheraSphere and Ekosonic acquisitions, and
preparing for launch of Varisolve, for Varicose veins.
Management
Outlook
Chairman Garry Watts
CEO Louise Makin We believe BTG’s recent acquisitions, and the strong base business mean the
CFO Rolf Soderstrom company is well positioned for continued double digit topline growth for the rest of
Director, IR Andy Burrows the decade, which should drive operating leverage, and hence see EBITDA margins
expand from 31.6% in the prior year, up to c.50% by 2020. We forecast a 2013-20
Major Shareholders EPS CAGR of 29%. We see the potential for further M&A, which could see BTG
Invesco. 27%
Perpetual. 19%
deliver even faster earnings growth.
Prudential 10%
AXA 8%
Schroders 5%
Overweight
BTG Plc (BTG.L;BTG LN)
Company Data FYE Mar 2011A 2012A 2013A 2014E 2015E
Price (p) 568 Revenue FY (£ mn) 111 197 234 285 340
Date Of Price 17 Dec 13 Gross Profit FY (£ mn) 77 141 167 186 236
Price Target (p) 510 EBIT FY (£ mn) (14) 20 26 23 61
Price Target End Date 30-Sep-14 EBITDA FY (£ mn) 10 55 74 53 96
52-week Range (p) 575-314 Adj. EPS FY (p) 1.00 11.22 14.39 16.56 19.70
Market Cap (£ bn) 1.85 Adj P/E FY 569.6 50.6 39.5 34.3 28.8
Shares O/S (mn) 326 FCF FY (£ mn) (22) 45 53 29 70
38
(44-20) 7742-3681 02 January 2014
BTG Plc
4% 2% 2%
9%
Specialty Pharmaceuticals
USA
(Marketed Products)
42% Interventional medicine UK
39% (Biocompatibles)
Licensing and Biotechnology
Europe excl. UK
Milestone/One offs Rest of World

87%
15%

450 30.0% 24.1%

394
400 25.0%
340 18.0%
350 20.0%
285
300 15.0% 11.3% 10.1% 11.0%
234 8.2%
250 197 10.0%
2.1%
200 5.0%
150 99 111 0.0%
75 85
100 -5.0% (10.8)% (12.4)%
50 -10.0%
0 -15.0%

30.0 27.0 0.0x 0.0 (0.1)x 0.0

(0.9)x (1.1)x
(1.4)x
25.0 (1.0x) (1.9)x (2.1)x
19.7 (2.0x)
20.0 16.6 (3.0x)
14.4
15.0 (4.0x)
11.2
10.0 7.0 6.9 (5.0x) (6.0)x
(6.0x)
5.0
1.0
(7.0x)
39
(44-20) 7742-3681 02 January 2014
C&W Communications
Neutral
26 Red Lion Square, London, WC1R 4HQ. T: 0207 315 4000
CWC.L,CWC LN Business activities
Price: 51p CWC provides telecoms services in the Caribbean and Central American region.
Price Target: 43p CWC is a strong competitor in most of its markets; being market leader in more than
two-thirds of its mobile and broadband markets, and almost all its fixed line markets.
United Kingdom
European Telecoms
History
Carl Murdock-Smith
AC In the 1860s John Pender first lay submarine cables across the Atlantic. The
(44-20) 7134-4947
company then expanded internationally, following the British Empire. Imperial &
carl.murdocksmith@jpmorgan.com International Communications was renamed Cable & Wireless in 1934. After WW2
Bloomberg JPMA MURDOCKSMITH <GO> C&W was nationalised, before being privatised at the beginning of the 1980s with a
J.P. Morgan Securities plc license to compete with BT in the UK (what became CWW). The two businesses
(CWW and CWC) began separating in 2006, before the demerger occurred in March
Price Performance 2010. In 2013, CWC disposed of its Islands & Macau assets, leaving the company
50
with a cleaner footprint focused on the Caribbean and Central America (as well as
Monaco).
46
p
42
38 With such a diverse footprint, CWC’s management has until recently been more
34 involved in portfolio management, rather than day-to-day operations. Having now
largely cleaned up the portfolio, CWC is relocating its HQ to Miami, and focusing on
YTD 1m 3m 12m
Abs 42.1% 7.2% 26.7% 40.8%
operational performance. CWC is guiding to deliver run-rate savings of $100m pa over 2
years to March 2015. From a product perspective, management sees considerable
opportunity in mobile data, bundling, and enterprise spending in its regions.
Outlook
Management
Chairman Sir Richard Lapthorne CWC has the opportunity in Panama, its largest market, to drive mobile data growth.
CEO Tony Rice However, CWC is facing the challenge of being no.1 in a four-player market,
CEO designate Phil Bentley profitability being under pressure in recent years as it has successfully defended
CFO Tim Pennington market share. In Jamaica, with regulation now more favourable, CWC is focused on
IR Kunal Patel market share gains, although in time this should flow through to improved financials
(albeit challenging macro). In Bahamas, CWC is focused on becoming operationally
Major Shareholders
Orbis 14% “fit” before competition enters in 2014. In its smaller markets, macro remains
Franklin Templeton 10% challenging. Monaco is non-core and CWC may seek a disposal, albeit high cash
J.P. Morgan AM 9% generation means there is no rush.
Newton 7%
Neutral
Cable & Wireless Communications Plc (CWC.L;CWC LN)
Price (p) 51 Adj.EPS FY ($) 0.065 0.019 0.008 0.041 0.052
Date Of Price 17 Dec 13 Bloomberg EPS FY ($) 0.066 0.057 0.022 0.044 -
Price Target (p) 43 Revenue FY ($ mn) 2,875 1,942 1,910 1,900 1,895
Price Target End Date 31-Mar-15 EBITDA FY ($ mn) 882 589 593 623 648
52-week Range (p) 52-35 EBITDA Margin FY 30.7% 30.3% 31.1% 32.8% 34.2%
Market Cap (£ bn) 1.27 Net debt FY ($ mn) 1,395 1,651 558 620 617
Shares O/S (mn) 2,504 DPS (Net) FY ($) 0.080 0.040 0.040 0.040 0.040
Dividend Yield FY 9.7% 4.8% 4.8% 4.8% 4.8%
Source: Company data, Bloomberg, J.P. Morgan estimates. Move from 2013 to 2014E net debt reflects
disposals of Islands and Macau. Adj. EPS is Underlying EPS (continuing).
40
(44-20) 7742-3681 02 January 2014
C&W Communications
12%
18%
Mobile
Caribbean Panama
Broadband & TV
50%
31% 57%
22% Fixed-line
Monaco
Enterprise
10%

$ millions £ in millions
3,500 40.0% 35.6% 36.9% 35.7%

2,875 33.1% 32.8% 34.2%
3,000 35.0% 30.7% 30.3% 31.1%
2,462 2,447 2,348 2,440 30.0%
2,500
1,942 1,910 1,900 1,895 25.0%
2,000
20.0%
1,500
15.0%
1,000 10.0%
500 5.0%
0 0.0%

$ cents £ in millions
18.0 3.0x 2.8x

15.9
16.0
13.7 2.5x
14.0
12.0 2.0x 1.6x
10.0 1.5x 1.1x
7.2 7.2 0.9x 1.0x 1.0x
8.0 6.5 0.8x
5.2 1.0x
6.0 4.1
4.0 0.5x
1.9 0.0 0.0
2.0 0.8
0.0x
41
(44-20) 7742-3681 02 January 2014
Cairn Energy
Overweight
50 Lothian Road, Edinburgh, EH3 9BY. T: 0131 475 3000
CNE.L,CNE LN Business activities
Price: 260p Cairn is an exploration focused E&P company, with a number of licenses located
Price Target: 360p along the Northern Atlantic Margin and including countries such as Morocco,
Senegal, Mauritania, Greenland and Ireland. In addition the company has a portfolio
of non-operated interests in the North Sea, which contain several development assets.
United Kingdom
These included in the UK the EnQuest operated Kraken field and the Premier Oil
European Oil & Gas
AC operated Catcher fields and in Norway the Wintershall operated Skarfjell discovery.
James Thompson
(44-20) 7134-5942
james.a.thompson1@jpmorgan.com
History
Bloomberg JPMA THOMPSON <GO> Cairn has been exploring for over 25 years. In its formative years, Cairn was a UK
J.P. Morgan Securities plc focused entity although it quickly acquired assets in Vietnam and Spain. Its first
major successes came in the sub-continent, particularly in Bangladesh, before the
Price Performance breakthrough discovery in the Rajastan region of India in 1999. An extremely
300
successful Indian venture culminated with the sale of the majority of its 62% stake in
290
280
Cairn India to Vedanta in 2010. This led to a $3.5bn return of cash to shareholders in
p
270 2012, although with the company retaining a 22% stake in Cairn India (now 10.3%
260 stake valued at c.$1bn). Cairn has also pioneered an exploration campaign offshore
250 Greenland, in the summers of 2010 and 2011, although without tasting success.
CNE.L share price (p)

MSCI-Eu (rebased) Operational overview
YTD 1m 3m 12m
Abs -3.4% -3.5% -2.9% 0.5%
Through 2012 and 2013 Cairn has focused on portfolio management. The company
Rel -13.8% 0.8% -2.6% -10.1% has taken a pragmatic approach to this, entering new licenses, swapping out of or
selling others all at relatively low cost and enabling the company to position itself for
Management the future. This period of portfolio management has coincided with a period of low
Chairman Sir Bill Gammell
exploration and production activity (save for non-operated drilling in the North Sea).
CEO Simon Thomson
CFO Jann Brown The company is a partner in the significant Skarfjell discovery, which adds another
IR David Nisbet option to Cairn’s portfolio.
Major Shareholders
MFS Investment Mgmt 9%
Outlook
BlackRock 8% Cairn has recently emerged from the period of low activity, returning to the
Franklin Templeton 6% exploration fold in Morocco. It spudded its first well offshore Morocco, on the Foum
Bat Handiv 4%
Aviva Investors 4%
Draa License. This starts a period of at least 12 months where the company will
target half a dozen exploration prospects across several North West African basins.
We see Cairn as materially geared into this exploration upside, and see Cairn’s
current low valuation as offering an attractive entry point.
Overweight
Cairn Energy Plc (CNE.L;CNE LN)
Price (p) 260 Revenue FY ($ mn) 2,372 0 0 0 0
Date Of Price 17 Dec 13 Net Profit FY ($ mn) 4,101 73 (85) (124) (128)
Price Target (p) 360 Adj.EPS FY ($) 3.32 0.11 (0.14) (0.21) (0.21)
Price Target End Date 31-Dec-14 Adj.P/E (x) FY 1.3 38.2 NM NM NM
52-week Range (p) 310-251 Debt adj. CF FY ($ mn) 1,913 (74) (56) (59) (62)
Market Cap (£ mn) 1,568.03 EV/DACF (x) FY 0.3 NM 23.6 14.5 2.9
Shares O/S (mn) 602 Net debt / (cash) FY ($ mn) (4,731) (1,586) (1,320) (852) (181)
Ave. Prod. (kboepd) FY 0.0 0.0 0.0 0.0 0.0
42
(44-20) 7742-3681 02 January 2014
Cairn Energy
Figure 99: Core NAV by business division Figure 100: Revenue
Last full year reported $ in millions
2,500 2,372
2,000
30% 30% 1,601
India
1,500
UK 1,000
500 299
Cash 170
0 0 0 0
0
40% FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E

500 120%
100%
15.0x 10.6x
400 80%
60% 10.0x 6.4x 5.2x
300 40% 2.9x
5.0x 1.1x
20% (0.2)x
200 0% 0.0x
-20% (5.6)x
100 -40% (5.0x)
(9.9)x
-60% (10.0x)
0 -80%
(15.0x)
Share price premium/(discount) to NAV RHA Source: J.P. Morgan estimates, Company data.
43
(44-20) 7742-3681 02 January 2014
Cape
Neutral
Drayton Hall, Church Road, West Drayton, Middlesex UB7 7PS. T: 01895 431 705
CIU.L,CIU LN Business activities
Price: 268p Cape is an international leader in the provision of essential, non-mechanical
Price Target: 288p industrial services, namely scaffolding, insulation and painting (SIP) services. It
provides these principally to plant operators and major Engineering and Construction
(E&C) contractors in the oil and gas, power generation, chemical, minerals and
United Kingdom
mining sectors.
European Oil & Gas
AC
Andrew Dobbing
History
(44-20) 7134-5944
andrew.dobbing@jpmorgan.com Cape started its operations as an importer and manufacturer of insulation materials in
Bloomberg JPMA DOBBING <GO> 1893. Over the years it moved on from building and acquiring factories to
J.P. Morgan Securities plc establishing its contracting services. Its Middle East and Asia operations were
managed under Cape East and its operations in the rest of the world were managed
Price Performance under Cape Industrial Services. In 2007 Cape merged all its group companies under a
340
single entity - ‘Cape’.
300
p 260
Cape has two business segments, the Construction support services segment, which
220
does contract work on projects in the Oil & Gas, mining and utilities sector, and the
180 Maintenance support services segment, which typically has multi-year agreements to
maintain client facilities. Cape's UK business and JV with SOCAR in Azerbaijan are
YTD 1m 3m 12m
Abs 24.8% -0.6% 0.5% 40.6%
doing well, but it is currently restructuring its Australian business to make it more
competitive. Cape is also in the process of overhauling its internal reporting and risk
management structure.
Management Outlook
Chairman Tim Eggar
CEO Joe Oatley
We believe Cape's Australian business will continue to suffer in FY 13, but expect a
CFO Michael Speakman small positive margin in FY 14 as the benefits of its performance improvement plans
IR Karen Menzel bear fruit. Cape’s UK and Middle East operations are expected to provide steady
margins in 2014/15. While the market has been hoping that large Australian LNG
Major Shareholders contracts would drive earnings upgrades for this stock, in reality the awards on
M&G Investment 15% Wheatstone are simply replacing large, higher margin contracts in the Asia Pacific
Schroders 9%
region that are finishing this year, and we need additional order intake to improve the
Artemis Investment 6%
J O Hambro 6% growth outlook.
Aviva 4%
Neutral
Cape plc (CIU.L;CIU LN)
Date Of Price 17 Dec 13 Bloomberg EPS FY (p) 41.50 16.60 24.40 28.50 32.60
Price Target (p) 288 Revenue FY (£ mn) 723 749 691 692 727
Price Target End Date 31-Dec-14 EBITDA FY (£ mn) 96 48 59 66 72
Market Cap (£ bn) 0.32 EV/EBITDA (x) FY 3.9 8.1 6.7 5.8 5.2
Adj P/E FY 6.1 16.5 11.9 9.2 7.5
44
(44-20) 7742-3681 02 January 2014
Cape
29%
UK, Europe & CIS
Construction support services
42%
49% Middle East & North Africa
58%
Maintenance support services
Asia Pacific
22%

£ in millions in %
800 723 749 727 751 15.0% 11.6% 10.3%

691 692 8.5%
700 623
655 650 10.0% 7.3% 7.9% 8.1%
600 3.7%
5.0%
500 (0.7)%
0.0%
400
-5.0%
300
200 -10.0%
(17.3)%
100 -15.0%
0 -20.0%

in pence £ in millions
50.0 7.0x 6.5x

42.5 43.7
45.0 6.0x
37.4 38.8
40.0 36.0 5.0x
35.0 30.1 29.2 4.0x
30.0
25.0 22.5 3.0x 2.0x
20.0 16.2 2.0x 1.2x
0.3x 0.4x 0.6x 0.4x
15.0 1.0x 0.2x
(0.4)x
10.0 0.0x
5.0 (1.0x)
45
(44-20) 7742-3681 02 January 2014
Capital & Regional

Overweight
52 Grosvenor Gardens, London, SW1W 0AU. T: 0207 932 8000
CAL.L,CAL LN Business activities
Price: 43p Capital & Regional is a specialist property company focusing on retail property.
Price Target: 49p Capital & Regional founded The Mall in conjunction with Aviva Investors, for which
it acts as property and asset manager and holds 20.3% of the fund. Capital &
Regional & Ares Management each hold a 50% stake in a German retail property
United Kingdom
portfolio which is managed by Garigal Asset Management GmbH, in which Capital
European Property
AC & Regional holds a 30% interest. Capital & Regional has a number of other joint
Neil Green, CFA ventures and wholly-owned properties.
(44-20) 7134-4478
neil.d.green@jpmorgan.com
Bloomberg JPMA GREEN <GO>
History
J.P. Morgan Securities plc Capital and Regional was founded in 1979 as Capital & Regional Properties. It was
floated on the Unlisted Securities Market in 1986. In 2001 it established the Mall
Price Performance Fund and the Junction Fund with Morley Fund Management, and in 2004, the X-
50
Leisure fund was established (from the combination of three existing funds
45 previously managed by MWB).
40
p
30 Capital & Regional has recently sharpened its focus (inline with its stated strategy)
25 on UK shopping centres following the sale of stakes in the Junction Fund (retail
parks, to Hammerson), X-Leisure (to Land Securities) and Great Northern
YTD 1m 3m 12m
Abs 47.8% -1.2% 4.3% 53.2%
Warehouse. As of June 2013, the shopping centre portfolio was valued at c. £1bn
was outperforming national footfall indices by 2.5% and had resilient occupancy of
c. 96.7%.
Management Outlook
Chairman John Clare
CEO Hugh Scott-Barrett Capital & Regional's recent 3Q IMS showed improving trends 1) “enhanced
CFO Charles Staveley performance and valuations” going into 4Q and 2014, 2) further evidence of retailers
upsizing space in the schemes, 3) “strong interest” in the German asset being
Major Shareholders
Parkdev 24%
marketed, 4) redevelopments making progress, and 5) good operational metrics
Henderson 11% (footfall ahead of benchmark, lettings slightly ahead of ERV and administrations
Standard Life 10% “dramatically” down). We believe the company is in a much improved state,
Morgan Stanley IM 9% particularly following the sale of Great Northern (which has removed all remaining
APG 5%
debt from the group balance sheet) and we still see value in the stock trading at a
25% discount to June 2013 NAV (55p).
Overweight
Capital & Regional Plc (CAL.L;CAL LN)
Date Of Price 17 Dec 13 Adj P/E FY 10.4 9.1 14.5 14.6 14.6
Price Target (p) 49 DPS FY (p) 0.00 0.00 0.63 0.63 0.63
Price Target End Date 30-Sep-14 Dividend Yield FY 0.0% 0.0% 1.5% 1.5% 1.5%
52-week Range (p) 45-27 Adjusted NAV ps FY (p) 62.5 55.3 57.5 61.1 64.7
Market Cap (£ bn) 0.15 NAV premium (discount) 67.1% 75.9% 73.1% 68.8% 64.9%
Shares O/S (mn) 350 FY
ROIC FY 8.0% 1.2% 4.7% 6.0% 5.9%
ROE FY 7.7% 8.7% 5.6% 5.3% 5.0%
46
(44-20) 7742-3681 02 January 2014
Capital & Regional

5%
23%
24% UK shopping centres
Germany UK Germany
71% Other
77%

120 108 90.0% 85.1% 83.6% 84.8% 84.2% 77.8%

80.0% 69.7% 69.8% 69.7% 69.5%
100
70.0%
80 74 60.0%
60 56 50.0%
60 51
39 40.0%
38 38 38
40 30.0%
20.0%
20
10.0%
0 0.0%

30.0 27.5 12.0x 10.4x 10.3x 10.1x 9.9x

10.0x
9.1x 9.2x 9.4x
25.0 10.0x
8.0x 7.0x
20.0
15.0 6.0x
4.0x
10.0
5.9
4.4 4.1 4.7 2.0x
5.0 2.9 2.9 2.9 3.0
0.0x
47
(44-20) 7742-3681 02 January 2014
Carillion
Neutral
24 Birch Street, Wolverhampton WV1 4HY. T: 01902 422 431
CLLN.L,CLLN LN Business activities
Price: 311p Carillion is a construction and support services group. Operations are predominantly
Price Target: 300p focused in the UK, Canada, and Middle East.
United Kingdom
History
European Construction, Building The history of Carillion traces to the companies that had become part of the Tarmac
Materials & Infrastructure Group by the late 1990s: Tarmac Construction, Wimpey Construction, Cubitts and
Emily Biddulph
AC Mitchell Construction. In 1999 Carillion demerged from the Tarmac building
(44-20) 7134-5906 materials business. Since then, the company has been relatively acquisitive,
emily.biddulph@jpmorgan.com acquiring both Mowlem (2006) and Alfred McAlpine (in 2008) in the UK
Bloomberg JPMA BIDDULPH <GO> construction sector and eaga, a UK support services environmental focused company
J.P. Morgan Securities plc in 2011.
Price Performance
340
320
The Group has four business segments:
300
p  Support services - this includes facilities management, facilities services, energy
280
services, rail services, road maintenance and utility services.
260
240  Public Private Partnership (PPP) projects - this includes the group’s investing
activities in PPP projects in its chosen sectors of defence, health, education,
YTD 1m 3m 12m
Abs -3.4% 3.8% -3.0% -0.0%
transport, secure, energy services and other Government accommodation.
 Middle East construction services - this includes the group’s building and civil
Management
engineering activities in the Middle East.
Chairman Philip Rogerson
 Construction services (excluding the Middle East) - this includes
CEO Richard Howsen
CFO Richard Adam consultancy, building, civil engineering and developments activities in the UK
and construction activities in Canada.
Major Shareholders
Franklin 20% Outlook
Blackrock 5%
We believe the outlook will remain relatively difficult for the group, with ongoing
Standard Life 5%
Schroders 5% pressure in UK support services (primarily owing to weakness in the ECO and green
Brewin Dolphin 5% deal associated businesses), as well as ongoing difficult UK construction market
conditions, and the Middle East and Canadian markets not yet showing the material
growth the industry had hoped for.
Neutral
Carillion Plc (CLLN.L;CLLN LN)
Price Target (p) 300 EBIT FY (£ mn) 238 250 247 250 247
52-week Range (p) 334-240 Pre Tax Income FY (£ mn) 212 214 180 182 180
Market Cap (£ mn) 1,338.47 Net debt / (cash) FY (£ mn) 51 156 212 89 (1)
Shares O/S (mn) 430 DPS FY (p) 16.90 17.00 19.00 19.00 19.00
P/E (x) FY 7.2 7.2 8.8 8.7 8.8
48
(44-20) 7742-3681 02 January 2014
Carillion
6% 8% 12%
28% Construction ex. Middle East Construction ex. Middle
East
Middle East Construction
UK
Support Services
54% 12% Canada
Infrastructure Investments
80%
Figure 117: Revenue Figure 118: Operating profit margin

6,000 5,709 6.0% 5.3%

5,051 5,143 4.9%
5,000 4,705 5.0%
4,403 4.3% 4.3% 4.2%
4,000 4.0%
3,000 3.0%
2,000 2.0%
1,000 1.0%
0 0.0%
FY11 FY12 FY13E FY14E FY15E FY11 FY12 FY13E FY14E FY15E

350.0 £ in millions
294.9 1.0x 0.9x
300.0 272.8
255.1
250.0 226.2 234.7 0.8x
0.5x 0.5x
200.0 0.6x
150.0 0.4x
0.2x
100.0 0.2x
50.0 0.0x (0.1)x
0.0
(0.2x)
FY11 FY12 FY13E FY14E FY15E
49
(44-20) 7742-3681 02 January 2014
Catlin
Overweight
20 Gracechurch Street, London, EC3V 0BG. T: 020 7626 0486
CGL.L,CGL LN Business activities
Price: 538p Catlin is a leading international specialty insurance underwriter with a prominent
Price Target: 595p position within the Lloyd's Market. Catlin underwrites across Reinsurance, Property,
Casualty, Energy, Marine and a range of specialty lines. Catlin underwrites from its
syndicates at Lloyd’s and from five international hubs.
United Kingdom
European Insurance
AC History
Andreas van Embden
(44-20) 7134-4574
Catlin was established at Lloyd’s in 1984 and has since then become one of the
andreas.vanembden@jpmorgan.com leading underwriters in the London Market. The company listed in 2004 at the
Bloomberg JPMA VANEMBDEN <GO> London Stock Exchange. In 2007 Catlin merged with Wellington to become the
J.P. Morgan Securities plc largest underwriting agency at Lloyd’s. In addition, Catlin has grown its platform
across underwriting hubs in Bermuda, US, Canada, Asia and Europe.
Price Performance
560
540
520
Catlin's business model is able to withstand the increasing challenges across the
p 500 reinsurance and specialty insurance markets. A diversified growth strategy outside of
480 the Lloyd's market enables the group to access business whilst rates soften in US
460 reinsurance lines. Catlin continues to invest in infrastructure and people in order to
440 gain access to specialty business outside of the Lloyd's market. This we believe gives
the company the flexibility to manage a softening cycle in reinsurance lines in the
YTD 1m 3m 12m
Abs 7.0% 1.9% 11.4% 10.1%
US in particular. This does require investment, hence the higher expense ratio vs
peers. However, as the company increases its scale we believe this will create an
Management
attractive operating leverage and accelerate earnings growth.
Chairman John Barton
CEO Stephen Catlin Outlook
CFO Benjamin Meuli
IR William Spurgin
Going into 2014, premium growth is likely to slow down but remain in the mid to
high single digit range. We believe 2013 is likely to be another good underwriting
Major Shareholders year for the group which continues to invest in scaling up the business. Despite the
Invesco 9.7% challenges, we expect underwriting results to remain solid.
Cantillon Capital 5.2%
Dimensional 4.3%
M&G 4.2% .
Blackrock 3.7%
Overweight
Catlin Group Ltd (CGL.L;CGL LN)
Price (p) 538 Analyst Adjusted Diluted 0.11 0.83 0.85 0.92 1.15
Date Of Price 17-Dec-13 EPS FY ($)
Price Target (p) 595 P/E (x) FY 83.0 10.6 10.4 9.6 7.7
Price Target End Date 30-Dec-14 Dividend (Net) FY ($) 0.43 0.46 0.50 0.53 0.56
52-week Range (p) 597-449 Gross Yield FY 4.9% 5.3% 5.6% 6.0% 6.4%
Market Cap (£ bn) 1.88 NAV/Sh FY ($) 373.84 385.80 408.54 419.62 457.53
Pretax Profit Adjusted FY 71 339 363 428 525
($ mn)
50
(44-20) 7742-3681 02 January 2014
Catlin
15% 18%
Reinsurance London/UK originating
36%
Property
16% Berm,uda
Casulaty 51%
21% Catlin US
Marine/Energy
Specialty other International

21% 12% 10%

$ in millions
5,000 25.0%
4,421 20.7%
4,500 3,995 4,154
4,000 3,612 3,604 20.0%
3,500 3,219
2,918
3,000 15.0% 12.6% 11.9%
2,500 9.4% 10.3%
9.1%
2,000 10.0%
1,500
1,000 5.0% 2.0%
500
0 0.0%

Pence
500.0 457.5 110.0%

419.6 105.0%
450.0 408.5
405.0 373.8 385.8 105.0%
400.0
347.2
350.0 100.0%
300.0 94.4%
95.0% 93.1% 93.0% 92.6%
250.0 91.9% 91.2%
200.0
90.0%
150.0
100.0 85.0%
50.0
0.0 80.0%
51
(44-20) 7742-3681 02 January 2014
Charlemagne Capital
Underweight
St Mary’s Court, 20 Hill Street, Douglas, Isle of Man. T: 0207 518 2100
CCAP.L,CCAP LN Business activities
Price: 14p Charlemagne Capital is an emerging market equities asset manager. Its product range
Price Target: 13p includes mutual funds, hedge funds, and institutional and specialist fund products,
primarily covering Global Emerging Markets (GEMs), Eastern Europe, Latin
America and Asia.
United Kingdom
European Tobacco & Financials
AC History
Rae Maile
(44-20) 7134-9738
Charlemagne Capital was founded in 2000, following a demerger from Hong Kong
rae.maile@jpmorgan.com based regent, Pacific Group. The company was introduced to the AIM market of the
Bloomberg JPMA MAILE <GO> LSE in April 2006.
Price Performance
The company has four main business areas. Magna is a range of long-only mutual
15 funds which have the ability to generate performance fees. OCCO is a range of
13
absolute return, long/short funds. Specialist Funds include offshore funds, structured
p products and private equity. Institutional Mandates are funds provided by other
11
institutions.
9
7 At the end of September 2013, the company had AUM of $2.5bn, of which Magna
accounted for $0.45bn (17%), Specialist Funds $0.12bn (5%), OCCO $0.6bn (24%)
YTD 1m 3m 12m
Abs 66.2% -5.0% 1.8% 81.0%
and Institutional Mandates $1.36bn (53%).
Charlemagne employs a bottom-up analysis model, supplemented by a risk

Management
CEO Jayne Sutcliffe management process. Fund managers specialise geographically and by sector; all
CFO Huw Jones investment decisions are subject to peer review.
Major Shareholders
James Mellon 20%
Outlook
Jayne Sutcliffe 11% The recovery in markets should allow the company to rebuild profits and profitability
AXA 5% over time, provided of course that the recovery is maintained. It is reassuring that the
Paul Isaac 5%
company has material cash and cash equivalent balances of $22.6m at the end of
Majedie 5%
June 2013, and so does not have financial risk.
Underweight
Charlemagne Capital Ltd (CCAP.L;CCAP LN)
Price (p) 14 Adj. EPS FY ($) 0.01 0.01 0.01 0.01
Price Target End Date 31-Dec-14 DPS (Net) FY ($) 0.6 0.6 0.6 0.6
52-week Range (p) 16-8 Net Yield FY 4.2% 4.2% 4.2% 4.2%
Market Cap (£ bn) 0.04 Revenue FY ($ mn) 31 39 44 56
Shares O/S (mn) - Pretax Profit Adjusted FY ($ mn) 5 10 13 10
Net Income adjusted FY ($ mn) 2 3 3 4
52
(44-20) 7742-3681 02 January 2014
Charlemagne Capital
11%
25%
Magna
OCCO
UK
7% Specialist
Institutional
57%
100%

$ millions £ in millions
60 56 35.0% 32.6%
29.5%
50 30.0% 26.6%
44
23.8% 23.4%
39 25.0% 21.7%
40
28 31 20.0% 16.5%
28
30 24
15.0%
20
10.0%
10 5.0%
0 0.0%

3.5 0.0x
3.1
3.0 (1.0x)
(2.2)x
2.5 (2.0x) (2.7)x
2.0
2.0 (3.2)x
(3.0x) (3.6)x
1.4 (3.8)x
1.5 1.2 1.1 (4.3)x
1.0 (4.0x)
1.0 0.7 (5.3)x
(5.0x)
0.5
(6.0x)
0.0 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
FY09 FY10 FY11 FY12 FY13E FY14E FY15E
53
(44-20) 7742-3681 02 January 2014
Chemring
Neutral
1500 Parkway, Whiteley, Fareham, Hampshire PO15 7AF. T: 0148 988 1880
CHG.L,CHG LN Business activities
Price: 213p Chemring is a leading manufacturer and supplier of a high technology electronics
Price Target: 260p and energetic products primarily to the global defence industry. Key areas of
specialism include countermeasures for aircraft, ground penetrating radar for military
vehicles and a range of flares and smokes. The group primarily sells to the US DoD
United Kingdom
and UK MoD but serves over 60 nations worldwide.
AC
Andrew J Wilson
History
(44-20) 7742-6332
andrew.j.wilson@jpmorgan.com The company that was to become Chemring was founded in 1905. In 1982,
Bloomberg JPMA AWILSON <GO> prompted by the Falklands War, the group built a site to manufacture chaff for
J.P. Morgan Securities plc decoys. Between 1986 and 1992 the group expanded its UK footprint in
countermeasures organically and through acquisition and in 1993 it made its first US
Price Performance acquisition (Alloy Surfaces). From 2005 the group made a series of acquisitions
340
across a number of areas of energetic materials. Following a series of profit warnings
300 and an approach from Carlyle, Mark Papworth was appointed CEO in November
2012.
p 260
220
180 The group manufactures in eight countries with the businesses managed and
reporting under four product-based segments: Countermeasures, Sensors &
YTD 1m 3m 12m
Abs -10.5% 4.0% -31.7% -10.0%
Electronics, Pyrotechnics & Munitions and Energetic Sub-Systems. The new
management team are finalising a Strategic Planning Process to determine the
group's strategy over the next three years. Full details are yet to be announced but as
well as having identified further cost opportunities, management has also confirmed
Management that a number of businesses have been identified as non-core and a process has
Chairman Peter Hickson
CEO Mark Papworth
started to divest of these businesses.
CFO Steve Bowers
IR Rupert Pittman Outlook
Major Shareholders
The group’s core defence markets remain under pressure and we do not expect this
Invesco 25% backdrop to improve in the near-term. Management continues to work to improve the
UBS 7% quality of the group and we see a significant opportunity for improved financial
Investec 7% performance through self-help measures. However, delivery will likely take time and
JP Morgan 6%
Ameriprise 5%
patience may be needed.
Neutral
Chemring Group PLC (CHG.L;CHG LN)
Company Data FYE Oct 2011A 2012A 2013E 2014E
Price Target (p) 260 Adjusted EBITA FY (£ mn) 136 88 71 69
Price Target End Date 31-Oct-14 EBITA Margin FY 18.8% 11.9% 11.1% 10.9%
Market Cap (£ mn) 413.80 EV/EBITA FY 4.9 7.4 9.2 9.3
Div Yield FY 6.9% 4.5% 3.2% 3.2%
54
(44-20) 7742-3681 02 January 2014
Chemring
13% 8%
31% Sensors & Electronics USA

18%
UK
Countermeasures 45%
Europe
Pyrotechnics & Munitions
34% 9% Middle-East
Energetic Sub-Systems Other
22%
20%

800 724 740 25.0% 22.8% 23.0%

700 637 630 654
597 18.8%
20.0%
600
504
500 15.0% 11.9% 11.1% 11.2%
400 10.9%
300 10.0%
200
5.0%
100
0 0.0%

250.0 3.0x
210.7 2.5x 2.4x
2.5x 2.1x 2.1x
200.0 2.0x
2.0x 1.6x
150.0
1.5x
0.9x
100.0 1.0x
49.3 49.5
50.0 28.1 0.5x
20.2 19.3 21.1
0.0x
55
(44-20) 7742-3681 02 January 2014
Cineworld
Overweight
Power Road Studios, 114 Power Road, Chiswick, London W4 5PY. T: 0208 987 5000
CINE.L,CINE LN Business activities
Price: 381p Cineworld is the largest cinema business in the UK (on the basis of admissions). Its
Price Target: 425p main competitors are Odeon and Vue. The company operates over 100 cinemas
throughout the UK and Ireland, approximately 20% of which are branded
Picturehouse. Most Cineworld cinemas are multiplex format. Cineworld derives
United Kingdom
revenue mainly from the sale of cinema tickets, food and beverage, 3D glasses and
AC screen advertising.
Alexander Mees
(44-20) 7742-3681
History
Bloomberg JPMA MEES <GO> Cineworld was formed as Cine-UK in 1995 by the current CEO Stephen Wiener. Its
J.P. Morgan Securities plc first multiplex opened in Stevenage in 1996. A further 34 were added by 2004, at
which time Cine-UK was acquired by Blackstone Group. Cineworld acquired the UK
Price Performance operations of UGC (42 cinemas) later that year. Cineworld listed in 2007. In 2012,
450
Cineworld acquired the Picturehouse chain of art house cinemas.
400
p 350
Cineworld has recently completed the transition of all of its cinema estate to digital
300
projection. This has opened up significant opportunities to grow screen advertising
250 and alternative content as well as enhancing the immersive experience of cinema.
Picturehouse is run as a largely autonomous business unit within Cineworld.
YTD 1m 3m 12m
Abs 45.0% 5.4% -2.2% 47.5%
Outlook
Cineworld’s new site rollout programme is on track and Picturehouse has integrated
well, despite the modestly adverse ruling from the Competition Commission that
Management requires it to divest three cinema sites. Three-quarters of the 35 2013-2017 target
Chairman Anthony Bloom
CEO Stephen Wiener pipeline Cineworld sites have been signed. Three are scheduled for 2013 and a
CFO Philip Bowcock further five for 2014. Cineworld recently announced the retirement of its CEO and
VP Business Affairs Crispin Lilly founder, Stephen Wiener. The opportunity for a new CEO to drive the next stage of
the company’s development appears compelling. Cineworld has already grown to
Major Shareholders
Franklin Templeton 10% become the largest cinema operator in the UK. We believe the challenge for the new
Mawer Investment 6% CEO will be to consolidate that position and capitalise on opportunities arising from
Legal & General 5% changes such as digital projection and online booking to reshape the cinema
Aviva Investors 5% experience and drive underlying organic growth.
Rathbones 4%
Overweight
Cineworld (CINE.L;CINE LN)
Price Target End Date 31-Dec-14 EBITDA FY (£ mn) 63.3 67.1 73.0 79.7 88.7
Market Cap (£ mn) 544.50 DPS (Net) FY (p) 11.2 11.8 13.0 14.0 16.0
Shares O/S (mn) 143 Adj P/E FY 19.7 18.6 16.9 15.5 14.1
EV/EBITDA (x) FY 9.8 9.6 8.8 8.1 7.4
Net Yield FY 2.9% 3.1% 3.4% 3.7% 4.2%
56
(44-20) 7742-3681 02 January 2014
Cineworld
7%
23%
Box Office Retail Other UK and Ireland
70%
100%

500 471 20.0% 19.5%

438
450 407 19.5% 18.9%
18.7%
400 348 359 19.0%
333 343 18.2% 18.2%
350 299 18.5% 18.0%
17.7%
300 18.0%
17.2%
250 17.5%
16.7%
200 17.0%
150 16.5%
100 16.0%
50 15.5%
0 15.0%
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E

pence £ in millions
35.0 2.5x 2.2x

30.1
30.0 27.0 1.9x 1.9x
24.5 2.0x 1.7x 1.7x
1.6x 1.6x 1.5x
25.0 22.5
19.3 20.5 1.5x
18.2 1.2x
20.0
14.6 16.2
15.0 1.0x
10.0 0.5x
5.0
0.0x
57
(44-20) 7742-3681 02 January 2014
Clarkson
Neutral
St. Magnus House, 3 Lower Thames Street, London EC3R 6HE. T: 0207 796 4133
CKN.L,CKN LN Business activities
Price: 2,014p Clarkson is a global market leader in shipping services. Its core ship broking
Price Target: 1,990p business is supplemented by sector leading research platform. It also provides
support services such as port agency and forwarding, as well as financial services.
Clarkson's expertise spans across all major shipping sectors including dry bulk, crude
United Kingdom
and product tankers, LNG, container and offshore vessels.
European Transportation &
Logistics
Wenchang Ma
AC History
(44-20) 7134-5918 Clarkson was founded in 1852 with its first century marked by growth into a number
wenchang.ma@jpmorgan.com of areas such as vessel ownership, insurance services, and broking. The company
Bloomberg JPMA WMA <GO> was listed on the London Stock Exchange in 1986. Nearly a decade later, efforts
J.P. Morgan Securities plc were re-focused on core broking activities. Clarkson launched the industry-leading
research product the Shipping Intelligence Network in 2000. Management has
Price Performance
completed a number of acquisitions which broadened sector coverage from dry bulk
2,200
to the current space. Clarkson also built Financial Services including derivatives
broking, structured finance, and capital markets.
1,800
p
1,400
Clarkson’s IMS (in November 2013) indicated early signs of improvement in rates
1,000 and asset values on the shipping market. Also, losses in the Financial segment have
narrowed yoy. Performance of Clarkson’s core broking business is closely correlated
YTD 1m 3m 12m
Abs 70.7% -6.3% -5.6% 73.3% with shipping market cycles, as the commission fee is typically based on the
transaction value. That said, we believe Clarkson is well positioned given its
leadership position in the sector and its diversified exposure to various shipping
Management
markets.
Chairman Bob Benton
CEO Andi Case
CFO Jeff Woyda Outlook
We expect 2014 to be a better year than 2013 for the global shipping market overall.
Major Shareholders Capacity oversupply is still expected in crude tankers and containers, while we
Employees 23%
expect the dry bulk segment to eventually reach parity. We are positive on the long-
Franklin Resources 13%
Private Individuals 11%
term prospects of Clarkson but think the current share price already reflects a sharper
Praxis Trustees 10% recovery of the general shipping market than our base case, which assumes 9%
Mason Hill Advisors 7% revenue growth for Clarkson in 2014, with 6% in Broking business. Every 100bps
incremental revenue growth translates into 3% upside to our 2014e EPS estimate.
Neutral
Clarkson Plc (CKN.L;CKN LN)
Price Target End Date 31-Dec-14 Adjusted PBT FY (£ mn) 32 20 23 32 38
52-week Range (p) 2,441-1,150 DPS FY (p) 50.00 51.00 53.00 56.00 59.00
Market Cap (£ bn) 0.38 Adj P/E FY 17.1 26.3 22.6 16.9 14.2
Shares O/S (mn) 19 EV/EBIT FY 10.8 16.5 14.0 9.9 8.1
Div Yield FY 2.5% 2.5% 2.6% 2.8% 2.9%
58
(44-20) 7742-3681 02 January 2014
Clarkson
5% 14%
9%
3% Broking EMEA
11%
Financial
Americas
Support
Asia Pacific
Research
75%
83%

250 20.0% 17.9% 19.0%

216 17.0%
203 206 18.0% 15.8%
195 197 15.2%
200 177 176 180 16.0%
12.8% 12.4%
14.0%
10.8%
150 12.0%
10.0%
100 8.0%
6.0%
50 4.0%
2.0%
0 0.0%
FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E

180.0 0.0x
158.2
160.0 142.1 (0.5x)
140.0 125.7 (1.0x)
117.9 119.3
120.0 (1.5x)
100.0 90.2 89.1 (2.0x)
76.7 (2.5x) (3.0)x (2.9)x
80.0 (3.1)x
(3.0x) (3.6)x (3.5)x (3.6)x
60.0
(3.5x) (4.1)x
40.0 (4.2)x
(4.0x)
20.0
(4.5x)
0.0 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
59
(44-20) 7742-3681 02 January 2014
Close Brothers
Overweight
10 Crown Place, London EC2A 4FT. T: 0207 655 3100
CBRO.L,CBG LN Business activities
Price: 1,319p Close Brothers (“Close”) operates three divisions: Banking, Securities and Asset
Price Target: 1,242p Management. It has a strong balance sheet, with well diversified sources of funding.
United Kingdom
History
European Tobacco & Financials Founded in 1878, Close has a long history in financial services. The company listed
Rae Maile
AC on the London Stock Exchange in 1984.
(44-20) 7134-9738
rae.maile@jpmorgan.com Operational overview
Bloomberg JPMA MAILE <GO> Close’s lending model supports over 23,000 SMEs and 1.8m individuals from its
J.P. Morgan Securities plc network of over 40 offices. It offers high touch, specialist service from which it can
generate strong returns. The loan book has grown at a CAGR of ~11% in the last 10
Price Performance
years, and is primarily small-ticket, secured, short duration loans. The company has
1,400
1,300
been able to generate high net interest margins over the medium term, and bad debt
1,200
has been consistently low.
p 1,100
1,000 Outlook
900 Close’s Banking division is set for another year of good profit growth. The loan book
800
has been growing rapidly, but prudently, in its chosen specialist areas of lending, and
YTD 1m 3m 12m
Close has benefited from the withdrawal of capacity from competitors in the wake of
Abs 50.2% 7.1% 17.6% 52.4% the financial crisis. Bad debts remain firmly under control.
Trading in the company’s securities business, in particular at Winterflood, has

Management
suffered from lower levels of market activity, but having reduced costs there is scope
CEO Preben Prebensen for material profit recovery when activity picks up. A recent pick-up in primary
FD Jonathan Howell market activity allows tentative cause for optimism.
IR Jon Nash
Major Shareholders
The company has been transforming its Asset Management business over the last
Prudential 10% few years, and following a period of heavy investment spend, the division has
Scottish Widows 7% returned to profitability. The group aims to improve revenue and operating margins
Standard Life 6% over the medium term.
Blackrock 5%
Aberdeen 5%
Overweight
Close Brothers (CBRO.L;CBG LN)
Company Data FYE Jul 2012A 2013A 2014E 2015E
Price (p) 1,319 Adj. EPS FY (p) 68.9 83.1 1,00.4 1,13.0
Date Of Price 17 Dec 13 Bloomberg EPS FY (p) 66.30 83.30 99.20 115.10
Price Target (p) 1,242 Adj P/E FY 18.1 15.0 12.4 11.0
Price Target End Date 31-Dec-14 DPS (Net) FY (p) 41.50 44.50 47.50 51.25
52-week Range (p) 1,364-847 Net Yield FY 3.3% 3.6% 3.8% 4.1%
Market Cap (£ bn) 1.96 NAV/Sh FY (p) 529 572 635 708
Shares O/S (mn) - P/NAV FY 2.4 2.2 2.0 1.8
Pretax Profit Adjusted FY (£mn) 134 167 193 217
60
(44-20) 7742-3681 02 January 2014
Close Brothers
14%
Banking
18%
Securities UK
68% Asset Managment
100%

£ millions
800 35.0% 30.6% 31.6%

684 28.0%
700 629 30.0%
583 25.4%
600 549 532
502 495 25.0% 20.4%
500 17.6%
20.0%
400 14.3%
15.0%
300
200 10.0%
100 5.0%
0 0.0%
Figure 155: Adjusted EPS

Pence
120.0 113.0
100.4
100.0
83.1
80.0 68.9
64.8
60.5 58.2
60.0
40.0
20.0
0.0
61
(44-20) 7742-3681 02 January 2014
Colt
Neutral
15 St Botolph Street, London, EC3A 7QN. T: 0207 390 3900
COLT.L,COLT LN Business activities
Price: 124p Colt provides telecoms and IT services to enterprise and wholesale customers in
Price Target: 115p major European cities, using its 44,000km network that connects directly into 19k
buildings and 20 Colt data centres. Its revenues are c25% UK, c22% Germany, c14%
France, c9% Spain, with the remainder being other European countries.
United Kingdom
European Telecoms
AC History
Carl Murdock-Smith
(44-20) 7134-4947
Colt was founded in 1992, backed by Fidelity Investments (which currently owns c.
carl.murdocksmith@jpmorgan.com two-thirds of the company). It began operations in 1993 with a 15km network in the
Bloomberg JPMA MURDOCKSMITH <GO> City of London. In 1996, the company floated and started to expand its services in
J.P. Morgan Securities plc key European cities. In 1999 it began the process of linking up the city networks.
Today, Colt’s network spans 22 European countries.
Price Performance
140
130
Colt operates in the challenging enterprise telecoms sector. Colt’s customers are
p
120
corporate CIOs, who in the main are activist customers who know the value of what
110
they are purchasing, and are willing to tender to multiple providers. Colt’s
100 competitors are other network owners (normally the national incumbent who has
90 better economies of scale), but also resellers, IT services companies, and consultants
(as due to active wholesale markets in Europe, you don’t have to be the company
YTD 1m 3m 12m
Abs 26.2% -2.7% 4.1% 32.8%
which owns the network to provide the services). These factors combine to make
demand/supply dynamics challenging, leading to poor pricing. As such, Colt’s 2012
annual report lists the accumulated cost of Colt’s assets at c€6bn, while its market
cap is only c€1bn. Colt recognises the commoditisation of many of its legacy
Management
Chairman Timothy Hilton services, and as such has been pushing into differentiated managed services
CEO Rakesh Bhasin (including increased data centre operations).
CFO Mark Ferrari
IR Morten Singleton
Outlook
Major Shareholders We view enterprise telecoms as a difficult space (well-informed customers and lots
FMR 34% of providers), in which Colt lacks the scale of many of its incumbent competitors.
FIL 17% We support its attempts to differentiate and push into managed services, but this
Info Tech Fund 12%
Ruffer 5% takes time and investment. However, against the backdrop of significant sector
L&G 3% M&A, we believe Colt’s network and tax assets make it an interesting prospect
(albeit any action depends on Fidelity’s intentions).
Neutral
COLT Telecom Group S.A. (COLT.L;COLT LN)
Price (p) 124 Adj.EPS FY (€) 0.07 0.06 0.04 0.06 0.07
Date Of Price 17 Dec 13 Bloomberg EPS FY (€) 0.07 0.07 0.05 0.06 0.07
Price Target (p) 115 Revenue FY (€ mn) 1,554 1,595 1,587 1,634 1,684
Price Target End Date 31-Dec-14 Adj.EBITDA FY (€ mn) 332 334 319 340 354
52-week Range (p) 136-93 Bloomberg EBITDA FY (€ 328 325 328 347 368
Market Cap (£ bn) 1.11 mn)
Shares O/S (mn) 893 EBIT FY (€ mn) 67 57 44 62 67
Net debt FY (€ mn) (344) (280) (194) (207) (233)
Adj.P/E FY 20.1 25.6 34.0 23.8 21.9
62
(44-20) 7742-3681 02 January 2014
Colt
14%
25%
30%
Data UK Germany
51% Voice France Spain
35%
Managed Services 9% Other
22%
14%

€ millions £ in millions
1,800 22.0% 21.4% 21.3%

1,741 20.9% 20.9% 20.8% 21.0%
1,750 21.0%
1,684 20.1%
1,700 1,675 19.6%
20.0%
1,650 1,623 1,634
1,584 1,595 1,587 19.0%
1,600 18.1%
1,554
18.0%
1,550
1,500 17.0%
1,450 16.0%

€ cents £ in millions
12.0 0.0x (0.0)x
9.2 9.6 (0.2x)

10.0 8.9
8.0 7.3 7.5 (0.4x)

6.7 (0.6)x (0.6)x
5.7 6.2 (0.7)x
6.0 (0.6x) (0.8)x
4.3 (0.8)x
(0.8x) (0.9)x
4.0 (1.0)x
(1.0)x
(1.0x)
2.0
(1.2x)
63
(44-20) 7742-3681 02 January 2014
Computacenter
Neutral
Hatfield Business Park, Hatfield AL10 9TW. T: 01707 631 000
CCC.L,CCC LN Business activities
Price: 647p Computacenter (CCC) is a provider of IT infrastructure product and services to the
Price Target: 500p corporate and public sectors across the UK, Germany, France and Benelux. Supply
Chain (product) accounts for 69% of revenues, but just half of profit. Managed and
Professional Services are the growth drivers of the company.
United Kingdom
European Software & IT Services
AC History
Stacy Pollard
(44-20) 7134-5420
The company was founded in 1981 as a provider of IT hardware and related services,
stacy.pollard@jpmorgan.com and grew mainly organically throughout its early history until shortly after its
Bloomberg JPMA POLLARD <GO> flotation on the London Stock Exchange in spring 1998. Computacenter made a
J.P. Morgan Securities plc number of regional capability acquisitions in Belgium (1999), France (2001 and
2011) and Germany (2003 and 2009). The company has Managed Services contracts
Price Performance with a number of large companies, including BT, Lloyds, Santander, Schroders,
700
M&S, Audi, BMW, AstraZeneca, Bosch, Boots, Nationwide, Rolls-Royce and EDF.
650
600
p 550
500 Computacenter operates mainly in Europe, although it services international clients
450 around the world. The UK and Germany account for 42% of revenues each, while
400 France is 15% and Benelux 2%. Managed and Professional Services account for
nearly a third of revenues but more than half of gross profits. Operating margins have
YTD 1m 3m 12m
Abs 42.3% 8.4% 19.4% 46.1%
increased steadily from 1.7% in 2006 to an estimated 2.8% in 2013e.
Outlook
Management
Chairman Greg Lock In our view, Computacenter can continue to improve profit margins via 1) faster
CEO Mike Norris growth in the Services divisions (both Managed and Professional) which carry higher
CFO Tony Conophy gross margins, while Supply Chain remains a strategic but lower growth and lower
COO Chris Webb
margin business, and 2) growth and improvement in core German operations (and
Major Shareholders remaining on track with onerous contracts). Unfortunately, the French business
Peter Ogden 23% continues to face tough market conditions and is likely to remain unprofitable for the
Philip Hulme 10% next year or two. Computacenter has a strong balance sheet and cash flow. The
Standard Life 7%
Schroders 5%
company returned £75m to investors in 2013, and looks to be on track for FCF of at
Hadley Trust 4% least as much again over the next three years.
Neutral
Computacenter (CCC.L;CCC LN)
Company Data FYE Dec 2012A 2013E 2014E 2015E
Price (p) 647 Adj.EPS FY (p) 40.81 42.30 50.83 54.46
Price Target End Date 31-Dec-14 Adjusted PBT FY (£ mn) 79 82 88 97
52-week Range (p) 675-390 Net Income adjusted FY (£ 62 61 70 75
Shares O/S (mn) 149 Adj EBITDA FY (£ mn) 103 105 108 112
DPS (Net) FY (p) 15.50 16.80 20.85 22.38
Dividend Yield FY 2.4% 2.6% 3.2% 3.5%
Adj.P/E FY 15.9 15.3 12.7 11.9
64
(44-20) 7742-3681 02 January 2014
Computacenter
2%
16%
24%
United Kingdom
Supply Chain (Product)
41%
Germany
Professional Servic es
7% France
69% Managed Services Benelux

41%

3,500 3,155 3.5% 3.1%

2,990 3,064 2.9%
2,852 2,914 2.7% 2.7%
3,000 2,676 3.0% 2.6%
2,560 2,503 2.5%
2,500 2.5% 2.2%
2,000 2.0% 1.7%
1,500 1.5%
1,000 1.0%
500 0.5%
0 0.0%

60.0 54.5 1.5x 1.1x

50.8
50.0 1.0x
40.8 42.3
40.0 37.4 0.5x
33.0 0.0x
27.7 0.0x (0.3)x
30.0 (0.4)x (0.5)x
21.0
(0.5x)
20.0 (1.0)x
(1.1)x
(1.0x) (1.3)x
10.0
(1.5x)
0.0 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
65
(44-20) 7742-3681 02 January 2014
CSR Plc
Overweight
Cambridge Business Park, Cambridge CB4 0WZ. T: 01223 692 000
CSR.L,CSR LN Business activities
Price: 619p CSR is a fabless semiconductor company and supplies connectivity, image
Price Target: 650p processing and other chips/platforms used in a wide range of products such as cars,
headsets, digital cameras, laptops, games console personal navigation devices and
many other consumer electronics products
United Kingdom
European Semiconductors
AC History
Sandeep Deshpande
(44-20) 7134-5276
CSR was founded in 1998 and split from Cambridge Consultants in 1999. In 2012,
sandeep.s.deshpande@jpmorgan.com CSR sold its handset connectivity and handset location operations to Samsung for a
Bloomberg JPMA DESHPANDE <GO> consideration of US$310m in cash. The stock price appreciated 130% since the
J.P. Morgan Securities plc announcement of the sale of the handset business as CSR was not a leading player in
the highly competitive handset connectivity market with highly concentrated
Price Performance customer base.
600
p
500 Post the sale of the handset connectivity business to Samsung, CSR has five focus
400
core business segments of voice & music (V&M); automotive infotainment; indoor
location; imaging & Bluetooth smart. CSR has the #1 market position in the V&M
300 segment and #2 in the Automotive Infotainment segment in the markets that it serves.
YTD 1m 3m 12m
Abs 87.1% 23.3% 19.1% 85.0%
Outlook
CSR expects its total serviceable addressable market (excluding the market of indoor
Management
location which is not yet commercially deployed) to grow at a CAGR of 13.5%,
Chairman Ron Mackintosh double the expected growth for the semiconductor industry from 2013-2018. CSR
CEO Joep van Beurden expects the V&M segment to grow at a CAGR of 14% and the Auto segment to grow
CFO Will Gardiner at a CAGR of 13% from 2013 to 2018. CSR expects the Bluetooth Smart market to
IR Jeffery Torrance
grow at a CAGR of 34% from 2013 to 2018.
Major Shareholders
Schroder 16% We are positive on CSR. As CSR continues to show robust growth in their core
Schroders 12% markets with the associated leverage on the margin towards their mid teens
Majedie 6%
Aberforth Partners 5% percentage target, we believe the stock has a potential to continue to re-rate. In
Blackrock 5% particular, the Bluetooth smart market could be a substantial growth driver for the
company.
Overweight
CSR Plc (CSR.L;CSR LN)
Price (p) 619 Adj.EPS FY ($) 0.20 0.27 0.45 0.53 0.61
Date Of Price 17-Dec-13 Revenue FY ($ mn) 845 1,025 957 885 900
Price Target (p) 650 Adjusted EBIT FY ($ mn) 49 (53) 101 120 135
Price Target End Date 31-Dec-14 Adj.EBIT Margin FY 5.8% (5.2%) 10.5% 13.6% 15.0%
52-week Range (p) 630-334 EV/Revenue FY 1.5 1.3 1.3 1.5 1.4
Market Cap (£ bn) 1.03 EV/EBITDA (x) FY NM 47.1 15.7 12.8 11.1
Shares O/S (mn) 166 Adj.P/E FY 50.8 36.8 22.6 18.9 16.5
Bloomberg EPS FY ($) 0.14 0.30 0.45 0.52 0.63
66
(44-20) 7742-3681 02 January 2014
CSR Plc
4%
8%
25%
30% Voice & Music
Auto
Asia US Europe
Consumer
21% Legacy revenue

24% 88%

$ in millions
1,200 16.0% 15.0%

1,025 13.6%
957 14.0%
1,000 885 900
801 845 12.0% 10.5% 10.6% 10.5%
800 695 10.0%
601 7.2%
600 8.0%
5.8%
6.0% 4.5%
400
4.0%
200
2.0%
0 0.0%

$ cents
70.0 100.0x
61.2 76.0x
60.0 53.3 80.0x
49.2 60.0x
50.0 45.0 44.6
40.0 40.0x
27.3 20.0x
30.0 (4.2)x (4.2)x (4.5)x
19.8 0.0x (11.8)x (13.8)x (12.1)x
20.0 19.5
(28.8)x
(20.0x)
10.0
(40.0x)
67
(44-20) 7742-3681 02 January 2014
Dairy Crest
Overweight
Claygate House, Littleworth Road, Esher, Surrey KT10 9PN. T: 01372 472200
DCG.L,DCG LN Business activities
Price: 526p Dairy Crest is the largest independent dairy company in the UK. It processes two
Price Target: 583p billion litres of raw milk pa into spreads, cheese and liquid milk. It has some of the
best known brands in the industry – including Cathedral City, Clover, Country Life
and FRijj – and is one of the three largest processors of liquid milk in the country.
United Kingdom
The company employs 5,300 people throughout the UK.
AC
Alexander Mees
History
(44-20) 7742-3681
alexander.c.mees@jpmorgan.com Dairy Crest was created as a division of the Milk Marketing Board in 1980 and
Bloomberg JPMA MEES <GO> floated on the London Stock Exchange in 1996. As a public company, Dairy Crest
J.P. Morgan Securities plc made a number of significant acquisitions, which added considerable scale to the
group. In the ten years between 2000 and 2010, group revenue more than doubled. In
Price Performance 2007, Dairy Crest made a significant step outside of the UK though the acquisition of
550
St Hubert, a spreads business in France and Italy, for €370m (£248m). St Hubert was
500 sold to a private equity firm, Montagu Capital, for €430m (£340m) in 2012.
p 450
400
Dairy processing is a challenging pursuit. The market itself exhibits a low level of
350 growth; the supply chain is diverse and complex; commodity prices are volatile; and
there is always risk that the weather might turn nasty. Dairy Crest aims to generate
YTD 1m 3m 12m
Abs 37.3% 0.6% 8.6% 34.2%
10% of its annual sales from ‘new products’ (those which have been introduced
within the past three years). This equates to approximately £140m. In an industry as
mature as dairy, we see this as a real challenge, but the pipeline looks likely to
Management facilitate its achievement in the near-term.
Chairman Anthony Fry
CEO Mark Allen
CFO Tom Atherton Outlook
IR Arthur Reeves Dairy Crest aims to restore the operating margin of its Dairies business to 3%. We
believe it will make good progress towards this goal in 2014, helped by property
Major Shareholders
Legal & General 5% profits and an increased contribution from its chilled milk drink brand, FRijj. Dairy
Henderson 4% Crest has announced it will invest £45m in developing the capability to produce
Delta Lloyd 4% demineralised whey powder at its cheese facility at Davidstow. It expects an
Blackrock 4% annualised return of £9m EBITDA, representing a five-year cash payback. Cheese is
Fidelity 4%
likely to remain the primary engine of earnings in the near to medium-term as the
success of Cathedral City continues to build, offsetting weakness in Spreads.
Overweight
Dairy Crest Group Plc (DCG.L;DCG LN)
Date Of Price 17 Dec 13 Bloomberg EPS FY (p) 48.70 32.10 36.80 40.70 -
Price Target (p) 583 Revenue FY (£ mn) 1,515 1,382 1,370 1,395 1,434
Price Target End Date 31-Dec-14 Adjusted EBITDA FY (£ 100 100 103 119 126
52-week Range (p) 543-374 mn)
Shares O/S (mn) 133 Adjusted P/E FY 18.5 20.3 14.2 12.5 11.3
EV/EBITDA (x) FY 10.6 7.9 8.7 7.4 6.9
68
(44-20) 7742-3681 02 January 2014
Dairy Crest
17%
14%
Cheese Spreads Dairies UK
69%
100%

1,800 1,648 1,630 1,605 7.0% 6.2%

1,570 1,515 5.9% 5.8%
1,600 5.6%
1,382 1,370 1,395 6.0% 5.2%
5.0%
1,400 4.5%
5.0%
1,200
1,000 4.0%
800 3.0%
600
2.0%
400
200 1.0%
0 0.0%
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY09 FY10 FY11 FY12 FY13E FY14E FY15E

50.0 47.1 47.5 4.0x 3.4x 3.4x

45.0 44.7 42.9
45.0 3.5x
37.7 2.7x
40.0 3.0x 2.4x
34.8
35.0 2.5x
28.9 1.7x
30.0 26.2 2.0x 1.3x
25.0 1.5x 0.8x
20.0 1.0x
0.5x
15.0 (0.4)x
0.0x
10.0
(0.5x)
5.0
(1.0x)
69
(44-20) 7742-3681 02 January 2014
Daisy
Underweight
Daisy House, Lindred Road Business Park, Nelson, BB9 5SR. T: 01282 882421
DAY.L,DAY LN Business activities
Price: 177p Daisy is seeking to be a one-stop shop for telecoms services (fixed and mobile) to
Price Target: 160p SMEs in the UK, by reselling network operators’ services. The SME market is
currently very fragmented, with no obvious alternative to BT. It is 98% UK.
United Kingdom
European Telecoms
History
Carl Murdock-Smith
AC Matthew Riley founded Daisy in 2001 and led the company through rapid inorganic
(44-20) 7134-4947
growth. In 2009, Daisy announced a reverse takeover of Freedom4 (as well as the
carl.murdocksmith@jpmorgan.com acquisition of Vialtus), giving Daisy a public listing. Daisy has continued with its
Bloomberg JPMA MURDOCKSMITH <GO> acquisitive strategy, although recent acquisitions have proven less frequent and more
J.P. Morgan Securities plc strategic, rather than opportunistic purchases of distressed assets in 2009 and 2010.
Price Performance
200
Daisy operates in the highly fragmented UK SME market, still largely dominated by
BT (c50% market share). The challenges of this market are – high churn (self-
p
160 selecting by the customer’s initial choice to leave the incumbent), a high reliance on
120
declining legacy products such as calls and lines, how to target potential new
customers (which is ultimately why the incumbent is still so dominant), and how to
80 compete on innovation with the much larger incumbent. Combined with the
disruption of embedding multiple acquisitions, this led to c10% underlying revenue
YTD 1m 3m 12m
Abs 92.1% 0.7% 24.5% 92.9%
decline in ‘12/13. Daisy’s opportunities to differentiate itself are better customer
service, and the ability to be an agnostic one-stop shop of all services. Meanwhile, a
focus on cross-sell should further embed customers, and act to reduce churn.
Management
Chairman Peter Dubens
CEO Matthew Riley
Outlook
CFO Steve Smith Daisy’s investment case to wrap up the tail of UK SME telecoms operators into a
one-stop shop alternative to BT is high-risk, layering together multiple high-churn
Major Shareholders customer bases, and with poor visibility of underlying trends due to the number of
Toscafund 27% acquisitions (we believe underlying rev decreased c10% last year). As such, we
Invesco 26%
struggle to gain comfort with Daisy at its new valuation levels. However, improving
Matthew Riley 23%
macro should help Daisy’s revenue trends, while Daisy’s cross-selling strategy
should help support its current level of FCF generation by reducing churn.
Underweight
Daisy Group plc (DAY.L;DAY LN)
Price (p) 177 Adj.EPS FY (p) 9.44 13.27 13.94 13.10 13.21
Price Target End Date 31-Mar-15 EBITDA FY (£ mn) 41 56 56 57 58
52-week Range (p) 207-85 Bloomberg EBITDA FY (£ 41 56 56 57 59
Shares O/S (mn) 257 EBITDA Margin FY 15.3% 16.1% 16.0% 16.0% 16.2%
DPS (Net) FY (p) 0.00 0.00 4.00 4.60 5.29
Net debt FY (£ mn) 66 78 81 106 93
Adj.P/E FY 18.7 13.3 12.7 13.5 13.4
70
(44-20) 7742-3681 02 January 2014
Daisy
2%
28%
Networks Data
43%
UK Europe
9% Systems Mobile
20% 98%

400 359 359 358 18.0% 16.1% 16.0% 16.0% 16.2% 16.2%
349 351 15.3%
350 16.0%
300 266 14.0%
12.0%
250
10.0% 8.2%
200
134 8.0%
150
6.0%
100 4.0%
50 2.0%
0 0.0%

16.0 2.0x 1.9x

13.9 13.7 1.6x 1.6x
14.0 13.3 13.1 13.2 1.8x
1.6x 1.4x 1.4x
12.0 1.3x
1.4x
9.4
10.0 1.2x
1.0x 0.8x
8.0
0.8x
6.0 4.4 0.6x
4.0 0.4x
0.2x
2.0
0.0x
71
(44-20) 7742-3681 02 January 2014
Darty Plc
Underweight
22-24 Ely Place, London, EC2N 6TE. T: 0207 269 1400
DRTY.L,DRTY LN Business activities
Price: 102p Darty is the leading electricals retailer in the France (229 stores) and also has
Price Target: 85p operations in Belgium & the Netherlands (core region, 129 stores), and he Czech
Republic. In addition to its stores the group has transactional websites in all of the
regions in which it operates.
United Kingdom
European Retail
AC History
Georgina Johanan
(44-20) 7134-5791
Darty was founded by the Darty family in France in the 1950/60s. In 1993 Darty was
georgina.s.johanan@jpmorgan.com bough by Kingfisher plc which integrated Darty and UK electricals retailer Comet,
Bloomberg JPMA JOHANAN <GO> calling the combined business Kesa, which went on to expand internationally via
J.P. Morgan Securities plc acquisition. In 2003 Kesa demerged from Kingfisher. As the UK entered the
downturn in 2009 the performance of Comet materially deteriorated and in 2012
Price Performance Kesa successfully disposed of the business to OpCapita, albeit at a cash cost of £50m
to Kesa. Post the sale of the UK business Kesa changed its name to its French brand
90
name of Darty. In 2013 Darty also disposed of its loss making Spanish operations
70 and effectively sold its Italian business. Regis Schultz (preciously CEO of BUT, the
p
French furniture and electricals retailer) joined as CEO in April 2013.
50
The group is committed to improving performance in its core regions and is targeting
YTD 1m 3m 12m
Abs 67.5% 13.4% 34.1% 72.6%
significant cost savings in France. It is also pursuing market share online in France
through keener pricing and an enhanced online offering. Suppliers are becoming
more supportive. The Czech Republic is a non-core region and Darty is exploring
opportunities to exit this market
Management
Chairman Alan Parker
CEO Regis Schultz Outlook
FD Dominic Platt Strategic initiatives and cost savings are progressing which should help to mitigate
IR Simon Ward ongoing pressure on margins from both mix and the promotional environment in key
Major Shareholders regions. However, while we expect internal initiatives to generate market share gains
Knight Vinke 25% in France, with ongoing uncertainty over the consumer environment in the region we
Schroders 15% continue to see short and medium term risk to underlying earnings.
UBS 10%
Tameside MBC 6%
Standard Life 6%
Underweight
Darty Plc (DRTY.L;DRTY LN)
Company Data FYE Apr 2011A 2012A 2013A 2014E 2015E
Price (p) 102 Adj.EPS FY (€) 0.12 0.06 0.02 0.05 0.06
Date Of Price 17-Dec-13 Adj.P/E FY 10.1 19.6 49.2 25.5 19.9
Price Target (p) 85 Revenue FY (€ mn) 4,109 4,026 3,803 3,494 3,531
Price Target End Date 30-Oct-14 Adjusted PBT FY (€ mn) 103 59 26 52 57
52-week Range (p) 110-37 EV/EBITDA (x) FY 1.5 2.9 5.7 4.8 4.3
Market Cap (£ bn) 0.54 Adjusted EBITDA FY (€ 211 189 104 129 134
Dividend (Net) FY (€) 0.07 0.04 0.04 0.04 0.04
EBIT FY (€ mn) 116 70 39 64 69
72
(44-20) 7742-3681 02 January 2014
Darty Plc
8%
France
19%
Electrical retailing Begium & the Netherlands
Turkey & Czach Republic

73%
100%

€ in millions
7,000 3.0% 2.8%

5,789
6,000 2.5% 2.1%
1.9% 2.0%
5,000 1.7% 1.8%
4,109 4,026 2.0%
3,803 3,569
4,000 3,494 3,531
1.5%
3,000 1.0%
1.0%
2,000
1,000 0.5%
0 0.0%

€ cents
14.0 2.0x 1.6x
12.1 1.5x
12.0 11.3
1.5x 1.2x
10.0 0.9x
1.0x 0.7x
8.0 7.3
6.2 6.1 0.5x
6.0 4.8
0.0x (0.4)x
4.0 2.5 (0.6)x
(0.5x)
2.0
(1.0x)
0.0
73
(44-20) 7742-3681 02 January 2014
De La Rue
Overweight
De La Rue House, Jays Close, Viables, Basingstoke RG22 4BS. T: 01256 605000
DLAR.L,DLAR LN Business activities
Price: 894p De La Rue is the largest integrated producer of banknotes in the world, and holds a
Price Target: 974p leading position in banknote printing and design, as well as the manufacture of
associated substrates. The company also produces a wide range of security
documents and cash management processing systems. De La Rue has two reporting
United Kingdom
divisions Currency and Solutions. The Solutions division incorporates the Cash
AC Processing Solutions, Security Products and Identity Systems business units. The
Alexander Mees company currently employs approximately 4,000 people worldwide.
(44-20) 7742-3681
alexander.c.mees@jpmorgan.com History
Bloomberg JPMA MEES <GO>
The company was founded in Guernsey by Thomas de la Rue in 1813. It is one of the
oldest currency suppliers in the world. It has a long track record of delivery in an
Price Performance
industry that values continuity of supply. The company was first listed on the
1,050 London Stock Exchange in 1947. De La Rue sold its Cash Systems business in 2008.
1,000
The following year it won a ten-year contract to supply the UK passport. Following a
950
profit warning and the departure of the former CEO, Tim Cobbold was appointed
p CEO in 2011.
900

800 In October 2013, De La Rue informed the market that it will likely fall short of its
long-standing FY2014 operating profit target of £100m. There is no getting away
YTD 1m 3m 12m
Abs -2.4% 7.1% -11.5% -4.2%
from the fact that the market is right to be disappointed by De La Rue’s failure to
achieve this target, but the achievement of £40m annualised and sustainable cost
savings since FY2011 is, in our opinion, considerable. De La Rue expects to supply 7
Management billion banknotes in FY2014, 11% higher than FY2013 and the largest volume of
Chairman Philip Rogerson notes since FY2010.
CEO Tim Cobbold
CFO Colin Child
Outlook
Major Shareholders We believe key to De La Rue’s long-term outlook will be its ability both to maintain
M&G Investment 16%
Mondrian 8%
its share of the print market and to broaden its business activities into areas such as
Jupiter 7% polymer notes, banknote security features, e-passports and government revenue
Threadneedle 5% solutions. In the short-term, we anticipate De La Rue will hold its operating profit
Kames 5% (before the effect of IAS 19 accounting changes) steady at £91m in FY2015 as the
annualisation of cost savings is offset by a full twelve months (rather than six) of
pricing pressure in banknote printing.
Overweight
De La Rue (DLAR.L;DLAR LN)
Price Target (p) 974 Revenue FY (£ mn) 528 484 515 547
Price Target End Date 31-Dec-14 Operating profit FY (£ mn) 63 63 91 91
52-week Range (p) 1,053-808 DPS (Net) FY (p) 42.3 42.3 42.3 42.3
Market Cap (£ mn) 889.03 Adj P/E FY 20.5 22.2 14.4 14.4
Shares O/S (mn) 100 EV/EBITDA (x) FY 14.5 15.6 12.1 11.8
Div Yield FY 4.7% 4.7% 4.7% 4.7%
74
(44-20) 7742-3681 02 January 2014
De La Rue
23%
UK and Ireland
39%
Rest of Europe
Currency Solutions
54% 10% Americas
61%
Rest of world
13%

800 754 25.0%

700 19.2% 19.5%
561 20.0% 17.6%
600 528 547 16.6%
502 515
464 484
500 15.0% 13.1%
11.9%
400
8.7%
300 10.0%
200
5.0%
100
0 0.0%
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY09 FY10 FY11 FY12 FY13E FY14E FY15E

80.0 75.7 1.0x 0.9x 0.8x

70.0 65.3 0.8x
62.0 61.9 0.5x 0.5x
57.9 0.6x
60.0 56.2 0.3x 0.3x
0.4x
0.1x
50.0 43.5 0.2x
40.2
40.0 0.0x
(0.2x)
30.0 24.0 (0.4x)
20.0 (0.6x) (0.8)x
10.0 (0.8x)
(1.0x)
75
(44-20) 7742-3681 02 January 2014
Debenhams
Overweight
10 Brock Street, Regent’s Place, London, NW1 3FG. T: 0207 408 4444
DEB.L,DEB LN Business activities
Price: 82p Debenhams is a department store retailer with around 160 stores in the UK (as well
Price Target: 118p as a website) and 79 stores internationally of which 62 are franchised.
United Kingdom
History
European Retail Debenhams traces its history back to the 1700s but was incorporated in 1905 and
Georgina Johanan
AC became a public company for the first time in 1928. It was then owned by the Burton
(44-20) 7134-5791
group from 1985 to 1998, at which point it demerged and came back to market.
georgina.s.johanan@jpmorgan.com Belinda Earle was CEO of Debenhams from 2000 until 2003 when it was taken
Bloomberg JPMA JOHANAN <GO> private again by a consortium of venture capitalists. The VC group brought it to
J.P. Morgan Securities plc market for the third time in May 2006. After its return to the market, Debenhams was
run by Rob Templeman, until he left the business in September 2012 to be replaced
Price Performance by Michael Sharp as CEO (previously held the role of deputy CEO).
115
105
p The group currently operates around 160 stores in the UK with approximately 11m
95
sq ft of trading space. Management sees the opportunity to add a further 70 stores in
85 the long term of which there are 16 stores in the current pipeline. Overseas the
75 majority of stores are operated under franchise agreements. Targets are for 150
franchise stores by 2017, versus 62 at present. Online sales have also been
YTD 1m 3m 12m
Abs -25.4% -13.1% -16.8% -25.7%
experiencing fast growth and currently represent around 13% of gross transaction
value (GTV). Around 77% of GTV is represented by own bought product with the
remainder being concessions. Within own bought product Clothing is just over half
Management of the sales mix, with Health & Beauty being the next largest category at over 20%
Chairman Gareth Davies of sales.
CEO Michael Sharp
CFO Simon Herrick
IR Lisa Williams Outlook
The stock suffered a tumultuous year in 2013 as management guidance provided a
Major Shareholders
Schroders 18%
series of negative surprises. However, with the UK representing over 80% of
Milestone Resources 7% operating profit and a significant level of operational gearing, we consider
LSV 5% Debenhams to be one of the few remaining stocks in the sector offering a value way
Bestinver Gestion 5% in which to play a UK consumer recovery.
Majedie 5%
Overweight
Debenhams (DEB.L;DEB LN)
Company Data FYE Aug 2012A 2013A 2014E 2015E
Date Of Price 17-Dec-13 Revenue FY (£ mn) 2,708 2,777 2,902 2,989
Price Target (p) 118 EBITDA FY (£ mn) 267 263 283 298
Price Target End Date 31-Aug-14 Pretax Profit Adjusted FY 158 154 148 155
52-week Range (p) 118-78 (£ mn)
Market Cap (£ bn) 1.06 Adj.P/E FY 8.4 8.1 8.5 8.2
Shares O/S (mn) 1,287 EV/EBITDA (x) FY 6.3 6.4 6.4 6.0
FCF Yield FY 9.1% 7.5% 7.7% 12.1%
DPS FY (p) 3.30 3.40 3.40 3.54
76
(44-20) 7742-3681 02 January 2014
Debenhams
19%
Retailing UK International
81%
100%

3,500 9.0% 7.8% 7.6%

3,078
2,902 2,989 8.0% 7.3% 7.0%
3,000 2,640 2,708 2,777 6.6% 6.5% 6.5% 6.8%
2,564 7.0% 6.1%
2,500 2,336 2,340
6.0%
2,000 5.0%
1,500 4.0%
3.0%
1,000
2.0%
500 1.0%
0 0.0%

12.0 10.9 4.0x 3.8x

9.8 10.2 10.1
9.6 3.5x
10.0 8.9
8.1 8.2 3.0x
7.6
8.0 2.5x 2.1x
1.8x
6.0 2.0x 1.4x 1.4x
1.4x 1.3x
1.5x 1.0x
4.0 1.0x 0.7x
2.0 0.5x
0.0x
77
(44-20) 7742-3681 02 January 2014
Development Securities
Neutral
Portland House, Bressenden Place, London SW1E 5DS. T: 020 7828 4777
DSC.L,DSC LN Business activities
Price: 240p Development Securities is a real estate developer that seeks to acquire schemes for
Price Target: 220p redevelopment or change of use potential. The group raised equity in 2012 to acquire
opportunistically and put the proceeds to use across c.40 schemes around the UK in
all sub-sectors (i.e. office, retail, residential etc). The realization of any profit
United Kingdom
potential comes from the disposal of these assets. The group also has a small
European Property
AC investment portfolio which is actively managed and generates income to cover some
Neil Green, CFA of the costs of the business.
(44-20) 7134-4478
History
J.P. Morgan Securities plc Development Securities was founded in 1993 although was previously Clayform
properties. Michael Marx was appointed CEO in the early 2000s after being
Price Performance appointed to the board in 1994.
260
240
220
p 200 In October 2013, Development Securities presented confident interim results with
180 two key takeaways, in our view: 1) underlying secondary property valuations will
160 surprise to the upside in 2H-14 as yield compression returns (JPMe: +0%), and 2)
140 DevSecs is increasingly confident of trading gains, upgrading (and front loading)
guidance: £41.6m (34p/share) in 2015 vs. £32.8m previously.
YTD 1m 3m 12m
Abs 60.2% 0.1% 23.5% 58.1%
Outlook
The group reported positive HY results in which one of the key takeaways was the
Management
prospect of yield compression in 2H-14 particularly for secondary property which
Chairman David Jenkins
CEO Michael Marx has struggled in recent years. The group must also dispose of assets to realise the
CFO Marcus Shepherd profit potential although management has been successful in doing so over the last 18
IR Lucy Grimble months.
Major Shareholders
FIL 25%
Blackrock 15%
Aberdeen 12%
SFM UK Mgmt 8%
Neutral
Development Securities plc (DSC.L;DSC LN)
Price (p) 240 Adj. EPS FY (p) (8.77) 9.24 4.88 5.71 6.32
Date Of Price 17 Dec 13 Adj P/E FY NM 26.0 49.3 42.1 38.0
Market Cap (£ bn) 0.30 NAV premium (discount) (25.5%) (24.8%) (24.8%) (25.4%) (26.2%)
ROIC FY 0.3% 2.5% 3.8% 4.5% 4.6%
Operating return FY 1.1% 4.2% 3.8% 4.1% 4.1%
78
(44-20) 7742-3681 02 January 2014
Development Securities
Property UK
100% 100%

180 171 20.0% 17.7% 17.5% 17.1% 16.8% 16.8%

160 15.0%
6.9%
140 10.0%
2.6% 1.5%
120 5.0%
100 100 99 99 98 98 0.0%
100
-5.0%
80
-10.0%
60 44 -15.0%
35
40 -20.0% (24.6)%
20 -25.0%
0 -30.0%
Figure 208: Adjusted NAV Figure 209: ND/EBITDA

450.0 405.3 120.0x 109.8x

400.0 100.0x
350.0 301.0 80.0x
300.0 276.0 262.3 259.8 259.9 262.1 264.9
60.0x
250.0
200.0 40.0x 19.3x 22.0x
150.0 20.0x 8.3x 5.6x 2.7x 1.4x 1.3x
(5.3)x
100.0 0.0x
50.0 (20.0x)
FY08 FY09 FY10 FY11 FY12 FY13 FY14E
79
(44-20) 7742-3681 02 January 2014
Devro
Overweight
Moodiesburn, Chryston, Scotland G69 0JE. T: 01236 872261
DVO.L,DVO LN Business activities
Price: 287p Devro manufactures collagen casings for use in sausages and other meat products.
Price Target: 357p The company has manufacturing operations in Scotland, the USA, the Czech
Republic and Australia. The manufacturing process converts collagen, a natural
polymer sourced from animal hide, into tubular casings, gels and films. Devro
United Kingdom
supplies more than 1,000 customers in over 100 countries.
AC
Alexander Mees
History
(44-20) 7742-3681
alexander.c.mees@jpmorgan.com Devro was founded as a division of Johnson & Johnson in the 1950s. Devro was
Bloomberg JPMA MEES <GO> spun out in a £108m MBO in 1991. Two years later, in 1993, the company listed on
J.P. Morgan Securities plc the London Stock Exchange. In 1996, Devro acquired the US company, Teepak
International, for $135m. Teepak had a controlling stake in a Czech business,
Price Performance Cutisin; Devro acquired the remaining interest in this business in 2004. Devro
380
opened a new facility in the Czech Republic in 2006. It announced a major capital
360 investment in its US business in 2013.
340
p
300 Devro continues to see good underlying growth in demand for edible collagen
280 casings. Some of Devro’s competitors are responding to the structural growth in
demand by increasing manufacturing capacity. In the short-term, we believe the
YTD 1m 3m 12m
Abs -10.7% -8.9% -14.7% -6.1%
increased capacity is likely to offset the underlying growth in demand, resulting in
limited price inflation during 2014. Raw material cost inflation appears to have
stabilised and we believe margins will rise once again in 2014.
Management Outlook
Chairman Steve Hannam
CEO Peter Page The short-term outlook will likely be dominated by the project to reduce
CFO Simon Webb manufacturing costs in the U.S. This project, which will involve capex of £40m, is
expected to have a five-year payback. Over the medium to long-term, we believe
Major Shareholders Devro is well-placed to benefit from increased demand for collagen casings with a
Schroders 10%
Marathon 7% high degree of traceability. Devro is experiencing particularly strong growth in
Blackrock 5% demand from Brazil, Russia and South East Asia. We continue to regard expansion
AXA 4% in China as a real opportunity.
Fidelity 4%
Overweight
Devro PLC (DVO.L;DVO LN)
Price Target (p) 357 Revenue FY (£ mn) 228 241 251 264
Price Target End Date 31-Dec-14 EBIT FY (£ mn) 43 43 42 46
52-week Range (p) 382-283 EBIT Margin FY 18.7% 17.9% 16.8% 17.3%
Market Cap (£ mn) 478.88 DPS (Net) FY (p) 8.0 8.5 8.9 9.1
Shares O/S (mn) 167 Adj P/E FY 13.8 14.4 14.4 13.3
EV/EBITDA (x) FY 9.6 9.2 9.3 8.7
80
(44-20) 7742-3681 02 January 2014
Devro
24%
Americas
47%
Collagen casings Asia-Pacific
Europe
29%
100%

300 280 30.0%

264 25.3%
241 251
250 220 228 25.0%
214
18.9% 18.2%
183 20.0% 16.9%
200 15.7% 16.2% 16.8%
150 15.0% 12.2%
8.4%
100 10.0%
50 5.0%
0 0.0%

40.0 36.9 0.8x 0.7x

0.6x
35.0 0.7x 0.6x
30.0 27.1 0.6x 0.5x
23.9 0.5x 0.4x
25.0 20.8 21.6 0.4x 0.4x
20.0 19.9
20.0 0.4x
0.3x 0.2x
15.0 13.5
0.2x
10.0
5.5 0.1x
5.0
0.0x
81
(44-20) 7742-3681 02 January 2014
Dixons Retail Plc

Neutral
Marylands Avenue, Hemel Hempstead, Herts, HP2 7TG. T: 01727 204 422
DXNS.L,DXNS LN Business activities
Price: 49p Dixons is the leading electricals retailer in the UK, the Nordics and Greece. In the
Price Target: 50p UK & Ireland the group operates the Currys and PC World brands and has around
550 stores (over 20% market share including multi-channel). Elkjop is the leading
brand in the Nordics and Dixons also runs stores under several other banners
United Kingdom
including El Giganten (319 stores in Northern Europe). In Greece Dixons operates
European Retail
AC under the Kotsovolos brand. Multi-channel represents 16% of group sales.
Georgina Johanan
(44-20) 7134-5791
georgina.s.johanan@jpmorgan.com
History
Bloomberg JPMA JOHANAN <GO> Dixons was founded by Charles Kalms in the 1930s and listed on the LSE in 1962
J.P. Morgan Securities plc with 16 stores and a large mail order business. Rapid expansion followed including
the 1984 acquisition of The Currys Group. In 2007 John Browett joined as CEO and
Price Performance soon after announced a strategy which included significant cost reductions and
55
service improvements. The 2009 downturn resulted in further pressure and in March
50
2009 a placing and rights issue was announced. This allowed the strategy to
45
continue. In 2012 John Browett was succeeded by Sebastian James. The new
p 40
35
management has disposed of the loss-making PIXmania and Southern European
30
businesses and progress in the UK has been helped by key competitor Comet going
25 into administration in November 2012.
YTD 1m 3m 12m Operational overview

Abs 75.0% 6.5% 8.5% 83.5%
The group remains committed to its multi-channel strategy in the UK which includes
ongoing cost savings and store rationalisation as well as improvements to service to
drive customer satisfaction and supplier support. Top line performance in the
Management Nordics remains robust, although the gross margin remains under pressure as
Chairman John Allan
CEO Sebastian James management continues to invest to drive growth and market share.
FD Humphrey Singer
IR David Lloyd-Seed Outlook
Major Shareholders With elimination of the non-core, loss making regions practically complete, the
AXA 11% group has a more streamlined and stable foundation from which to go forward and
UBS 10% management focus can now be on progress in the core regions. In our view there is
Schroders 8%
upside risk to earnings from an improving trajectory in the UK business both from
Old Mutual 8%
Capital 5% internal initiatives and a positive trend in the white goods market if encouraging
signs in the housing market continue.
Neutral
Dixons Retail Plc (DXNS.L;DXNS LN)
Company Data FYE Apr 2012A 2013A 2014E 2015E
Price Target (p) 50 Adj.EBITDA FY (£ mn) 265 299 330 347
Price Target End Date 1-Oct-14 Adj. EBITDA margin FY 3.3% 4.2% 4.4% 4.6%
52-week Range (p) 53-25 Pretax Profit Adjusted FY 82 146 155 172
Market Cap (£ bn) 1.76 (£ mn)
Shares O/S (mn) 3,609 Adj.P/E FY 34.9 18.9 17.6 15.4
EV/EBITDA (x) FY 6.8 5.5 5.1 4.5
FCFF Yield FY 10.2% 17.9% 7.7% 10.3%
82
(44-20) 7742-3681 02 January 2014
Dixons Retail Plc

12%
UK & Ireland
Retailing 51% Northern Europe
37%
Southern Europe
100%

£ in millions
8,600 3.0% 2.6% 2.8%

8,320 2.5%
8,400 8,180 8,154
8,200 2.5%
7,910
8,000
2.0% 1.6%
7,800 7,599 1.6% 1.5%
7,600 7,442 1.5%
7,400 7,170 1.0%
7,200 1.0%
7,000
6,800 0.5%
6,600
6,400 0.0%

Pence
3.5 3.2 2.0x 1.7x
3.0 2.8 1.5x

2.6
2.5 1.0x
0.5x 0.4x
2.0 0.5x
1.5 1.4 0.0x
1.5 1.4
0.0x (0.3)x
1.0 (0.5)x
1.0 (0.6)x
(0.5x)
0.5
(1.0x)
83
(44-20) 7742-3681 02 January 2014
Dunelm Group plc

Neutral
Watermead Business Park, Syston, Leicestershire, LE7 1PF T: 0116 264 4400
DNLM.L,DNLM LN Business activities
Price: 936p Dunelm is a UK out-of-town homewares retailer. It has a leading share of 6.9% of
Price Target: 1,000p the homewares market operating from 126 superstores and a transactional website.
United Kingdom
History
European Retail Dunelm was founded as a home textiles business by Bill and Jean Adderley in 1979,
Georgina Johanan
AC originally operating from a market stall. The first store was opened in 1984 and has
(44-20) 7134-5791
since experienced slow and steady expansion, first under Bill Adderley and from
georgina.s.johanan@jpmorgan.com 1996 under his son, Will Adderley. Dunelm listed on the LSE in October 2006. In
Bloomberg JPMA JOHANAN <GO> 2011 Will Adderley stepped down as CEO, although he continues to have a day-to-
J.P. Morgan Securities plc day role in the business as Executive Deputy Chairman. Nick Wharton has replaced
him as CEO.
Price Performance
1,100
1,000
Dunelm aims to offer choice and value with a wide range of products within any one
p
900
category with opening price point product being described as “grocer price, higher
800
quality”, through to “branded quality, lower price”. It currently retails from 126
700 superstores and a website. Dunelm sources product largely through UK agencies
600 with only around 14% to 16% of product being sourced directly. We estimate that the
margin differential is around 8-10 percentage points; management is currently
YTD 1m 3m 12m
Abs 37.3% 5.4% -6.0% 47.5%
targeting an increase in directly sourced product of around 2 percentage points pa.
Outlook
We believe Dunelm has the opportunity to grow market share with online growth and
Management
Chairman Geoff Chairman market consolidation being the key factors, particularly as the first TV national
CEO Nick Wharton advertising campaign starts to yield benefits. Homewares is a highly fragmented market.
FD David Stead
Major Shareholders
Dunelm has a significant roll-out opportunity with only 126 superstores at present and
Adderley family 54% hence is well placed to capture share from independents as it opens new space.
Blackrock 5% Currently only 4-5% of the group’s sales are generated online, well below players such
AXA 4% as John Lewis with c.25% of sales generated online. As the group steps up advertising
Kames Capital 4%
William Blair 3%
and makes further improvements to its delivery proposition we expect this to drive
growth. Furthermore, Dunelm’s LFL sales have historically been highly correlated to
the housing market. If government stimulus delivers a significant uplift in the level of
housing market transactions in 2014, Dunelm is likely to be a key beneficiary.
Neutral
Dunelm Group plc (DNLM.L;DNLM LN)
Company Data FYE Jun 2012A 2013E 2014E 2015E
Date Of Price 17-Dec-13 Revenue FY (£ mn) 604 677 746 815
Price Target (p) 1,000 Adjusted EBIT FY (£ mn) 95 107 121 135
Price Target End Date 30-Jun-14 Adjusted EBITDA FY (£ 114 128 144 160
52-week Range (p) 1,027-609 mn)
Market Cap (£ bn) 1.91 Pretax Profit Adjusted FY 96 108 121 135
Shares O/S (mn) 204 (£ mn)
DPS FY (p) 14.00 16.03 18.18 20.44
Adj.P/E FY 26.7 23.3 20.5 18.3
EV/EBITDA (x) FY 15.6 14.0 12.1 10.5
84
(44-20) 7742-3681 02 January 2014
Dunelm Group Plc

Retailing UK
100% 100%

900 815 18.0% 16.3% 16.6%

15.3% 15.5% 15.8% 15.9%
800 746 16.0%
677 12.7% 12.4%
700 604 14.0%
600 539 12.0%
493
500 424 10.0%
392
400 8.0%
300 6.0%
200 4.0%
100 2.0%
0 0.0%

60.0 0.2x 0.1x

51.2
50.0 45.6 0.0x (0.2)x
40.2
40.0 35.1 (0.2x) (0.4)x (0.4)x (0.4)x
29.3 (0.4x)
30.0 26.8 (0.6)x
(0.6)x
16.8 18.5 (0.6x)
20.0
(0.8x) (0.9)x
10.0
(1.0x)
0.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E
85
(44-20) 7742-3681 02 January 2014
Elementis
Overweight
10 Albemarle Street, London W1S 4HH. T: 020 7408 9300
ELM.L,ELM LN Business activities
Price: 259p Elementis produces specialty chemicals used in end-markets such as construction, oil
Price Target: 284p & gas, textiles and general industrial. Specifically, the company’s largest division,
Specialty Products, produces additives used for industrial/decorative coatings,
oilfields and personal care products. The second division, Chromium produces
United Kingdom
chromium-based chemicals used for metal tanning, pigments and timber treatment,
European Chemicals
AC for example. Geographically, North America and Europe account for 75% - 80% of
Martin Evans sales.
(44-20) 7134-5958
martin.evans@jpmorgan.com History
Bloomberg JPMA EVANS <GO>
Restructuring at Elementis continued in 2007 with a further major disposal (of
Pigments) to leave two remaining core areas, Specialties and Chromium. The
Price Performance
recovery dates from the involvement of Hanover Investors, a turnaround investment
specialist which took a 5.2% stake in 2005 (now disposed of). A strategic review of
270 the company’s operations was then initiated. At the end of October 2005, the first
phase of the strategic review was completed, aimed at further cost elimination and at
250
p addressing the problems in Chromium. March 2006 saw Phase II of the strategic
230 review announced.
Elementis’ niche product positioning, upstream integration and heavy US production
YTD 1m 3m 12m
Abs 9.7% 2.9% 0.7% 10.9%
exposure leave it well positioned in the context of overcapacity and competitive
disadvantages impacting the European Chemicals Sector. We also believe that direct
exposure selling into the shale drilling markets and the recovering US construction
market should continue to drive growth. At the latest set of earnings, the company
Management
confirmed a return to normal trading patterns following maintenance outages and
Chairman Bob Beeston
CEO David Sutro
customer destocking in H1.
CFO Brian Taylorson Outlook
The fundamentals of the business continue to support the buy case and Elementis is,
Major Shareholders at the time of writing, one of our few Overweight stocks in a sector suffering from
AXA 10% wider capacity issues and competitive disadvantages. Strong trading momentum and
Threadneedle 6% robust fundamentals (e.g. strong margins, net cash balance sheet, special dividend
Amerirprise Financial 5% program, high return on capital etc) continue to support the buy case.
Schroders 5%
Blackrock 4%
Overweight
Elementis (ELM.L;ELM LN)
Price (p) 259 Adj. EPS FY ($) 0.21 0.24 0.22 0.25 0.28
Date Of Price 17 Dec 13 Revenue FY ($ mn) 761 757 781 820 865
Price Target (p) 284 Adj.EBITDA FY ($ mn) 157 165 171 188 202
Price Target End Date 31-Dec-14 Adj.EBIT FY ($ mn) 165 144 146 162 175
52-week Range (p) 281-206 EV/EBITDA (x) FY 8.9 9.4 9.6 8.6 7.9
Market Cap (£ mn) 1,151.70 Adj P/E FY 19.8 17.8 18.8 16.7 14.9
Shares O/S (mn) 445 FCF Yield FY 6.8% 3.8% 3.4% 4.0% 4.8%
86
(44-20) 7742-3681 02 January 2014
Elementis
9% 9%
30% 30% Europe

Chromium
24% North America
Specialities
Asia
Surfactants RoW
61%
37%

$ in millions £ in millions
1,000 25.0%
865 20.3%
900 781 820 19.0% 18.7% 19.8%
742 761 757 18.0%
800 697 20.0%
700 14.7%
564
600 15.0% 13.0%
500
400 10.0%
6.4%
300
200 5.0%
100
0 0.0%

30.0 28.3 2.0x 1.9x

25.4
25.0 23.7 1.5x
22.5
21.3
1.0x 0.8x
20.0 0.6x
15.4
15.0 0.5x
(0.2)x (0.3)x (0.2)x
8.3 0.0x (0.3)x (0.4)x
10.0
4.3 (0.5x)
5.0
(1.0x)
87
(44-20) 7742-3681 02 January 2014
EnQuest
Overweight
5th Floor, Cunard House, 15 Regent Street, London, SW1Y 4LR. T: 020 7925 4900
ENQ.L,ENQ LN Business activities
Price: 136p EnQuest is a production focused E&P company with its focus in the UK North Sea.
Price Target: 185p The company has built a strategy focusing on producing hubs in the North Sea,
typically on legacy assets, where EnQuest’s operational focus targets production
enhancement and lengthening economic life. This has been expanded to include near
United Kingdom
field appraisal and exploration aimed to boost the reserve base around its hubs – further
European Oil & Gas
AC enhancing the economic life of infrastructure. During 2013, EnQuest began to expand
James Thompson its strategy internationally, focusing on mature hydrocarbon provinces.
(44-20) 7134-5942
james.a.thompson1@jpmorgan.com History
Bloomberg JPMA THOMPSON <GO>
EnQuest was founded in 2010, through a combination of Petrofac’s and Lundin’s
North Sea assets. The independent entity focussed on managing this production base
Price Performance
which no longer fitted into the portfolio of the parent companies. In its relatively
145 short life, it has shown a top quartile ability to operate mature assets. It has also been
140 able to access a number of other assets, notably Kraken and Alma/Galia, which are
135 both new projects and provide the core of EnQuest’s near-term production growth.
p 130
120
In early 2013 EnQuest’s assets were impacted by unplanned third party shutdowns. This
115
had an impact on production, but this has since been recovered by an excellent
YTD 1m 3m 12m performance on the remaining assets, particularly on Thistle. The installation of new
Abs 12.6% 1.3% 3.9% 17.9% power on Thistle has returned field production to levels not seen since the late 1990's.
Unfortunately the Alma/ Galia development has been delayed into 2014 due to weather
Management related issues and also due to some additional commissioning and finishing works.
Chairman Dr. James Buckee EnQuest reached a key milestone in late 2013 with the sanction of the Kraken offshore
CEO Amjad Bseisu development, one of the few heavy oil developments in the North Sea.
CFO Jonathan Swinney
IR Michael Waring
Outlook
Major Shareholders
In 2014, we focus on the start up of Alma/Galia, which should come on stream
Baillie Gifford 9%
Double A 9% around the mid-point in the year. In addition we look to the advancement of both the
Swedbank Robur 7% Kraken development (focusing on costs) and also on the potential for Scolty and
Montanaro AM 4% Crathes fields to move towards submission of a development plan. Drilling results on
Schroders 4%
Cairngorm in the North Sea will be a near term focus (well currently drilling), whilst
the exploration drilling in Malaysia in H2 2014 offers exploration upside potential
not previously seen in EnQuest portfolio of assets.
Overweight
EnQuest PLC (ENQ.L;ENQ LN)
Price (p) 136 Revenue FY ($ mn) 890 894 1,227 1,360
Date Of Price 17 Dec 13 Net Profit FY ($ mn) 362 211 212 216
Price Target (p) 185 Adj. EPS FY ($) 0.46 0.28 0.28 0.28
Price Target End Date 31-Dec-14 P/E (x) FY 4.8 8.1 8.0 7.8
52-week Range (p) 146-115 Debt adjusted Cashflow FY 580 615 848 896
Market Cap (£ bn) 1.04 ($ mn)
Shares O/S (mn) 765 EV/DACF (x) FY 2.8 3.4 2.4 2.0
Net debt / (cash) FY ($ mn) (90) 363 296 73
Total Production (kboepd) 23 23 32 38
FY
88
(44-20) 7742-3681 02 January 2014
EnQuest
2%
UK
UK
Tunisia
98% 100%

$ in millions
1,600 50.0% 47.5%

1,360 45.0% 40.3% 41.5% 42.4%
1,400 1,299 39.2%
1,227
40.0%
1,200 31.4%
936 35.0%
1,000 890 894 30.0%
800 25.0%
583
600 20.0%
15.0% 11.3%
400 234 7.1%
10.0%
200 5.0%
0 0.0%
FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E

180 70%
160 60% 2.5x 2.2x
140 50%
2.0x
120 40%
30% 1.5x
100
20% 1.0x
80 0.6x
10% 0.3x
60 0% 0.5x 0.1x
40 (0.2)x (0.1)x
-10% 0.0x (0.3)x
20 -20% (0.6)x
0 -30% (0.5x)
(1.0x)
Share price premium/(discount) to NAV RHA Source: J.P. Morgan estimates, Company data.
89
(44-20) 7742-3681 02 January 2014
Entertainment One
Overweight
120 New Cavendish St, London, W1W 6XX. T: 0207 907 3773
ETO.L,ETO LN Business activities
Price: 257p eOne acquires, produces and distributes film and TV content globally. The company
Price Target: 280p generates revenues from new investments as well as its library of rights.
History
United Kingdom
European Media & Internet eOne was established in 1973 as “Records on Wheels” originally focusing on music
AC retail sales and, subsequently, music distribution to Canadian Retailers. In the 1980s,
Filippo Pietro Lo Franco
the group expanded into video distribution and continued to grow its business with
(44-20) 7134-9779
filippo.p.lofranco@jpmorgan.com
acquisitions including cdplus.com, which extended its CD and DVD business to
Bloomberg JPMA LOFRANCO <GO> Internet Retailers. The company was listed on the Toronto Stock Exchange between
J.P. Morgan Securities plc 2003 and 2007 as Entertainment One Income Fund, before trading on AIM in March
2007 post the acquisition of the assets of Entertainment One Income Fund. Since
Price Performance then, eOne has continued to grow the business via a number of acquisitions
260 expanding the Group's international footprint and its business model. eOne was
240
included in the UK FTSE 250 Index Series in September 2013.
220
p 200
180
160 eOne reports two divisions Film (81% of FY14E revenues) and TV (19% of FY14E
140 revenues):
YTD 1m 3m 12m
 Film: eOne is the largest independent global distributor of films in the industry.
Abs 49.9% 5.8% 15.2% 58.4% The company acquires and exploits rights across all media platforms in the UK,
Canada, US, Benelux, Spain and Australia. It also owns a home entertainment
distribution business in North America where it distributes its own content, as
Management well as third party content.
Chairman James Corsellis  Television: The company produces programming in Canada and the UK that is
CEO Darren Throop
CFO Giles Willits broadcast domestically and internationally. In the UK, the company has
successful licensed and merchandised key brands, including Peppa Pig.
Television also includes the group’s US based-music label.
Major Shareholders
Marwyn Value 27% Outlook
M&G Investment 13%
Capital Group 7%
At the H1 results, on 19 November 2013, management noted the outlook for the
Schroders 5% remainder of the financial year was positive. Management expects another strong
Fidelity 4% slate of releases in the Film Division and noted that the TV Division was on track to
deliver a yoy increase in the volume of programming. In its release, the company
stated: “The directors look forward to delivering profit growth in line with
management expectations”. We remain positive and continue to believe that eOne
remains well placed to take advantage of the accelerating digital revolution as we see
a continued shift in value from distribution/networks to content/data analysis.
Overweight
Entertainment One Ltd. (ETO.L;ETO LN)
Price Target (p) 280 EBITDA FY (£ mn) 53 63 89 95 101
Price Target End Date 31-Dec-14 EBITDA Margin FY 10.5% 9.9% 10.6% 11.0% 11.3%
52-week Range (p) 260-159 DPS Adjusted FY (p) 0.00 0.00 0.98 2.19 3.57
Market Cap (£ bn) 0.74 Net Debt/EBITDA FY 1.7 2.3 1.9 1.5 1.0
Net Profit FY (£ mn) 16 (1) 24 47 53
90
(44-20) 7742-3681 02 January 2014
Entertainment One
Figure 240: Revenue by business division (2014E) Figure 241: Revenue by geography (2013A)
7%
19%
11%
Canada
38% UK
Film TV US
19%
Rest of Europe
Other
81%
25%
Source: J.P. Morgan estimates, Company data. Source: Company data.
Figure 242: Revenue Figure 243: Underlying EBITDA margin

1,000 901 11.5% 11.3%

838 865
900 11.0%
800 11.0%
700 629 10.6%
10.5%
600 503 10.5%
500 9.9%
400 10.0%
300
200 9.5%
100
0 9.0%

25.0 23.8 2.5x 2.3x

21.9
19.6 1.9x
20.0 2.0x 1.7x
15.9 1.5x
15.4
15.0 1.5x
1.0x
1.0x
10.0
0.5x
5.0
0.0x
0.0 FY12 FY13 FY14E FY15E FY16E
91
(44-20) 7742-3681 02 January 2014
Essar Energy
Neutral
Lansdowne House, 57 Berkeley Square, London W1J 6ER. T: 0207 408 8700
ESSR.L,ESSR LN Business activities
Price: 71p Essar Energy combines a small upstream business, a world scale refinery in India, a
Price Target: 125p refinery in the UK, a pan-Indian fuels retailing network and a portfolio of very
efficient gas and coal fired power stations in India.
United Kingdom
European Oil & Gas
History
Nitin Sharma
AC Essar Energy plc was formed as a combination of oil & gas and power assets of
(44-20) 7134-5947
Essar Group. These assets were previously held in two separate Indian companies –
nitin.sharma@jpmorgan.com Essar Oil and Essar Power. Essar Group is one of the largest industrial
Bloomberg JPMA SHARMA1 <GO> conglomerates in India – the group’s interests (in addition to power and oil & gas)
J.P. Morgan Securities plc range across steel, telecommunications, construction and shipping.
Price Performance
160
The performance of Essar Energy's R&M business in India and UK is linked to the
140
outlook for the refining margins in the respective country - buoyant outlook for
p
120
product demand in India (vs UK) is an obvious plus for the performance of the
100
Vadinar refinery. Essar Energy's Power business historically relied on ROE (Return
80 on Equity) projects where fuel cost was a pass through, but the growth projects
60 coming on-stream in recent years have long term PPA (power supply agreements)
with the respective state electricity boards.
YTD 1m 3m 12m
Abs -41.9% -32.8% -46.6% -40.4%
Outlook
Essar has made good progress towards reducing its funding costs by converting
Management c.$870m of Rupee debt to lower cost $ loans and raising $452m debt in the Power
Chairman Prashant Ruia business to repay its existing debt and extending its maturity. Stanlow’s performance
CEO Sushil Maroo
CFO Deepak Maheshwari
hinges on the continued delivery of its margin enhancement plans in the face of a
IR Mark Lidiard structurally weak European refining environment. But its key growth driver, the
Power business, faces regulatory bottlenecks in the delivery of its growth projects –
Major Shareholders and has a history of timeline delays on those projects.
Essar Global Fund 77%
Capital Grou 3%
Lloyds Banking Group 3%
Standard Life Investments 3%
Henderson 2%
Neutral
Essar Energy Plc (ESSR.L;ESSR LN)
Price (p) 71 Adj.EPS FY ($) 0.10 0.01 0.01 0.19 0.31
Date Of Price 17 Dec 13 Bloomberg EPS FY ($) 0.09 0.07 0.06 0.22 -
Price Target End Date 31-Dec-14 EV/DACF FY 9.1 NM 7.4 7.9 6.5
52-week Range (p) 155-66 Net debt / (cash) FY ($ mn) 8,011 8,992 8,612 8,543 8,227
Market Cap (£ bn) 0.92 Net Debt/Equity FY 219.7% 273.3% 317.6% 286.2% 240.6%
Shares O/S (mn) 1,303 Adjusted EBITDA FY ($ 737 1,336 1,150 1,463 1,687
mn)
EBIT FY ($ mn) 533 1,058 831 1,104 1,281
92
(44-20) 7742-3681 02 January 2014
Essar Energy
17% 21%
0% R&M India
R&M UK India
23% E&P
60% UK
Power
79%
Figure 248: EBITDA Figure 249: Adjusted EPS

$ in millions $ cents
1,800 1,687 35.0

30.7
1,600 1,463 30.0
1,336
1,400
1,150 25.0
1,200
19.1
1,000 20.0 18.4
697 737
800 625 15.0
526 11.6
600 9.9 9.9
10.0
400
200 5.0 1.4 0.8
0 0.0
Figure 250: ND/EBITDA

£ in millions
12.0x 10.9x
9.2x
10.0x
7.5x
8.0x 6.7x
5.8x 5.6x 5.8x
6.0x 4.9x
4.0x
2.0x
0.0x
93
(44-20) 7742-3681 02 January 2014
Essentra
Neutral
201-249 Avebury Bvd., Milton Keynes, MK9 1AU. T: 01908 359 100
ESNT.L,ESNT LN Business activities
Price: 813p Essentra is a leading international supplier of speciality plastic, fibre and foam
Price Target: 847p products.
United Kingdom
History
UK Small and Mid Caps Essentra (formerly Filtrona) commenced its manufacturing operations in the mid-
Victoria Prior, CFA
AC 1940s through the establishment of a cigarette filter production facility in the UK.
(44-20) 7134-5912
Over the following 50 years, it built a global cigarette filter and writing instrument
victoria.prior@jpmorgan.com reservoir business, and began its move into Plastic Technologies with the acquisition
Bloomberg JPMA PRIOR <GO> of a number of speciality businesses. Essentra was formerly a business area of Bunzl
J.P. Morgan Securities plc plc and demerged in 2005. Colin Day was appointed CEO in April 2011 and
Matthew Gregory was appointed CFO in September 2012.
Price Performance
800
Essentra has recently restructured its operations into four principal divisions;
p
700 Component & Protection Solutions (31% revenue) is a leading distributor of plastic
600
injection/vinyl dip moulded, and metal items to a wide range of industrial customers.
Porous Technologies (13%) designs and manufactures components that are used in
500 writing instruments, printer cartridges, healthcare and household markets that often
control the flow of liquids. Packaging & Securing Solutions (17%) manufactures and
YTD 1m 3m 12m
Abs 45.2% 4.8% 4.0% 44.8%
supplies a range of cartons, tapes, leaflets, foils and labels into various end markets.
Filter Products (35%) is the only global independent cigarette filter supplier.
Management Outlook
Chairman Jeff Harris
Essentra should continue to perform well in 2014 with growth seen in all of its
CEO Colin Day
CFO Matthew Gregory businesses in 2013, particularly if the European economic recovery is sustained. We
anticipate that the group will continue to focus on acquisitions to drive earnings on
Major Shareholders top of organic growth with c. £200m of available facilities at the end of FY13E. We
Blackrock 16%
estimate that c. £100m of acquisition spend could add c. 4% to EPS in a full year.
FIL 9%
AXA 8% Management’s ‘Vision 2015’ targets are 100% profit conversion to cash, 60-80bps
Oppenheimer 6% improvement in the group’s gross margin of which c. 30-40bps drops through to the
L&G 4% operating margin, LFL revenue growth in mid-high single digits and a progressive
dividend.
Neutral
Essentra (ESNT.L;ESNT LN)
Price Target (p) 847 Adjusted EBIT FY (£ mn) 85 105 132 151 161
Market Cap (£ mn) 1,698.13 (£ mn)
EV/EBITDA (x) FY 16.5 13.7 11.0 9.5 8.7
Adj. P/E FY 32.4 25.6 21.2 18.6 17.3
Net Yield FY 1.3% 1.5% 1.8% 2.0% 2.3%
94
(44-20) 7742-3681 02 January 2014
Essentra
5%
23%
30% Protection & Finishing Products Europe
Porous Technologies 44%

39% North America
Coated & Security Products
Filter Products
Asia
13% Other 33%
13%

£ in millions 18.0% 16.2% 16.6% 16.8%
15.3% 15.6% 15.9%
1,200 16.0%
14.0% 12.7%
959
1,000 908 10.8%
813 12.0%
800 663 10.0%
541 8.0%
600 526 490
444 6.0%
400 4.0%
2.0%
200
0.0%
0 FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E Source: J.P. Morgan estimates, Company data.

Pence 3.0x
50.0 46.9 2.4x
43.7 2.5x
45.0
38.2
40.0 2.0x
35.0 31.7 1.4x 1.4x 1.3x
1.5x
30.0 25.1 1.0x 1.0x
25.0 21.0 1.0x 0.7x
20.0 16.2 14.8 0.4x
0.5x
15.0
10.0 0.0x
0.0
95
(44-20) 7742-3681 02 January 2014
esure
Overweight
The Observatory, Castlefield Road, Reigate, Surrey, RH2 0SG. T: 01737 222 222
ESUR.L,ESUR LN Business activities
Price: 240p esure is one of the leading direct Motor and Home insurers in the UK. esure’s two
Price Target: 300p main brands are Sheila’s Wheels and esure. Distribution is largely driven by the
aggregator channel and the Co. owns a 50% stake in GoCompare. esure has a c.5%
market share in UK motor and 1% in home insurance.
United Kingdom
European Insurance
AC History
Andreas van Embden
(44-20) 7134-4574
esure was founded by Peter Wood, the Group’s Chairman, in 2000 with backing
andreas.vanembden@jpmorgan.com from Halifax (later Lloyd’s Banking Group) and led the management buyout in 2010.
Bloomberg JPMA VANEMBDEN <GO> Before esure, Peter Wood set up Direct Line in 1985 a leading direct writer in the
J.P. Morgan Securities plc UK and Spain. esure listed on the London Stock Exchange in March 2013.
Price Performance
320
UK motor rates are under pressure but we expect esure’s policy growth to continue at
a low to mid single digit pace as the company benefits from its Sheila’s Wheels
p
280 portfolio and continues with a selective growth strategy with the esure book. Overall,
240
underwriting margins will provide an offset to top line pressure thanks to a
combination of a) margin expansion in the SW book, b) declines in average claims
200 costs, and c) significant reserve releases. Ancillary revenues will remain an important
Mar-13 Jun-13 Sep-13 Dec-13
driver of profit growth in 2014/15e albeit there is some pressure from regulatory
YTD 1m 3m 12m
Abs -17.2% 3.0% 2.6% -17.2%
reforms. In addition, the group is expected to expand its Home and broker business
over time.
Management
Chairman Peter Wood Outlook
CEO Stuart Vann UK motor rates have overshot the potential benefits coming from regulatory reforms
CFO Darren Ogden in the UK but it is still too early to suggest rates have bottomed, in our view. esure
IR Nick Wrighton
signaled at the Q3 IMS that 2013 earnings are set to meet consensus expectations and
Major Shareholders on track to reach a full year £130m trading profit and a net result of £91m-£93m.
Peter Wood 31% Revenue trends in Q3 are broadly in line with expectations, offering reassurance that
Blackrock 12% the change in underwriting strategy is not shrinking the book. Overall, the company.
FIL 7%
Standard Life 7%
is well positioned to benefit from an improvement in UK motor rates once the cycle
Schroders 5% turns.
Overweight
esure Group (ESUR.L;ESUR LN)
Date Of Price 17 Dec 13 Adjusted P/E FY 21.7 10.7 10.7 9.3 8.4
Price Target (p) 300 Dividend (net) FY (p) 0.00 0.00 14.61 19.95 23.27
Price Target End Date 30-Jun-14 Gross Yield FY 0.0% 0.0% 6.1% 8.3% 9.7%
52-week Range (p) 337-212 BV/Sh FY (£) 0.37 0.59 0.66 0.74 0.83
Market Cap (£ bn) 0.95 ROE FY 35.5% 47.1% 37.0% 36.9% 36.7%
Shares O/S (mn) 394 P/BV (x) FY 6.5 4.1 3.7 3.2 2.9
96
(44-20) 7742-3681 02 January 2014
esure
18%
Motor Home UK
82%
100%
Figure 259: Net Premium Income Figure 260: PBT margin

£ in millions
600 35.0%
522 28.0% 29.0%
491 30.0% 26.5% 27.2%
500 448 448
423 423 25.0%
400 20.0%
14.1%
300 15.0%
10.0%
200
5.0% (0.5)%
100 0.0%
0 (5.0)%
FY10 FY11 FY12 FY13E FY14E FY15E FY10 FY11 FY12 FY13E FY14E FY15E

Pence
90.0 140.0%
81.2 118.4%
80.0 72.1 120.0%
70.0 96.5% 96.7% 93.1% 92.9% 92.0%
62.4 100.0%
60.0 54.4
50.0 80.0%
40.0 60.0%
31.6
30.0 40.0%
18.4
20.0
20.0%
10.0
0.0 0.0%
97
(44-20) 7742-3681 02 January 2014
F&C Asset Management

Neutral
Exchange House, Primrose Street, London, EC2A 2NY. T: 0207 628 8000
FCAM.L,FCAM LN Business activities
Price: 91p F&C is a diversified, multi-specialist asset manager where each investment team
Price Target: 118p operates with a high degree of autonomy in developing its investment approach. The
group manages assets in all asset classes (equities, bonds, property and alternatives)
and for a variety of clients (life companies, insurance companies, retail, investment
United Kingdom
trusts).
AC
Rae Maile
History
(44-20) 7134-9738
rae.maile@jpmorgan.com F&C traces its origins to the launch of the Foreign & Colonial Investment Trust in
Bloomberg JPMA MAILE <GO> 1868. In 2004 F&C Management merged with ISIS Asset Management, which itself
J.P. Morgan Securities plc had been created by the merger of Friends Provident's asset management business
with Ivory & Sime. This merger created F&C Asset Management in its current form.
Price Performance In 2009 F&C was demerged from Friends Provident.
115
110
105
p 100 As at 30 September 2013 the company managed assets worth £90.1bn. By product /
95 client type this comprised Strategic Partners (57%), Wholesale (1%), Retail (6%) and
90 Third-Party Institutional (28%). By asset class, the mix was fixed interest (55%),
85 equities (30%), property (8%), liquidity (6%) and other alternative investments (1%).
YTD 1m 3m 12m
Abs -10.3% -3.7% -7.6% -9.5%
Outlook
After a period of corporate uncertainty which lasted a number of years, the company
Management has now set out its medium-term strategic plan to grow and develop its business
Chairman Kieran Poynter through a focus on core strengths, including liability-driven investments; multi-
CEO Richard Wilson manager products; multi-asset products; and certain specialist areas of expertise
CFO David Logan within equities and in direct property. By distribution channel the company is
Major Shareholders exploring opportunities in the UK retail market, investment trusts, and the direct-to-
Fidelity 18% consumer market. The company faces known headwinds from the notified and
Aviva 12% potential loss of business from Strategic Partners, but has also outlined its intention
Standard Life 8% to manage its cost base to mitigate the lost revenues’ impact on profits.
Threadneedle 7%
Aberforth 4%
Neutral
F&C Asset Management PLC (FCAM.L;FCAM LN)
Market Cap (£ bn) 0.53 Revenue FY (£ mn) 244 251 244 254
Shares O/S (mn) - Pretax Profit Adjusted FY (£mn) 52 74 75 81
Earnings Before Tax FY (£mn) -2 31 30 36
98
(44-20) 7742-3681 02 January 2014
F&C Asset Management

4% 7%
19% Wholesale
30%
UK
Retail 41%
Investment Trusts Continental Europe
16% Third Party Institutional Rest of World

52%
Strategic Partners
31%

280 40.0% 37.1% 37.0% 37.6%

267
270 35.0%
29.2%
254 26.6% 27.6%
260 30.0%
251 24.4%
250 243 244 244 25.0%
240 20.0%
230 225 15.0%
220 10.0%
210 5.0%
200 0.0%

12.0 0.4x 0.2x

10.4
0.2x
10.0 9.1 8.9 0.0x (0.2)x
(0.2x) (0.5)x
8.0 7.1 (0.4x)
5.8 5.7 5.5 (0.6x)
6.0
(0.8x)
(1.1)x
4.0 (1.0x) (1.2)x
(1.4)x (1.3)x
(1.2x)
2.0 (1.4x)
(1.6x)
99
(44-20) 7742-3681 02 January 2014
Fenner
Neutral
Ferriby Road, Hessle, East Yorkshire, HU13 0PW. T: 01482 626 500
FENR.L,FENR LN Business activities
Price: 437p The group has two divisions. Engineered Conveyor Solutions (ECS, 68% of sales) is
Price Target: 405p a world leader in the manufacture, supply and service of conveyor belting, primarily
for the mining industry. Advanced Engineered Products (AEP, 32% of sales)
manufactures and supplies a broad range of products into selective niches.
United Kingdom
AC History
Andrew J Wilson
(44-20) 7742-6332
The Group was founded in 1861. By1921 the group had started to develop woven
andrew.j.wilson@jpmorgan.com textile belting and by 1937 the reinforced V-belts used in power transmission
Bloomberg JPMA AWILSON <GO> through to the 1990s. The group diversified its product base until the 1990s where
J.P. Morgan Securities plc restructuring, two rights issues and a number of acquisitions and disposals led to a
more focused group concentrating on reinforced polymers. Between 2006 and 2010
Price Performance the group spent c.£240m on an investment programme to transform the business and
460
position it for sustainable through-cycle growth and stronger returns.
420
p 380
The ECS division provides conveyor belting and associated service primarily to the
340
mining majors and a number of players in the US Coal market. Products are sold on a
300 total cost of ownership basis - c.85% of sales are opex related (including replacement
belting and service) - with demand driven by production volumes and customer need
YTD 1m 3m 12m
Abs 4.1% -2.8% 7.9% 12.4%
to avoid downtime. The differentiated business model means the ECS business is less
dependent on capex budgets than many mining peers. The AEP division provides
solutions to customer problems in mostly attractive niches. There are often few
competitors and customers are prepared to pay a premium for the product. As a
Management result, margins are high, though demand has proven to be cyclical.
Chairman Mark Abrahams
CEO Nick Hobson
CFO Richard Perry Outlook
IR Aidan Wallis Following a difficult FY13 with weakness in key ECS markets (Australian mining
Major Shareholders
and US Coal) and destocking across a number of AEP product lines, management
Standard Life 11% believe mining markets have stabilised and are confident the group will return to
Lloyds 6% growth in FY14. We remain cautious given the headwinds we continue to see across
Aberdeen 5% mining markets and the negative commentary of peers (though we do acknowledge
Scottish Widows 5%
Threadneedle 5% Fenner's differentiated opex-driven model). We forecast only modest yoy
progression in FY14.
Neutral
Fenner Plc (FENR.L;FENR LN)
Company Data FYE Aug 2011A 2012A 2013A 2014E
Price Target End Date 31-Dec-14 EBIT Margin FY 12.7% 14.3% 12.4% 12.7%
Market Cap (£ mn) 844.25 Adj. P/E FY 15.5 12.1 14.5 14.3
Shares O/S (mn) 193 EV/Operating Profit FY 10.9 8.5 9.9 9.5
Div Yield FY 1.8% 2.4% 2.6% 2.7%
100
(44-20) 7742-3681 02 January 2014
Fenner
8%
32%
Engineered Conveyor
Solutions Americas EMEA
30% 46%
Advanced Engineered
68% Products Asia Pacific UK
Source: J.P. Morgan estimates, Company data. 16%


1,000 16.0% 14.3%

900 831 821 832 858 13.0% 13.1%
811 14.0% 12.7% 12.4% 12.7%
800 718 11.3%
12.0% 10.3%
700
600 553 10.0% 8.3%
499
500 438 8.0%
400 6.0%
300
4.0%
200
100 2.0%
0 0.0%

40.0 35.9 3.5x

2.9x
35.0 32.0 33.3
30.5 3.0x
30.1
30.0 27.9
2.5x
25.0 2.0x 1.6x
1.5x
20.0 17.8
15.5 1.5x
0.9x 1.0x
15.0 0.7x 0.8x
1.0x 0.5x
10.0 0.2x
0.5x
5.0 2.8
0.0x
101
(44-20) 7742-3681 02 January 2014
Ferrexpo Plc
Underweight
2-4 King Street, London SW1Y 6QL. T: 0207 389 8300
FXPO.L,FXPO LN Business activities
Price: 184p Ferrexpo is a leading European iron ore pellet producer operating two open pit mines
Price Target: 150p in the Ukraine, which is headquartered in Switzerland and listed on the Main Market
of the London Stock Exchange and is a member of the FTSE 250 index. The
company has one of the largest iron ore resources in the world (4.7Bnt JORC) and
United Kingdom
plans to produce 12Mtpa by FY14 and up to 22Mtpa by FY17.
European Metals, Mining & Steel
AC
Ben Defay
History
(44-20) 7134-5936
ben.defay@jpmorgan.com The construction of the Poltava complex took place in 1960, mining started in 1963
Bloomberg JPMA DEFAY <GO> and the first iron ore concentrate was produced in 1970. In 1977, Poltava began
J.P. Morgan Securities plc producing iron ore pellets from concentrate. In 1995 the State Property Fund of
Ukraine privatised Poltava and in 1996, 42% of the company’s shares were sold to a
Price Performance group of three private investors, including Kosyantin Zhevago, who subsequently
300
increased his stake to 85.8% via secondary market purchases and buying out his
250 business partners. FXPO was the first Ukrainian company to be listed on the main
market of the London Stock Exchange following its IPO on 15 June 2007.
p 200
150
100 We believe the group is on track to produce 12Mt of pellets in FY14E on the back of
an increase in production from the Yeristovo mine and we forecast the average Fe
YTD 1m 3m 12m
Abs -31.5% 0.7% 0.2% -24.3%
content in pellets will increase to 65% at the end of FY15E compared to ~63.5% in
FY13E. We also expect the company to increase its share of shipments to “growth
markets” in Asia on the back of a reduction in freight costs.
Management Outlook
Chairman Michael Abrahams
CEO Kostyantin Zhevago We believe FXPO is on track to reach our FY13 cash cost estimate of $60/t (~$60.6/t
CFO Chris Mawe in 9M FY13) and we forecast a ~5% decline in FY14E. FXPO retains a solid balance
IR Ingrid McMahon sheet despite a ~60% increase in net debt to $677m in 9M FY13E with FY13E year-
Major Shareholders
end gearing of 29% and ND/EBITDA of 1.5x, but we estimate net debt will rise to
Fevamotinico/K. Zhevago 51% $788m at FY15E year-end (gearing of 30% and ND/EBITDA of 2.9x). While FXPO
Wigmore Street Inv./BXR 25% trades at an appealing 3.8x/3.5x spot FY14/15E earnings, we are UW primarily on
JPM AM 6% valuation grounds, with a P/NPV of 1.48x reflecting a conservative $80/t (CFR
China) long-term iron ore price assumption.
Underweight
Ferrexpo Plc (FXPO.L;FXPO LN)
Price (p) 184 Adj. EPS FY ($) 0.36 0.37 0.40 0.16
Price Target (p) 150 EBITDA FY ($ mn) 400 448 483 322
Price Target End Date 31-Dec-14 Adj EBITDA Margin FY 28.1% 29.2% 29.0% 21.3%
Market Cap (£ mn) 1,076.51 EV/EBITDA (x) FY 4.8 5.0 4.9 7.3
Shares O/S (mn) 585 Dividend Yield FY 4.4% 2.2% 2.2% 2.2%
FCF FY ($ mn) (79) (104) 54 70
102
(44-20) 7742-3681 02 January 2014
Ferrexpo Plc
10%
China
40%
25% Austria
Iron ore
Other Europe
Other Asia
100% 25%

$ in millions
2,000 1,788 50.0% 45.1% 45.1% 44.7%

1,800 1,665 45.0%
1,536 1,514 1,449
1,600 1,424 40.0%
1,400 1,295 35.0% 29.8%
1,117 28.1% 29.2% 29.0%
1,200 30.0%
1,000 25.0% 20.6% 21.3%
800 649 20.0%
600 15.0%
400 10.0%
200 5.0%
0 0.0%

$ cents
120.0 2.5x 2.2x

97.3 1.9x
100.0 2.0x
1.5x 1.5x
80.0 74.3
1.5x
59.1 1.1x 1.1x
60.0
40.1 1.0x
36.1 37.1
40.0 29.9 0.4x
0.5x 0.2x
16.5 0.1x
20.0 12.6
0.0x
103
(44-20) 7742-3681 02 January 2014
FirstGroup
Overweight
50 Eastbourne Terrace, London, W2 6LG. T: 020 7436 3337
FGP.L,FGP LN Business activities
Price: 119p FirstGroup is an operator of inter-city coach (UK Bus and Greyhound), intra-city
Price Target: 150p transit (First Transit), school bus (First Student) and rail services with a presence
spanning the UK and North America (25%, 12%, 22% and 41% of group revenue,
respectively). The group employs about 120,000 people and generates c.£7bn of
United Kingdom
revenue annually.
Logistics
Christopher G Combe
AC History
(44-20) 7134-5917 FirstGroup developed from a small, municipally owned bus company in Aberdeen,
christopher.g.combe@jpmorgan.com Scotland, which expanded significantly into the inter-city, rail and student markets
Bloomberg JPMA COMBE <GO> over a 20-year period. This past summer, FirstGroup completed a rights issue which
J.P. Morgan Securities plc netted £585m of proceeds in order to secure its investment grade debt rating as well
as support a multi-year investment/restructuring effort targeting better returns.
Price Performance
240
200
The current focus is on a four-year profit improvement program rooted in lifting the
p 160 sub-optimal returns in UK Bus and the First Student while attaining/retaining UK
Rail business, maintaining strong First Transit performance and recovering/growing
120
Greyhound (North American inter-city coach). These efforts target 10-12% group
80 ROCE (FY13a 8%) supported by £1.6bn of capex over four years.
YTD 1m 3m 12m
Abs -43.6% 1.1% -2.5% -37.8% Outlook
Our DCF-based price target of 150p implies c.30% upside potential and discounts
attainment of c.40% of targeted profitability gains over the targeted four-year
Management restructuring period. These largely hinge on better commercial positioning of UK
Chairman Martin Gilbert Bus and greater contracting discipline and efficiency gains for First Student. Our
CEO Tim O’Toole FY14 group EBIT estimate is 1% below Bloomberg consensus while the shares
CFO Chris Surch currently trade on 12.1x calendar-year 2014E ex-Rail EV/EBIT or a c.10% discount
IR Faisal Tabbah
to UK Bus & Rail peers.
Major Shareholders
Majedie 9%
Orbis 6%
J.P. Morgan 5%
BNY Mellon 5%
Overweight
FirstGroup plc (FGP.L;FGP LN)
Price (p) 119 Analyst Adjusted Diluted 25.06 16.87 9.91 10.65
Date Of Price 17 Dec 13 EPS FY (p)
Price Target (p) 150 Revenue FY (£ mn) 6,679 6,901 6,955 6,751
Price Target End Date 31-Mar-14 EBITDA FY (£ mn) 743 667 639 670
52-week Range (p) 183-90 EBIT FY (£ mn) 429 335 304 327
Market Cap (£ bn) 1.43 Bloomberg EPS FY (p) 32.10 22.60 9.60 11.20
Shares O/S (mn) 1,205 Div Yield FY 12.5% 16.3% 3.2% 3.6%
Adjusted P/E FY 4.7 7.0 12.0 11.1
DPS (Net) FY (p) 14.86 19.29 3.73 4.29
104
(44-20) 7742-3681 02 January 2014
FirstGroup
9%
16%
12% UK Bus UK Rail
43%
First Student First Transit UK North America
57%
22%
Greyhound
41%
Figure 283: Revenue (£ in millions) Figure 284: Operating margin

8,000 £ in millions
6,679 6,901 6,955 6,751
7,000 6,187 6,262 6,429 9.0%
7.6%
8.0%
6,000 8.0% 7.2% 7.1%
5,180 6.4%
4,708 7.0% 6.3%
5,000
6.0% 4.9% 4.8%
4,000 4.4%
5.0%
3,000
4.0%
2,000 3.0%
1,000 2.0%
0 1.0%
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E 0.0%
Source: J.P. Morgan estimates, Company data. FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
Figure 285: Adjusted EPS (pence) Figure 286: Net Debt / EBITDA
£ in millions
60.0
48.3 4.5x 4.0x
50.0
40.4 40.9 4.0x
39.2 3.2x 3.1x
40.0 3.5x 3.0x
3.0x 2.6x 2.6x
30.0 25.1 2.3x 2.3x
2.5x 2.1x
16.9 2.0x
20.0
9.9 10.6 10.8 1.5x
10.0 1.0x
0.5x
0.0
0.0x
105
(44-20) 7742-3681 02 January 2014
Gem Diamonds Ltd

Overweight
2 Eaton Gate, London SW1W 9BJ. T: 0203 043 0280
GEMD.L,GEMD LN Business activities
Price: 138p Gem Diamonds Ltd produces high quality rough diamonds from the Letseng mine in
Price Target: 190p Lesotho, and markets them via tender in Antwerp. As well as rough sales, the
company has a small-scale downstream processing capacity, allowing it to cut and
polish a portion of its production in-house to be sold in polished form. GEMD is also
United Kingdom
developing the Ghaghoo project in Botswana, with first production due in Q2’14.
AC
Roger Bell, CFA
History
(44-20) 7134-5932
roger.m.bell@jpmorgan.com Founded in 2005 by CEO Clifford Elphick, GEMD acquired the Letseng mine in
Bloomberg JPMA BELL <GO> 2006 before raising $635m at £9.50/share via IPO in Feb 2007. The company
J.P. Morgan Securities plc promptly commenced an acquisition spree, purchasing the Ellendale mine in
Australia, the Gope deposit (remaned Ghaghoo) in Botswana, the Cempaka mine in
Price Performance Indonesia, as well as prospects in the DRC, CAR and Angola. However, with the
180
global economic downturn severely impacting rough diamond prices in 2008, GEMD
160 was forced to write-down the value of its investments and raise a further $100m at £1
per share in April 2009. Since then, the company has managed its balance sheet
p 140
conservatively, with minimal investment approved at Ghaghoo and the disposal of
120 peripheral assets, including Ellendale.
100
Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Operational overview
YTD 1m 3m 12m
Abs -7.8% -9.9% -10.5% -5.6%
Letseng is on course to meet targeted 95-105kcts of production for 2013 (JPMe
95.8kcts), although this guidance was lowered at the mid-year stage due to a delay in
accessing ore from the higher-grade Satellite Pipe. This improvement in the mix
from Main to Satellite material should, however, aid both production levels and
Management realised prices in late 2013/early 2014E. We forecast opex/t of ore milled to increase
Chairman Roger Davis 13% YoY to 148Maloti/t for FY13E, vs a guided range of 140-170M/t. Cost inflation
CEO Clifford Elphick
CFO Michael Michael
in USD terms is, however, mitigated by the weaker Maloti (tied to ZAR).
IR Sherryn Tedder
Outlook
Major Shareholders
Laurence Graff 15%
We continue to view diamonds as a play on late-cycle growth in emerging markets,
Lansdowne Partners 15% especially China, with an increasingly middle-class consumer base driving jewellery
Blackrock 12% demand, as well as ongoing recovery in OECD markets. Letseng's prices should also
Fidelity International 8% benefit from an improved ore mix and reduced diamond damage following the
Clifford Elphick 7%
installation of new “diamond-friendly” crushers during 2013. With an end ‘14E
P/NPV of 0.75x before considering any further phases at Ghaghoo, we remain OW.
Overweight
Gem Diamonds Ltd (GEMD.L;GEMD LN)
Price (p) 138 Adj. EPS FY ($) 0.12 0.14 0.27 0.29
Price Target (p) 190 EBITDA FY ($ mn) 66 68 105 114
Price Target End Date 31-Dec-14 EBITDA Margin FY 32.4% 35.6% 46.5% 42.9%
Market Cap (£ mn) 191.02 EV/EBITDA FY 5.1 6.2 4.0 3.4
Shares O/S (mn) 138 FCFF Yield FY (40.1%) (3.6%) 9.9% 18.6%
106
(44-20) 7742-3681 02 January 2014
Gem Diamonds Ltd

3%
Lesotho
Diamonds 49% Belgium

48%
Other
100%

$ in millions
450 50.0% 45.5% 46.5%

396 42.9% 43.1%
400 45.0%
350 40.0% 35.6%
297 299 30.8% 32.4%
300 266 266 35.0%
28.0%
244 30.0%
250 226
202 192 25.0% 21.8%
200
20.0%
150 15.0%
100 10.0%
50 5.0%
0 0.0%

$ cents
60.0 46.7 0.0x (0.3)x

36.6 (0.4)x
40.0 27.3 29.1 (0.6)x
12.9 12.4 14.2 (0.5x) (0.8)x (0.9)x
20.0 (0.9)x
9.4 (1.1)x
0.0 (1.0x)
(20.0) (1.6)x
(1.5x)
(40.0)
(2.1)x
(60.0) (2.0x)
(80.0) (74.2)
(2.5x)
(100.0) FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
107
(44-20) 7742-3681 02 January 2014
Gemfields
Underweight
54 Jermyn Street, 8th Floor, London SW1Y 6LX. T: 0207 518 3400
GEM.L,GEM LN Business activities
Price: 33p Gemfields is a producer of coloured gemstones. Its primary operations are in
Price Target: 28p Zambia, where the company produces emeralds from the Kagem Emerald Mine.
Gemfields also has a non-controlling interest in the world’s single largest producing
amethyst mine at Kariba, Zambia. The company has 20 coloured gemstone
United Kingdom
exploration licences in Madagascar, and a 75% stake in the Montepuez Ruby Mine in
AC Mozambique.
Alexander Mees
(44-20) 7742-3681
History
Bloomberg JPMA MEES <GO> In 2007, Gemfields acquired a 75% interest in the Kagem Emerald Mine from Rox, a
J.P. Morgan Securities plc company owned by its major shareholder, Pallinghurst Resources. In 2011,
Gemfields acquired a 75% interest in a ruby deposit in the Montepuez district of
Price Performance Mozambique. In 2012, Gemfields acquired the luxury jewellery brand, Fabergé, also
40
from its major shareholder Pallinghurst Resources, for $142m, funded by new equity.
35
p
25
Operationally, Gemfields continues to perform well at its emerald mine at Kagem.
20 Production has been steady, if not spectacular, following push-back of the high wall.
15 Gemfields intends to develop underground mining at Kagem by around June 2015.
Gemfields produced 30m carats of gemstones in FY13. Bulk sampling operations are
YTD 1m 3m 12m
Abs -2.2% -6.7% 30.4% -0.7%
ongoing at Montepuez. Gemfields’ focus at Fabergé is on building the brand through
development of the product range and marketing. Fabergé continues to be loss-
making.
Management
Chairman Graham Mascall Outlook
CEO Ian Harebottle
CFO Janet Blas
In 2013, the Government of Zambia restricted the sale of Zambian emeralds outside
COO Dev Shetty of the country. Gemfields has worked with the Government to optimise returns while
assuaging any concerns. We believe auctions of Gemfields’ Zambian emeralds are
Major Shareholders likely to be held in Lusaka for the foreseeable future. We anticipate, however, that
Pallinghurst 48%
NGPMR 13% Gemfields will start to diversify its downstream sources of revenue by bringing
Investec Pallinghurst 13% Mozambican rubies to auction in 2014. Ultimately, we see an opportunity for
Blackrock 3% Gemfields to add other types of coloured stone to its portfolio, possibly sapphires.
Standard Chartered 2%
Underweight
Gemfields Plc (GEM.L;GEM LN)
Company Data FYE Jun 2012A 2013A 2014E 2015E
Price (p) 33 Adj. EPS FY ($) 0.0714 (0.0511) 0.0216 0.0382
Date Of Price 17 Dec 13 Bloomberg EPS FY ($) 0.0760 (0.0120) 0.0310 0.0240
Price Target (p) 28 Revenue FY ($ mn) 84 48 119 140
Price Target End Date 31-Dec-14 Adj.EBITDA FY ($ mn) 255 0 41 56
52-week Range (p) 39-19 EBITDA Margin FY 305.1% 1.0% 34.7% 39.9%
Market Cap (£ bn) 0.11 EBIT FY ($ mn) 47.8 (19.1) 19.9 34.6
Shares O/S (mn) 325 EBIT Margin FY 297.1% (40.9%) 15.7% 23.5%
Adj P/E FY 7.6 NM 25.1 14.2
108
(44-20) 7742-3681 02 January 2014
Gemfields
9% 9%
4%
Zambia
Gemstones Fabergé UK (corprorate)
Rest of world
91% 87%

180 70.0% 65.0%

161
160 140 60.0% 55.4%
140 119 50.0% 41.1%
120 39.6%
33.1% 35.8%
100 84 40.0%
80 30.0%
60 48
40 20.0%
40 20
20 10.0% 2.4%
0 0.0%

cents £ in millions
35.0 6.0x 5.1x

30.0 28.2 5.0x
25.0 4.0x
20.0
3.0x
15.0
10.0 7.1 2.0x
5.1 3.8 4.6
5.0 1.1 2.2 1.0x 0.1x 0.1x 0.3x
0.0 0.0x (0.6)x (0.6)x (0.7)x (0.9)x
(5.0) (1.0x)
(10.0) (5.1)
(8.3) (2.0x)
(15.0) FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
109
(44-20) 7742-3681 02 January 2014
Go-Ahead
Overweight
4 Matthew Parker Street, Westminster, London SW1H 9NP. T: 0207 799 8999
GOG.L,GOG LN Business activities
Price: 1,704p Go-Ahead is a Bus & Rail operator with almost exclusive exposure to the UK. The
Price Target: 1,800p company operates deregulated bus services in the South East, Southern and North
East England (operator bears revenue risk; 42% of group EBIT), as well as regulated
bus services in London (operator does not bear revenue risk; 45% of EBIT). The
United Kingdom
company also owns 65% stake of Govia, JV with Keolis, which operates three UK
Logistics rail franchises (Southern, South Eastern and London Midland; 13% of group EBIT).
AC
Wenchang Ma
(44-20) 7134-5918
History
wenchang.ma@jpmorgan.com Go-Ahead was founded in the late 1980s during the deregulation and privatization of
Bloomberg JPMA WMA <GO> the UK bus industry. The company expanded its footprints through multiple
J.P. Morgan Securities plc acquisitions as well as organic growth. The acquisition of London Central in 1994
marked the company’s entrance into the London bus market. The company was listed
Price Performance
on the London Stock Exchange since 1994 and entered the UK rail market with
1,800
Thameslink franchise during the privatization of the industry in 2006.
1,700
1,600
p 1,500 Operational overview
1,400 We believe management’s Fiscal 2015/16 Bus EBIT target of £100m is achievable,
1,300 based on revenue growth CAGR assumptions of 3.6% for deregulated bus and 2.7%
1,200 for regulated (London) bus, combined with £10m cost savings (broadly in-line w/
management guidance). Backward calculation using our DCF model suggests that
YTD 1m 3m 12m
Abs 32.0% 4.5% 6.4% 35.0% current share price reflects c.70% progress towards the targeted incremental gain.
Further upside potential could be driven by stronger revenue growth in deregulated
bus fueled by positive underlying economic development. We estimate every 100bps
Management
incremental revenue growth (14e) to translate into c.3% upside to our EPS estimate.
Chairman Andrew Allner
CEO David Brown
CFO Keith Down Outlook
IR Holly Birch Go-Ahead is our top pick among UK public transport names given (1) achievable
F15/16 target not fully reflected in current price; (2) option value offered by potential
Major Shareholders
UK Rail franchise wins; (3) sustainable DPS supported by solid balancesheet, with
UBS 6%
JO Hambro Capital 5%
potential for growth. Our DCF-based PT of £1,800p implies c. 10% upside. We
Ameriprise Financial 5% expect major catalysts in 2014 from announcement of rail franchise wins, with the
Estate of M Ballinger 5% largest franchise Thameslink to be awarded in May. Govia is the incumbent operator
Threadneedle 5% of the Southern franchise, which will be merged into the Thameslink in July 2015. It
is shortlisted with competitors FirstGroup, Abellio, Stagecoach, and MTR.
Overweight
Go-Ahead Group plc (GOG.L;GOG LN)
Company Data FYE Jun 2012A 2013A 2014E 2015E
Price (p) 1,704 Adj. EPS FY (p) 141.89 139.57 127.70 138.46
Price Target (p) 1,800 EBITDA FY (£ mn) 164 161 144 151
Price Target End Date 30-Jun-14 EBIT FY (£ mn) 101 92 74 82
52-week Range (p) 1,741-1,235 DPS FY (p) 81.00 81.00 81.00 81.00
Market Cap (£ bn) 0.73 Div Yield FY 4.8% 4.8% 4.8% 4.8%
Shares O/S (mn) 43 Adj P/E FY 12.0 12.2 13.3 12.3
110
(44-20) 7742-3681 02 January 2014
Go-Ahead
13%
Deregulated Bus
17%
Regulated Bus UK
70% UK Rail
100%

£ in millions
3,000 2,715 2,633 6.0% 5.3%

2,572
2,346 2,424
2,500 2,199 2,202 2,297 2,139
5.0% 4.5%
4.1% 4.3%
2,000 4.0% 3.6% 3.6%
3.1%
2.7%
1,500 3.0% 2.3%
1,000 2.0%
500 1.0%
0 0.0%

Pence
200.0 1.2x 1.1x

180.0 172.8
156.3 1.0x
160.0 152.3
135.2 141.9 139.6 127.7 138.5 0.8x 0.7x
140.0 126.9 0.6x
0.5x 0.6x 0.6x
120.0 0.6x 0.4x
100.0 0.4x 0.2x
80.0
60.0 0.2x
(0.1)x
40.0 0.0x
20.0 (0.2x)
111
(44-20) 7742-3681 02 January 2014
Grainger
Overweight
Citygate, St James' Boulevard, Newcastle upon Tyne, NE1 4JE. T: 0191 261 1819
GRI.L,GRI LN Business activities
Price: 201p Grainger acquires tenanted properties at a discount to vacant possession value and
Price Target: 225p sells them when they become vacant. Grainger continues to seek acquisition
opportunities for reversionary assets. The company lets at market rents and actively
manages assets to drive rental growth. Grainger aims to grow the market rental
United Kingdom
business and develop purpose built residential rental assets to hold and manage for
European Property
AC the long term. The company earns fees from management of residential assets owned
Tim Leckie, CFA by third-parties or within co-investment vehicles and aims to increase fee income.
(44-20) 7134-4477
timothy.leckie@jpmorgan.com
History
J.P. Morgan Securities plc Grainger was established in Newcastle in 1912 to acquire and manage tenanted
residential properties, and floated on the LSE in 1983 with assets of £19m. After
Price Performance entering land development in 1985, followed by large scale acquisitions of
220
residential portfolios in 1989 and 2001, Grainger has become the largest listed
200
residential manager and investor in the UK.
180
p 160
140
120 Grainger is an owner, manager and developer of residential property in the UK, with
100 60% of the portfolio in London and south east England. 54% of operating profit
comes from sales of homes, 33% from rents and 13% from fees. Sales of homes are
YTD 1m 3m 12m
Abs 72.0% -1.1% 15.6% 70.9%
derived from acquisitions, vacant possessions and disposals of Regulated Tenancy
properties, and Equity Release property acquisitions, as well as freehold properties.
Outlook
Management
Chairman Robin Broadhurst We are positive on house price inflation going into 2014, which at current share price
CEO Andrew Cunningham levels is not priced in. UK house price inflation is focused on London and south east
CFO Mark Greenwood England, where Grainger has 60% of its portfolio. HPI translates directly into
IR Kurt Mueller portfolio capital growth, with Grainger beating market indices comfortably over the
Major Shareholders past years and is expected to do so going forward. Longer term, Grainger is targeting
Schroders 27% opportunities in the build-to-rent market, which is receiving increasing levels of
Norges 5% government support.
L&G 3%
APG 3%
Overweight
Grainger plc (GRI.L;GRI LN)
Company Data FYE Sep 2012A 2013E 2014E 2015E 2016E
Date Of Price 17 Dec 13 NNNAV ps FY (£) 157.17 174.49 194.44 215.94 226.98
Price Target (p) 225 ROIC FY 5.6% 7.7% 9.4% 9.8% 7.0%
Price Target End Date 30-Sep-14 DPS FY (p) 1.92 2.21 2.65 3.18 3.82
52-week Range (p) 212-112 Dividend Yield FY 1.0% 1.1% 1.3% 1.6% 1.9%
Market Cap (£ bn) 0.84 Adjusted NAV ps FY (p) 223.1 230.8 250.7 272.2 283.3
Shares O/S (mn) 416 Capital growth FY 0.0% 3.9% 6.3% 6.4% 3.6%
LTV FY 59.2% 47.8% 43.7% 39.8% 36.9%
112
(44-20) 7742-3681 02 January 2014
Grainger
8%
35% Sales
Fees and Income UK Germany

56%
Rents
9%
92%

100 90 57.0% 55.9%

86 55.5%
90 56.0%
80 76 55.0%
69 68 53.9% 53.7%
70 66 54.0%
60 53.0% 52.3%
50 52.0%
40 51.0% 50.3%
30 50.0%
20 49.0%
10 48.0%
0 47.0%

300.0 272.2 40.0x 34.8x

250.7 35.0x
230.8 30.2x
250.0 216.2 223.1 28.2x
199.8 30.0x 24.3x 24.9x
23.0x
200.0 25.0x
150.0 20.0x
15.0x
100.0 10.0x
50.0 5.0x
0.0x
0.0 FY10 FY11 FY12 FY13 FY14E FY15E
113
(44-20) 7742-3681 02 January 2014
Greene King
Neutral
Westgate Brewery, Bury St Edmunds, Suffolk IP33 1QT. T: 01284 763 222
GNK.L,GNK LN Business activities
Price: 849p Greene King operates around 2,300 pubs in the UK, of which around 1,000 are
Price Target: 880p managed and the remainder tenanted. The managed estate (65% of group EBIT in
FY14E) has outperformed its peers in the managed pub segment in terms of LFL
sales growth (+4% for GNK vs. c.+2% for peers over the past three years). We
United Kingdom
believe that this is driven by GNK’s exposure to London (14% of the estate) as well
Leisure as higher maintenance capex (c.8% of managed pub sales vs. c.5% for freehold
AC managed peers). GNK continues to dispose of underperforming tenanted sites,
Victoria A Greer
(44-20) 7742-2509
aiming to reach 1100 sites by FY14E. It also has a brewing division (11% of FY14E
victoria.a.greer@jpmorgan.com
group EBIT), focused on the growing premium ale market.
Bloomberg JPMA GREER <GO>
J.P. Morgan Securities plc History
Greene King’s roots in brewing and pub operations date back as far as the 19th
Price Performance
century. The company acquired Loch Fyne seafood restaurants in FY07 and made
900
three small acquisitions in FY11/FY12 (the Cloverleaf carvery format, now
850
800
Farmhouse Inns, as well as Capital and Realpubs in London).
p 750
650 Greene King continues to expand its managed pub division by around 30 pubs per
600 year (a mixture of new-build pubs, single-site acquisitions and leasehold openings).
It also sees scope to transfer around 15 sites from its tenanted division to its managed
YTD 1m 3m 12m
Abs 34.2% 4.9% 2.6% 32.1% formats. In its tenanted estate, GNK has disposed of around 100 sites per year since
FY11, which we expect to slow to around 50 per year in FY15 and FY16.
Outlook
Management
Chairman Tim Bridge Greene King’s managed pub division is the key driver of group earnings growth
CEO Rooney Anand (66% of group EBIT in FY14E). Greene King is now nearing the end of its tenanted
CFO Matthew Fearn disposals, which have been a drag on growth, and we forecast 9% EPS growth in
FY15 and 16. There could be modest upside to this from stronger like-for-like sales
Major Shareholders
Capital 9% growth in the managed estate (and potentially modest margin expansion), driven by
Standard Life 8% an improved consumer environment. GNK trades on 13.4x CY14E PE, which we see
AXA 7% as a peak multiple relative to its (and the pubs sector’s) long-term range. We remain
Old Mutual 6%
Dimensional 3%
Neutral, and would look for signs of positive trading momentum before becoming
more positive.
Neutral
Greene King (GNK.L;GNK LN)
Price Target End Date 30-Dec-14 Revenue FY (£ mn) 1,195 1,263 1,340 1,426
DPS (Net) FY (p) 26.60 28.50 31.50 34.00
Div Yield FY 3.1% 3.4% 3.7% 4.0%
114
(44-20) 7742-3681 02 January 2014
Greene King
15%
Greene King Retail (managed)

13%
Pub Partners (tenanted) UK
Brewing and brands

72%
100%
Source: Company data. Source: Company data.

1,600 23.0% 22.6%

1,426
1,340 22.5%
1,400 1,263
1,140 1,195
1,200 22.0% 21.5%
984 1,043 21.3%
955 21.5%
1,000 20.7% 20.8%
21.0% 20.4% 20.3%
800 20.2%
20.5%
600
20.0%
400 19.5%
200 19.0%
0 18.5%

80.0 72.3 7.0x

5.8x
70.0 66.1 6.0x
60.5 5.1x 5.1x 5.1x
57.0 4.7x 4.5x
60.0 53.5 53.0 5.0x 4.3x
48.2 3.9x
50.0 43.4 4.0x
40.0 3.0x
30.0
2.0x
20.0
1.0x
10.0
0.0x
115
(44-20) 7742-3681 02 January 2014
Halfords
Neutral
Icknield Street Drive, Washford West, Redditch, Worcestershire, B98 ODE. T: 01527 517 601
HFD.L,HFD LN Business activities
Price: 442p Halfords retails car maintenance, car enhancement, cycles and other leisure products.
Price Target: 460p It operates from 466 stores in the UK. It also operates an MOT, car servicing and
repair business called Autocentres from 296 sites in the UK.
United Kingdom
European Retail
History
Georgina Johanan
AC Halfords was founded in Birmingham in 1892. From 1965 onwards it was owned by
(44-20) 7134-5791
several different groups (including Boots) before being acquired by CVC in 2002. It
georgina.s.johanan@jpmorgan.com came to market in 2004. In 2010 Halfords acquired Nationwide Autocentres (now
Bloomberg JPMA JOHANAN <GO> operated as Halfords Autocentres). The group’s performance has come under
J.P. Morgan Securities plc pressure in recent years following pricing pressure from online, a structural decline
in product categories such as SatNav and as the brand became associated with poor
Price Performance service. Following several profit warnings CEO David Wild left the business in July
500
2012. He was replaced by Matt Davies in October 2012, who has a strong track
450 record for customer service following 8 years as CEO of Pets at Home.
400
p
300 Within the Retail business (86% of group sales and 92% of group EBIT), car
250 maintenance represents 33% of sales, car enhancement 25%, cycling 30% and travel
solutions 13%. New management is pursuing a strategy through which it aims to drive
YTD 1m 3m 12m
Abs 32.6% -6.7% 12.3% 27.5%
top line through investment in improved service, a better product range, and a
significantly improved online proposition. Whilst significant opex investment is required
to achieve this, over half of the spend is variable in nature, reducing the risk somewhat.
Management All autocentre sites are now branded as Halfords Autocentres, although at present these
Chairman Dennis Millard are effectively run separately from the Retail business on a day to day basis.
CEO Matt Davies
FD Andrew Findlay
IR Craig Marks Outlook
Halfords reported a very strong H114 performance in November 2013, and whilst
Major Shareholders
Artemis 11% favourable weather conditions played a part, there was also evidence of progress on
Blackrock 9% strategic initiatives. It is early days in the current quarter, but with relatively mild
Legal & General 6% weather to date and the likelihood of another “electronics Christmas”, we believe that
Schroders 5% upgraded forecasts post the H1 results already fully encapsulate the likely level of H2
Invesco 4%
growth.
Neutral
Halfords Group Plc (HFD.L;HFD LN)
Date Of Price 17-Dec-13 Revenue FY (£ mn) 863 871 926 964
Price Target (p) 460 EBITDA FY (£ mn) 121 103 98 104
Price Target End Date 30-Sep-14 Pretax Profit Adjusted FY 92 72 68 74
52-week Range (p) 496-297 (£ mn)
Market Cap (£ bn) 0.89 Div Yield FY 5.0% 3.9% 3.2% 3.2%
Adj.P/E FY 13.2 16.1 16.6 15.3
DPS FY (p) 22.00 17.10 14.00 14.00
116
(44-20) 7742-3681 02 January 2014
Halfords
14%
Retail Autocentres UK
86%
100%

1,200 16.0% 14.4% 14.7%

1,011 13.6%
964 14.0% 12.8%
1,000 926
832 870 863 871 11.3%
795 12.0%
800 744 9.0%
10.0% 8.9%
7.9% 8.2%
600 8.0%
6.0%
400
4.0%
200
2.0%
0 0.0%

45.0 42.7 1.6x 1.4x

39.4 1.3x
40.0 1.4x
33.5 32.9 1.1x 1.2x 1.1x
35.0 32.5 1.2x 1.1x
29.3 28.8
30.0 27.5 26.5 1.0x 0.9x
25.0 0.8x 0.7x
20.0 0.6x
15.0 0.4x
10.0 0.2x
5.0 0.0x
117
(44-20) 7742-3681 02 January 2014
Hays
Neutral
250 Euston Road, London, NW1 2AF. T: 0207 383 2266
HAYS.L,HAS LN Business activities
Price: 119p Hays is one of the leading, global recruitment companies, focused on professional
Price Target: 118.0p recruitment. Hays’ business is split between Temporary recruitment (59% of
revenues) and Permanent recruitment (41% of revenues). In the last year, Hays
placed around 53,000 people into permanent jobs and around 182,000 people into
United Kingdom
temporary assignments. Hays employs 7,840 staff in 239 offices across 33 countries
AC and 20 sectors.
Robert Plant
(44-20) 7134-5922 History
robert.plant@jpmorgan.com Hays' Specialist Recruitment business was founded as the Career Care Group in 1969
Bloomberg JPMA PLANT <GO>
by former CEO Denis Waxman. This business was acquired by Hays plc in 1986, the
Specialist Recruitment business forming part of the diversified larger Hays Group.
Price Performance
Hays demerged itself of its non-recruitment activities, leaving Hays as a standalone
130 recruitment company in 2004. In 2007, Mr. Waxman retired and was succeeded by
120
Alistair Cox.
p
100 We characterise Hays as operating in the middle/high end of the recruitment market
90 e.g. accountants, IT programmers, engineers, by salary above the level of the blue-
80 collar temporary recruitment companies, but below headhunting companies. Hays’
operates in three regions, Continental Europe & Rest of the World (42% of
YTD 1m 3m 12m
Abs 38.6% -3.4% 6.1% 45.2%
revenues), UK & Ireland (32% of revenues) and Asia Pacific (26% of revenues). The
private sector accounts for 84% of revenues and the public sector for 16% of
revenues. By sector, the business is split between Accountancy & Finance (25% of
Management revenues), Construction & Property (25% of revenues), IT & Engineering (15% of
Chairman Alan Thomson
revenues) and Other (35% of revenues).
CEO Alistair Cox
CFO Paul Venables Outlook
IR David Walker
Hays issued a Q1 trading statement for trading between July and September, on 10
Major Shareholders October 2013, when management said that overall trading had been better than they
Virtus Trust 7% had expected at the start of the quarter, with the UK & Ireland being the main
Baillie Gifford 6% positive surprise as they had expected 5% growth from this division compared to the
Cedar Rock 5% eventual outcome of 8% growth. The exit rate was said to be broadly in line with the
Sun Life 4% quarter (so we assume 2%) but management's comments throughout the conference
call implied to us that October was probably a bit stronger than September.
Neutral
Hays Plc (HAYS.L;HAS LN)
Company Data FYE Jun 2011A 2012A 2013A 2014E 2015E
Price (p) 119 EPS Adjusted FY (p) 5.10 5.37 5.06 5.81 7.24
Price Target (p) 118.0 EBITDA Adj. FY (£ mn) 124 138 137 146 173
Price Target End Date 31-Dec-14 Operating Profit Adj. FY (£ 114 128 126 134 160
Market Cap (£ mn) 1,658.63 Pretax Profit Adj. FY (£ mn) 111 122 119 129 156
Shares O/S (mn) 1,390 P/E Adjusted FY 23.4 22.2 23.6 20.5 16.5
DPS (Net) FY (p) 5.80 2.50 2.50 2.50 2.75
118
(44-20) 7742-3681 02 January 2014
Hays
25% 26%
Accounting & Finance Continental Europe & ROW
35%
Construction & Property 42%
UK & Ireland
IT & Engineering
Asia Pacific
Other
25%
15% 32%

4,500 4,084 12.0%

3,697 3,767 10.0%
4,000 3,655
3,256 10.0%
3,500
3,000 2,540 2,691 8.0%
2,448 6.5%
2,500
6.0%
2,000 3.9%
3.5% 3.5% 3.4% 3.6%
1,500 4.0% 3.0%
1,000
2.0%
500
0 0.0%

14.0 1.2x 1.0x

12.5 0.9x
1.0x 0.7x
12.0 0.8x
0.6x 0.4x
10.0 0.3x
0.4x
8.0 7.7 7.2 0.2x (0.0)x (0.0)x
5.4 5.8 0.0x
6.0 5.1 5.1 (0.2x)
3.2 (0.4x)
4.0 (0.8)x
(0.6x)
2.0 (0.8x)
(1.0x)
119
(44-20) 7742-3681 02 January 2014
Helical Bar
Neutral
11-15 Farm St, London, W1J 5RS. T: 020 7629 0113
HLCL.L,HLCL LN Business activities
Price: 320p Helical aims to deliver market leading returns by acquiring high yielding investment
Price Target: 295p properties, applying a rigorous approach to asset management and deploying limited
equity through a variety of different structures into development situations which
have the potential to be highly profitable
United Kingdom
European Property
AC History
Tim Leckie, CFA
(44-20) 7134-4477
The Helical Bar and Engineering Company Limited was incorporated as a limited
timothy.leckie@jpmorgan.com company on 3 July 1919 to make and sell reinforcing steel for the construction
Bloomberg JPMA LECKIE <GO> industry. After continuing this business for over 65 years, financial difficulties led
J.P. Morgan Securities plc the Company to seek new activities. In 1984 Michael Slade was appointed to the
Board. The steel reinforcement business was sold at the end of 1986 enabling
Price Performance Helical Bar to become a property development and investment company with
340
Michael Slade as its Chief Executive and Nigel McNair Scott as its Finance Director.
320
Gerald Kaye joined the Board in 1994, and having joined Helical in 1995 and 2001
300
respectively, Matthew Bonning-Snook and Jack Pitman were appointed directors in
p 280
260
2007.
240
During 1H14 Helical crystalised £62m of development profits at 200 Aldersgate and
YTD 1m 3m 12m
Abs 33.9% 2.2% 12.5% 37.5%
Brickfields (£23m incremental post tax), attained planning permission at 207-211
Old Street, King St and Cortonwood, and demolition was completed at Mitre Square.
They continue to look for acquisitions and high ROE investment structures.
Management Outlook
Chairman Nigel McNair Scott Positioned for “London growth and investors moving up the risk curve.” Helical Bar
CEO Mike Slade is "long both in central London offices and in high yielding secondary regional asset”
CFO Tim Murphy
IR
and is reaping the rewards as London continues to grow and investors move into the
regions.
Major Shareholders
Director and relatives 15.3%
Aberdeen 14.4%
Mike Slade 11.0%
JPAM 9.2%
Baillie Gifford 7.5%
Neutral
Helical Bar plc (HLCL.L;HLCL LN)
Price (p) 320 Adj. EPS FY (p) 3.63 (3.36) 1.08 0.52 (0.56)
Date Of Price 17 Dec 13 Adj P/E FY 88.1 NM 297.1 612.2 NM
Market Cap (£ bn) 0.37 NAV premium (discount) 14.3% 8.2% (3.7%) (11.9%) (19.5%)
ROE FY 1.7% (1.5%) 0.5% 0.2% (0.2%)
ROIC FY 3.3% 3.3% 9.8% 8.2% 8.2%
120
(44-20) 7742-3681 02 January 2014
Helical Bar
7%
4%
29% London
Investment 36%
In town retail
South East Offices

Trading and development
71% Other
53%

25 23 23 24 60.0%
51.3%
20 20
20 50.0% 42.6%
38.8% 40.9% 40.1%
16 36.6%
14 40.0%
15
30.0%
20.4%
10
20.0%
5 10.0%
0 0.0%

350.0 325.0 60.0x 54.2x

297.1
300.0 272.0 264.4 50.0x
252.8 250.4
250.0 36.9x
40.0x
30.4x 30.3x
200.0 25.2x 26.6x
30.0x 22.4x
150.0
20.0x
100.0
10.0x
50.0
0.0x
121
(44-20) 7742-3681 02 January 2014
HellermannTyton
Overweight
Stoner House, London Road, Crawley, RH10 8LJR. T: 01293 537272
HTY.L,HTY LN Business activities
Price: 295p HellermannTyton is the global leader in the manufacture and supply of high
Price Target: 335p performance cable management products and solutions. The key markets for the
group’s products and solutions are the Electrical, Automotive and Datacom
industries.
United Kingdom
AC History
Andrew J Wilson
(44-20) 7742-6332
In 1933, the ‘Insulok’ business was established in the UK. Two years later, the Paul
andrew.j.wilson@jpmorgan.com Hellermann business was established in Germany. Paul Hellerman was sold to Mr.
Bloomberg JPMA AWILSON <GO> Jack Bowthorpe of the UK in 1957. Bowthorpe plc had been listed in 1955 and later
J.P. Morgan Securities plc became Spirent plc in 2000. Following a period of growth and consolidation, Spirent
announced its intention to sell the business in 2005 and in 2006 Doughty Hanson
Price Performance acquired HellermannTyton from Spirent plc for £288m. The group was listed on the
340
London Stock Exchange in March 2013.
300
p 260
HellermannTyton operates primary production facilities in 11 locations in nine
220
countries. It supplies customers directly in 34 countries. The group’s products are
180 highly engineered, reliable and supplied on short-lead times to a blue-chip customer
Mar-13 Jun-13 Sep-13 Dec-13
base. The group has well established customer relationships, some of which stretch
YTD 1m 3m 12m
Abs 51.1% 0.7% 6.6% 51.1%
to over 30 years. The group’s customers value quality and reliability over price and
therefore relationships are sticky and customer churn is low. The group is integrated
into customer design processes and solutions are developed alongside customers to
Management meet specific needs.
Chairman David Newlands
CEO Steve Salmon
Outlook
CFO Tim Jones
COO Andrew Leyland The group has a strong track record of delivering ‘Industrial Production plus’ growth
and has delivered strong organic revenue growth in 2013, despite mixed end markets
Major Shareholders across its geographies. The group is well positioned to benefit from increasing
Schroders 14%
Standard Life 7% production volumes at key automotive customers and from any recovery in the
Artemis 7% European macro backdrop.
J.P. Morgan AM 4%
Henderson 3%
Overweight
HellermannTyton Group PLC (HTY.L;HTY LN)
Price (p) 295 Adj. EPS FY (€) 0.183 0.228 0.233 0.255 0.278
Date Of Price 17 Dec 13 Revenue FY (€ mn) 474 514 530 569 610
Price Target (p) 335 Adjusted EBITA FY (€ mn) 74 79 80 86 93
Price Target End Date 13-Dec-14 EBITA Margin FY 15.6% 15.4% 15.1% 15.2% 15.2%
52-week Range (p) 321-194 DPS (net) FY (€) 0.000 0.000 0.072 0.102 0.111
Market Cap (£ mn) 635.14 EV/Operating Profit FY 12.6 11.7 11.0 10.2 9.2
Shares O/S (mn) 215 Adjusted P/E FY 19.3 15.5 15.1 13.8 12.7
Div Yield FY 0.0% 0.0% 2.1% 2.9% 3.2%
122
(44-20) 7742-3681 02 January 2014
HellermannTyton
9%
22%
Electrical EMEA
47%
Automotive 53% Americas
44%
Datacom 25% Asia

€ in millions £ in millions
700 18.0%
610 15.4% 15.6% 15.4% 15.1% 15.2% 15.2%
600 569 16.0%
514 530
474 14.0%
500 11.0%
413 12.0%
372
400 10.0%
308
300 8.0% 6.2%
6.0%
200
4.0%
100 2.0%
0 0.0%

€ £ in millions
30.0 27.6 14.0x

25.3 11.9x
25.0 22.6 23.1 12.0x
10.0x
20.0 18.1
8.0x
15.0 6.0x
3.6x
10.0 4.0x 2.2x 1.9x 1.7x 1.2x 1.1x 0.8x
2.0x
5.0
0.0x
123
(44-20) 7742-3681 02 January 2014
Heritage Oil
Neutral
Windward House, La Route de la Liberation, St Helier, Jersey, JE2 3BQ. T: 01534 835 400
HOIL.L,HOIL LN Business activities
Price: 144p Heritage is an E&P company which underwent a transformation in late 2012/2013
Price Target: 245p following the acquisition of a major producing asset, OML30, in Nigeria. This
producing asset transformed Heritage’s production, reserves and cash generation
profile, although brought with it the risks inherent on the Niger Delta. Exploration
United Kingdom
activity remains important for the company, which is looking to drill in 2014 on
European Oil & Gas
AC licenses in Tanzania and Papua New Guinea.
James Thompson
(44-20) 7134-5942
History
Bloomberg JPMA THOMPSON <GO> Heritage was founded in 1992, and has had a successful exploration history in some
J.P. Morgan Securities plc frontier regions of the globe. The company started in Africa with licenses in Angola
and Congo, before entering Uganda. In Uganda the company partnered with Energy
Price Performance Africa (now Tullow) in opening up the onshore East African Rift system, with the
220
Kingfisher discovery. Heritage entered the Kurdistan Region of Iraq in 2007,
200 discovering the Miran gas field in 2009. In 2010 the company exited Uganda selling
180 its interest to partner Tullow for $1.45bn. In 2012 it acquired an interest in OML30,
p
160 Nigeria, and subsequently (in 2013) disposed of its interest in Miran.
140

The first few months under new owners of OML30 saw a few teething troubles,
YTD 1m 3m 12m
Abs -27.3% -18.0% -25.4% -18.7%
predominantly in the form of community related issues. Heritage and operator NPDC
have set about addressing the main issues and ensuring a dialogue is in place to
maintain good community relations in the future. This was also a period when new
equipment was ordered prior to installation. As a result H1 13 production was below
Management
Chairman Michael Hibberd
expectations. H2 has seen a marked improvement in production although still below
CEO Anthony Buckingham guidance. With new equipment currently being installed we look to further
CFO Paul Atherton production gains going forward.
IR Tanya Clarke

Albion 34% Away from Nigeria we look to the company committing to exploration drilling in
Capital Research & Mgmt 9% both Tanzania and Papua New Guinea and hence we look for updated prospect sizes
Lansdowne Partners 8%
London & Capital 4%
and timings from future statements. On OML30 we look principally to the results of
Barclays Stockbrokers 2% installation of new equipment, such as gas compressors, as an indicator of potential
production performance on the asset.
Neutral
Heritage Oil (HOIL.L;HOIL LN)
Price (p) 144 Revenue FY ($ mn) 9 9 455 648 1,187
Date Of Price 17 Dec 13 Net Profit FY ($ mn) (67) 29 92 150 292
Price Target (p) 245 EPS FY ($) (0.24) 0.11 0.35 0.58 1.12
Price Target End Date 31-Dec-14 P/E (x) FY NM 21.2 6.6 4.1 2.1
52-week Range (p) 225-122 Debt adj. CF FY ($ mn) (30) (152) 170 105 199
Market Cap (£ bn) 0.37 EV/DACF (x) FY (15.2) (8.5) 5.8 9.1 4.1
Shares O/S (mn) 259 Net debt / (cash) FY ($ mn) (306) 472 378 340 207
Ave. Prod. (kboepd) FY 0.71 2.84 11.10 16.63 37.36
124
(44-20) 7742-3681 02 January 2014
Heritage Oil
2%
14%
Nigeria
15%
Russia Nigeria Russia
Cash
71%
98%
Figure 343: Revenue Figure 344: NAV tracker

$ in millions 700 200%
1,400 600 150%

1,187
1,200 500
100%
1,000 400
50%
800 648 300
600 0%
455 200
400 100 -50%
200
3 5 9 9 0 -100%
0
Figure 345: ND/EBITDA

8.0x 7.2x 6.6x
6.0x 4.6x
4.0x
1.3x
2.0x 0.8x
0.2x
(0.5)x
0.0x
(2.1)x
(2.0x)
(4.0x)
125
(44-20) 7742-3681 02 January 2014
Hochschild
Neutral
46 Albemarle Street, London W1S 4JL. T: 0207 907 2930
HOCM.L,HOC LN Business activities
Price: 130p Hochschild is a silver and gold producer. The company currently operates four
Price Target: 135p underground mines, three located in southern Peru (Arcata, Pallancata and Ares) and
one in southern Argentina (San Jose), which are expected to produce ~20Moz of
silver equivalents on an attributable basis in FY13E. All four operations are
United Kingdom
epithermal vein systems principally using the cut and fill mining method. Hochschild
AC is also developing the Inmaculada project in Southern Peru.
Roger Bell, CFA
(44-20) 7134-5932
roger.m.bell@jpmorgan.com
History
Bloomberg JPMA BELL <GO> Hochschild Mining traces its origins to the original Hochschild Group founded in
J.P. Morgan Securities plc 1911 by Mauricio Hochschild. From the 1940s onwards, the group opened mines
across Latin America, including the Arcata mine in Peru in the 1960s and the Mantos
Price Performance Blancos copper mine in Chile (later sold to Anglo American). In the early 2000s,
500
HOC entered JVs to develop San Jose in Argentina and Pallancata in Peru, before
400 listing in Nov 2006, raising $515m at £2.70/share with an initial target of >40Moz of
attributable silver equivalent output by FY10E (vs FY10A of ~26.4Moz).
p 300
200
100 HOC is on track to meet FY13E production guidance of ~20Moz Ag eq (attrib),
while FY14E guidance currently stands at ~21Moz (attrib), assuming Hochschild’s
YTD 1m 3m 12m
Abs -73.7% -8.4% -43.3% -73.6%
acquisition of IMZ completes by end ‘13E. Hochshild’s mines have seen significant
cost inflation in recent years due to a combination of declining grades and strong
underlying cost pressures during a period of strong precious metals prices: we
calculate all-in cash costs per silver equivalent oz (pre-growth capex) increased by
Management ~57% over the 2010-2012E period to ~$24.6/oz. In response to steep declines in
Chairman Eduardo Hochschild
CEO Ignacio Bustamente
silver and gold prices in FY13E, Hochshild has initiated a cost-cutting programme
CFO Ramon Barua which we forecast to deliver 14% lower all-in unit costs in FY13E and a further 8%
IR Charles Gordon reduction in FY14E; long-term, we estimate average all-in costs of ~$17/oz (Ag eq)
once Inmaculada has fully ramped up post-2015E.
Major Shareholders
Eduardo Hochschild 54%
M&G 18% Outlook
BlackRock 5% Despite factoring in Hochshild’s impressively swift cost cuts, we maintain a N rating
Norges 2%
Royce & Associates 2%
primarily on valuation grounds (end ‘14E P/NPV 1.11x), having upgraded from UW
in Dec ’13 following a fall in the share price.
Neutral
Hochschild Mining Plc. (HOCM.L;HOC LN)
Price (p) 130 Adj. EPS FY ($) 0.19 (0.06) (0.05) 0.09
Date Of Price 17 Dec 13 Bloomberg EPS FY ($) 0.22 -0.09 0.01 0.20
Price Target (p) 135 Adj EBITDA FY ($ mn) 385 199 192 283
52-week Range (p) 506-119 Adj P/E FY 11.1 NM NM 24.1
Market Cap (£ bn) 0.44 EV/EBITDA FY 2.0 6.0 7.0 4.8
Shares O/S (mn) 338 FCFF Yield FY (1.0%) (18.2%) (12.7%) 10.7%
126
(44-20) 7742-3681 02 January 2014
Hochschild
8%
31% 32% Asia
Silver 27% Europe
North America
Gold
69% Other
33%

$ in millions
900 818 50.0% 47.0%

800 45.0% 40.8%
693
700 40.0% 35.3%
614 32.4%
600 542 35.0%
30.0%
500
25.0%
400
20.0%
300 15.0%
200 10.0%
100 5.0%
0 0.0%
FY12 FY13E FY14E FY15E FY12 FY13E FY14E FY15E

$ cents
25.0 2.0x 1.7x

19.2 1.3x
20.0 1.5x
0.9x
15.0 1.0x
8.8
10.0 0.5x
5.0
0.0x
0.0 (0.7)x
(0.5x)
(5.0)
(6.2) (5.0) (1.0x)
(10.0) FY12 FY13E FY14E FY15E
FY12 FY13E FY14E FY15E
127
(44-20) 7742-3681 02 January 2014
Homeserve
Neutral
Cable Drive, Walsall, WS2 7BN. T: 01922 426 262
HSV.L,HSV LN Business activities
Price: 264p Homeserve is a leading provider of home assistance policies and repair networks to
Price Target: 295p homeowners in the UK, the US, France, Spain and more recently Italy and Germany.
United Kingdom
History
UK Small and Mid Caps Homeserve (originally called Home Service) was founded by Richard Harpin, the
Victoria Prior, CFA
AC current CEO. The business grew organically and through acquisitions. In 2001, the
(44-20) 7134-5912
group launched a policy business in France, Doméo, in a joint venture with Veolia
victoria.prior@jpmorgan.com and later bought out Veolia’s stake. In August 2007, the group acquired Reparalia, a
Bloomberg JPMA PRIOR <GO> claims management business which has given the group entry into the Spanish
J.P. Morgan Securities plc market.
Price Performance
300
280
Across all its geographies, Homeserve's business model is based on partnering with
260
major utility companies through which it markets its home assistance products. Its
p 240 largest geography is the UK which represented 55% of revenue in FY13 with 2.3m
220 customers albeit this number is anticipated to reduce to c. 2.0m by FY14E. The US
200 (18% revenue) offers the group the largest potential for growth, in our view, with
180 1.9m customers in a market 5x the size of the UK. France (14%) is the group’s
second most established market where the group had 0.9m customers in FY13. The
YTD 1m 3m 12m
Abs 9.2% 4.6% 1.3% 9.4%
group has a newer business in Spain (11%) as well as start-ups in Italy and Germany.
Outlook
Management
Chairman Barry Gibson 2014 should be a key year for the group in determining the future prospects of the
CEO Richard Harpin UK operations and potentially receiving a conclusion to the ongoing FCA
CFO Jonathan Ford investigation. The group has a plan in place to stabilise the UK business at 2.0m
IR Mark Jones customers the focus remains on delivery with the winter months key to the group's
Major Shareholders performance (the six months to March represent c. 75-80% of group profits in a
Invesco 28% typical year). If the group can stabilise the UK business at these levels, we believe it
Richard Harpin 12% is capable of achieving operating profit of c. £45m-£50m, with growth at the group
M&G 10% level to be delivered by the International businesses. Our base case assumes that the
Marathon 7%
Franklin 4% International businesses account for c. 50% of operating profit by FY15E with the
US business offering the greatest potential for growth, in our view.
Neutral
Homeserve Plc (HSV.L;HSV LN)
Market Cap (£ mn) 849.79 (£ mn)
EV/EBITDA (x) FY 6.3 7.2 9.0 8.6 8.0
Adj. P/E FY 9.4 11.5 15.4 15.0 14.1
Net Yield FY 4.3% 4.3% 4.3% 4.3% 4.3%
128
(44-20) 7742-3681 02 January 2014
Homeserve
2%
11%
26%
UK
UK
14% USA
USA
Domeo 55%
55% Europe
Spain
19%
18% New Markets

700 35.0%
576 27.8%
600 535 547 533 548 30.0% 25.5%
24.0%
500 467 25.0% 19.7%
379 20.0% 16.4% 16.2% 16.3%
400
284 15.0%
300
10.0%
200
5.0%
100 0.0%
0 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E

Pence 0.5x 0.4x 0.4x
30.0 28.0 0.5x 0.4x
25.9 0.4x
25.0 22.2 23.0 0.3x
21.4 0.4x 0.3x
18.6 0.3x 0.3x
20.0 17.1 17.5
0.3x
15.0 0.2x 0.1x
10.0 0.2x 0.1x
0.1x
5.0 0.1x
0.0 0.0x
FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
129
(44-20) 7742-3681 02 January 2014
Hunting
Underweight
3 Cockspur Street, London SW1Y 5BQ. T: 020 7321 0123
HTG.L,HTG LN Business activities
Price: 752p Hunting manufactures and distributes products that enable the extraction of oil and
Price Target: 752p gas. Hunting, through its three divisions, Well Construction, Well Completion and
Well Intervention, provides an integrated service across the phases of development
and maintenance of the wellbore. The business is therefore highly levered to drilling
United Kingdom
activity.
European Oil & Gas
AC
Andrew Dobbing History
(44-20) 7134-5944
andrew.dobbing@jpmorgan.com
Hunting started in the late 1800s as a ship-owning firm. After suffering huge
Bloomberg JPMA DOBBING <GO> personnel and fleet losses in successive world wars, the Hunting family diversified
J.P. Morgan Securities plc the business and got into petroleum retailing, lubricants and specialized products.
The three companies were then merged into the present Hunting PLC. Hunting then
Price Performance underwent restructuring and sold off its Canadian midstream business and acquired
950 Innova-Extel, Dearborn, Specialty Supply, WL Doffing, Titan Group and other
900 companies to become the present day Hunting.
850
p Operational overview
800
Hunting has three business segments: (i) Well construction: supplies products and
750
services for the initial drilling and construction of oil and gas wells. (ii) Well
700
completion: supplies premium steel tubing and other products for the completion
YTD 1m 3m 12m phase of the wells. This unit also manufactures and distributes perforating guns, tools
Abs -5.5% -8.6% -11.6% -0.8% and logging equipment. (iii) Well Completion: manufactures and supplies equipment
for the logging and intervention of producing wells. Hunting's biggest market is the
Management US, where it has 25 manufacturing and 20 distribution centers. Hunting is investing
Chairman Richard Hunting to increase its global footprint and gain market share in the North Sea, African and
CEO Dennis Proctor Asian markets.
Finance Director Peter Rose
Outlook
Major Shareholders Hunting is highly levered to the US drilling space and with the US rig count
AXA Group 10% remaining flat since the start of the year (1,754 rigs currently from 1,762; Source:
M&G Investment 10% Baker Hughes), we expect Hunting to face a challenging environment. In the long
Hunting Investment 7% term, Hunting is exposed to attractive themes like shale, deepwater and HP/HT wells
Threadneedle 6% and also has attractive geographic expansion opportunities, but we believe its current
Schroder 5%
premium PER valuation is unjustifiable.
Underweight
Hunting (HTG.L;HTG LN)
Market Cap (£ bn) 1.09 EV/EBITDA FY 14.3 9.1 8.4 7.7 7.4
Adj P/E FY 19.4 13.1 12.4 11.4 11.0
130
(44-20) 7742-3681 02 January 2014
Hunting
Figure 358: Revenue by business division Figure 359: Manufacturing/Distribution centers by geography
4% 10%
7%
Well construction 12% North America

34%
Well Completion
Europe/Africa/Middle East
Well Intervention
Asia Pacific
Others
55% 78%

£ in millions in %
1,000 898 924 923 25.0%

865
900 826 19.2% 19.6% 19.4% 19.4%
800 20.0% 16.9%
700 609 14.2%
600 15.0% 12.1% 12.3%
500 440 423
360
400 10.0%
6.2%
300
200 5.0%
100
0 0.0%

£ in pence £ in millions
80.0 4.0x 3.0x

68.4 68.8 1.2x 0.9x 0.7x 0.5x
66.1 2.0x (0.0)x
70.0
57.5 60.4 0.0x
60.0 (2.0x) (4.1)x
50.0 (4.0x)
38.7 (7.1)x
40.0 (6.0x)
26.7 (8.0x)
30.0 21.3 (10.0x)
17.4
20.0 (12.0x) (13.6)x
(14.0x)
10.0
(16.0x)
131
(44-20) 7742-3681 02 January 2014
Imagination Technologies
Overweight
Home Park Estate, Kings Langley, WD4 8LZ. T: 01923 260 511
IMG.L,IMG LN Business activities
Price: 175p Imagination Technologies is a semiconductor intellectual property (IP) company and
Price Target: 425p licenses graphics, video, display, connectivity/broadcast and other IP to
semiconductor companies. Imagination also has a consumer electronics business
(PURE Digital), manufacturing digital radios and internet-connected radios.
United Kingdom
European Semiconductors
AC History
Sandeep Deshpande
(44-20) 7134-5276
Imagination was founded in 1985 as VideoLogic and was listed on LSE in 1994. In
sandeep.s.deshpande@jpmorgan.com 1999, the company decided to refocus its strategy to intellectual property licensing
Bloomberg JPMA DESHPANDE <GO> and changed its name to Imagination Technologies. In December 2012, Imagination
J.P. Morgan Securities plc purchased MIPS for a consideration of US$100m.
Price Performance
550 Smartphones and tablets are Imagination’s key markets. Imagination is exposed to
450
Apple and Mediatek, a global leader in smartphones/tablets and a leader in emerging
p market smartphones respectively. The company re-engaged with Samsung in LSI in
350
’11 while Qualcomm has also licensed Imagination IP, though not graphics IP.
250
150 At 1H14 results, Imagination’s licensing revenue increased 65% HoH and
Imagination indicated that it was positioned for growth in 2H with full year licensing
YTD 1m 3m 12m
Abs -58.2% -35.4% -52.7% -59.8%
likely to rise 10%. Imagination also indicated that it saw 43 agreements or extensions
in 1H14 vs. 35 signed in 2H13.
Outlook
Management
Chairman Geoff Shingles
Imagination has guided to 580-630m chips (ex. MIPS) containing its IP should ship
CEO Sir Hossein Yassaie in FY14. Imagination has also indicated 1bn unit shipments by 2016. Imagination
CFO Richard Smith has delivered 28% EPS CAGR over the past three years, though earnings growth has
IR Susi Barrett stalled in the past and FY14 due to a slowdown in licensing, hence the lower
Major Shareholders
indicated royalty units from the company. The customer base remains intact - indeed
Intel Capital 14% the company has gained traction at new customers, so we see no reason why the
AXA 11% company cannot return to growth.
Prudential 10%
Apple 9%
Baillie Gifford 8%
Overweight
Imagination Technologies Group Plc (IMG.L;IMG LN)
Company Data FYE Apr 2011A 2012A 2013A 2014E 2015E
Date Of Price 17-Dec-13 Revenue FY (£ mn) 98 127 151 184 207
Price Target (p) 425 Adj.EBIT FY (£ mn) 24 37 33 27 32
Price Target End Date 30-Apr-15 Adj.EBIT Margin FY 24.4% 28.8% 22.1% 14.9% 15.5%
Market Cap (£ bn) 0.47 EV/EBITDA (x) FY 25.5 16.8 17.8 18.0 15.3
Shares O/S (mn) 266 Adj.P/E FY 23.2 18.2 19.5 21.5 18.3
Bloomberg EPS FY (p) 7.70 11.20 9.50 8.10 9.40
132
(44-20) 7742-3681 02 January 2014
Imagination Technologies
5% 1%
21%
17% North America
Technology
Asia
Pure
57% UK and Europe
21%
MIPS RoW
78%

£ in millions f
250 35.0%
207 28.8%
30.0%
200 184 24.4%
25.0% 22.1%
151
150 127 20.0% 16.6%
14.9% 15.5%
98
100 81 15.0%
60 64
10.0% 6.8%
50 4.7%
5.0%
0 0.0%

Pence
12.0 0.5x 0.2x

9.6 9.6 0.0x (0.4)x
10.0 9.0
8.1 (0.5x)
7.5
8.0 (1.0x)
(1.5x) (1.8)x
6.0 (2.1)x
4.3 (2.4)x (2.2)x (2.3)x
(2.0x)
4.0 (2.5x)
(3.2)x
2.0 1.2 1.6 (3.0x)
(3.5x)
133
(44-20) 7742-3681 02 January 2014
Imperial Innovations
Neutral
52 Princes Gate, Exhibition Road, London SW7 2PG. T: 0207 581 4949
IVO.L,IVO LN Business activities
Price: 364p Imperial Innovations (IVO) is a technology commercialisation and investment
Price Target: 350p company and a business incubator, sourcing intellectual property from four of the
UK’s top universities, Imperial, UCL, Oxford and Cambridge. The company is
involved in identification and backing of ideas, intellectual property protection,
United Kingdom
business development and licensing of technology, incubation and investment in
European Healthcare (Pharma,
Biotech) technologies related primarily to healthcare (biotech or medical devices firms) and
AC energy, environment and emerging technologies.
James D Gordon
(44-20) 7742-6654 History
james.d.gordon@jpmorgan.com
The group was initially established in 1986 as the technology transfer office for
Bloomberg JPMA GORDON1 <GO>
Imperial College, London to exploit commercial opportunities from the College’s
research base in science, technology and medicine. The company completed its IPO
Price Performance in 2006 and has subsequently expanded this research base to include Cambridge,
450 Oxford and UCL thereby spreading over four of the top research intensive
universities in Europe with a research income of over £1.2 billion per annum.
400
p 350
300 IVO provides financing from pre-company formation through all the stages of
250
development, up to and including listing or trade sale. Through a special Technology
Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Pipeline Agreement out to 2020, the company has proprietary access to technology
YTD 1m 3m 12m developed at Imperial College with opportunities in Oxford and Cambridge, and
Abs 16.9% -11.8% 25.5% 14.6% UCL sourced through local networks and management teams. Following a fund-
raising in 2011, IVO is now able to invest larger amounts, and maintain investment
for longer, in the most promising companies within the portfolio.
Management
Chairman Martin Knight Outlook
CEO Russ Cummings
CIO Nigel Pitchford IVO’s portfolio is maturing, with a number of portfolio companies likely to see value
Senior Director (NE) David Allen uplifts in 2014. In particular, we would highlight: (1.) The progress made for Oxford
Immunotec, with a the company recently announcing a potential NASDAQ IPO. (2.)
Major Shareholders Circassia, IVO’s most valuable company, by NAV, recently announced positive
Invesco 47%
Perpetual 26% results from a Phase II study for grass allergy treatment, with Phase III data in 2015.
Imperial College 19% (3.) PsiOxus, developing oncolytic vaccines, with data for the treatment of solid
Lansdowne Partners 14% tumours, expected 2014.
St. James’ PU Trust 2%
Neutral
Imperial Innovations Group plc (IVO.L;IVO LN)
Company Data FYE Jul 2012A 2013A 2014E 2015E
Price (p) 364 Revenue FY (£ mn) 4 3 3 3
Date Of Price 17 Dec 13 Gross Profit FY (£ mn) 3 3 2 2
Price Target (p) 350 Admin FY (£ mn) (9) (11) (10) (9)
Price Target End Date 31-Dec-14 EBIT FY (£ mn) (6) 3 (4) (3)
52-week Range (p) 490-245 PBT FY (£ mn) (4) 4 (3) (2)
Market Cap (£ bn) 0.23 Diluted EPS FY (p) (3.82) 3.97 (2.82) (2.21)
Shares O/S (mn) 63 Cash FY (£ mn) 44 66 63 51
134
(44-20) 7742-3681 02 January 2014
Imperial Innovations
9% 0%
Licence and royalty revenue
43% Revenue from services

UK
Corporate finance fees
48%
Dividends received
100%

5 5 100.0% 81.3%
4 4
5
4 50.0%
3 3 3
4 0.0%
3
3 -50.0% (71.7)%
(96.5)% (87.6)%
2 (108.2)%
2 -100.0% (139.4)%
1 -150.0%
1
0 -200.0%

Pence
5.0 4.0
4.0
3.0
2.0
1.0
0.0
(1.0)
(2.0)
(3.0) (2.2)
(4.0) (2.8)
(3.3)
(5.0) (3.8)
(4.5)
FY09 FY10 FY11 FY12 FY13 FY14E
135
(44-20) 7742-3681 02 January 2014
Intermediate Capital Group

Neutral
Juxon House, 100 St Paul’s Churchyard, London, EC4M 8BU. T: 0203 201 7700
ICP.L,ICP LN Business activities
Price: 416p The company structures and provides mezzanine finance, leveraged credit and
Price Target: 497p minority equity. It invests on behalf of third-party investors and its own balance
sheet. Total assets under management at the end of September 2013 were €12.1bn, of
which €9.8bn was managed on behalf of third parties.
United Kingdom
European Tobacco & Financials History
AC
Rae Maile The company was founded in 1989 and began investing third party capital in 1994. It
(44-20) 7134-9738 was listed on the London Stock Exchange in 1994.
rae.maile@jpmorgan.com
Bloomberg JPMA MAILE <GO> Operational overview
The business reports two business lines: the Fund Management Company (FMC)
Price Performance
which manages third-party assets and charges a fee for management of internal
550 assets; and the Investment Company, essentially the balance sheet investments. Over
500
time, as the company grows its third-party AUM and as the balance sheet
450
investments are realised and reinvested in seed capital in new funds, the relative
p weighting of profit contribution between the two businesses should shift in favour of
400
the FMC.
350
300 In the last financial half year to September 2013 the company successfully exited
nine of its largest 20 investments on the balance sheet, reducing the balance sheet
YTD 1m 3m 12m
Abs 25.6% -12.1% -8.5% 32.6%
investment portfolio to £2.0bn from £2.7bn at March 2013. It also reported further
success in launching new funds, with €1.7bn raised in the period, and another €0.7bn
raised at the start of the current financial period.
Outlook
Management
Chairman Justin Dowley
The company continues to progress with its strategy to grow its fund management
CEO Christophe Evian business while successfully managing its investment portfolio to maximise value for
CFO Philip Keller shareholders. The rate of exits is likely to return to lower levels through the course of
IR Ian Stanlake the year, with new investments being heavily skewed towards seeding new funds
Major Shareholders
rather than direct investments. The FMC has shown that it is capable of launching a
Schroders 11% variety of new funds, while the building of an in-house distribution team will reduce
Blackrock 6% the cost of launching new funds as fees will no longer need to be paid to introducers.
Aviva 6%
F&C 5% The balance sheet remains soundly financed as a result of the exits achieved in the
Baillie Gifford 4%
last half year, refinancing of existing banking facilities and a broadening of funding
sources, including the introduction of retail bonds.
Neutral
Intermediate Capital Group (ICP.L;ICP LN)
Price Target (p) 497 DPS (Net) FY (p) 19.0 20.0 21.0 22.1
Price Target End Date 31-Dec-14 Net Yield FY 4.1% 4.3% 4.6% 4.8%
52-week Range (p) 506-307 BV/Sh FY (p) 336 353 390 394
Market Cap (£ bn) 1.67 P/BV FY 1.4 1.3 1.2 1.2
Shares O/S (mn) 399 Revenue FY (£ mn) 438 370 445 335
136
(44-20) 7742-3681 02 January 2014
Intermediate Capital Group

2%
13%
38% Fund Management Company Europe
Asia
62%
Investment Company US
85%

£ million
500 445 60.0%

438 49.6%
450 48.8%
50.0% 45.7%
400 359 370
335 341 38.5% 38.7% 39.5%
350 40.0%
286 291 276
300
250 30.0%
200
150 20.0%
100 10.0%
50
0 0.0%
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY11 FY12 FY13 FY14E FY15E FY16E

Pence
100.0 88.4
80.0
60.0 47.3 43.3
40.0 32.6 32.4 27.5
25.0 26.3
20.0
0.0
(20.0)
(40.0) (35.1)
(60.0)
137
(44-20) 7742-3681 02 January 2014
International Personal Finance

Neutral
Meadow Lane. Leeds, LS11 5BD. T: 0113 285 6700
IPF.L,IPF LN Business activities
Price: 585p International Personal Finance (“IPF”) is a subprime lender of small sums in Eastern
Price Target: 665p Europe and Mexico. It serves in excess of 2.4m customers.
United Kingdom
History
European Tobacco & Financials The company was originally founded as a subsidiary of Provident Financial in 1996
Rae Maile
AC when work began on research into the feasibility of introducing home credit to new,
(44-20) 7134-9738
international markets. IPF was separately listed in July 2007 following a demerger
rae.maile@jpmorgan.com from the parent company.
Bloomberg JPMA MAILE <GO>
J.P. Morgan Securities plc Operational overview
IPF remains a combination of well established, highly profitable businesses in
Price Performance
Poland, Czech Republic, Slovakia and Hungary, with growing businesses in Mexico,
650
Romania, Lithuania and Bulgaria. The company offers small, unsecured cash loans -
typically sums equivalent to £200 – over short periods of between six months and
p
550 two years. Agents typically serve customers in their homes, and collect repayments
450
on a weekly basis. There is a single fixed fee for credit issued, and no default or
penalty charges.
350
Outlook
YTD 1m 3m 12m
Abs 52.4% 1.9% -6.5% 55.2% The company has benefitted from healthy demand for credit in its core markets and
favourable funding conditions to produce ROE in excess of 20% since 2009. Its
success in newer markets, such has Mexico, has been more muted, however, and we
await further progress before becoming more constructive. Increased competition
Management
CEO Gerard Ryan also represents a potential risk.
CFO Adrian Gardner
IR Rachel Moran
Major Shareholders
Standard Life 14%
JPMorgan 11%
Fidelity 9%
Blackrock 5%
Marathon 5%
Neutral
International Personal Finance Plc (IPF.L;IPF LN)
Price Target (p) 665 Pretax Profit Adjusted FY (£mn) 90 129 132 157
Price Target End Date 31-Dec-14 NAV/Sh FY (p) 151.0 187.2 217.5 254.1
52-week Range (p) 683-370 DPS (Net) FY (p) 7.7 9.0 10.1 11.3
Market Cap (£ bn) 1.40 Adj P/E FY 20.5 18.0 15.6 13.2
Shares O/S (mn) 257 P/NAV FY 4.1 3.3 2.8 2.4
Net Yield FY 1.3% 1.5% 1.6% 1.8%
138
(44-20) 7742-3681 02 January 2014
International Personal Finance

9% 9%
Poland & Lithuania Poland & Lithuania

18% 18%
41% Czech & Slovakia 41% Czech & Slovakia
Hungary Hungary
Mexico Mexico
12% 12%
Romania & Bulgaria Romania & Bulgaria
20% 20%

£ million 20.0%
17.2%
1,200 18.0% 15.5% 16.0%
14.5% 15.2%
985 16.0% 13.9%
1,000 868 14.0%
11.2%
753 12.0%
800
609 650 652 10.0%
557 550 8.0%
600
6.0%
400 4.0%
2.0%
200
0.0%
0 FY09 FY10 FY11 FY12 FY13E FY14E FY15E

Pence
50.0 46.5
45.0 39.5
40.0
34.2
35.0 29.6 30.0
30.0 24.6
25.0
19.7
20.0 17.7
15.0
10.0
5.0
0.0
139
(44-20) 7742-3681 02 January 2014
Interserve
Overweight
Ruscombe Park Twyford, Berkshire, RG10 9JU. T: 0118 932 0123
IRV.L,IRV LN Business activities
Price: 637p Interserve is a services, maintenance and building group operating in the public and
Price Target: 660p private sectors in the UK and internationally. Services range from advice, design and
construction to facilities management. In addition, Interserve is a leading player in
the access and formwork rental markets.
United Kingdom
AC History
Victoria Prior, CFA
(44-20) 7134-5912
In June 2000, the group moved from the Building and Construction sector to Support
victoria.prior@jpmorgan.com services, and changed its name from Tilbury Douglas to Interserve in 2001. Adrian
Bloomberg JPMA PRIOR <GO> Ringrose, who was Managing Director of InterserveFM since 2001, became Chief
J.P. Morgan Securities plc Executive in July 2003. Tim Haywood was appointed Finance Director in November
2010.
Price Performance
650
The group operates in the Support Services and Construction markets under five
p
550 divisions; Support Services UK which offers outsourced support services to public
450
and private sector clients ranging from facilities management to management of the
DWP Work Programme. Support Services International predominantly services the
350 Middle Eastern markets with a particular focus on oil & gas related support services.
UK Construction and International Construction (again predominantly based in the
YTD 1m 3m 12m
Abs 62.1% 3.1% 9.4% 74.0%
Middle East) both offer design and construction of buildings and infrastructure.
Equipment Services provides design, hire and sale of formwork, falsework and
associated access equipment for infrastructure and building projects.
Management Outlook
Chairman Norman Blackwell
CEO Adrian Ringrose Interserve is approaching a turning point in a number of its end markets, in our view.
CFO Tim Hayward The outlook for both Equipment Services (which is highly operationally geared) and
UK Construction is getting more positive. Construction in the Middle East is
Major Shareholders
Henderson 7%
anticipated to remain subdued, albeit there remains a need for infrastructure
Mondrian 7% investment over the medium-term, particularly in Qatar. As we progress through
Standard Life 5% 2014, the risk to estimates should be on the upside. In addition, with a strong balance
J.P. Morgan 4% sheet, we anticipate further acquisitions; including helping to build the International
M&G 3%
Support Services business.
Overweight
Interserve Plc (IRV.L;IRV LN)
EV/EBITDA FY 7.3 6.9 6.9 5.9 5.4
Adj P/E FY 14.6 13.9 13.6 12.4 11.7
Net Yield FY 3.0% 3.2% 3.3% 3.4% 3.5%
140
(44-20) 7742-3681 02 January 2014
Interserve
4% 1% 1%
7% 2%
12%
8% UK Support Services
United Kingdom
0%
International Support Services
Rest of Europe
UK Construction
50% Middle East & Africa
International Construction
Australasia
Equipment Services
30% Far East
Investments
Americas
1% 84%

2,200 6.0%
2,119
4.8%
2,100 2,065 5.0% 4.4%
2,022 4.1% 4.3%
3.7% 3.7% 3.8%
2,000 1,958 4.0% 3.5%
1,907
1,900 1,872 3.0%
1,848
1,800
1,800 2.0%
1,700 1.0%
1,600 0.0%

60.0 54.6 1.2x 1.0x

49.7 51.4
50.0 46.7 45.7 46.7 1.0x
42.8 43.7
0.8x 0.6x
40.0 0.6x
0.6x 0.4x 0.5x
0.4x
30.0 0.3x
0.4x
20.0 0.2x
10.0 0.0x
(0.2)x
0.0 (0.2x)
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E (0.4x)
141
(44-20) 7742-3681 02 January 2014
John Menzies
Neutral
108 Princes Street, Edinburgh, EH2 3AA. T: 0131 225 8555
MNZS.L,MNZS LN Business activities
Price: 783p John Menzies operates in two market segments: Distribution and Aviation. Menzies
Price Target: 807p Aviation is the world’s second largest, global aviation services business. Menzies
Distribution provides distribution and marketing services to the newspaper and
magazine supply chain in the UK.
United Kingdom
AC History
Victoria Prior, CFA
(44-20) 7134-5912
Menzies’ origins date back to 1833 when John Menzies set up as a bookseller in
victoria.prior@jpmorgan.com Edinburgh. It opened its first airport newsstand in 1951 and extended its operations
Bloomberg JPMA PRIOR <GO> into England through the acquisition of Wymans in 1959. In 1998, following a
J.P. Morgan Securities plc strategic review, Menzies started the exit from its retail operations with the sale of its
John Menzies retail shops to WH Smith. The newspaper and magazine distribution
Price Performance industry has been continually examined by the OFT over the past decade to
850
determine whether it is anti-competitive in nature. In 2008 the OFT announced that it
800 was unlikely to refer it to the competition commission and that the current structure
750 was appropriate.
p
700

600 Menzies Aviation (35% revenue, 59% operating profit) is the world’s second largest,
global aviation services business offering ground handling for commercial airlines,
YTD 1m 3m 12m
Abs 23.6% 1.4% -2.1% 27.2%
cargo handling and freight forwarding services. It operates at 131 airports in 29
countries. Menzies Distribution (65% revenue 41% operating profit) is one of two
wholesalers in the UK. It handles around 5m newspapers and 2.1m magazines per
Management day.
Chairman Iain Napier
CFO Paula Bell
Company Secretary John Geddes Outlook
While the outlook for Distribution remains muted, Menzies' Aviation business looks
Major Shareholders
Schroders 16%
set to continue to grow. The commercial ground handling market is anticipated to
D C Thomson 11% grow at c. 5% p.a. with potential for Menzies to outpace that as more airlines
Directors 8% outsource their ground handling operations (68% is currently self-handled) and the
J O Hambro 6% group pursues bolt-on acquisitions. Management is targeting 5-10% growth in
Mrs. P Menzies 4%
Aviation over the medium-term.
Neutral
John Menzies Plc (MNZS.L;MNZS LN)
EV/EBITDA (x) FY 6.7 6.8 7.3 6.9 6.5
Adj. P/E FY 11.2 11.7 11.8 11.6 11.2
Net Yield FY 3.1% 3.2% 3.3% 3.5% 3.6%
142
(44-20) 7742-3681 02 January 2014
John Menzies
6% 9%
8%
8%
Distribution United Kingdom
8%
Ground Handling Continental Europe
21%
Cargo Handling Americas
65% Rest of the World
Cargo Forwarding
75%

2,500 3.5% 3.2% 3.1% 3.3%

3.0% 3.0%
1,995 1,990 1,987 3.0% 2.7% 2.7%
1,838 1,900 1,904 2.5%
2,000
1,606 2.5%
1,476
1,500 2.0%
1,000 1.5%
1.0%
500
0.5%
0 0.0%

80.0 3.0x 2.6x

69.6 66.9 66.2 67.5 69.8
70.0
2.5x
60.0 54.3
50.0 43.8 2.0x 1.8x
40.0 1.4x 1.4x
31.3 1.5x 1.2x 1.2x 1.2x
30.0 0.9x
20.0 1.0x
10.0
0.5x
0.0
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E 0.0x
Source: J.P. Morgan estimates, Company data. FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
143
(44-20) 7742-3681 02 January 2014
Jupiter
Overweight
1 Grosvenor Place, London. T 0207 412 0703
JUP.L,JUP LN Business activities
Price: 365p Jupiter is an active fund manager with a well-known brand and an established track
Price Target: 392p record, seeking to add value for clients through the delivery of investment
outperformance over the medium to long term. It is primarily an equity investor but
with a growing presence in fixed income, multi-asset and absolute return sectors.
United Kingdom
AC History
Rae Maile
(44-20) 7134-9738
The Jupiter Group was founded in 1985 as a specialist boutique by John Duffield.
rae.maile@jpmorgan.com Having listed on the London Stock Exchange in 1991, it was sold to Commerzbank
Bloomberg JPMA MAILE <GO> in two tranches in 1995 and 2000. Duffield left in 2000 to form New Star Asset
J.P. Morgan Securities plc Management in direct competition to Jupiter. In June 2007 the management bought
the company out from Commerzbank, supported by financing from TA Associates.
Price Performance In June 2010, Jupiter listed on the main board of the London Stock Exchange and
420
raised £220m in an IPO.
380
p 340
As at end September 2013 the company had £29.9bn of assets under management
300
with a clear bias towards equities (over 77% of AUM); mutual funds (79%); and UK
260 clients (over 88%).
YTD 1m 3m 12m
Abs 25.6% -9.1% -1.5% 33.7%
The company has a top five position in UK retail mutual funds by share of assets
under management. The company has a long track record, stretching back to 1999,
for positive flows into UK mutual funds in each quarter which has continued in
Management
CEO Edward Bonham Carter recent years.
CFO Philip Johnson
Outlook
Major Shareholders
TA Associates 11% As with any asset manager, revenues are a function of market levels and new
Blackrock 9% business flows. Although market levels are beyond Jupiter's control, its long track
RBC 5% record for investment performance does mean that it has successfully gathered new
F&C 4%
Old Mutual 4%
assets despite market conditions, which have often been hostile.
Overweight
Jupiter Fund Management plc (JUP.L;JUP LN)
Price Target End Date 31-Dec-14 DPS (Net) FY (p) 7.8 8.8 11.5 12.5 13.5
52-week Range (p) 406-269 Net Yield FY 2.1% 2.4% 3.2% 3.4% 3.7%
Market Cap (£ bn) 1.67 Revenue FY (£ mn) 249 245 283 307 333
Shares O/S (mn) 458 EBITDA FY (£ mn) 135 124 148 162 175
(£ mn)
144
(44-20) 7742-3681 02 January 2014
Jupiter
Figure 397: AUM by product type Figure 398: AUM by client geography
7% 2% 3%1%
8%
12% Mutual funds UK
Segregated Mandates Europe
Private clients Middle East
Investment trusts ROW

79%
88%

£ million £ in millions
350 333 53.0% 52.4% 52.2%

307
300 283 52.0%
249 50.8%
245 51.0% 50.2%
250 231 50.1%
182 50.0% 49.0%
200
49.0%
150 47.5%
48.0%
100 47.0%
50 46.0%
0 45.0%

35.0 5.0x 4.4x

29.4
30.0 27.0 4.0x
24.7
25.0 3.0x
19.1 19.0 2.0x
20.0 17.6
1.0x 0.5x
15.0 0.0x
11.3 (0.6)x
0.0x (1.0)x
10.0 (1.3)x
(1.0x) (1.6)x
5.0
(2.0x)
145
(44-20) 7742-3681 02 January 2014
Kazakhmys Plc
Underweight
6th Floor, Cardinal Place, 100 Victoria Street, London SW1E 5JL. T: 0207 901 7800
KAZ.L,KAZ LN Business activities
Price: 201p Kazakhmys is a copper producer based in Kazakhstan with a total of 16 operating
Price Target: 180p mines, nine concentrators and two smelters (one currently suspended) spread across
three regional production hubs – Zhezkazgan, Central and East. The company is
developing two new open pit projects, Bozshakol and Aktogay, which are expected
United Kingdom to increase copper production by ~88% over the next five years. Until completion of
European Metals, Mining & Steel the proposed sale of its 50% stake in the Ekibastuz power station (announced Dec
Fraser Jamieson 2013), Kazakhmys will also remain the largest electricity producer in Kazakhstan,
(44- 20) 7742-5930 supplying ~20% of the nation’s power.
fraser.jamieson@jpmorgan.com
History
KAZ’s Balkash smelter complex began production in the 1930s, followed in the
Price Performance
1970s by Zhezkazgan. In 1992, the Government of Kazakhstan began a series of
900 privatisations, reducing its holding to 0% by 2002. The company listed on the LSE in
700 October 2005, entering the FTSE100 in December 2005. Over the course of 2007/08
p 500
KAZ built a 26% stake in Kazakh peer ENRC and acquired the Ekibastuz power
300
plant, although during the global economic downturn in 2010 KAZ sold a 50% stake
100
to Samruk, the state investment fund. The sale of ENRC in 2013 and expected sale of
KAZ.L share price (p)

the remainder of Ekibastuz in 2014 will refocus Kazakhmys portfolio on its core
MSCI-Eu (rebased) copper business.
YTD 1m 3m 12m
Abs -75.7% -18.8% -33.2% -74.4%
Rel -86.1% -14.5% -32.9% -85.0% Operational overview
We forecast copper production of 293kt in 2013, along with 127kt and 11.7Moz of
by-product zinc and silver output respectively. In 2014, we expect ongoing grade
decline will lead to a further fall in copper production to 288kt and a 15% increase in
Management
post-by-product credit unit costs to 289c/lb in FY14E from 251c/lb in FY13E. The
Chairman Simon Heale
CEO Oleg Novachuk deterioration in the legacy copper mines should be mitigated to a certain extent by
CFO Andrew Southam the start-up of Bozshakol and Aktogay from the end of FY15E, although this comes
IR John Smelt at a significant cost to the balance sheet with total combined project capex of
Major Shareholders
~$4.2bn.
Vladimir Kim 33%
Oleg Novachuk 8% Outlook
BlackRock 4% We estimate KAZ to be loss-making in FY14/15E on current spot prices. Although
Baillie Gifford 2% we see opportunities for KAZ to create value through a restructuring of the legacy
Franklin Templeton 2%
copper assets and delivery of growth projects, both come with significant challenges,
while a stretched balance sheet (3.9x ND/EBITDA by end ‘14E) also presents a risk.
We therefore maintain our UW rating despite a relatively undemanding end ‘14E
P/NPV of 0.86x.
Underweight
Kazakhmys Plc (KAZ.L;KAZ LN)
Price (p) 201 Adj. EPS FY ($) 0.94 0.26 (0.32) (0.30)
Price Target (p) 180 EBITDA FY ($ mn) 1,316 776 409 563
52-week Range (p) 840-190 Adj P/E FY 3.5 12.6 NM NM
Market Cap (£ bn) 1.05 EV/EBITDA (x) FY 0.1 3.2 7.4 7.8
Shares O/S (mn) 524 FCFF Yield FY (20.4%) (69.7%) (116.6%) (87.8%)
146
(44-20) 7742-3681 02 January 2014
Kazakhmys Plc
5%
5% 15%
5%
Copper
9% Silver
45% China
Gold
Zinc Europe
40%
Other
76%

6,000 60.0% 54.1%

4,771
5,000 4,315 50.0%
39.2%
4,000 3,563 3,353 40.0% 33.7%
3,085 3,069
25.8% 26.3%
3,000 30.0% 22.5%
2,000 20.0%
1,000 10.0%
0 0.0%
FY11 FY12 FY13E FY14E FY15E FY16E FY11 FY12 FY13E FY14E FY15E FY16E

300.0 280.4 5.0x 4.6x

4.5x
250.0 4.0x 3.5x
3.5x
200.0
3.0x
2.2x
2.5x 2.0x
150.0 118.4 2.0x
93.7
100.0 1.5x 0.9x
53.9 1.0x 0.4x
50.0 28.5 0.5x
8.8
0.0x
0.0 FY11 FY12 FY13E FY14E FY15E FY16E
FY11 FY12 FY13E FY14E FY15E FY16E
147
(44-20) 7742-3681 02 January 2014
KCOM
Overweight
Carr Lane, Hull, HU1 3RE. T: 01482 602711
KCOM.L,KCOM LN Business activities
Price: 97p KCOM has two main divisions, KC and KCom: KC consists of the incumbent
Price Target: 115p telecoms provider in Hull and East Yorkshire. Kcom is a managed communications
services provider to national enterprise customers, with network operations
outsourced to BT Wholesale.
United Kingdom
European Telecoms
AC History
Carl Murdock-Smith
(44-20) 7134-4947
KCOM’s origins are unique: it remained outside the nationalisation of the UK
carl.murdocksmith@jpmorgan.com telecoms industry in the early part of last century and was the sole municipally-
Bloomberg JPMA MURDOCKSMITH <GO> owned telephone company. In 1999, its shares were listed, raising £169m for
J.P. Morgan Securities plc expansion outside its East Yorkshire network, most notably in business services. The
following March, it raised a further £100m via a share placing. Kingston upon Hull
Price Performance Council disposed of its remaining 31% stake in May 2007, leaving KCOM with a
110
100% free float, removing a potential overhang to any corporate activity.
100
p 90
KCOM’s incumbent KC business in Hull and East Yorkshire is highly cash-
80
generative and faces similar dynamics to those faced by BT nationally, albeit
70 somewhat less challenging in terms of both regulation and competition (no
competitors have entered Hull). KC is also a passive beneficiary of the inflationary
YTD 1m 3m 12m
Abs 38.3% -6.7% 8.6% 36.7%
pricing environment being seen in UK consumer fixed-line. The Kcom division
targets UK nationwide enterprise telecoms customers. Kcom has taken measures to
better right-size its cost base, outsourcing national network management to BT in
2009, effectively turning itself into a variable cost-base reseller. Kcom has the
Management opportunity to focus on customer service and areas of speciality, in order to offer
Chairman Graham Holden superior service than the incumbent BT.
CEO Bill Halbert
CFO Paul Simpson
Outlook
Major Shareholders We view KCOM as a solid investment case, anchored by its KC division’s Hull
Invesco 12% incumbency to support its strong dividend yield. Business division Kcom remains in
FIL 10% a difficult space, although importantly it has right-sized its cost, and management is
Aviva 7%
positioning the division for a return to profitable growth.
FMR 6%
Overweight
KCOM Group Plc (KCOM.L;KCOM LN)
Price Target End Date 31-Mar-15 EBITDA FY (£ mn) 78 75 75 77 80
52-week Range (p) 106-69 Bloomberg EBITDA FY (£ 78 77 77 76 -
Net debt FY (£ mn) 75 88 90 92 93
Adj.P/E FY 13.2 12.5 12.8 12.1 11.5
148
(44-20) 7742-3681 02 January 2014
KCOM
8%
7%
28% 28%
KC (Hull) Kcom
Hull Rest of the UK
Eclipse Smart 421

72%
57%

600 25.0% 20.1% 20.0% 20.0% 20.3% 20.7%

517 17.1%
472 20.0% 14.4%
500 12.6%
413 15.0%
395 387 373 374 380 388
400 10.0%
5.0%
300
0.0%
200 -5.0%
-10.0% (13.6)%
100
-15.0%
0 -20.0%

9.0 8.5 3.0x 2.6x

7.8 8.1
7.4 7.6 1.9x
8.0 7.3
2.0x 1.2x 1.2x 1.2x 1.2x 1.2x
7.0 6.1 1.0x
6.0 5.5 1.0x
5.0 4.4 0.0x
4.0
(1.0x)
3.0
(2.0x) (2.4)x
2.0
1.0 (3.0x)
149
(44-20) 7742-3681 02 January 2014
Kenmare Resources
Neutral
Chatham House, Chatham Street, Dublin 2, Ireland. T: +353 1 6710411
JEV.L,KMR LN Business activities
Price: 19p Headquartered in Dublin, KMR produces titanium minerals, in the form of ilmenite
Price Target: 24p and rutile, and zircon from the Moma mine on the northeast coast of Mozambique.
Kenmare’s customers use ilmenite and rutile primarily in the manufacture of white
titanium dioxide pigment for use principally in paint, paper and plastics, while zircon
United Kingdom
is used to make opacifiers for ceramics.
AC
Roger Bell, CFA
History
(44-20) 7134-5932
roger.m.bell@jpmorgan.com Kenmare has been active in Mozambique since the 1980s, focusing on exploration
Bloomberg JPMA BELL <GO> for heavy minerals, gold, graphite and uranium. The acquisition and discovery of
J.P. Morgan Securities plc several mineral sands orebodies in Northern Mozambique, some through a joint
venture with BHP, led to the development of the integrated Moma project. Following
Price Performance BHP’s withdrawal from the JV in 1999 and acquisition of the remaining minorities in
40
2001, Kenmare obtained a 100% interest in Moma. Having secured debt and equity
35 funding, construction began in 2004 and operations commenced in 2007. A series of
30 production disruptions and capex increases on a second phase expansion has,
p
25 however, forced the company to raise new equity five times in the last six years.
20
A Phase 2 project to increase capacity to 1.2Mtpa from 800ktpa of ilmenite output is
YTD 1m 3m 12m
Abs -41.5% -8.0% -28.2% -37.3%
nearing completion. Our current ilmenite and zircon production forecasts therefore
sit at 1,180kt and 87kt, respectively, for FY14E, versus 804kt and 59kt for FY13E.
However, with production guidance yet to be updated post a recent fire in a section
Management
of the Wet Concentrator Plant and ongoing unplanned power outages on the
Chairman Justin Loasby Mozambican grid, we see a significant risk that production guidance will once again
Managing Director Michael Carvill be missed.
Financial Director Tony McCluskey
IR Virginia Skroski
Outlook
Major Shareholders While the long-term fundamentals of the titanium dioxide market appear compelling,
Prudential 17% the near-term outlook remains uncertain, with pigment producers having been in a
BlackRock 9%
Capital 6%
prolonged destocking phase. Furthermore, despite a compelling end '14E P/NPV of
Norges 4% 0.8x, we continue to see elevated execution risks to this valuation, and maintain a
JP Morgan 4% Neutral rating.
Neutral
Kenmare Resources PLC (JEV.L;KMR LN)
Price (p) 19 Adj. EPS FY ($) 0.01 0.02 (0.01) 0.01 0.03
Date Of Price 17 Dec 13 Bloomberg EPS FY ($) 0.01 0.03 -0.01 0.03 0.05
Price Target (p) 24 EBITDA FY ($ mn) 65 98 18 89 169
52-week Range (p) 38-18 Adjusted P/E FY 25.5 15.5 NM 26.5 10.2
Market Cap (£ mn) 475.77 EV/EBITDA FY 10.3 7.7 41.3 8.0 3.7
Shares O/S (mn) 2,463 FCF Yield FY (12.8%) (4.3%) (3.8%) 10.1% 17.8%
150
(44-20) 7742-3681 02 January 2014
Kenmare Resources
8% 7%
8%
Asia
Ilmenite
31% 45% Europe
Zircon
US
61%
Rutile 40% ROW

$ in millions
400 50.0% 46.9% 44.6%

361 355 41.9%
350 45.0% 39.1%
37.3%
40.0% 34.4%
300 259
235 35.0%
250 30.0%
200 167 171 25.0%
150 20.0%
92 15.0% 10.5%
100
10.0%
50 5.0%
0 0.0%
FY10 FY11 FY12E FY13E FY14E FY15E FY16E FY10 FY11 FY12E FY13E FY14E FY15E FY16E

$ cents
4.0 16.0x 14.2x

3.1
2.8 14.0x
3.0
2.0 12.0x
2.0 10.0x
1.2 1.2
1.0 8.0x
6.0x 3.8x
0.0 2.9x 2.8x 2.5x
4.0x
2.0x 0.8x 0.3x
(1.0)
(1.2) 0.0x
(2.0) (1.5) FY10 FY11 FY12E FY13E FY14E FY15E FY16E
FY10 FY11 FY12E FY13E FY14E FY15E FY16E
151
(44-20) 7742-3681 02 January 2014
Kier Group
Overweight
Tempsford Hall, Sandy, Bedfordshire SG19 2BD. T: 01967 640 111
KIE.L,KIE LN Business activities
Price: 1,845p Kier Group plc is a leading construction, services and property group.
Price Target: 1,850p
History
United Kingdom Kier was originally founded in 1928. The present day group was formed by an MBO
European Construction, Building in 1992 and listed on the LSE in 1996. The Group acquired MayGurney, a UK
Materials & Infrastructure support services company in 2013, for £221m.
AC
Emily Biddulph
(44-20) 7134-5906 Operational overview
emily.biddulph@jpmorgan.com Kier Group plc is a leading construction, services and property group, specialising in
Bloomberg JPMA BIDDULPH <GO> building and civil engineering, support services, residential and commercial property
J.P. Morgan Securities plc development and infrastructure project investment. The group has exposure to both
commercial small scale construction and larger, economic infrastructure projects,
Price Performance
1,900
with capacity to undertake large scale civil engineering such as Crossrail and works
associated with power station construction. The group has operations both in the UK
1,700
and overseas, primarily in the Caribbean, Hong Kong and Middle East. Construction
p 1,500 revenues were relatively robust through the last recession, supported by the group’s
exposure to public sector frameworks.
1,300
1,100
Outlook
YTD 1m 3m 12m We view Kier’s acquisition of May Gurney as a highly logical, value accretive
Abs 41.6% 7.6% 9.6% 43.6% transaction. We believe there are significant potential revenue synergies in the
combined group (yet to be reflected in our estimates), we significant scope for cross-
Management selling, as well as opportunity for bidding on more complex contracts, from an
Chairman Phil White increasingly competitive cost position. We view the cost synergies targeted (£20m by
CEO Paul Sheffield
CFO Haydn Mursell 2016, £5m in FY14) as highly achievable. In addition, we expect the group’s
increasing exposure to higher-margin overseas markets to continue to be a growth
Major Shareholders driver (management expects 9% of 2014 contract wins to come from overseas vs. 5%
Private individuals 11% in 2012).
Schroders 9%
Standard Life 8%
Jupiter 4%
Legal and General 3%
Overweight
Kier Group (KIE.L;KIE LN)
Price (p) 1,845 Adj.EPS FY (p) 153.16 156.84 138.68 102.54 124.97
Price Target End Date 11-Sep-14 Pre Tax Income FY (£ mn) 70 70 63 70 86
52-week Range (p) 1,860-1,129 Net debt / (cash) FY (£ mn) (165) (129) (57) 113 78
Market Cap (£ mn) 1,014.75 DPS FY (p) 64.00 66.00 68.00 69.00 70.00
Shares O/S (mn) 55 Div Yield FY 3.5% 3.6% 3.7% 3.7% 3.8%
Net Profit FY (£ mn) 58 60 55 56 69
152
(44-20) 7742-3681 02 January 2014
Kier Group
11% 6%
Construction
22% UK
Services
Property Rest of World

67%
94%

3,500 4.0% 3.7% 3.7% 3.6% 3.7%

3.3% 3.4%
2,872 3.5%
3,000 2,708 2.9%
2,500 2,332 3.0%
2,112 2,140 2.4%
2,000 2,030 1,943 2.5%
2,000
2.0%
1,500
1.5%
1,000 1.0%
500 0.5%
0 0.0%

250.0 237.4 £ in millions
1.5x 1.1x
200.0 1.0x 0.7x
153.2 156.8 0.5x
150.0 138.7
123.7 125.0 0.0x
(0.7)x
105.0 102.5 (0.5x)
100.0 (1.0x) (1.4)x (1.4)x (1.5)x
(1.5x) (1.9)x
50.0 (2.0x) (2.4)x
(2.5x)
0.0
(3.0x)
153
(44-20) 7742-3681 02 January 2014
Ladbrokes
Underweight
Imperial House, Imperial Drive, Rayners Lane, Harrow HA2 7JW. T: 0208 868 8899
LAD.L,LAD LN Business activities
Price: 170p Ladbrokes is the second-largest operator in the UK high street betting shop market
Price Target: 140p (29% market share). Its Digital business has underperformed its peers in the UK
online gambling market, with only 8% market share in FY12. This is down from
14% in FY08 and significantly below market leader William Hill. Ladbrokes signed
United Kingdom
a 5-year partnership deal with software provider Playtech in Q113, which we expect
Leisure to materially improve Ladbrokes’ online marketing and customer relationship
AC management, and therefore to accelerate revenue growth. Its European Retail
Victoria A Greer
(44-20) 7742-2509
division also operates betting shops in Ireland, Belgium and Spain.
victoria.a.greer@jpmorgan.com
Bloomberg JPMA GREER <GO> History
J.P. Morgan Securities plc Ladbrokes has been associated with betting in the UK since 1886, and first floated on
the London Stock Exchange in 1967. Between 1999 and 2005 Ladbrokes operated as
Price Performance
Hilton Group, but since then has been a pure-play betting and gaming operator. In
240 FY13, it acquired the Betdaq betting exchange for €30m and a small Australian
220 online operator for £13m.
p
200
180
160
Ladbrokes’ UK Retail business benefited from an upgrade to its gaming machines
LAD.L share price (p) (c.50% of revenue) in FY11and FY12, but in FY13 has suffered from the slowdown
MSCI-Eu (rebased)
in the UK gaming machine market seen across the industry.
YTD 1m 3m 12m
Abs -15.4% -4.1% -15.6% -12.7%
Rel -25.8% 0.2% -15.3% -23.3% Outlook
The crux of the investment thesis for Ladbrokes is the scope for a turnaround in its
online business, in our view. We expect the deal with Playtech to materially improve
Management
Chairman Peter Erskine
Ladbrokes’ online marketing and customer relationship management capability, and
CEO Richard Glynn therefore to accelerate Digital revenue growth once migration is complete in FY14.
CFO Ian Bull However, we think that it will be difficult to accelerate this growth beyond the mid-
teens growth rate that we forecast in FY14/15. We expect the UK online market to
Major Shareholders
Schroders 10%
become increasingly competitive as operators fight for market share ahead of the UK
Capital 7% Point of Consumption tax in FY15, and we note that the shift to mobile is making
Invesco 5% cross sell from sports to gaming materially more difficult. With only mid-teens
Jupiter 5% Digital top-line growth, we think it will be difficult for Ladbrokes to avoid a
Fidelity 5%
significant fall in the Digital EBIT contribution in FY15.
Underweight
Ladbrokes PLC (LAD.L;LAD LN)
Price Target (p) 140 Adjusted P/E FY 9.3 15.5 13.3 16.4
Price Target End Date 30-Nov-14 Revenue FY (£ mn) 1,085 1,096 1,145 1,184
DPS (Net) FY (p) 8.90 9.00 9.00 9.00
Div Yield FY 5.2% 5.3% 5.3% 5.3%
154
(44-20) 7742-3681 02 January 2014
Ladbrokes
1%
17% 15%
UK Retail
European Retail
12%
UK Other Europe
Online
70% Telephone
85%

1,400 25.0% 21.7%

1,230 20.6%
1,151 1,145 1,184 19.5% 19.0%
1,200
1,032 1,085 1,096
980 977 20.0%
1,000 16.3%
13.7%
800 15.0% 12.7%
11.2% 11.1%
600 10.0%
400
5.0%
200
0 0.0%

25.0 4.0x 3.6x

20.7 3.5x 3.1x
20.0 18.3
3.0x 2.4x
15.4 2.3x 2.3x
14.9 2.5x 2.1x
15.0 12.7 12.8 1.9x 1.9x
11.0 10.8 2.0x 1.5x
10.4
10.0 1.5x
1.0x
5.0 0.5x
0.0x
155
(44-20) 7742-3681 02 January 2014
Laird
Overweight
100 Pall Mall, London SW1Y 5NQ. T: 0207 468 4040
LRD.L,LRD LN Business activities
Price: 260p Laird manufactures electronic components that provide heat and electromagnetic
Price Target: 272p shielding, and also devices that enable connectivity through antennae systems.
Laird’s end markets include IT/telecoms, transportation and industrial, and
applications include use within telecoms equipment, handsets, tablets, gaming
United Kingdom
devices and automotive antennae. Laird operates globally but has a bias towards Asia
AC due to its electronics exposure.
Alexander Mees
(44-20) 7742-3681
History
Bloomberg JPMA MEES <GO> Laird was established in 1824 as a shipbuilder. In the 1970s and 1980s Laird was a
J.P. Morgan Securities plc leading manufacturer of railway rolling stock, supplying the London Underground
and the Hong Kong MRT. In 1985, Laird moved into electronics with the acquisition
Price Performance of Fullarton Fabrication. Its primary focus shifted to electronics in the 1990s with the
280
development of EMI shielding in 1994. In 2010, Laird acquired Cattron ($90m),
260
followed in 2011 by the acquisition of Klüver (€25m). Also in 2011, Laird fended off
240
a 200p hostile takeover bid from Cooper Industries.
p 220
200

160 Laird’s earnings were subject to some volatility in 2013, in line with the level of
activity from its major customer, Apple. The recent launch of iPhone 5C and iPhone
YTD 1m 3m 12m
Abs 22.5% 4.4% 11.0% 23.5%
5S, as well as Microsoft’s Xbox One, has led to an upturn in revenue and – as a
result of the high level of operational gearing – margins. In Wireless Systems,
revenue has been supported by a steady level of demand from the automotive and
infrastructure markets.
Management
Chairman elect Dr. Martin Read
CEO David Lockwood Outlook
CFO Jonathan Silver In our opinion, the key challenge for Laird is to diversify the source of its earnings so
IR Anna Hartropp as to limit the impact on group results from variations in activity levels from key
Major Shareholders customers. Investors, who still recall the problems Laird had with Nokia, have reason
Artemis 14% to be cautious of the risk of overreliance on one customer. In our opinion, Laird has
Franklin Resources 11% the framework in place to be able to reduce customer concentration (without
Schroders 7% shrinking the absolute size of its business with Apple) through organic and inorganic
Mondrian 7%
J O Hambro 5% means.
Overweight
Laird Plc (LRD.L;LRD LN)
Price Target (p) 272 Revenue FY (£ mn) 491.3 520.2 551.8 580.1
Price Target End Date 30-Sep-14 Pre Tax Income FY (£ mn) (101.9) 58.0 46.5 54.7
EBITDA FY (£ mn) 75.9 87.2 87.8 96.0
Div Yield FY 3.1% 3.8% 4.6% 4.8%
156
(44-20) 7742-3681 02 January 2014
Laird
2%
15%
Asia
38% Performance Materials
North America
47%
Europe
62% Wireless Systems
36% Rest of world

700 635 624 15.0% 11.1% 10.6% 12.0%

580 8.4% 9.4%
600 567 552 10.0%
529 520 4.2%
491 5.0% 0.9%
500 (1.5)%
0.0%
400
(5.0)%
300
(10.0)%
200 (15.0)%
(20.7)%
100 (20.0)%
0 (25.0)%

35.0 1.8x 1.7x 1.6x

29.7 1.6x 1.4x
30.0 27.4 1.3x
25.5 1.4x 1.2x
25.0 21.9 1.2x 1.0x
19.1 19.4
20.0 1.0x 0.8x
16.1 0.6x
0.8x
15.0 11.8
0.6x
10.0 9.6
0.4x
5.0 0.2x
0.0x
157
(44-20) 7742-3681 02 January 2014
Lamprell PLC
Overweight
Jebel Ali Free Zone, Box 33455, Dubai, UAE. T:+971 4 8039308
LAM.L,LAM LN Business activities
Price: 135p Lamprell’s business can be split into three areas: (1) upgrade and refurbishment of
Price Target: 175p offshore (largely jackup) drilling rigs at its Hamriyah and Sharjah facilities in the
UAE, (2) upgrade and refurbishment of land drilling rigs, and (3) new build
construction activity including FPSO topsides, tender drilling rigs, lift boats at its
United Kingdom
Jebel Ali, Hamriyah and Sharjah facilities.
European Oil & Gas
AC
Andrew Dobbing
History
(44-20) 7134-5944
andrew.dobbing@jpmorgan.com Lamprell was started in the 1970s in the UAE and worked on different engineering
Bloomberg JPMA DOBBING <GO> projects before getting increasingly involved in the offshore marine industry. The
J.P. Morgan Securities plc company refurbished its first jack-up drilling rig in 1992 and then eventually got into
the new build construction market. Since 2007, Lamprell has also been involved in
Price Performance the renewable sector by constructing self-propelled liftboats and wind farm
180
installation vessels.
160
p
120
Lamprell completed its strategic review early in 2013 and decided to ‘stick to the
100 basics’ after the departure of its earlier management team. The new management
80 team has rectified its weak financial position and successfully steered the company
back to profitability. The company has established a new ERP system to improve its
YTD 1m 3m 12m
Abs 19.2% -11.8% -6.4% 41.7%
reporting systems and supply chain management.
Outlook
We turned positive on Lamprell’s outlook after its successful implementation of the
Management
‘back to basics’ strategy and the completion of its last problematic contracts.
President Steven Lamprell
CEO James Moffat
Lamprell is well positioned to benefit from the increasing demand for both rig
refurbishment and new build work as the global jack-up fleet ages over the coming
Major Shareholders decade (55% of the global jack-up fleet is over 30 years old). Lamprell’s facilities are
Lamprell Holdings 33% based in the Middle East, which is not only the largest jack-up market but also has a
Schroders 12% disproportionate share of older rigs.
Prudential 6%
Massachusetts Financial 5%
Legg Mason 5%
Overweight
Lamprell PLC (LAM.L;LAM LN)
Price (p) 135 Adj. EPS FY ($) 0.31 (0.43) 0.08 0.17 0.25
Date Of Price 17 Dec 13 Bloomberg EPS FY ($) 0.31 -0.41 0.07 0.17 0.25
Price Target (p) 175 Revenue FY ($ mn) 1,148 1,045 1,051 1,046 1,098
Price Target End Date 31-Dec-14 EBITDA FY ($ mn) 99 (65) 58 77 100
52-week Range (p) 183-88 EBITDA Margin FY 8.6% (6.2%) 5.5% 7.3% 9.1%
Market Cap (£ bn) 0.35 EV/EBITDA FY 6.8 NM 8.9 6.5 4.6
Shares O/S (mn) 260 ROE FY 18.1% (23.7%) 5.1% 9.6% 13.0%
Adj P/E FY 7.1 NM 26.7 13.3 8.8
158
(44-20) 7742-3681 02 January 2014
Lamprell Plc
12%
New build activities - oil and
gas
New build activities -
17% renewable
47% Upgrade and refurbishment
UAE
activities
Offshore construction
Other services
17%
7% 100%

1,400 15.0% 12.2% 11.5%

1,148 9.2% 9.1% 10.0%
1,200 1,045 1,051 1,046 1,098 1,098 10.0%
8.6%
7.3%
1,000 5.5%
800 741 5.0%
600 504
426 0.0%
400 (6.2)%
-5.0%
200
0 -10.0%

60.0 2.0x 1.6x

47.6 1.0x
50.0
40.0 30.9 1.0x
29.3
30.0 21.3 25.1
13.2 16.5 0.0x
20.0 (0.9)x (1.0)x (1.0)x (1.0)x (1.2)x
8.2
10.0 (1.0x) (1.5)x
0.0
(10.0) (2.0x)
(20.0)
(3.0x) (3.7)x
(30.0)
(40.0) (4.0x)
159
(44-20) 7742-3681 02 January 2014
Lancashire
Neutral
60 Fenchurch Street, London, EC3M 4AD. T: 020 7264 4000
LRE.L,LRE LN Business activities
Price: 765p Lancashire is a specialist insurance underwriter. The Company writes a diversified,
Price Target: 804p largely short tail, book of business across Reinsurance, Property, Energy, Marine and
Aviation lines in Bermuda, the London Market and at Lloyd's.
United Kingdom
European Insurance
History
Andreas van Embden
AC Lancashire was founded in 2005 post the US hurricane season (KRW) with the aim
(44-20) 7134-4574
of benefitting from a dislocated reinsurance and retro markets. In addition,
andreas.vanembden@jpmorgan.com Lancashire diversified into Offshore Energy and Marine lines. Since then the
Bloomberg JPMA VANEMBDEN <GO> business model has evolved with the recent acquisition of Cathedral, providing LRE
J.P. Morgan Securities plc with an underwriting platform at Lloyd's, and the build-up of a Third Party capital
management business, Kinesis.
Price Performance
950
900
The acquisition of Cathedral will complement Lancashire’s core business model in
p
850
London and Bermuda and its Kinesis fund arm with access to the worldwide risks
800
that are being brought to Lloyd’s by the global brokers. Cathedral has a solid
750 underwriting track record in short tail specialty insurance and reinsurance lines but in
700 niches that Lancashire has not previously underwritten. In addition, the transaction
allows Lancashire, through Cathedral, to use the worldwide licensing agreements at
YTD 1m 3m 12m
Abs -3.4% -2.2% -0.1% -3.4%
Lloyd’s and its efficient capital structure.
Outlook
The acquisition of Cathedral and the launch of the Kinesis capital management
Management
Chairman Martin Thomas business will allow Lancashire to better navigate challenging market conditions
CEO Richard Brindle across its Reinsurance and specialty lines. More importantly, the company is now
CFO Elaine Whelan well positioned to benefit from an upturn in the market or a market dislocation post a
IR Jonny Creag-Coen nat cat event across its various platforms (Bermuda, London Market, Lloyd’s and
Major Shareholders Kinesis). Lancashire aims to generate a cross –cycle RoE of 13% above the risk free
Invesco 10% rate, be profitable every 4 out of 5 years and cap its peak exposures at 25% of capital.
Standard Life 8% We believe the transaction is of significant strategic value to Lancashire in the
Franklin Mutual 5% current more challenging market and offers long term growth options for the group.
L&G 5%
Neutral
Lancashire Holdings Limited (LRE.L;LRE LN)
Price (p) 765 Adj. EPS FY ($) 1.20 1.29 0.96 1.06 1.05
Date Of Price 17 Dec 13 Adjusted P/E FY 10.4 9.6 12.9 11.8 11.8
Price Target (p) 804 BV per share FY ($) 8.46 8.59 7.63 8.70 9.77
Price Target End Date 30-Jun-14 P/BV FY 1.5 1.4 1.6 1.4 1.3
52-week Range (p) 838-683 ROE FY 16.2% 17.3% 14.1% 15.3% 13.5%
Market Cap (£ bn) 1.23 Combined ratio FY 63.7% 63.8% 69.6% 72.4% 72.9%
Shares O/S (mn) 161 Adjusted Pre Tax Income 219 237 198 235 239
FY ($ mn)
Dividend (Net) FY ($) 59.93 132.03 116.92 9.42 9.42
160
(44-20) 7742-3681 02 January 2014
Lancashire
Figure 445: Revenue by business division (Incl Cathedral) Figure 446: Revenue by geography (LRE excl Cathedral)
8% 10% 13%
4%
Reinsurance North America
34% 5%
23% Direct property International
Marine Europe
Energy Far East
12% Aviation /other Other

23% 68%

$ in millions
900 827 70.0% 65.3%

808
800 60.0% 55.2%
700 614
595 575 583 563 50.0%
600 38.1% 40.6%
40.0% 35.1%
500 29.1% 28.9%
400 30.0%
300 20.0%
200
10.0%
100
0 0.0%

Pence
700.0 80.0% 69.6% 72.4% 72.9%

613.4
70.0% 63.7% 63.8%
600.0 547.5 528.8 546.4
541.0 54.3%
500.9 479.1 60.0%
500.0 44.6%
50.0%
400.0
40.0%
300.0 30.0%
200.0 20.0%
100.0 10.0%
0.0 0.0%
161
(44-20) 7742-3681 02 January 2014
Liontrust Asset Management

Underweight
2 Savoy Court, London, WC2R 0EZ. T: 0207 412 1700
LIO.L,LIO LN Business activities
Price: 248p Liontrust is a specialist fund management group. It provides process-driven portfolio
Price Target: 243p management services to a range of funds, targeted primarily at professional investors
and advisers. Its management covers segregated and pooled pension fund accounts,
unit trusts, offshore funds, PEPs and ISAs, and hedge funds.
United Kingdom
AC History
Rae Maile
(44-20) 7134-9738
The company was founded in 1995 and listed on the London Stock Exchange in
rae.maile@jpmorgan.com 1999. Funds under management grew from £0.6bn in March 1999 to a peak of
Bloomberg JPMA MAILE <GO> £5.7bn in early 2007 before falling back to £1.2bn in October 2010. Material changes
J.P. Morgan Securities plc in senior management and fund management staff; an improvement in investment
performance and net flows; stronger equity markets; and a series of acquisitions,
Price Performance have together been responsible for an increase in AUM to £3.6bn at 11 November
260
2013.
p 180 The company manages assets in a number of discrete strategies, including the
Cashflow Solution (23%); Economic Advantage (46%); Multi-Asset (3%); Credit
140
(11%); Macro (14%); and Indexed (2%). By distribution channel the company
100 sources its funds from the UK Retail market (70%); Institutions (15%); Offshore
Funds (12%) and PMS (3%).
YTD 1m 3m 12m
Abs 109.3 -3.5% 0.4% 120.0
% % After a period of being loss-making following material fund outflows, the company
has returned to being profitable (£3.8m of adjusted PBT for the half year to
September 2013) and to paying a dividend (1p in respect of the 2013 financial year,
Management
Chairman Adrian Collins
1p in respect of the first half of the current financial year).
CEO John Ions
CFO Vinay Abrol Outlook
Major Shareholders
The company’s recovery from its recent nadir has been impressive, we believe, and
Schroders 21% the continued ability of the company to find and complete interesting bolt-on
Blackrock 8% acquisitions has accelerated that recovery. Inevitably market levels will be a major
Henderson 6% influence on revenues, as with any fund management company, but the company
Investec 6%
Artemis 5%
does appear to have established the right balance between returns to employees and
returns to shareholders, which was notable by its absence under previous leadership.
Underweight
Liontrust Asset Management (LIO.L;LIO LN)
Price (p) 248 Adj. EPS FY (p) (2.1) 7.6 15.7 21.3
Date Of Price 17 Dec 13 Bloomberg EPS FY (p) -1.00 6.20 14.60 20.00
Price Target (p) 243 Adj P/E FY NM 30.9 15.1 11.1
Shares O/S (mn) 39 EBIT FY (£ mn) (2) (4) 8 11
Pretax Profit Adjusted FY (£mn) (2) (4) 8 11
162
(44-20) 7742-3681 02 January 2014
Liontrust Asset Management

Asset management UK
100% 100%

40 36 36 50.0%
37.2%
35 32 40.0% 32.4% 33.1%
29 26.7%
30 30.0%
25 20.0%
20
20 10.0% 2.0%
14 14
15 11 0.0%
(11.7)%
10 -10.0% (18.3)%
(22.1)%
5 -20.0%
0 -30.0%

30.0 28.0 27.0 20.0x

7.8x
25.0 21.3 10.0x 1.8x 2.8x
(2.3)x (5.0)x
20.0 15.7 0.0x (6.5)x (7.8)x
15.0 (10.0x)
10.0 7.6
5.8 (20.0x)
5.0
(30.0x)
(41.0)x
0.0
(40.0x)
(5.0) (2.1)
(50.0x)
(10.0) (6.2) FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
163
(44-20) 7742-3681 02 January 2014
London Mining
Overweight
Nations House, 103 Wigmore Street, London W1U 1QS. T: 020 7408 7500
LOND.L,LOND LN Business activities
Price: 100p London Mining is a producer and developer of iron ore concentrate for the global
Price Target: 195p steel industry, with one operating mine, Marampa, in Sierra Leone, and early stage
projects in Greenland and Saudi Arabia.
United Kingdom
History
Roger Bell, CFA
AC London Mining was founded in 2005 by current CEO Graeme Hossie and former
(44-20) 7134-5932
CEO Chris Brown. In the same year, London Mining acquired an exploration license
roger.m.bell@jpmorgan.com for the Isua mine in Greenland, followed in 2006 by the purchase of the Marampa
Bloomberg JPMA BELL <GO> license in Sierra Leone, and in 2007 by the acquisition of an operating mine in Brazil
J.P. Morgan Securities plc for $89m. In 2008, after just 15 months of ownership, London Mining sold its
Brazilian asset to ArcelorMittal at a $660m profit (1200% return), paid off all debts
Price Performance and returned $220m to shareholders. Having listed on the Oslo Axess exchange in
200
2007, in 2009 London Mining listed on AIM with a $74m secondary placing. Since
180
then, London Mining 's focus has been the development of the Marampa mine,
160
reaching first production in late 2011.
p 140
120

80 London Mining is targeting 3.3-3.4Mt of production and 3.5-3.6Mt of shipments
(wet basis) from Marampa during FY13E. The commissioning of a new ball mill and
YTD 1m 3m 12m
Abs -36.6% -19.0% -15.4% -25.9%
gravity circuit by the end of FY13E is expected to raise capacity to 5.4Mt (wet),
while the company plans a further $280m in capex on additional magnetic separation
and crushing capacity over the next three years to increase output to 6.5Mt over an
Management extended >40 year mine life. The company expects to achieve long-term operating
Chairman Michael Miles OBE costs of $42-45/t (wet) on an FOB basis.
CEO Graeme Hossie
CFO Benjamin Lee
IR Thomas Credland Outlook
While iron ore prices have surprised to the upside during 2013 (sitting at ~$140/t as
Major Shareholders
UBS 10% of 4th Dec), this has led to some nervousness over the short-term outlook for iron ore
Blackrock 10% prices as we enter 2014. In the long-term, we expect low cost Australian and
Standard Life 10% Brazilian supply will displace higher cost Chinese production, meaning prices will
GIC 9% trend towards the marginal cost ex-China of ~$80/t (CFR, 62% Fe). However, even
F&C 9%
on this conservative price assumption, we calculate an end ‘14E NPV of 194p/share.
Overweight
London Mining PLC (LOND.L;LOND LN)
Price (p) 100 Adj. EPS FY ($) (0.21) (0.05) 0.53 0.32
Date Of Price 17 Dec 13 Revenue FY ($ mn) 121 308 480 460
Price Target (p) 195 Adj EBITDA FY ($ mn) (15) 53 176 141
Price Target End Date 31-Dec-14 EBITDA Margin FY (12.6%) 17.2% 36.7% 30.8%
52-week Range (p) 190-86 EBIT FY ($ mn) (27) 24 139 100
Market Cap (£ mn) 134.24 EBIT Margin FY (22.5%) 7.8% 28.9% 21.8%
Shares O/S (mn) 134 Adj P/E FY NM NM 3.1 5.1
Bloomberg EPS FY ($) -0.35 0.14 0.51 0.42
164
(44-20) 7742-3681 02 January 2014
London Mining
Iron ore Asia
100% 100%

$ in millions
600 40.0% 36.7%

30.8%
480 460
500 30.0%
17.2%
400 20.0%
308
300 10.0%
200 0.0%
121
(12.6)%
100 (10.0)%
0 (20.0)%
FY12 FY13E FY14E FY15E FY12 FY13E FY14E FY15E

$ cents
60.0 52.6 6.0x 3.9x

50.0 4.0x
0.8x 1.0x
40.0 32.2 2.0x
30.0 0.0x
20.0 (2.0x)
(4.0x)
10.0
(6.0x)
0.0
(8.0x)
(10.0) (5.0) (10.9)x
(10.0x)
(20.0)
(12.0x)
(30.0) (21.1)
165
(44-20) 7742-3681 02 January 2014
LondonMetric
Overweight
1 Curzon Street, London, W1J 5HB. T: 0207 484 9000
LMP.L,LMP LN Business activities
Price: 131p LondonMetric invests across the UK in Retail and Distribution properties as well as
Price Target: 130p Greater London real estate opportunities. The strategy focuses on increasing income
and improving capital values through active asset management initiatives,
opportunistic acquisitions, JVs, and short cycle developments. As of September
United Kingdom
2013, its portfolio comprised 37% Retail, 20% Distribution, 14% Office, 10%
European Property
AC Residential, 7% Leisure and 10% Development.
Tim Leckie, CFA
(44-20) 7134-4477 History
timothy.leckie@jpmorgan.com LondonMetric is a UK REIT, which was admitted on the Official List and to trading
on the main market of the London Stock Exchange on 28 January 2013, as a result of
the merger between London & Stamford Property and Metric Property Investments.
Price Performance
London & Stamford began trading on the AIM market of the LSE from 7 November
2007. Metric Property began trading on the main market of the LSE since its IPO on
130 24 March 2010.
p
LondonMetric’s portfolio remains in excellent shape, with a 7.8% increase in
110
annualised rent roll to £67.4m as at the 1H, due in part to accretive portfolio
100 management (310bps of positive yield arbitrage between acquisitions and disposals
over the period). Occupancy stands at 99% (March 2013: 95%), and the WAULT
YTD 1m 3m 12m
Abs 19.6% -0.2% 13.9% 22.0%
increased 11.8 years unexpired (to first break). LondonMetric only has 3.4% of rental
income expiring over the next 3 years, and 24.9% of rental income is now subject to
fixed uplifts, rising to 31% post period end.
Management
Chairman Patrick Vaughan Outlook
CEO Andrew Jones LondonMetric remains one of our preferred stocks. The company delivered positive
CFO Martin McGann recent results earlier this month, while its strategy of focusing on the regions and
IR Juliana Weiss Dalton
reducing exposure to London is increasingly paying off. This strategy is in line with
Major Shareholders our view and the company’s long, solid income stream (11.8 years lease length, 99%
Caledonia 5.3% occupancy) and best in class management team, means LondonMetric ticks the right
Rothschild 5.1% boxes.
Rathbone 4.5%
Blackrock 4.4%
Electra 4.1%
Overweight
LondonMetric Property PLC (LMP.L;LMP LN)
Market Cap (£ bn) 0.82 NAV premium (discount) (6.7%) 1.1% 1.0% (2.7%) (7.7%)
ROIC FY 2.2% 0.1% 5.4% 7.3% 7.9%
ROE FY 3.7% 3.4% 4.5% 6.3% 7.1%
166
(44-20) 7742-3681 02 January 2014
LondonMetric
10%
7% Retail
38% Distribution
10% Office
UK
Residential
Leisure
14%
Development
21% 100%

120 78.0% 76.8%

98 75.7%
100 76.0% 75.1%
87
80 74.0%
65
71.3%
60 50 48 72.0% 70.4%
45 70.0%
40 70.0%
20 68.0%
0 66.0%

9.0 8.1 14.0x 12.5x 12.5x

8.0 7.0 12.0x 10.1x
7.0 9.5x
10.0x 8.8x
6.0 7.1x
4.9 8.0x
5.0 4.4
3.9
4.0 6.0x
3.0
3.0 4.0x
2.0 2.0x
1.0 0.0x
0.0 FY11 FY12 FY13 FY14E FY15E FY16E
FY11 FY12 FY13 FY14E FY15E FY16E
167
(44-20) 7742-3681 02 January 2014
LXB Retail Properties

Neutral
Ogier House, The Esplanade, St Helier, Jersey, JE4 9WG. T: 0207 432 7900
LXB.L,LXB LN Business activities
Price: 121p LXB is a focused out of town retail park developer. More recently, the group has
Price Target: 130p added some residential exposure.
United Kingdom
History
European Property LXB floated in October 2009 with the strategy of looking to capitalise on the
Neil Green, CFA
AC structural change occurring in the out-of-town UK retail sector through focused
(44-20) 7134-4478
acquisition of retail parks where there is scope, through development and asset
neil.d.green@jpmorgan.com management. The company has an external management structure (LXB Manager)
Bloomberg JPMA GREEN <GO> and there is a continuation vote in October 2014.
Price Performance
LXB announced 1H13 results earlier this year, in which the key takeaway was the
126
material disposals at Greenwich (slightly earlier than expected in our view). The sale
122 of the Sainsbury, M&S, Stone Lake and Wickes sites crystallises £41m of profit,
p 118 securing a 26.5% return on cost (roughly inline with JPMe). This will allow the
group to return £103m of capital over the next 18 months, in addition to the £25m it
114
has already returned via its share buyback earlier this year. Elsewhere, EPRA NAV
110 came in at 117p (JPMe FY: 136p) and while the group remains committed to its
remaining retail schemes, it is also looking to take advantage of wider opportunities
YTD 1m 3m 12m
Abs 2.5% -2.4% 10.0% 2.5%
notably its Living Villages concept.
Outlook
Management The group continues to ramp up development and secure additional lettings to
Chairman Phil Wrigley
CEO Tim Walton retailers (predominantly non-food given these anchors have already been secured).
CFO Brendan O’Grady The group has secured attractive disposals at Greenwich and has signaled its
IR intention to take advantage of the opportunity it sees in residential. However, the
group will have a continuation vote in October 2014, when shareholders will have
Major Shareholders
Morgan Stanley 18% the opportunity to determine LXB’s future.
Invesco 17%
Jupiter 11%
Perpetual 9%
Neutral
LXB Retail Properties PLC (LXB.L;LXB LN)
Company Data FYE Sep 2011A 2012A 2013E 2014E 2015E
Price (p) 121 Adj. EPS FY (p) 0.01 (1.07) 0.28 1.89 0.81
Date Of Price 17 Dec 13 Adj P/E FY 8,085.0 NM 433.2 63.9 149.8
Price Target (p) 130 EVA spread FY 5.2% (3.6%) 15.9% 12.3% (2.3%)
Price Target End Date 30-Sep-14 DPS FY (p) 0.00 0.00 0.00 0.00 0.00
52-week Range (p) 127-105 Dividend Yield FY 0.0% 0.0% 0.0% 0.0% 0.0%
Market Cap (£ bn) 0.31 Adjusted NAV ps FY (p) 108.2 112.0 136.9 171.0 181.5
Shares O/S (mn) 254 ROIC FY 13.5% 4.7% 24.1% 20.5% 5.9%
NAV premium (discount) 4.4% 0.9% (17.5%) (33.9%) (37.7%)
FY
168
(44-20) 7742-3681 02 January 2014
LXB Retail Properties

Property UK
100% 100%

45 41 80.0% 61.5%
40 48.8% 51.0%
60.0%
35 40.0% 24.1%
30 25 9.4%
20.0%
25
19 0.0%
20
-20.0% (39.5)%
15
9 -40.0%
10 5 5 (61.6)%
5 1 -60.0%
0 -80.0%

200.0 181.5 100.0x

171.0 51.7x
180.0 22.3x
50.0x 17.1x 15.6x 8.3x
160.0 136.9
140.0 0.0x (22.2)x
108.2 112.0
120.0
94.2 (50.0x)
100.0
80.0 (100.0x)
60.0
40.0 (150.0x) (186.2)x
20.0 (200.0x)
169
(44-20) 7742-3681 02 January 2014
Man Group
Neutral
Riverbank House, 2 Swan Lane, London, EC4R 3AD. T: 0207 144 1000.
EMG.L,EMG LN Business activities
Price: 80p Man Group is one of the world’s largest independent alternative investment managers. It
Price Target: 102p owns a number of brands - AHL, GLG and FRM in particular - and operates a diverse
range of investment strategies in both hedge funds and long only products.
United Kingdom History
European Tobacco & Financials Man can trace its foundation to James Man, who in 1783 founded a sugar cooperage
AC
Rae Maile and brokerage in London. The company moved into alternative investment
(44-20) 7134-9738 management in 1983, and bought a majority stake in AHL in 1989. The company
rae.maile@jpmorgan.com listed on the London Stock Exchange in 1994. The company sold its brokerage
Bloomberg JPMA MAILE <GO>
business in 2007, and in 2010 it acquired GLG.
Price Performance
The company’s three main investment businesses operate largely autonomously.
130 AHL invests using a systematic approach usually typified as being a trend-following
110
model investing via managed futures. GLG is a discretionary, multi-strategy global
p
investment management business offering a range of absolute and long-only
90
strategies across asset classes, sectors and geographies. FRM specialises in open
70
architecture hedge fund and “alpha solutions”, including fund of hedge funds, client
EMG.L share price (p)

advisory solutions, outsourced research and consulting.
MSCI-Eu (rebased)
YTD 1m 3m 12m
Abs -4.6% -3.2% -10.4% -1.9%
Outlook
Rel -15.0% 1.1% -10.1% -12.5% The company has been in a period of retrenchment over the last couple of years,
seeking to cut costs and husband its capital resources in the face of material declines
in revenues as assets under management have declined as a result of poor investment
Management performance. With the cost-cutting programme well advanced, the major influence
Chairman Jon Aisbitt
CEO Emmanuel Roman
on revenue expectations and hence profits will come from investment performance,
CFO Jonathan Sorrell in particular at AHL. In this respect the portents are mixed. A strong start to 2013 in
IR Fiona Smart investment performance terms unwound rapidly through May, deteriorated further
through until October and a recent uptick has returned the NAV only to the levels of
Major Shareholders
mid June. Re-establishing a credible three-year track record for AHL will be
UBS 6% essential in reinvigorating flows, we believe. In the meantime, the finances of the
Legal & General 4% company are sound, with material cash and capital backing to the balance sheet,
Odey 4% albeit that some of the capital strength is a direct result of the winding down of the
Point Pleasant 4%
highly profitable guaranteed book of business sold prior to the financial crisis.
Neutral
Man Group Plc (EMG.L;EMG LN)
Price (p) 80 Adj. EPS FY ($) 0.11 0.09 0.14 0.18
Market Cap (£ bn) 1.47 Revenue FY ($ mn) 1,299 1,115 1,143 1,319
Shares O/S (mn) 1822 Pretax Profit Adjusted FY (£mn) 278 206 302 403
170
(44-20) 7742-3681 02 January 2014
Man Group
7% 14% 17%
UK
Management fee income 3%
USA
Offshore locations
Performance fee income
Other
93% 66%

1,800 1,655 45.0% 39.0%

1,600 40.0%
1,400 1,254 1,299 1,319 35.0% 30.2%
1,115 1,143 26.1%
1,200 30.0% 25.4% 24.5%
22.3%
1,000 25.0%
800 20.0%
600 15.0%
400 10.0%
200 5.0%
0 0.0%

30.0 27.6 0.0x

(1.4)x
25.0 (1.0x) (1.8)x
(2.0x) (3.0)x
20.0 17.7
(3.0x) (3.6)x
13.8
15.0 (4.0x) (4.7)x
11.4
11.3 9.4
10.0 (5.0x) (5.7)x
5.0 (6.0x)
(7.0x)
171
(44-20) 7742-3681 02 January 2014
Marston's
Neutral
Marston’s House, Brewery Road, Wolverhampton WV1 4JT. T: 01902 711 811
MARS.L,MARS LN Business activities
Price: 147p Marston’s operates around 1,900 pubs in the UK, with around 45% of EBIT from
Price Target: 160p managed pubs and around 45% from tenanted and leased pubs. The remaining 10%
of group EBIT comes from its brewing operations, which are focused on the growing
premium ale segment of the market. Martson’s estate is biased towards the West
United Kingdom
Midlands and the North of England, with a relatively low exposure to the strong
Leisure London pub market in comparison to its peers. It also has relatively high financial
AC gearing (5.5x net debt/EBITDA at FY14E).
Victoria A Greer
(44-20) 7742-2509
Bloomberg JPMA GREER <GO> Marston’s began as Wolverhampton & Dudley Breweries in 1890, acquiring
J.P. Morgan Securities plc Marston, Thompson & Evershed in 1999. The company has made a number of
smaller acquisitions since then, including Burtonwood and Jennings in 2005,
Price Performance
Ringwood in 2007 and the Wychwood brewery in 2008.
170
160
150
p In response to the difficult trading outlook for wet-led community pubs in the UK,
140
Martson’s continues to dispose of pubs from the lower half of its estate. It sold
130 around 330 pubs in FY13 (with 200 as a package to REIT NewRiver Retail for
120 alternative use) and expects to generate a total of £130m of proceeds from disposals
in FY14 and FY15 (JPMe 350 pubs). Martson’s continues to expand its managed pub
YTD 1m 3m 12m
Abs 18.5% -1.0% -7.7% 19.2% estate through new build pub openings (25-30 sites/year).
Outlook
Management
Chairman Roger Devlin Martson’s managed estate (Destination and Premium, 33% of group EBIT) continues
CEO Ralph Findlay to trade well, with LFL sales growth of 2.2% at FY13, and we expect it to benefit
CFO Andrew Andrea from the improving UK consumer environment. With the FY13 disposal of 202
tenanted pubs, the ongoing programme of single-site disposals (about a further 400
Major Shareholders
Schroders 5% pubs) and the conversion of the remainder of the Taverns estate to the franchise
Dimensional 4% model, we expect Martson’s pub estate to be almost entirely under managed/
Brewin Dolphin 4% franchised formats by FY16. While the pubs sub-sector is at the time of writing
Rathbones 4% trading at peak multiples, we see scope for modest upgrades to consensus forecasts
Legal & General 3%
driven by stronger managed LFLs (as the UK consumer continues to improve), and
helped by operational and financial gearing.
Neutral
Marston's Plc (MARS.L;MARS LN)
Company Data FYE Sep 2012A 2013E 2014E 2015E
Price Target End Date 30-Nov-14 Revenue FY (£ mn) 720 783 811 812
DPS (Net) FY (p) 6.10 6.40 6.72 7.06
Div Yield FY 4.1% 4.4% 4.6% 4.8%
172
(44-20) 7742-3681 02 January 2014
Marston’s
16%
Destination & Premium
7%
45% Taverns
UK
Leased
Brewing
32%
100%

900 811 812 30.0%

783
800 720 24.3%
682 25.0% 22.9% 22.9% 22.6% 21.9%
666 651 21.5%
700 645 19.9% 20.9%
600 20.0%
500
15.0%
400
300 10.0%
200
5.0%
100
0 0.0%

20.0 18.4 6.8x

18.0 6.6x
6.6x 6.5x
16.0 6.4x 6.4x 6.4x
13.3 13.5
14.0 12.3 12.3 12.0 6.4x 6.2x
12.0 11.2
10.0 6.1x
10.0 6.2x
8.0 5.9x
6.0x
6.0
4.0 5.8x
2.0 5.6x
173
(44-20) 7742-3681 02 January 2014
Mecom
Neutral
1st Floor, Parnell House, 25 Wilton Road, London SW1V 1LW. T: 0207 925 7200
MEC.L,MEC LN Business activities
Price: 81p Mecom operates leading positions in the news and information publishing business
Price Target: 60p in the Netherlands and Denmark. The Group had 1m subscribers to its 20 paid titles
as of its 2012 annual report.
United Kingdom
European Media & Internet
History
Nicolas J Dubourg
AC Mecom acquired its core Dutch and Danish operations in 2006-2007. On July 19th
(44-20) 7134-5226
2012 Mecom announced a strategic review and subsequently embarked on a
nicolas.j.dubourg@jpmorgan.com programme of divestments, which has included its Norwegian and Polish operations.
Bloomberg JPMA DUBOURG <GO>
As a publisher of subscription-based regional newspapers, Mecom is less exposed to
Price Performance
declining circulation than many industry peers. However, advertising revenues
100
remain weak, with double-digit decline in rates in the Netherlands, and until the
80 market sees signs of improvement this is likely to remain a key share price driver in
p 60 our view.
40
Outlook
20
Mecom is preparing to continue operating its major remaining businesses, having
YTD 1m 3m 12m
received no satisfactory offers for these. The strategic review is nearing its
Abs 9.5% 12.5% 98.2% 14.9% conclusion and Chief Executive Stephen Davidson is stepping down. We remain
Neutral: we see a return to shareholder remuneration as the next catalyst. In the
absence of major divestments, we would expect this prospect to materialise only after
Board/Management refinancing and further restructuring are agreed. On these two points, i) Mecom
Non-exec. chairman Rory MacNamara expects to complete re-financing before FY13 results; ii) further Netherlands
COO Keith Allen
Group FD Henry Davies restructuring is to be detailed by the January 2014 pre close statement
Major Shareholders
Aviva 18%
Aberforth 13%
Blackrock 5%
North Atlantic 5%
Legal & General 5%
Neutral
Mecom Group plc (MEC.L;MEC LN)
Price (p) 81 Adj. EPS FY (€) 0.24 0.19 0.13 0.14
Date Of Price 17 Dec 13 Revenue FY (€ mn) 910 799 744 724
Price Target (p) 60 EBITDA FY (€ mn) 88 70 59 61
Price Target End Date 30-Jun-14 EBITDA Margin FY 9.6% 8.8% 7.9% 8.4%
52-week Range (p) 99-27 Pretax Profit Adjusted FY 40 31 21 23
Market Cap (£ bn) 0.09 (€ mn)
Shares O/S (mn) 115 Net Att. Income FY (€ mn) 28 22 15 17
Adj P/E FY 4.0 5.1 7.4 6.8
DPS (Net) FY (€) 9.75 0.00 0.00 4.00
174
(44-20) 7742-3681 02 January 2014
Mecom
15%
40% Advertising 41% Netherlands

Circulation
59%
Other Denmark
45%

1,600 12.0% 11.0% 10.8%

1,410 1,415
1,400 9.6%
10.0% 8.8% 8.8% 8.4%
1,200 1,056 7.9%
910 8.0%
1,000
799 744
800 724 6.0%
600
4.0%
400
2.0%
200
0 0.0%

50.0 46.2 3.5x

44.0 2.9x
45.0 3.0x 2.6x
40.0
35.0 2.5x
2.0x
30.0 2.0x 1.6x
24.0
25.0 1.5x 1.2x
18.9 1.1x
20.0
12.9 14.1 1.0x 0.7x
15.0
10.0 6.3 0.5x
5.0 0.0x
175
(44-20) 7742-3681 02 January 2014
Michael Page
Neutral
1 Dashwood Lang Road, Addlestone, Weybridge, KT15 2QW. T: 01932 264 000
MPI.L,MPI LN Business activities
Price: 463p Michael Page is one of the world’s leading recruitment companies. Michael Page
Price Target: 424p specializes in the higher end of the recruitment market, with a greater weighting
towards permanent recruitment (76% of revenues) than temporary recruitment (24%
of revenues). Michael Page operates in 34 countries. Michael Page is based around
United Kingdom
three main brands: Page Executive, which is the executive search division, Michael
AC Page, which is the original brand and Page Personnel, the clerical brand.
Robert Plant
(44-20) 7134-5922
robert.plant@jpmorgan.com
History
Bloomberg JPMA PLANT <GO> Michael Page was founded in 1976, in London, by Bill McGregor and Michael Page,
J.P. Morgan Securities plc providing selection and recruitment services for accounting and finance
professionals. Michael Page was listed in 1983. In 1997, Michael Page was acquired
Price Performance by the Spherion Group. Michael Page was relisted in 2001. In 2008, Michael Page
500
rejected a takeover approach from Adecco.
460
p
420
One way that Michael Page is different to other companies is that commission is
380 divided amongst teams rather than individuals and a large degree of autonomy is
340 given to the individual teams. By geography, Michael Page is organized between
EMEA (38% of revenues), UK (24% of revenues), Asia Pacific (22% of revenues)
YTD 1m 3m 12m
Abs 12.5% -3.1% -6.7% 18.2%
and the Americas (16% of revenues). By sector, Michael Page is split between
Finance & Accounting (42% of revenues), Legal, Technology, HR, Secretarial and
Healthcare (21% of revenues) Engineering, Property & Construction, Procurement &
Management Supply Chain (19% of revenues) and Marketing, Sales & Retail (18% of revenues).
Chairman Robin Buchanan
CEO Steve Ingham
CFO Kelvin Stagg Outlook
At the time of the Q3 trading statement, issued on 14 October 2013, the pace of
organic revenue decline improved from a decline of 3.8% in Q2 to a decline of 0.2%
Major Shareholders
FIL 20% in Q3. Management added that there had been an improvement throughout the
Sleep Zakaria 7% previous few months and September 2013 supports that trend as measured by
Causeway Capital 7% indicators such as the level of job flow and speed of hire.
Nomad Investment 7%
FMR 6%
Neutral
Michael Page (MPI.L;MPI LN)
Price (p) 463 EPS Adjusted FY (p) 18.20 13.45 14.56 17.94
Date Of Price 17 Dec 13 Revenue FY (£ mn) 1,019 990 998 1,057
Price Target (p) 424 EBITDA Adj. FY (£ mn) 98 80 88 107
Price Target End Date 31-Dec-14 Operating Profit Adj. FY (£ 86 65 68 84
Market Cap (£ mn) 1,412.53 Pretax Profit Adj. FY (£ mn) 86 65 68 84
Shares O/S (mn) 305 P/E Adjusted FY 25.4 34.4 31.8 25.8
DPS (Net) FY (p) 10.00 10.00 10.50 11.55
176
(44-20) 7742-3681 02 January 2014
Michael Page
18% 16%
Finance & Accounting EMEA
38%
42% Legal, Technology and HR UK
19% 22%
Engineering, Property & Asia Pacific
Construction
Americas
Marketing, Sales and Retail
21% 24%

1,200 16.0% 14.4%

1,019 1,057
973 990 998 14.0%
1,000
832 12.0% 10.7%
800 717
10.0% 8.4% 7.9%
600 8.0% 6.8%
5.8%
6.0%
400
4.0% 2.8%
200
2.0%
0 0.0%

35.0 0.0x (0.7)x

29.9 (0.8)x (1.0)x
(0.5x) (1.0)x (1.1)x (1.2)x
30.0
(1.0x)
25.0 (1.5x)
18.2 (2.0x)
20.0 17.9
(2.5x)
14.7 13.5 14.6
15.0 (3.0x)
(3.5x)
10.0 (4.0x) (4.4)x
5.0 3.8 (4.5x)

(5.0x)
177
(44-20) 7742-3681 02 January 2014
Micro Focus
Neutral
22-30 Old Bath Road, Newbury, RG14 1QN. T: 01635 565 200
MCRO.L,MCRO LN Business activities
Price: 788p Micro Focus supplies software that allows companies to develop, test, deploy, assess
Price Target: 815p and modernize business-critical enterprise applications (typically legacy
applications). Micro Focus has more than 18,000 customers and over two million
licensed users, including 91 of the Fortune Global 100 companies.
United Kingdom
European Software & IT Services
AC History
Stacy Pollard
(44-20) 7134-5420
Micro Focus was founded in 1976 to supply software to support COBOL
stacy.pollard@jpmorgan.com applications on the then emerging market of personal and small computers. The
Bloomberg JPMA POLLARD <GO> focus has subsequently evolved to include support for all mainframe and modern
J.P. Morgan Securities plc platforms. Micro Focus listed on the LSE in May 2005, and made two large
acquisitions (Borland and Compuware testing) in 2009 which formed the core of its
Price Performance current software testing business. The company saw some management churn prior
900
to Chairman Kevin Loosemore taking the reins at CEO. Revenues have declined
850
three years in a row, but management is looking to stabilise and grow the core
800
businesses. The company has made significant returns of capital to investors over the
p 750
700
last few years, and the share price has appreciated under the new management style.
650
Micro Focus offers a number of solutions that assist enterprises in modernising their
YTD 1m 3m 12m
Abs 26.5% -3.5% -4.9% 30.0%
legacy applications, via the maintenance, testing and enhancement of existing legacy
deployments using modern tools and programming languages, or migrating legacy
applications to contemporary platforms such as Windows, UNIX or Linux. The
Management business is a pure-play software company, with licences generating 41% of revenues,
Chairman & CEO Kevin Loosemore maintenance 55%, and only 4% coming from consulting fees.
CFO Mike Phillips
IR Tim Brill
Outlook
Major Shareholders Guidance for 2014 is for 0-5% organic revenue growth; we are modeling 2%. We
Prudential 10% expect underlying adjusted EBITDA (which is the measure by which management
Standard Life 9% are compensated) to be around 43.5% in 2014. As the shareholder returns seem now
Old Mutual 8% nearly built into the share price; we are Neutral on the stock until we see evidence of
Artemis 6%
sustained revenue growth and operating margins combined.
JP Morgan 6%
Neutral
Micro Focus (MCRO.L;MCRO LN)
Price (p) 788 Adj.EPS FY ($) 0.86 0.95 1.01 1.04
Date Of Price 17 Dec 13 Revenue FY ($ mn) 414 421 429 436
Price Target (p) 815 Adj.EBITDA FY ($ mn) 188 189 193 195
Price Target End Date 31-Dec-14 Adj.EBITDA margin FY 45.4% 44.9% 44.9% 44.8%
52-week Range (p) 851-504 EBIT FY ($ mn) 161 162 166 169
Market Cap (£ bn) 1.62 Adjusted PBT FY ($ mn) 153 156 161 165
Shares O/S (mn) 205 Adjusted PAT FY ($ mn) 123 125 129 132
Net debt / (cash) FY ($ mn) 178 218 246 160
178
(44-20) 7742-3681 02 January 2014
Micro Focus
5%
6% 16%
COBOL North America
14%
Mainframe Solutions
46% International (EMEA and
Borland (Testing) LatAm)
57%
COBRA
Asia Pac & Japan
18% 38%
Niche

US$ millions £ in millions
500 45.0% 39.0% 38.5% 38.8% 38.8%

433 436 435 421 429 436
450 414 40.0% 35.8%
400 32.8% 33.2%
35.0%
350 27.6%
30.0% 24.4%
300 275
228 25.0%
250
20.0%
200
150 15.0%
100 10.0%
50 5.0%
0 0.0%
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E

120.0 1.5x 1.2x 1.3x

101.4 103.7 1.0x
0.8x
100.0 94.9 1.0x 0.6x
85.7 0.5x
80.0 71.2 0.5x 0.1x
56.1 53.8 0.0x
60.0
41.1 (0.7)x
(0.5x)
40.0 31.3
(1.1)x
(1.0x)
20.0
(1.5x)
179
(44-20) 7742-3681 02 January 2014
Mitchells & Butlers

Neutral
27 Fleet Street, Birmingham B3 1JP. T: 0121 498 4000
MAB.L,MAB LN Business activities
Price: 425p Mitchells & Butlers operates a managed pub/restaurant estate of around 1600 sites
Price Target: 400p across the UK. Food accounted for 50% of sales in FY12, as MAB continues to shift
its focus towards eating out. Mitchells & Butlers has around 15 operating formats,
including Harvester, Vintage Inns, Sizzling Pubs and Toby Carvery. It intends to
United Kingdom
expand its estate by 2-3% per year over the next three years.
Leisure
Victoria A Greer
AC History
(44-20) 7742-2509 Mitchells & Butlers began brewing and pub operations in 1898, and traded as Bass
victoria.a.greer@jpmorgan.com (with a large brewing business as well as pubs and restaurants) and Six Continents.
Bloomberg JPMA GREER <GO> Today, Mitchells and Butlers is a pure-play pub and restaurant company, focused on
J.P. Morgan Securities plc large, food-led businesses.
Price Performance
500
450
Since the arrival of new Chief Executive Alistair Darby (from Marston's) in 2012,
MAB has implemented an operational change programme focused on improving the
400
p company’s trading performance and cost control.
350
300
Outlook
250
Mitchells & Butlers’ estate of food-led, freehold managed pubs should ultimately
YTD 1m 3m 12m leave it well placed to benefit from an improvement in the UK consumer
Abs 29.1% 8.3% -2.1% 34.3% environment. We believe that the operational changes it is currently implementing
could ultimately deliver ~7% upside to our FY15 EPS forecast if LFL sales growth
were to improve. However, these changes are still at an early stage and we believe it
Management may be unrealistic to expect MAB to benefit from a stronger UK consumer
Chairman Bob Ivell environment as materially as its peers while it is focused on reshaping the business
CEO Alistair Darby for the long term. We also believe that the current 20% PE discount to peers is
CFO Tim Jones unlikely to close in the short term, given the lack of a dividend, ongoing pension
IR Stephen Hopson
issues and uncertainty over key shareholders’ intentions.
Major Shareholders
Piedmont 26%
Elpida 22%
Baillie Gifford 4%
Smoothfield 4%
Artemis 3%
Neutral
Mitchells & Butlers (MAB.L;MAB LN)
Company Data FYE Sep 2012A 2013E 2014E 2015E
Price Target End Date 30-Nov-14 Revenue FY (£ mn) 1,889 1,895 1,938 2,010
DPS (Net) FY (p) 0.00 0.00 5.00 10.00
Div Yield FY 0.0% 0.0% 1.2% 2.4%
180
(44-20) 7742-3681 02 January 2014
Mitchells & Butlers

1%
Managed pubs and

UK Germany
restaurants
100% 99%

2,150 16.6% 16.4% 16.5%

2,089 16.3% 16.3% 16.3% 16.3%
2,100 16.4%
2,050 2,010 16.1%
1,980 16.2%
2,000 1,958 1,938 16.0%
1,950 1,889 1,895 15.8%
1,900
15.6% 15.3%
1,850 1,796 15.4%
1,800
1,750 15.2%
1,700 15.0%
1,650 14.8%
1,600 14.6%

45.0 42.5 7.0x 6.4x

39.1 5.6x
40.0 34.9 35.9 6.0x 5.4x 5.2x
35.0 4.7x 4.5x
29.8 30.5 5.0x 4.3x 4.2x
30.0 27.8
23.7 4.0x
25.0
20.0 3.0x
15.0 2.0x
10.0 1.0x
5.0
0.0x
181
(44-20) 7742-3681 02 January 2014
Moneysupermarket
Neutral
Moneysupermarket House, St. David's Park, Ewloe, Chester, CH5 3UZ. T: 01244 665700
MONY.L,MONY LN Business activities
Price: 179p Moneysupermarket is a free online price comparison service in the UK. Customers
Price Target: 192p can compare financial, travel and other products and services from a large base of
suppliers. Moneysupermarket’s revenue mainly comes from fees paid by product
providers when a customer clicks through to its website and purchases a product. It is
United Kingdom
a success-based marketing fee.
European Media & Internet
AC
Nicolas J Dubourg
History
(44-20) 7134-5226
nicolas.j.dubourg@jpmorgan.com The business was co-founded in 1993 by Simon Nixon as an offline business. The
Bloomberg JPMA DUBOURG <GO> group launched the MoneySupermarket.com website in 1999, covering financial
J.P. Morgan Securities plc products incl. mortgages. It then entered insurance in 2003, launched
TravelSupermarket.com in 2004 and expanded into Home Services in 2006. In 2012,
Price Performance the group acquired MoneySavingExpert.com.
220
200
p The group remains focused on winning or defending market-leading positions in its
180
various verticals. The group has several levers for driving site traffic: paid search (eg:
160 Google ads), partnerships, free/”organic” online search, CRM and brand investment
140 (eg: TV advertising). The degree to which Moneysupermarket grows its audience
while moderating spend on paid search and TV advertising is key to profitability.
YTD 1m 3m 12m
Abs 11.2% -4.0% 13.9% 8.7%
Outlook
After slower growth in the first part of the year (13% in Q1, 10% in H1, flat in July
Board/Management
2013), momentum then picked up, with +25% revenue growth in the first weeks of
Chairman Gerald Corbett Q4. The company has stated that it is starting to recover positions in Google free
Deputy Chairman Simon Nixon search results (an issue earlier in the year) and, while growth in the Money vertical
CEO Peter Plumb remains slow (funding-for-lending has reduced banks’ willingness to compete for
CFO Paul Doughty
savings), comparables are becoming easier. The main short-term boost has been
Major Shareholders Energy, where price increases have boosted switching. The degree to which more
Simon Nixon 29% consumers durably increase their propensity to switch providers in each of
Capital Group 7% Moneysupermarket’s verticals will ultimately dictate the group’s speed of growth.
FIL 7%
Aviva 6%
Kames 5%
Neutral
MoneySupermarket.com Group Plc (MONY.L;MONY LN)
Price (p) 179 Adj. EPS FY (p) 2012A 2013E 2014E 2015E
Date Of Price 17 Dec 13 Revenue FY (£ mn) 9.15 10.40 11.86 12.83
Price Target (p) 192 Adj EBITDA FY (£ mn) 205 222 241 258
Price Target End Date 31-Dec-14 Adj EBITDA Margin FY 67 79 88 95
52-week Range (p) 214-142 Pretax Profit Adjusted FY 32.5% 35.7% 36.4% 36.8%
Shares O/S (mn) - Net Att. Income FY (£ mn) 63 73 82 88
FCF FY (£ mn) 48 56 64 70
DPS (Net) FY (p) 45 54 62 68
Adj.P/E FY 5.74 19.44 7.44 8.05
182
(44-20) 7742-3681 02 January 2014
Moneysupermarket
6% 1%
6%
28% Money
Insurance
Travel UK
Home Services
Other/ MSExpert
59%
100%

300 276 40.0% 35.7% 36.4% 36.8% 37.5%

258 32.5%
241 35.0%
250 222
205 30.0% 26.3% 27.5% 27.1%
200 181
25.0%
149
150 137 20.0%
15.0%
100
10.0%
50
5.0%
0 0.0%

16.0 0.5x 0.4x

14.1 0.0x
14.0 12.8
11.9 0.0x (0.3)x (0.3)x
12.0 10.4 (0.5)x
10.0 9.1 (0.5x) (0.7)x
(0.9)x
8.0 6.6
(1.0x)
6.0 4.6 5.2 (1.5)x
4.0 (1.5x)
2.0
(2.0x)
183
(44-20) 7742-3681 02 January 2014
Morgan Advanced Materials PLC

Overweight
55-57 High Street, Windsor, Berkshire, SL4 1LP UK. T: 01753 837000
MGAMM.L,MGAM LN Business activities
Price: 290p The group is a world leader in advanced materials, designing, manufacturing and
Price Target: 330p supplying a wide range of specialist, high-specification products to a broad range of
customers and end markets. Products are typically ceramics or carbons and designed
to provide a solution to a customer problem.
United Kingdom
AC History
Andrew J Wilson
(44-20) 7742-6332
The group was founded in 1856 as the Patent Plumbago Crucible Company by the
andrew.j.wilson@jpmorgan.com Morgan brothers, selling American-built crucibles in the UK. In the early 20th
Bloomberg JPMA AWILSON <GO> century the group broadened its product range developing carbon brushes and
J.P. Morgan Securities plc expanded its manufacturing footprint. The group, by now known as Morgan
Crucible, expanded significantly in the second-half of the 20th century and by the
Price Performance early 1990s comprised 200 companies in 80 countries. The current management team
320
has worked to better focus the group with a clearer strategic focus and a streamlining
300 of the business to focus on more attractive products and markets. On 27 March 2013,
the Morgan Crucible Company was renamed Morgan Advanced Materials.
p 280
260
240 The group has recently undergone a restructuring programme unifying the previous
divisions under the ‘One Morgan’ programme. As well as delivering initial cost
YTD 1m 3m 12m
Abs 5.7% -2.1% -6.7% 10.2%
savings, the programme is designed to increase flexibility, accelerate the pace of
change across the group, encourage collaboration and best-practice sharing and drive
cross-selling opportunities. The group now reports on a regional basis with strategies
Management specifically tailored to geographical characteristics and opportunities.
Chairman Andrew Shilston
CEO Mark Robertshaw Outlook
CFO Kevin Dangerfield
The group continues to make progress on its internal improvement programmes as
reflected in the margin progression, despite mixed end markets. Management has
Major Shareholders also committed to a more aggressive approach to portfolio reshaping, with action
AXA 16%
Prudential 14% already being taken and more to come, a clear catalyst for improving the quality of
HSBC 7% the group. Post restructuring, the business is well positioned for any recovery in the
Schroders 5% broader macro backdrop, but management is focused on delivering the internal
Standard Life 5% improvement, with any recovery being upside to come.
Overweight
Morgan Advanced Materials PLC (MGAMM.L;MGAM LN)
Date Of Price 17 Dec 13 Revenue FY (£ mn) 1,101 1,008 966 953
Price Target (p) 330 Operating profit FY (£ mn) 135 113 110 120
Price Target End Date 31-Dec-14 EBITA Margin FY 13.0% 12.0% 12.2% 13.5%
Market Cap (£ mn) 820.70 EV/EBITA FY 8.6 10.2 10.3 9.2
Div Yield FY 3.2% 3.4% 3.6% 3.8%
184
(44-20) 7742-3681 02 January 2014
Morgan Advanced Materials PLC

27% 27%
Europe Europe
36% 36%
North America North America
Asia/Rest of World Asia/Rest of World
37% 37%

1,200 1,101 14.0% 12.6% 12.3% 12.6% 12.8%

1,017 1,008 985 11.2% 11.3%
943 966 953 12.0%
1,000 10.0%
835
10.0%
800 7.7%
8.0%
600
6.0%
400
4.0%
200 2.0%
0 0.0%

35.0 2.5x
2.1x 2.1x
28.6
30.0
2.0x 1.7x
25.0 22.8 23.6
21.3 1.3x
19.6 1.5x 1.2x 1.3x
20.0 17.8 1.1x
0.8x
15.0 12.6 1.0x
10.0 0.5x
5.0
0.0x
185
(44-20) 7742-3681 02 January 2014
Mothercare
Overweight
Cherry Tree Road, Watford, Hertfordshire WD24 6SH. T: 01923 241000
MTC.L,MTC LN Business activities
Price: 448p Mothercare is a retailer, wholesaler and franchisor of products for babies, young
Price Target: 450p children and expectant mothers. It operates two key brands, Mothercare and Early
Learning Centre (ELC), as well as the gurgle.com parenting magazine and social
networking site. There are three principal retail channels: (1) UK stores, (2) Direct
United Kingdom
and (3) International stores. All of the 237 UK stores are operated by Mothercare plc
AC itself, while all of the 1,156 international stores are operated by franchise partners.
Alexander Mees There are three product categories: (1) Clothing, (2) Home & Travel and (3) Toys.
(44-20) 7742-3681
History
J.P. Morgan Securities plc Mothercare was founded by the entrepreneur, Selim Zilkha, who opened a store in
Kingston-upon-Thames in 1961. Mothercare became a public company in 1970. In
Price Performance 1982, Mothercare was acquired by Habitat, the Terence Conran homewares chain,
500
forming Habitat Mothercare plc. In 1986, Habitat Mothercare plc merged with
450 British Home Stores to form Storehouse plc. In 2000, BHS was sold to the retailer
400 Sir Philip Green. With BHS and Habitat now gone, the company changed its name
p
350 back to Mothercare plc. ELC was acquired by Mothercare for £85m in 2007.
300 Following a 94% drop in operating profit in 2011, Ben Gordon was replaced as CEO
250 by Simon Calver and a three-year Transformation and Growth plan was launched.
YTD 1m 3m 12m
Abs 30.5% 9.7% 7.8% 24.7% Operational overview
Before 2012, Mothercare had lost its way in the UK. Inefficient retail operations and
a tired store concept and product range culminated in a profit warning in October
Management
Chairman Alan Parker CBE 2011 that caused the share price to halve and the CEO to resign. Two years on and
CEO Simon Calver there are signs that a business recovery plan put in place by the new management
CFO Matt Smith team is starting to take effect. International is primarily a franchise business (in
IR Ramona Tipnis contrast to the wholly-owned UK operations). Mothercare has a target of delivering
Major Shareholders 15% growth in network sales overseas.
M&G 16%
Fidelity 12% Outlook
D C Thomson & Co 11%
Capital 6% Mothercare expects to ‘strengthen’ its position in 2014 despite anticipating consumer
Allianz 6% spending in the UK will remain ‘subdued’ for the rest of the year. We believe the UK
will achieve breakeven in FY2016.
Overweight
Mothercare (MTC.L;MTC LN)
Price Target End Date 31-Dec-14 Pretax Profit Adjusted FY (2) 4 16 32 45
52-week Range (p) 495-267 (£ mn)
EV/EBITDA (x) FY 13.6 11.4 9.2 7.2 6.4
FCFF Yield FY (3.1%) (0.5%) 1.9% 6.2% 6.2%
186
(44-20) 7742-3681 02 January 2014
Mothercare
20%
Clothing
41%
Home & Travel UK Rest of world

54%
59%
26%
Toys

900 813 6.0% 5.7% 5.7%

766 794 5.0% 4.8%
800 724 749 739 755
677 5.0% 4.3%
700
600 4.0% 3.6%
500
3.0% 2.2%
400
300 2.0%
200 0.7%
1.0%
100 0.1%
0 0.0%
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E

45.0 1.2x 0.9x 0.9x

39.4
40.0 1.0x 0.7x
34.5 0.8x
35.0 31.2 0.5x
30.8 29.0 0.6x
30.0
24.5 0.4x
25.0 0.2x
20.0 14.7 0.0x (0.3)x
15.0 (0.2x) (0.4)x (0.4)x
10.0 (0.4x) (0.7)x
3.5 (0.6x)
5.0 1.7
(0.8x)
187
(44-20) 7742-3681 02 January 2014
National Express
Neutral
Birmingham Coach Station, Mill Lane, Birmingham B5 6DD. T: 0121 460 8658
NEX.L,NEX LN Business activities
Price: 265p National Express has a diversified geographic exposure, with c. 40% of its EBIT
Price Target: 275p generated from inter-city coach and urban bus businesses in Spain (including a small
but fast-growing business in Morocco), and 28% from school bus and transit
businesses in North America. Deregulated UK bus and coach business contributes to
United Kingdom
c. 26% of group EBIT, while the remaining 6% comes from UK rail (currently only
Logistics one franchise operated, which is the Essex Thameside franchise, or C2C).
AC
Wenchang Ma
(44-20) 7134-5918
History
wenchang.ma@jpmorgan.com Following the privatisation of the UK Bus industry, National Express was spun off
Bloomberg JPMA WMA <GO> from the National Bus Company through a management buy-out in 1988, and was
J.P. Morgan Securities plc listed on the LSE since 1992. The core of its bus division was formed through the
merger with Travel West Midlands in 1995. Further acquisitions followed, with
Price Performance
presence in North America established through the acquisition of Durham School
280
Services in 1998, and that in Spain established through the acquisition of ALSA in
260
2005. NEX entered the UK rail market following the privatisation of the industry in
p
240 1996, but came under pressure and defaulted on the East Coast franchise in 2009.
220

180 Post sizeable acquisitions (c. £160m in 2012), management targets to reduce leverage
from 2.5x Net Debt / EBITDA at year-end 2012 to 2.0x by year-end 2014. Growth
YTD 1m 3m 12m
Abs 26.0% 4.1% -3.5% 35.3% strategy is mainly focused on capital-light opportunities, such as US Transit (we
estimate currently < 5% of group revenue), and German coach and rail operations.
Management
Chairman John Armitt Outlook
CEO Dean Finch Our DCF-based valuation yields PT of 275p, implying c.4% upside potential. We
CFO Jez Maiden estimate that near-term earnings growth prospects are largely reflected in current
IR Stuart Morgan
price, and further upside is likely to be contingent upon successful reduction of
Major Shareholders gearing level and evidence for delivery of the management's growth strategy in
European Express Entp. 15% existing and new areas. We also foresee medium-term risk in Spanish concession
Prudential 13% renewal, as the government is considering removal of the 5% incumbent advantage
Jupiter 6%
UBS 4%
in the bidding process, which is likely to weigh on pricing (although we do not
Norges 4% expect earnings to be impacted before 2015). We consider National Express's
exposure to UK rail catalysts to be relatively small comparing to peers Go-Ahead
and FirstGroup, given the known features of the franchises that the company is
shortlisted for (Essex Thamside, ScotRail and Crossrail).
Neutral
National Express Group plc (NEX.L;NEX LN)
Price Target End Date 31-Dec-14 EBIT FY (£ mn) 225 212 192 198 201
52-week Range (p) 278-189 DPS (Net) FY (p) 9.50 9.75 10.03 10.65 11.39
Market Cap (£ bn) 1.35 Div Yield FY 3.6% 3.7% 3.8% 4.0% 4.3%
188
(44-20) 7742-3681 02 January 2014
National Express
15%
29% UK Bus 29%
UK
UK Coach 39%
14%
UK Rail North America
North America
11% Spain
Spain
31% 32%

£ in millions
3,000 2,767 2,711 14.0%

11.6%
12.0% 11.0% 11.2%
2,500 2,238 10.2% 10.5%
2,126 9.2% 9.6% 10.1%
1,831 1,882 1,895 1,823 1,859 10.0%
2,000
8.0%
1,500 5.9%
6.0%
1,000
4.0%
500 2.0%
0 0.0%

Pence
60.0 4.0x
3.4x
50.8 3.5x
50.0 2.7x 2.7x
3.0x 2.5x 2.5x 2.4x 2.2x
40.0 2.5x 2.1x 2.1x
30.5 27.4 2.0x
30.0 23.5 25.4 24.0
21.3 22.1 22.8
1.5x
20.0 1.0x
10.0 0.5x
0.0x
189
(44-20) 7742-3681 02 January 2014
New World Resources

Underweight
NWR, Jachthavenweg 109, 1081 KM Amsterdam, The Netherlands. T: +31 20 570 220
NWRS.L,NWR LN Business activities
Price: 67p New World Resources (NWR) is a Central European coal producer, which sells
Price Target: 59p coking and thermal coal to the steel and energy sectors in Europe through its OKD
subsidiary. The group supplies primarily to a blue-chip customer base, including
ArcelorMittal, U.S. Steel, voestalpine, Dalkia, ČEZ, Verbund, Moravia Steel, and
United Kingdom
ThyssenKrupp. NWR’s coke subsidiary, OKK, Europe's largest producer of foundry
AC coke, is in the process of being divested. NWR had 374Mt of JORC hard coal
Ben Defay reserves as of 1 January 2013.
(44-20) 7134-5936
ben.defay@jpmorgan.com
Bloomberg JPMA DEFAY <GO>
History
J.P. Morgan Securities plc Czech coal mining operations were privatised in the 1990s with stock exchange
listings in Prague as ownership was partially transferred from the government into
Price Performance management vehicle Karbon Invest, which was then subsequently taken over by
350
RPG Group in 2004 (now BXR, NWR’s largest shareholder). RPG restructured the
300
various businesses within Karbon Invest, housing the coal assets in New World
250
Resources. NWR's initial public offering took place in 2008 with shares listed in
p 200
150
London, Warsaw and Prague. In 2013 NWR issued a strategy update with plans to
100
become Europe's leading coking coal producer and marketer with output of 10Mtpa
50 by FY17.
YTD 1m 3m 12m Operational overview

Abs -79.1% -19.6% -41.4% -74.7%
With coking coal prices falling to ~$165/t in Q1 2013, NWR announced a business
optimisation programme in May 2013 to protect its balance sheet, targeting €100m in
Management short-term cash saving measures combined with a portfolio optimization plan. In
Executive Chairman Gareth Penny September 2013 the company announced the divestment of its coke operations
CFO Marek Jelinek (expected to close before year-end) and its intention to close its high cost Paskov
IR Radek Namecek mine (expected to take place by the end of 2014).
Major Shareholders
BXR Group 64% Outlook
ING 3% While NWR has taken important steps to protect its balance sheet with the planned
L&G 1% sale of OKK, the expected closure of the high cost Paskov mine in FY14 and the
Norges Bank 1% renegotiation of the collective agreement at OKD, our forecasts continue to suggest a
~€200m funding gap through FY14E, assuming the OKK sale completes in Q4
FY13.
Underweight
New World Resources (NWRS.L;NWR LN)
Price (p) 67 Adj. EPS FY (€) (0.03) (1.12) (0.61) (0.07)
Date Of Price 17 Dec 13 Bloomberg EPS FY (€) 0.04 -1.32 -0.47 -0.26
Price Target (p) 59 Adj EBITDA FY (€ mn) 223 (36) (50) 159
Price Target End Date 31-Dec-14 Adj P/E FY NM NM NM NM
52-week Range (p) 339-52 EV/EBITDA (x) FY 3.4 NM NM 8.1
Market Cap (£ mn) 176.53 FCFF Yield FY (10.6%) 17.3% (30.1%) 32.2%
Shares O/S (mn) 264 Dividend Yield FY 7.6% 0.0% 0.0% 0.0%
Adj.EBITDA margin FY 17.1% (3.9%) (7.2%) 21.4%
190
(44-20) 7742-3681 02 January 2014
New World Resources

28%
Czech Republic
39%
Austria
Coal (coking & thermal)
Slovakia
16% Other Europe
100% 17%

2,500 40.0% 34.3% 34.0%

2,041 35.0%
27.7% 26.4%
2,000 30.0%
1,590 1,632 25.0% 21.4%
16.4% 17.7%
1,500 1,299 20.0%
1,117 15.0%
905
1,000 745 802 10.0%
690
5.0%
500 0.0% (3.9)%
(7.2)%
-5.0%
0 -10.0%

150.0 132.8 10.0x 6.9x

5.1x
2.7x 2.4x
100.0 5.0x 0.5x 0.6x 0.9x
59.3 (1.7)x
47.1 0.0x
50.0
6.2 (5.0x)
0.0 (10.0x)
(2.5) (6.5)
(50.0) (25.7) (15.0x) (20.2)x
(61.1) (20.0x)
(100.0)
(112.2) (25.0x)
(150.0) FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
191
(44-20) 7742-3681 02 January 2014
Ophir Energy
Overweight
50 New Bond Street, First Floor, London, W1S 1BJ. Tel: 0207 290 5800
OPHR.L,OPHR LN Business activities
Price: 306p Ophir is an exploration focused E&P company. The company has exploration
Price Target: 440p acreage in several offshore regions of Africa, principally in Tanzania, Equatorial
Guinea, Gabon and Kenya.
United Kingdom
European Oil & Gas
History
James Thompson
AC Ophir was founded in 2003, gaining exploration rights in Gabon and Tanzania a year
(44-20) 7134-5942
later. In 2005 it expanded its acreage position in Tanzania and gained exploration
james.a.thompson1@jpmorgan.com rights in Equatorial Guinea. Ophir farmed down its interest offshore Tanzania Blocks
Bloomberg JPMA THOMPSON <GO> 1,3 and 4 to BG in 2009 making the first gas discovery a few months later at Pweza.
J.P. Morgan Securities plc Ophir became publically listed in 2011 raising $325m to ramp up exploration.
Discoveries of Jodari and Mzia offshore Tanzania have been major components of
Price Performance the discovery of >15 Tcf gas to date, with a 100% success rate.
550
p
450 In 2013 Ophir’s shares lost much of their premium valuation on a perceived funding
350
risk (since resolved) and also on a drilling schedule which frequently changed. In
March 2013 the company raised $832m to fund near-term exploration, much of
250 which is being drilled in 2014. In recent weeks the company has announced the sale
of part of its interest in Tanzania Blocks 1, 3 and 4 to Pavilion Energy for a
YTD 1m 3m 12m
Abs -42.1% -13.6% -7.3% -38.6%
maximum consideration of $1,288m.
Management Outlook
Chairman Nicholas Smith The company is currently drilling one of several high impact exploration wells
CEO Dr Nicholas Cooper planned over the coming year. The well, Mlinzi Mbali-1, located in Block 7 offshore
CFO Lisa Mitchell
IR Richard Rose
Tanzania, is estimated to contain mean resources of 10 Tcf, with potential upside in
the event of a success of at least double this figure. This will be followed in Q1 14 by
Major Shareholders Ophir’s first pre-salt well in the offshore region of Gabon, West Africa. This is
Capital Group 19% another giant prospect, with estimated gross mean prospective resources of close to
Kulczyk Investment 10%
RS Investment Mgmt 8% 1bn barrels. Away from the drill bit, we look to further progress on farming out some
Janus Capital Mgmt 6% of its high equity interests across parts of its exploration portfolio. We also look to a
Wellington 5% potential farm down of its 80% interest in Block R Equatorial Guinea, where
Floating LNG is now seen as the preferred development method.
Overweight
Ophir Energy PLC (OPHR.L;OPHR LN)
Price (p) 306 Revenue FY ($ mn) 15 1 1 3 1
Date Of Price 17 Dec 13 Net Profit FY ($ mn) (19) (41) (74) (80) (87)
Price Target (p) 440 Adj. EPS FY ($) (0.06) (0.10) (0.13) (0.14) (0.15)
Price Target End Date 31-Dec-14 Adj P/E (x) FY NM NM NM NM NM
52-week Range (p) 499-294 Debt adj. CF FY ($ mn) (22) (31) (39) (41) (47)
Market Cap (£ bn) 1.80 EV/DACF (x) FY NM NM NM NM NM
Shares O/S (mn) 588 Net debt / (cash) FY ($ mn) (397) (228) (627) (196) 251
Ave. Prod. (kboepd) FY - - - - -
192
(44-20) 7742-3681 02 January 2014
Ophir Energy
Figure 541: Core NAV by business division Figure 542: Revenue
Last full year reported $ in millions
16 15
14
12
Tanzania 10
41% 8
44%
Equitorial Guinea 6
4 3
2 1 1 1 1
Cash 0
-2 0
15% FY09 FY10 FY11 FY12 FY13E FY14E FY15E

300 400%
350% 25.0x 22.0x
250
300% 20.0x
200 250%
15.0x 9.8x
200%
150 10.0x 5.5x
150% 4.2x 4.8x
100 100% 5.0x 0.6x (0.4)x
50% 0.0x (4.2)x
50
0% (5.0x)
0 -50%
(10.0x)
Core NAV (P/share) LHA Source: J.P. Morgan estimates, Company data.
193
(44-20) 7742-3681 02 January 2014
Pace
Not Rated
Victoria Road, Saltaire, West Yorkshire BD18 3LF. T: 01274 532000
PIC.L,PIC LN Business activities
Price: 298p Pace manufactures electronic hardware, principally for home entertainment and
— connectivity enablement. The company is a leading producer of set top boxes
(STBs), but also produces media servers, gateways and associated software as well
as offering service and support. Pace operates globally, and has a customer base
United Kingdom
consisting of over 160 of the world’s leading pay TV and broadband operators.
Alexander Mees
AC History
(44-20) 7742-3681 Pace was founded in 1982 as a retailer and distributor of Apple software. In the
alexander.c.mees@jpmorgan.com 1980s, Pace developed software and modems for a variety of platforms. The
Bloomberg JPMA MEES <GO> company launched its first set-top receiver (the SR640) in 1987. By the mid-1990s, it
J.P. Morgan Securities plc had developed a significant share of the global STB market, entering the US market
in 2001 and the Chinese market in 2005. Pace was listed in 1996. In 2008, Pace
Price Performance
340
acquired Philips’ STB division. By 2010, Pace had become the largest STB
manufacturer in the world. That year, Pace acquired 2Wire and Latens Systems.
300 Allan Leighton took over as Chairman and Mike Pulli as CEO in 2011. The proposed
p 260 acquisition of Aurora Networks was announced in late 2013.
180
The emergence of media servers as a significant product line (accounting, we
Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 estimate, for nearly 15% of group revenue in 2013) is an important trend, particularly
YTD 1m 3m 12m in the context of declining demand for traditional STBs in developed markets. The
Abs 58.3% -2.2% 8.4% 59.8%
sale of media servers to US customers was a major driver of profits in 2013. The
supply of media servers to DIRECTV, which was previously exclusive to Pace,
moved to a dual-sourcing arrangement in the second half of 2013. This pushed down
Management revenue, but the low margin nature of the products mean that gross margins moved
Chairman Allan Leighton
CEO Mike Pulli
up as a result of the change in mix. This has been augmented by further cost
CFO Roddy Murray rationalisation.
IR Chris Mather
Outlook
Major Shareholders If approved by shareholders, the $310m acquisition of Aurora Networks will be an
M&G 13% important factor in the performance of Pace during 2014. The company’s ability to
Schroders 13%
D R Hood 5% maintain underlying revenues flat, despite the reduction in the contribution from US
Blackrock 5% sales of media servers, will also be critical. Pace has won a number of important
LSV 4% hardware contracts in recent months (including the first supply of STBs to AT&T),
but we also expect Pace to focus on ramping up software revenue and possibly
growing media servers in Europe.
Not Rated
Pace Plc (PIC.L;PIC LN)
Price (p) 298 Adj. EPS FY ($) 0.351 0.433 0.534 0.584
Date Of Price 17 Dec 13 Revenue FY ($ mn) 2,403.4 2,430.9 2,595.5 2,647.0
Price Target (p) — Operating profit FY ($ mn) 158.1 187.9 233.4 251.4
Price Target End Date — EBITA Margin FY 6.6% 7.7% 9.0% 9.5%
52-week Range (p) 332-173 DPS (Net) FY ($) 0.045 0.059 0.081 0.094
FCFF Yield FY 15.6% 14.2% 12.9% 10.8%
194
(44-20) 7742-3681 02 January 2014
Pace
13% 17%
Europe
40% Pace Americas
15%
North America
Latin America
60%
Pace International
Rest of world
55%

$ in millions 9.0% 8.5% 8.5%
7.7%
3,000 8.0% 6.9%
2,595 2,647 2,659
2,403 2,431 7.0% 6.0%
2,500 2,309
2,063 6.0%
4.4%
2,000 5.0%
3.7%
4.0%
1,500
3.0%
1,000 2.0%
1.0%
500 0.0%
FY10 FY11 FY12 FY13E FY14E FY15E FY16E
0
FY10 FY11 FY12 FY13E FY14E FY15E FY16E Source: J.P. Morgan estimates, Company data.

cents £ in millions
70.0 2.5x
58.4 57.5 1.8x 1.9x
60.0 53.4 2.0x
50.0 43.3 1.5x

0.9x
40.0 37.1 35.1 1.0x
0.3x
29.7 0.5x
30.0 (0.2)x (0.2)x
0.0x
20.0
(0.5x) (0.8)x
10.0
(1.0x)
0.0 FY10 FY11 FY12 FY13E FY14E FY15E FY16E
195
(44-20) 7742-3681 02 January 2014
Paragon Group
Overweight
St Catherine’s Court, Herbert Road, Solihull, West Midlands. T: 0121 712 2323
PARA.L,PAG LN Business activities
Price: 353p Paragon is a leading independent specialist lender offering buy-to-let mortgages and
Price Target: 396p personal loans. It focuses on the professional buy-to-let market serving customers
who typically manage a portfolio of properties, and seeks portfolio acquisition
opportunities via its Idem Capital business.
United Kingdom
AC History
Rae Maile
(44-20) 7134-9738
Paragon started life as National Home Loans in 1985, offering mortgages to the
rae.maile@jpmorgan.com mainstream market. It launched its first buy-to-let mortgage in 1995 and refocused
Bloomberg JPMA MAILE <GO> away from mainstream mortgages to wider financial areas, in particular consumer
J.P. Morgan Securities plc finance. In 1997 the group rebranded to its current name. With the onset of the credit
crisis in 2007, the company faced the withdrawal of its corporate lending facility; it
Price Performance has since reestablished dependable sources of financing and buy-to-let lending
360
resumed in 2011.
340
320
p 300
280 The company’s focus in the buy-to-let mortgage market is on the professional
260 landlord market. On average, its customers manage portfolios of 14 properties and
240 have over a decade of experience as a buy-to-let landlord. It uses warehouse facilities
and securitisation markets to fund its activities.
YTD 1m 3m 12m
Abs 35.7% 7.7% 5.5% 38.3%
The Consumer Finance division contributed around a third of group profit in FY13,
and uses group capital to purchase and manage debt portfolios, as well as providing
Management loan servicing to outside investors.
CEO Nigel Terrington
CFO Nicholas Keen The company is also working toward the establishment of a banking subsidiary.
Blackrock 14%
Old Mutual 5% Paragon’s balance sheet is strong, and rising profitability and cash generation are
Prudential 5% increasing this strength even in the face of a more generous dividend payout policy.
BNY Mellon 5% The nominal returns currently available on cash have served to depress the group
Aviva 4%
ROE, but as the company finds opportunities to deploy its excess cash, we believe
there exists significant scope for upside to company profitability, and consequently
the market’s valuation of the shares.
Overweight
Paragon Group Companies PLC (PARA.L;PAG LN)
Company Data FYE Sep 2011A 2012A 2013A 2014E 2015E
Price Target (p) 396 Bloomberg EPS FY (p) 19.0 23.0 25.7 28.6 31.1
Price Target End Date 31-Dec-14 DPS (Net) FY (p) 4.0 6.0 7.2 8.0 9.0
52-week Range (p) 357-251 Net Yield FY 1.1% 1.7% 2.0% 2.3% 2.6%
Market Cap (£ bn) 1.06 NAV/Sh FY (p) 247.6 266.2 289.3 311.2 334.2
Shares O/S (mn) 302 Revenue FY (£ mn) 151 170 178 194 210
(£ mn)
196
(44-20) 7742-3681 02 January 2014
Paragon Group
Figure 551: Profit business division Figure 552: Revenue by geography
38% First Mortgages
UK
62% Consumer Finance
100%

£ millions
250 70.0%
210 59.2% 58.5% 57.8%
53.5% 56.1%
194 60.0%
200 178 48.5%
170
151 151 50.0%
148
150 36.0%
40.0%
100 30.0%
20.0%
50
10.0%
0 0.0%

Pence
35.0
30.7
29.0
30.0 27.5
25.0 23.5
19.6
20.0 17.8
15.0 13.7
10.0
5.0
0.0
197
(44-20) 7742-3681 02 January 2014
PayPoint
Overweight
Shire Park, Welwyn Garden City, AL7 1EL, United Kingdom. T: 01707 600 300
PAYP.L,PAY LN Business activities
Price: 999p PayPoint is a leading international provider of convenient payment and value added
Price Target: 1,407p services to the utility, telecoms, media, financial, transport, retail, e-commerce and
public sectors.
United Kingdom
History
Victoria Prior, CFA
AC PayPoint was initially set up in 1996 to collect cash payments for its eight founding
(44-20) 7134-5912
shareholders: British Gas, BT, London Electricity, the BBC and four water
victoria.prior@jpmorgan.com companies. In 2006, the group expanded into the internet payments market through
Bloomberg JPMA PRIOR <GO> the acquisition of Metacharge. The company acquired Pay Store in May 2007 which
J.P. Morgan Securities plc provides mobile top-ups and bill payments in Romania. PayByPhone, the group’s
phone payment service was acquired in 2010.
Price Performance
1,200
1,100 Retail Networks, the largest segment includes the group's UK & Ireland and
p 1,000 Romanian terminals located at retailers sites offering Bill and General payments
(prepaid energy, bills and transport tickets); Top-ups (mobile, pre-paid cards and the
900
Health Lottery in the UK); and Retail Services (in the UK only at present offering
800 ATMs, debit/credit card transactions, parcels, money transfer, SIMs and receipt
advertising). The second segment, Internet provides transactions between consumers
YTD 1m 3m 12m
Abs 20.3% -2.6% -10.9% 17.5%
and merchants online as well as pre-authorisations and Fraudguard). PayByPhone
operates predominantly in the parking market and Collect+ offers parcel
collection/return services through the Retail Network in the UK.
Management
Chairman David Newlands Outlook
CEO Dominic Taylor
CFO George Earle We believe that the medium and longer term potential for the group remains strong.
We like the PayPoint business model and the group continues to add new capabilities
Major Shareholders to its core UK & Ireland network, which should position the group well for further
Invesco 28%
LionTrust 8%
growth, in our view. Overall, the group is developing a broad payment capability
Standard Life 7% with sustainable growth in a number of areas, in our view. The group has recently
L&G 5% combined the Internet and PayByPhone businesses under one management team
LJ Athene 5% which is anticipated to bring both revenue and cost synergies, further details of
which should be provided in 2014.
Overweight
PayPoint Plc (PAYP.L;PAY LN)
52-week Range (p) 1,216-791 Pretax Profit Adjusted FY 37 41 45 49 54
EV/EBITDA (x) FY 16.1 14.6 13.8 12.4 11.0
Adj. P/E FY 24.9 22.0 19.7 18.2 16.5
Net Yield FY 2.7% 3.0% 3.3% 3.5% 3.7%
198
(44-20) 7742-3681 02 January 2014
Paypoint
2%
5% 3% 12%
1%
Bill and general

13% 7% UK
38% Top-ups
Retail Services Ireland
Internet
Romania
PayByPhone
Other income North America
39% 80%

20.3% 21.2%
300 19.4% 20.1%
18.7%
243 20.0% 17.3%
250 220 231
200 209
197 193 15.0%
200
150 10.0%
100 5.0%
50
0.0%
0 FY10 FY11 FY12 FY13E FY14E FY15E FY16E

Pence 0.0x
70.0 (0.2x) (0.4)x
60.5
60.0 54.9
50.6 (0.4x)
50.0 45.5 (0.7)x
40.1 (0.6x)
40.0 33.5 35.6 (0.8)x (0.9)x
(0.8x)
30.0 (1.0)x
(1.1)x
(1.0x)
20.0 (1.3)x
10.0 (1.2x)
0.0 (1.4x)
FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY10 FY11 FY12 FY13E FY14E FY15E FY16E
199
(44-20) 7742-3681 02 January 2014
Petropavlovsk
Underweight
11 Grosvenor Place, London SW1X 7HH. T: 0207 201 8900
POG.L,POG LN Business activities
Price: 70p Petropavlosvsk is one of Russia's leading gold miners with production of 710koz in
Price Target: 70p FY12. The group’s core assets are located in the Amur region in the Russian Far
East, which lies across one of the world’s major belts of mineralisation and where the
company operates four hard rock mines (Albyn, Malomir, Pioneer and Pokrovskiy)
United Kingdom
as well as a small number of alluvial operations. The company is listed on the Main
AC Market of the London Stock Exchange.
Dominic O'Kane
(44-20) 7742-6729
dominic.j.okane@jpmorgan.com
History
Bloomberg JPMA OKANE <GO> Petropavlosvsk has operated in Russia since 1994 when Peter Hambro, currently
J.P. Morgan Securities plc Chairman of the group, agreed to help finance the development gold deposit in the
Amur Region into a working mine. The deposit was then owned by Pavel
Price Performance Maslovskiy, currently Honorary President and one of the group’s largest
450
shareholders. Pokrovskiy was commissioned in 1999, Pioneer in 2007, Malomir in
350 2010 and Albyn in 2011. The company was listed on the AIM in 2002 as Peter
Hambro Mining before moving the Main Market of the LSE in 2009.
p 250
150
50 Petropavlosvsk reduced FY13 production guidance in October 2013 to 740-750koz
(was 760-780koz) with cash costs expected at the top of guided $900-1,000/oz due to
YTD 1m 3m 12m
Abs -81.1% 0.0% -8.2% -79.9%
regional flooding in Q2/Q3. To achieve guided 740-750koz, we estimate
Petropavlosvsk will require 240-250koz in Q4 (204koz Q3), which in our view will
require mining of higher grade ore, which introduces a risk of disappointing if
accessibility issues persist. Consequently, we forecast FY13E production below
Management
group guidance at 735koz, with 704koz in FY14E.
Chairman Peter Hambro
CEO Sergei Ermolenko
Deputy CEO Martin Smith Outlook
CFO Andrey Maruta Petropavlosvsk’s investment case is dominated by the risks posed by $1.08bn of net
IR Alya Samokhvalova debt at Oct’13. With a $380m convertible due Feb'15, we believe POG’s ability to
refinance this debt without seeking external equity capital, is compromised by a gold
Major Shareholders
Prudential 9% price that has fallen 27% in 2013, plus an eventual requirement to spend >$200m in
Vanguard Group 9% capex to complete its POX project in order to avert a production cliff. At current gold
Pavel Maslovskiy 8% prices ($1,225/oz), we forecast Petropavlosvsk will breach its max 4.0x net debt /
EBITDA loan covenant at YE’14 and forecast a >$400m funding gap a Q1’15.
Underweight
Petropavlovsk (POG.L;POG LN)
Price (p) 70 Adj. EPS FY ($) 0.53 (0.42) (0.40) (0.29)
Date Of Price 17 Dec 13 Bloomberg EPS FY ($) 0.58 -0.29 -0.05 -0.18
Price Target (p) 70 Adj. EBITDA FY ($ mn) 152 295 105 203
52-week Range (p) 417-54 Adj. P/E FY 2.1 NM NM NM
Market Cap (£ mn) 138.35 EV/EBITDA (x) FY 10.0 4.9 13.9 7.1
Shares O/S (mn) 198 FCFF Yield FY (181.0%) 70.2% 31.7% 55.5%
200
(44-20) 7742-3681 02 January 2014
Petropavlovsk
9%
Gold Russia & CIS China
100% 91%

$ in millions
1,600 50.0% 45.5%

1,375
1,400 1,262 45.0%
1,173 40.0%
1,200
35.0%
1,000 833 30.0% 25.1% 25.5%
797
800 25.0%
600 20.0%
11.1% 12.6%
15.0%
400
10.0%
200 5.0%
0 0.0%

$ cents
140.0 122.5 8.0x

6.8x
120.0 7.0x
100.0 6.0x
80.0 4.8x
5.0x
60.0 53.0
4.0x 3.2x
40.0
3.0x 2.3x
20.0
1.5x
0.0 2.0x
(20.0) 1.0x
(40.0) (29.1) 0.0x
(60.0) (42.0) (39.8) FY11 FY12 FY13E FY14E FY15E
201
(44-20) 7742-3681 02 January 2014
Phoenix Group
Not Rated
Juxon House 100 St Paul's Churchyard London EC4M 8BU. T: 0203 567 9100
PHNX.L,PHNX LN Business activities
Price: 692p Phoenix is a closed-life insurance consolidator and operates primarily in the UK. By
— closed-life consolidator, we mean that it is in a business of acquiring and managing
life insurers in the UK that have closed their business for new policies. It also owns
IGNIS asset management which manages the in-house policies of Phoenix’s life
United Kingdom
insurance operations and is also active in the third-party asset management space.
European Insurance
AC
Ashik Musaddi, CFA
History
(44-20) 7134-4708
ashik.x.musaddi@jpmorgan.com Phoenix Group (previously Pearl Group) was created following the acquisition of
Bloomberg JPMA MUSADDI <GO> Resolution PLC in 2008. By way of background, Resolution Life Group was created
J.P. Morgan Securities plc in 2003 to operate as a closed life insurance consolidator in the UK. During the
period 2003 to 2008, Resolution Life Group acquired closed life businesses.
Price Performance Following a change of name to Resolution Plc, the company was sold to Pearl Group
800
Ltd in 2008. Pearl Group achieved its secondary listing on LSE in 2009 and was
750
renamed Phoenix Group Holding in 2010 shortly after which it gained a premium
700
listing on LSE.
p 650
600

500 Given that Phoenix is a closed life insurance consolidator, its main aim is to generate
cash from maturing life insurance policies which it then uses to pay down to the
YTD 1m 3m 12m
Abs 26.3% -2.9% -11.2% 28.7%
shareholders in the form of dividends and to the bond holders in the form of debt
reduction. Along with the aim to generate cash, it also aims to derive synergies by
merging closed life operations and could range over cost synergies, tax synergies,
capital synergies etc. Over the past five years, Phoenix has generated on average
Management £700m-800m of cash every year from its life and asset management operations,
Chairman Sir Howard Davies
CEO Clive Bannister which it has distributed to share- and bondholders.
CFO Jim McConville
IR Katherine Jones Outlook
Major Shareholders We believe that Phoenix will continue to deliver predictable cash flows from its
Och Ziff 8% back-book, which provides strong cover to the dividend it pays to its shareholders. In
Hugh Osmond 7% the near term, we believe that it will remain active in the consolidation within the life
Manjit Date 6%
insurance market and believe it will continue to add more businesses by making
Henderson 5%
Artemis 5% further acquisitions of closed life insurance books in the UK.
Not Rated
Phoenix Group Holdings (PHNX.L;PHNX LN)
Price (p) 692 Adj. EPS FY (p) (76.16) 224.64 45.36 52.00
Date Of Price 17 Dec 13 Adj P/E FY NM 3.1 15.2 13.3
Price Target (p) — Embedded value FY (£ mn) 2,118 2,122 2,306 2,230
Price Target End Date — NAV/Sh FY (p) 880.80 894.96 699.25 695.90
52-week Range (p) 810-514 Net Attributable Income FY (131) 392 102 117
Shares O/S (mn) 225 Gross Yield FY 6.1% 6.9% 7.8% 8.2%
Dividend (Gross) FY (p) 42.00 47.70 54.00 56.70
202
(44-20) 7742-3681 02 January 2014
Phoenix Group
UK UK
100% 100%
Figure 570: Revenue Figure 571: MCEV

£ in millions Pence
2,500 1,400
2,087 1,227 1,214 1,216
1,893 1,987 1,200
2,000 1,803 1,027 993
1,717 956 959
1,000
1,500 800
1,000 600
545 400
500
200
0 0
FY09 FY10 FY11 FY12 FY13E FY14E FY10 FY11 FY12 FY13E FY14E FY15E FY16E
Figure 572: Gearing (debt as a % of capital employed)
70.0%
58.0% 57.0%
60.0% 55.1%
47.0% 46.1% 45.1%
50.0%
38.8%
40.0%
30.0%
20.0%
10.0%
0.0%
203
(44-20) 7742-3681 02 January 2014
Promethean
Neutral
Lower Philips Road, Blackburn, Lancashire BB1 5TH. T: 01254 298598
PRWP.L,PRW LN Business activities
Price: 19p Promethean is one of the largest global providers of education technology. It has an
Price Target: 21p integrated product portfolio that includes a range of hardware and software solutions.
Its primary hardware offerings are interactive display systems, or whiteboards, and
handheld learner response systems. This technology utilises software developed in-
United Kingdom
house by Promethean. Educational content are teacher resources are shared on
AC Promethean Planet, which, with more than 1.5m members, is the largest interactive
Alexander Mees whiteboard community in the world. Promethean’s primary market is education
(44-20) 7742-3681
(schools, colleges and universities), but it also supplies product for training purposes
into business and government.
History
Price Performance Promethean was founded by entrepreneur Tony Cann in the mid-1990s. The
ActivStudio software was launched in 2001 and ActivSlate hardware in 2003. The
24
private equity group Apax Partners took a 23% equity stake in 2004. Promethean
20 Planet was launched in 2006. Promethean listed on the London Stock Exchange in
p
2010.
16
Sales of Interactive Display Systems (IDS) and Learner Response Systems (LRS)
YTD 1m 3m 12m
Abs 14.8% -0.6% 12.3% 25.0%
continued to decline though 2013. Interactive whiteboards continue to be used and
valued by teachers around the world. What's hit Promethean’s whiteboard sales in
Management
recent years has been pressure on school budgets rather than the emergence of
Chairman Graham Howe competing technology.
CEO Jim Marshall
CFO Neil Johnson Outlook
Major Shareholders We believe key to the pace of earnings recovery will be the speed at which education
Tony Cann 33% budgets in the USA and around the world increase. Promethean recently launched the
Aberforth 22% ActivPanel Touch, an interactive flat panel, and the KUNO, a rugged tablet with
Graham Howe 5%
Artemis 5% effective lock-down technology. The membership of Promethean Planet continues to
Wolf Fund 4% grow; this is a resource we believe may be monetised in due course.
Neutral
Promethean World Plc (PRWP.L;PRW LN)
Price (p) 19 Adj. EPS FY (p) 8.2 (1.9) (1.9) (0.6)
Price Target (p) 21 EBITDA FY (£ mn) 31.1 5.1 7.8 10.2
Price Target End Date 31-Dec-14 Bloomberg EBITDA FY (£ 26.5 4.9 7.2 9.7
Market Cap (£ mn) 38.66 EBIT FY (£ mn) 23.4 (5.5) (2.9) (1.4)
Shares O/S (mn) 200 EBIT Margin FY 10.5% (3.5%) (2.1%) (0.9%)
DPS (Net) FY (p) 2.5 0.0 0.0 0.0
Adj P/E FY 2.4 (10.3) (10.4) (30.2)
EV/EBITDA (x) FY 0.3 4.7 2.7 1.9
204
(44-20) 7742-3681 02 January 2014
Promethean
11%
Interactive display systems North America
51% 49%
Learner response systems Rest of world
89%

250 235 18.0% 16.9% 16.5%

223
205 16.0% 14.1% 14.0%
200 14.0%
151 157 153 155 12.0%
140 143
150 10.0% 8.3% 8.8%
7.1%
8.0% 5.6%
100
6.0%
3.2%
4.0%
50
2.0%
0 0.0%

16.0 8.0x 7.4x

14.0 13.8 7.0x 5.7x
12.0 6.0x
10.5
5.0x
10.0 8.2 8.2 4.0x
8.0 3.0x
6.0 2.0x
4.0 1.0x (0.4)x (0.7)x
0.8 0.0x (1.0)x (1.0)x
2.0 0.4 (1.6)x (1.4)x (1.3)x
0.0 (1.0x)
(2.0x)
(2.0) (0.6) (3.0x)
(4.0) (1.9) (1.9)
205
(44-20) 7742-3681 02 January 2014
PZ Cussons
Neutral
3500 Aviator Way, Manchester, M22 5TG. T: 0161 435 1000
PZC.L,PZC LN Business activities
Price: 368p PZ Cussons is an international player in the household and personal goods market
Price Target: 390p with a presence in Africa, Europe and Asia. The company sells a wide range of
products including soaps, detergents, toiletries, white goods and edible oil.
United Kingdom
European Consumer Goods
History
Celine Pannuti, CFA
AC PZ Cussons has its origins as a trading company in Africa and was established by
(44-20) 7134-7123
two Greeks, George Paterson and George Zochonis, whose descendants still remain
celine.pannuti@jpmorgan.com shareholders in the company. Present in the region for over 100 years, the business
Bloomberg JPMA PANNUTI <GO> has evolved over time into an international player with operations in Europe, Asia
J.P. Morgan Securities plc and Africa. The company now manufactures and distributes over 30 brands across its
target markets.
Price Performance
440
420
400
The company focuses on a few countries/markets through a differentiated local
p 380 business model. Asia is the smallest division, accounting for just under a quarter of
360 total turnover, with the remaining 75% split almost equally between Africa and
340 Europe. Within Europe the company holds a strong foothold in the UK, particularly
320 in washing & bathing and beauty products. Nigeria accounts for c90% of African
sales where the company is focused on HPC products as well as white goods, edible
YTD 1m 3m 12m
Abs -4.4% -2.8% -13.1% 2.7%
oil and milk products via partnerships. In Asia, Indonesia and Australia are the two
largest markets where the company sells primarily babycare and HPC products.
Management Outlook
Chairman Richard Harvey With c60% of sales from emerging markets, PZ Cussons remains best positioned to
CEO Alex Kanellis benefit from strong growth in these regions and expansion in new
CFO/IR Brandon Leigh
categories/portfolio roll-out. In the medium term, we expect healthy top-line growth
Major Shareholders (c5%) as well as 50-70bps pa margin improvement, on the back of strong leverage in
Prudential 10% Asia, Africa and improving mix in Europe, to drive c10% earnings growth.
Capital 3%
AXA 3%
Fidelity 2%
Skagen 2%
Neutral
PZ Cussons (PZC.L;PZC LN)
Company Data FYE May 2012A 2013A 2014E 2015E
Price Target (p) 390 EV/EBITDA FY 13.4 13.7 12.6 11.6
Price Target End Date 31-May-14 Revenue FY (£ mn) 859 883 920 946
52-week Range (p) 440-335 EBITA (Calc) FY (£ mn) 93 108 119 129
Market Cap (£ mn) 1,574.07 Pretax Profit Adjusted FY 92 108 118 128
Shares O/S (mn) 428 (£ mn)
Net Income adjusted FY (£ 63 71 78 84
mn)
FCF Yield FY 1.0% 5.0% 4.0% 5.3%
206
(44-20) 7742-3681 02 January 2014
PZ Cussons
20% 20%
41% 41%
Africa Europe Asia Africa Europe Asia
39% 39%

£ in millions
1,200 16.0% 14.6%

13.1% 13.2% 13.7%
989 14.0% 12.9%
1,000 920 946 12.3%
859 883 11.6% 11.6%
821 12.0% 10.9%
782 772
800 661 10.0%
600 8.0%
6.0%
400
4.0%
200
2.0%
0 0.0%

Pence
25.0 0.6x
21.6 0.4x
19.6 0.4x 0.2x
20.0 18.2
16.0 16.6 0.2x 0.1x 0.1x
14.7 14.7 (0.0)x
15.0 0.0x (0.2)x
12.3 (0.2)x
10.7 (0.2x) (0.3)x
10.0
(0.4x)
5.0 (0.6x) (0.7)x
(0.8x)
207
(44-20) 7742-3681 02 January 2014
QinetiQ
Neutral
Cody Technology Park, Ively Road, Farnborough, Hampshire, GU14 0LX. T: 01252 392000
QQ.L,QQ/ LN Business activities
Price: 208p QinetiQ is split into three main divisions which are all predominantly focused on
Price Target: 215p Defence. EMEA Services (50% of FY2014E revenues) offers outsourced services in
the testing and evaluation of aircraft, ships and weapon also offers cyber services and
border protection. US Services (34% of FY 2014E revenues) provides a range of
United Kingdom
engineering, IT and logistical services to the US DoD, NASA, and other government
European Aerospace & Defence
AC agencies. Global Products (15% of FY 2014E revenues), produces a range of niche
David H Perry, CFA products to military and commercial customers.
(44-20) 7742-5606
david.h.perry@jpmorgan.com
Bloomberg JPMA PERRY <GO>
History
J.P. Morgan Securities plc QinetiQ, the evaluation, research and development branch of the UK's Ministry of
Defence, was privatised in June 2001 before being publicly listed in February 2006.
Price Performance In 2009-10 QinetiQ’s share price fell sharply as the US defence downturn began to
215
bite. Leo Quinn joined as CEO in November 2009 and over the last three years the
company has significantly strengthened its balance sheet and cut its cost base. It is
205
now undertaking a strategic review of its US Services business which could
p
195
potentially lead to a disposal.
185

We estimate that around 50% of revenues in QinetiQ’s EMEA Services division are
YTD 1m 3m 12m
Abs 11.9% 7.0% 10.1% 11.6%
derived from long-term contracts with the UK MoD which offer good visibility and
fairly stable revenues. These contracts have high barriers to entry as QinetiQ has a
very close relationship with the customer. On the other hand its US Services and
Management Global Products divisions have much shorter cycles and visibility is very low.
Chairman Mark Elliott
CEO Leo Quinn Outlook
CFO David Mellors
IR David Bishop We expect H2 2014 to be stronger that H1 2014. In FY 2013 QinetiQ had a record
H1 and softer H2. In FY 2014 we expect H1 to be weaker than H2, mainly because
Major Shareholders some contracts QinetiQ had expected in Apr-Jun 2013 were not secured until
Ruane Cuniff & Goldfarb 15%
Artisan 9% September/October 2013. We thus expect FY 14 sales down c8% (vs down 13% for
Schroders 5% H1 14A), FY 14 EBITA down 26% (vs down 38% for H1 14A) and FY 14 EPS
Norges 5% down 21% (vs down 33% in H1 14A.
Lloyds 4%
Neutral
Qinetiq Group plc (QQ.L;QQ/ LN)
Price (p) 208 Adj. EPS* FY (p) 14.6 18.9 15.0 15.1 15.5
Price Target (p) 215 JPM def. clean EPS FY (p) 14.8 16.8 14.7 14.8 15.2
Price Target End Date 31-Dec-14 JPM def. clean P/E FY 14.1 12.4 14.2 14.1 13.7
52-week Range (p) 219-178 EV/EBITA FY 7.9 8.4 9.5 8.9 8.2
Market Cap (£ mn) 1,351.89 Div yld FY 1.4% 1.8% 2.1% 2.3% 2.5%
Shares O/S (mn) 649 Sales FY (£ mn) 1,470 1,328 1,226 1,228 1,244
Fiscal Year End Mar EBITA FY (£ mn) 161 169 126 128 132
208
(44-20) 7742-3681 02 January 2014
QinetiQ
7%
15%
35% US Services UK
42%
EMEA Services North America
51%
Global Products Other
50%

1,800 1,703 11.0%
1,617 1,625 12.0% 10.2% 10.4% 10.6%
1,600 1,470 9.3% 9.6%
1,366 1,328 10.0% 8.5%
1,400 1,226 1,228 1,244 7.4%
1,200 8.0%
1,000 6.0%
800
4.0%
600
400 2.0%
200 0.0%
0 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E Source: J.P. Morgan estimates, Company data.

20.0 18.9 3.0x 2.7x 2.7x

2.3x
18.0 15.9 2.5x
15.0 15.1 15.5
16.0 14.2 14.6 2.0x 1.4x
13.4 1.5x
14.0
11.1 1.0x 0.6x
12.0
10.0 0.5x
0.0x (0.4)x
8.0 (0.9)x
(0.5x) (1.2)x
6.0
(1.0x) (1.5)x
4.0 (1.5x)
2.0 (2.0x)
209
(44-20) 7742-3681 02 January 2014
Quintain Estates & Development

Overweight
16 Grosvenor Street, London W1K 4QF. T: 0207 495 8968
QED.L,QED LN Business activities
Price: 97p Quintain is a London land value developer, with a history of land regeneration in
Price Target: 110p London at Greenwich (disposed of fully 2013) and Wembley, where phase one
development, consisting of the London Designer Outlet, attached restaurants and
cinema, and Brent Council offices is complete. Phase two is to begin development in
United Kingdom
March 2014, and consists of 475 residential units. The development business is
European Property
AC supported by a £2.2bn AUM fund management business, featuring student housing
Tim Leckie, CFA (iQ) and London offices (WELPUT).
(44-20) 7134-4477
History
J.P. Morgan Securities plc Quintain was established in 1992 to focus on short-term leasehold property assets.
The company floated on the LSE in 1996. Wembley was acquired in 2002, and the
Price Performance first phase of development completed at the end of 2013. Greenwich was acquired in
100
1999, as part of a land swap and the entire interest was disposed of in November
90 2013. The asset management business was boosted in 2012 by the acquisition of
80 Grafton Advisors, which brought WELPUT to join iQ as the mainstays of recurring
p
70 income.
60
2013 has seen an intense period of change for Quintain, under CEO Max James who
YTD 1m 3m 12m
Abs 74.7% 5.5% 15.9% 79.5%
became Chief Executive in May 2012. The Greenwich disposal lowered September
30 pro-forma LTV to 30%, giving the group control of its own destiny for the first
time since the 2007 financial crisis. Quintain has three areas of focus: 1) Wembley 2)
student accommodation through iQ, and, 3) select London acquisitions.
Management
Chairman William Rucker
CEO Max James Outlook
CFO Richard Stearn Wembley is the key driver of earnings going forward, with development of stage 1 of
IR Cresida Curtis phase 2 to begin spring 2014 with enabling works. We see upside risk to our £500
Major Shareholders
psf average lifetime selling price estimate, evidence would be sales >£450 psf when
Standard Life 11% marketing begins late 2014.
Caledonia 8%
J.P. Morgan 8%
PGGM 5%
Taube Hodson 5%
Overweight
Quintain Estates & Development plc (QED.L;QED LN)
Price Target End Date 30-Nov-14 Dividend Yield FY 0.0% 0.0% 0.0% 0.0% 0.0%
52-week Range (p) 102-53 Adjusted NAV ps FY (p) 116 105 114 122 133
Market Cap (£ bn) 0.50 ROIC FY (1.6%) (2.1%) 5.0% 5.1% 6.3%
Shares O/S (mn) 519 NAV premium (discount) (20.2%) (11.8%) (18.7%) (24.2%) (30.5%)
FY
FCFF Yield FY - 0.0% (1.7%) 0.3% 0.3%
210
(44-20) 7742-3681 02 January 2014
Quintain Estates & Development

27%
London Development
41%
Asset Management UK
Other
32%
100%

45 41 20.0%
15.5%
40 36 38
35 15.0%
35 32 10.7%
8.5% 9.4%
30 10.0%
25
5.0%
20
15 0.0%
(4.3)%
10
-5.0%
5
0 -10.0%
FY11 FY12 FY13 FY14E FY15E FY11 FY12 FY13 FY14E FY15E
Figure 595: Adjusted NAV

Pence
130.0
125.1
125.0 121.7
120.0 115.6
113.5
115.0
110.0
104.6
105.0
100.0
95.0
90.0
FY11 FY12 FY13 FY14E FY15E
211
(44-20) 7742-3681 02 January 2014
Record Plc
Overweight
Morgan House, Madeira Walk, Windsor, Berkshire, SL4 1EP. T: 01753 852 222
RECL.L,REC LN Business activities
Price: 33p Record is a leading, independent, specialist manager of currency funds. It manages
Price Target: 40p funds on behalf of institutions, including pension funds, charities, foundations,
endowments and family offices, as well as corporate clients.
United Kingdom
History
Rae Maile
AC Record was established in 1983 by Neil Record, who remains Chairman, and grew
(44-20) 7134-9738
largely around hedging for both corporate and institutional clients. From 2003 the
rae.maile@jpmorgan.com company grew its return-seeking business. Since 2009, the company has sought
Bloomberg JPMA MAILE <GO> greater product diversification while remaining focused on currency. It launched its
J.P. Morgan Securities plc first index-tracking currency fund in 2009 and its Emerging Market Currency Fund
in 2010. The company listed on the London Stock Exchange in 2007.
Price Performance
38
36
Record’s approach to currency management is based on a proprietary model of
p
34
exchange rates. The model has been developed over 20 years, resulting in a formal
32
process driven by systematic investment decision making. These trades largely
30 exploit strategies based on forward rate bias, trend analysis and range trading.
28
Outlook
YTD 1m 3m 12m
Abs 11.9% 6.9% -6.7% 6.9% After a long and difficult period for investment performance, outflows, client losses
and the renegotiation of fee rates by important clients, the company looks to have
turned something of a corner in recent periods. Client numbers have started to
Management increase while the company has reported that it has recently witnessed a higher level
Chairman Neil Record
CEO James Wood-Collins
of new business enquiries and selection processes, albeit that there has also been an
CFO Steve Cullen increase in competitive activity. We believe that currency's role as a separate asset
class is being increasingly understood by investment consultants and clients, and
Major Shareholders Record's position as a leading player in the industry is well established. The
Neil Record 32%
Schroders 18%
operational gearing of the business to new business wins is material, in our view, and
Leslie Meier 7% the benefit of even modest new business wins will be seen quickly in earnings.
Bob Noyen 4%
Mike Timmins 3%
Overweight
Record Plc (RECL.L;REC LN)
Shares O/S (mn) 221 Operating profit FY (£ mn) 7 6 7 7
212
(44-20) 7742-3681 02 January 2014
Record Plc
14% 7%
26%
Dynamic Hedging UK
US
22% 34%
Passive Hedgng
Switzerland
64%
Currency for Return
Other
33%

50 47 60.0% 55.3%
45 49.2%
40 50.0% 44.0%
33
35 40.0% 33.8%
28 32.7% 33.1% 33.5%
30
25 20 20 21 30.0%
18
20
15 20.0%
10 10.0%
5
0 0.0%

10.0 0.0x
9.0 8.7 (0.5x) (1.2)x (1.3)x
8.0 (1.0x)
7.0 (1.5x) (2.0)x
6.0 (2.0x)
5.4
5.0 (2.5x)
4.0
(3.0x) (3.6)x
4.0
2.3 2.5 (3.5x)
3.0 2.2 2.0 (4.3)x (4.4)x
(4.0x) (4.7)x
2.0 (4.5x)
1.0 (5.0x)
213
(44-20) 7742-3681 02 January 2014
Redrow
Neutral
Redrow House, St. David's Park, Flint, CH5 3RX. T: 01244 520 044
RDW.L,RDW LN Business activities
Price: 295p Redrow plc operates as a homebuilder in the United Kingdom. The Company builds
Price Target: 260p houses from seven regional offices in England and Wales. It opened a London office
in 2010; in 2013 we expect 10% of revenues to be derived from the division.
United Kingdom
History
Materials & Infrastructure Redrow was established in 1974 by Steve Morgan. The group entered house
Emily Biddulph
AC building in early 1980s. The group grew organically and floated on the London Stock
(44-20) 7134-5906 Exchange in 1994. Steve Morgan left the business in 2000, but returned in April
emily.biddulph@jpmorgan.com 2009. The group raised £150m via a rights issue in September 2009. In April 2012
Bloomberg JPMA BIDDULPH <GO> the group raised a further £80m, by way of a share placement, used for further
J.P. Morgan Securities plc investment in land. The placing was underwritten by Steve Morgan, meaning his
holding at this point increased to over 40%. In August 2012, a consortium consisting
Price Performance
of Steve Morgan's Bridgemere Securities, Tosca fund and Penta Capital made an
300
unsuccessful takeover approach for the group.
260
p 220 Operational overview

Redrow continues to focus on both the roll-out of its New Heritage standardized
180
house type (introduced in 2010) and its entry into London. We expect the group to
140 remain more highly geared than average for the sector, for the next few years, as it
continues to invest in land and work in progress, primarily in London.
YTD 1m 3m 12m
Abs 77.6% 11.7% 27.7% 81.5%
Outlook
Management We expect earnings growth to be driven by volume growth, house price inflation,
Chairman Steve Morgan ASP growth and the meaningful contribution of the London division for the first
Group MD John Tutte time. We expect positive trends in the UK housing market beyond 2014, partly
FD Barbara Richmond driven by the continuation of the government’s help to buy scheme, but moreover
Major Shareholders driven by a UK economic recovery, improved consumer confidence around housing
Steve Morgan 40% and better mortgage availability.
Fidelity 17%
Toscafund 13%
Credit Suisse 4%
Neutral
Redrow (RDW.L;RDW LN)
Price Target (p) 260 Gross Profit FY (£ mn) 64 83 114 168 214
52-week Range (p) 301-158 EBIT FY (£ mn) 31 48 74 120 163
P/E (x) FY 66.5 36.1 18.7 12.4 8.9
Net debt / (cash) FY (£ mn) 75 14 91 184 218
214
(44-20) 7742-3681 02 January 2014
Redrow
Housebuilding UK
100% 100%
Figure 604: Revenue Figure 605: Operating profit

1,200 20.0% 17.4% 16.5%

1,018 15.3%
1,000 936 15.0% 13.0% 12.2%
785 9.9%
800 10.0% 6.9%
650 605
3.2%
600 483 5.0%
453
397
400 302 0.0%
200 (5.0)% (7.4)%
0 (10.0)%

£ in millions
40.0 33.3 34.3 6.0x 3.3x

28.8 4.0x 2.6x 2.3x
30.0 23.7 1.2x 1.5x 1.3x 1.0x
2.0x 0.3x
20.0 15.7
0.0x
9.7
10.0 6.0 (2.0x)
0.2 (4.0x)
0.0
(6.0x)
(10.0) (8.0x)
(10.8)x
(20.0) (10.0x)
(19.3) (12.0x)
(30.0) FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E
215
(44-20) 7742-3681 02 January 2014
Restaurant Group
Overweight
5-7 Marshalsea Road, London SE1 1EP. T: 0203 117 5001
RTN.L,RTN LN Business activities
Price: 557p Restaurant Group operates around 400 managed restaurants and pubs, primarily
Price Target: 665p based on out-of-town retail and leisure parks as well as around 60 airport concessions.
Its main formats are Frankie and Benny’s (between 50% and 60% of the estate);
Mexican-themed Chiquito; and Garfunkel’s, as well as unbranded pub-restaurants at
United Kingdom
the premium end of the market. RTN intends to roll out between 50 and 100 sites
Leisure using its new Coast to Coast format, extending the rollout potential to 10 years at
AC between 5% and 7% of the estate per year.
Victoria A Greer
(44-20) 7742-2509
Bloomberg JPMA GREER <GO> Restaurant Group has operated in its current form since 2006, with its focus on retail
J.P. Morgan Securities plc park locations and airports.
Price Performance
600
550
Restaurant Group has consistently generated industry-leading returns (in terms of
EBITDA payback and ROIC) on its new site rollouts. We estimate that it generates
500
p around a 40% EBITDA return (i.e. EBITDA payback in two and a half years) across
450
its formats, vs. c.25% for peers. For ROIC, we estimate a return of 25% vs. 15% for
400 peers. We see this outperformance as sustainable, as we think that it is driven by
350 good site selection, strong formats and RTN’s policy of promoting new site
managers from within the business. Given RTN’s very strong track record in the UK
YTD 1m 3m 12m
Abs 42.2% 2.2% 1.2% 47.7% retail park market, we see it as an anchor tenant for developers and expect this to
provide some protection against competition for sites in the medium term.
Management Outlook
Chairman Alan Jackson Restaurant Group is the clear casual dining market leader in the attractive (and
CEO Andrew Page
CFO Stephen Critoph
growing) UK retail park market. It consistently generates industry-leading returns
from its new openings, which it funds from its existing cash generative restaurants.
Major Shareholders We forecast a 12% EPS CAGR over the next three years, driven by 3-4% LFL sales
Old Mutual 8% growth and 7% estate rollout. We see RTN as ideally positioned to benefit from an
Blackrock 7%
Legal & General 5%
improving UK consumer environment, and see at least 3-4pp upside to our three-year
JO Hambro 5% EPS CAGR forecast, driven by stronger LFLs and an accelerated rollout programme.
Standard Life 5%
Overweight
Restaurant Group Plc (RTN.L;RTN LN)
Price Target End Date 31-Aug-14 Revenue FY (£ mn) 533 584 653 723
DPS (Net) FY (p) 11.80 13.30 15.30 17.30
Div Yield FY 2.1% 2.4% 2.7% 3.1%
216
(44-20) 7742-3681 02 January 2014
Restaurant Group
Restaurants UK
100% 100%

800 723 12.9% 12.8%

700 653 12.8% 12.7%
584 12.7% 12.6% 12.6% 12.6% 12.6%
600 533
487 12.6% 12.5%
500 466
417 436 12.5%
400 12.4%
12.2%
300 12.3%
12.2%
200
12.1%
100 12.0%
0 11.9%

1.2x 1.0x
Source: J. 1.0x 0.8x
40.0 0.8x
34.4 0.5x
35.0 0.6x 0.5x
30.7 0.4x
30.0 26.8 0.4x 0.2x
24.1 0.2x
25.0 21.8 (0.0)x
19.9
20.0 17.4 0.0x
16.4 (0.2)x
(0.2x)
15.0
(0.4x)
5.0
0.0 Source: J.P. Morgan estimates, Company data.
P. Morgan estimates, Company data.
217
(44-20) 7742-3681 02 January 2014
RPC Group
Overweight
Sapphire House, Crown Way, Rushden, Northamptonshire NN10 6FB. T: 01933 410064
RPC.L,RPC LN Business activities
Price: 559p RPC is a leading pan-European manufacturer of rigid plastic packaging, principally
Price Target: 605p for FMCG customers, and employs three plastic packaging technologies: 1) Blow
Molding, 2) Injection Molding, and 3) Thermoforming. RPC’s packaging is used for
food and non food applications and includes barrier products in food, single-use
United Kingdom
coffee capsules, home improvements, cosmetics and pharmaceuticals. The
AC company’s strategy is based around maintaining GDP+ growth in its existing
Alexander Mees businesses, improving its sales mix and undertaking market consolidation.
(44-20) 7742-3681
alexander.c.mees@jpmorgan.com History
RPC was formed in 1991 by the management buyout of five rigid plastic packaging
companies owned by SCA (SCAB SS). Two years later, in 1993, the company was
Price Performance
floated on the London Stock Exchange. Since listing, RPC has made a number of
600 acquisitions, the largest of which was Superfos in 2010 for €240m. Following the
550
retirement of long-standing CEO Ron Marsh, Pim Vervaat was appointed CEO in
500
2013. The acquisition of M&H was announced in December 2013.
p
400 In our opinion, investors should cut through the noise of FX and polymer price
350 fluctuations and focus on the underlying growth potential, which we see as
significant. The recent trading statement emphasised the continued strong
YTD 1m 3m 12m
Abs 35.8% 7.8% 14.5% 34.4%
performance of higher added value products such as coffee capsules, but we see
potential also for the more cyclical product lines starting to improve too. RPC’s scale
and value adding packaging mean that it can pass through rising polymer costs
Management
Chairman Jamie Pike quickly to customers. The difficult market environment clearly makes it more
CEO Pim Vervaat challenging to pass through increases in other operating costs (such as energy and
CFO Simon Kesterton wages), but RPC has a track record of achieving pass-through to protect margins.
Major Shareholders
AXA 10% Outlook
Aberforth 6% RPC itself has stated that it is ‘well placed to benefit from an economic recovery in
Legal & General 5%
Threadneedle 3%
Europe.’ Strategic acquisition is a core tenet, in our opinion, of RPC’s vision for the
Norges Bank 3% future of its business. Set within the framework of a cost-efficient manufacturing
capability, RPC clearly sees opportunities to build on its position through further
consolidation of the fragmented European market such as the recent acquisition of
M&H. At least as important to RPC, in our opinion, appears to be expansion outside
of Europe. RPC has set itself financial KPIs that suggest to us that acquisitions are at
the forefront of its thinking.
Overweight
RPC Group (RPC.L;RPC LN)
Price Target (p) 605 Revenue FY (£ mn) 1,130 1,051 1,071 1,164
Price Target End Date 31-Dec-14 Operating Profit FY (£ mn) 94 90 97 113
Div Yield FY 2.6% 2.7% 2.8% 3.1%
218
(44-20) 7742-3681 02 January 2014
RPC Group
17%
22%
Injection Moulding
UK
33%
Germany
Thermoforming
24% 59% France
Blow Moulding Rest of world

31%
14%

1,400 12.0%
1,130 1,164 1,175 9.7% 10.1%
1,200 1,051 1,071 10.0% 9.0%
8.3% 8.5%
1,000
819 8.0% 6.8%
769 720
800 695 5.8% 5.7%
6.0% 4.6%
600
4.0%
400
200 2.0%
0 0.0%

60.0 2.5x
2.1x
49.3
50.0 45.5 2.0x
1.6x
37.3 37.8 1.3x
40.0 34.8 1.5x 1.3x
29.9 1.2x
1.1x 1.0x
30.0
1.0x
21.1
20.0 14.4
0.5x
10.0
0.0x
219
(44-20) 7742-3681 02 January 2014
RPS Group
Overweight
85 Milton Park, Abingdon, OX14 4RY. T: 01235 438 000
RPS.L,RPS LN Business activities
Price: 340p RPS is an international consultancy with operations in the UK, Ireland, the
Price Target: 341p Netherlands, the United States, Canada, Brazil, Africa, the Middle East, Australia
and Asia.
United Kingdom
History
Victoria Prior, CFA
AC Founded in 1970 as Rural Planning Services, Dr Alan Hearne joined RPS in 1978
(44-20) 7134-5912
and became chief executive in 1981. The company was floated on the USM (now
victoria.prior@jpmorgan.com AIM) in 1987 as RPS Group. The company has made a series of acquisitions that has
Bloomberg JPMA PRIOR <GO> seen the operations expand from its UK base to include operations in Ireland, the US,
J.P. Morgan Securities plc Australia, the Netherlands and Canada. Gary Young joined RPS as Finance Director
in 2000. The group expanded into energy services through the acquisitions of
Price Performance Hydrosearch and ECL in 2003 and 2005, respectively. Since July 2006, the group
340
has made a number of acquisitions across Australia, the US, Canada and the UK.
300
p 260
The group is operates through four segments; Energy, BNE Europe, BNE Asia
220
Pacific and BNE North America. Through the Built & Natural Environment (BNE)
180 divisions the group provides advice on land and property, the management of the
natural and built environments and occupational health and safety. The Energy
YTD 1m 3m 12m
Abs 37.3% 11.4% 16.9% 22.2%
business operates worldwide and advises clients on the development of natural
resources (predominantly in the oil & gas sector) as well as renewables.
Management Outlook
Chairman Brook Land
CEO Alan Hearne With an improving European outlook we anticipate a pick up in Built & Natural
CFO Gary Young Environment Europe, steady growth in Energy and a stablising performance from
AAP during 2014. We believe that the business is capable of delivering organic EPS
Major Shareholders growth in the mid-high single digits with further upside from the group’s strategy of
Aberforth 7%
F&C 5% growing through acquisitions supported by the group’s strong balance sheet and FCF
Kames 5% generation. For each £50m of acquisition spend, we believe the group could add c. 7-
Hargreave Hale 4% 8% to EPS.
Franklin Templeton 3%
Overweight
RPS Group (RPS.L;RPS LN)
EV/EBITDA (x) FY 10.9 9.1 9.2 7.7 6.9
P/E (x) FY 20.4 17.5 16.4 14.3 13.3
Net Yield FY 1.6% 1.9% 2.2% 2.5% 2.9%
220
(44-20) 7742-3681 02 January 2014
RPS Group
5% 2%
5% UK
32% BNE - Europe Australia
35% 6%
BNE - North America USA
43%
AAP 13% Canada
Energy Ireland
5%
Netherlands
28% Other
26%

£ in millions 16.0% 14.7% 14.7%
13.2% 13.0% 12.6% 13.0% 13.1% 13.2%
700 624 14.0%
11.7%
592
600 12.0%
519
479 10.0%
500 453
392 374 394 8.0%
400
6.0%
300
4.0%
200 2.0%
100 0.0%
0

Pence 0.6x 0.5x 0.5x 0.5x
30.0 0.5x 0.4x
25.6 0.4x
25.0 23.7
0.4x 0.3x
19.5 20.7
20.0 18.6 0.3x
17.1 15.8 16.7 0.2x
15.0 0.2x
10.0 0.1x
(0.0)x
5.0 0.0x
0.0 (0.1x)
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
221
(44-20) 7742-3681 02 January 2014
Serica Energy
Underweight
52 George Street, London, W1U 7EA. T: 0207 487 7300
SQZ.L,SQZ LN Business activities
Price: 17p Serica is an exploration focused E&P company with a number of license interests
Price Target: 25p across Europe and Africa. Its only producing asset ceased production, as planned in
2013, with the near term development potential likely drawn from the Columbus
field in the UK. Other assets include a financial interest in the Bream project.
United Kingdom
However, the company’s main focus is on ground floor access to exploration
European Oil & Gas
AC acreage. As it has done in the UK, Namibia and recently in Morocco these interests
James Thompson are typically farm-out to larger companies to reduce the financial burden of drilling,
(44-20) 7134-5942
whilst maintaining exploration upside.
Bloomberg JPMA THOMPSON <GO>
Serica has been exploring for over a decade, and has operated seventeen wells since
Price Performance 2004. Production historically came from the Kambuna field in Indonesia, although
this ceased in 2013. The company’s other development project is the Columbus gas-
28
condensate field in the North Sea; development plans are in the process of being
24 submitted to the DECC ahead of a potential project sanction.
p
20
16 Given the cessation of production at Kambuna, a focus of 2013 has been to secure
funds to progress through the upcoming exploration program, which has some
YTD 1m 3m 12m
Abs -33.3% -3.5% -22.0% -32.7%
material prospects planned for drilling in 2014. In October 2013 the company
secured the necessary funding to ensure this, raising equity finance of c.$20m.
Drilling has commenced on the first of these prospects on Foum Draa license
Management
offshore Morocco. This will be followed by a Genel operated well on the Sidi
Chairman Antony Craven Walker
CEO Antony Craven Walker Moussa license also in Morocco.
CFO Christopher Hearne
IR Rachel Stevens Outlook
Major Shareholders Drilling has commenced on the first of these prospects on Foum Draa license
Global Reserve 14% offshore Morocco. This will be followed by a Genel operated well on the Sidi
Fidelity Investment 12% Moussa license also in Morocco. These wells, if successful offer material upside,
Company Managed 5%
AXA IM 5%
which could be transformational for Serica. We also look for further updates on the
Cede & Co. 4% Columbus project, where negotiations continue towards a development concept and
following this approval from DECC. Finally we also look to an update from Namibia
where farm-in partner BP has to elect whether it will commit to drill or not by year
end.
Underweight
Serica Energy Plc (SQZ.L;SQZ LN)
Price (p) 17 Revenue FY ($ mn) 27 15 6 0 0
Date Of Price 17 Dec 13 Net Profit FY ($ mn) (20) (25) (4) (6) (5)
Price Target (p) 25 EPS FY ($) (0.12) (0.14) (0.02) (0.02) (0.02)
Price Target End Date 31-Dec-14 P/E (x) FY NM NM NM NM NM
52-week Range (p) 29-17 Debt adj. CF FY ($ mn) 7 4 3 (6) (4)
Market Cap (£ bn) 0.03 EV/DACF (x) FY NM NM NM 0.9 NM
Shares O/S (mn) 183 Net debt / (cash) FY ($ mn) (20) (22) (27) (5) 25
Ave. Prod. (kboepd) FY 0 0 0 0 0
222
(44-20) 7742-3681 02 January 2014
Serica Energy
11%
24%
Norway
UK Indonesia
Cash
65% 100%

$ in millions
35 31 200.0%
136.4%
30 27 150.0%
25 100.0%
50.0%
20
15 0.0%
15 (58.4)%
(50.0)% (99.5)%
10 8 (125.3)%
6 (100.0)% (156.4)%
5 (150.0)%
0 (200.0)%
FY09 FY10 FY11 FY12 FY13E FY09 FY10 FY11 FY12 FY13E

160 120%
140 100%
20.0x 2.2x 2.1x 4.5x
80% 0.7x 0.5x (3.3)x
120 60% (9.0)x
0.0x
100 40%
20% (20.0x)
80
0% (40.0x)
60 -20%
40 -40% (60.0x)
-60%
20 (80.0x) (93.3)x
-80%
0 -100% (100.0x)
Core NAV (p/share) LHA Source: J.P. Morgan estimates, Company data.
223
(44-20) 7742-3681 02 January 2014
Shaftesbury
Underweight
37/43 Sackville Street, London W1S 3DL. T: 0207 333 8118
SHB.L,SHB LN Business activities
Price: 598p Shaftesbury invests exclusively in London's West End, focusing on villages such as
Price Target: 630p Carnaby Street, Covent Garden and Chinatown. The company’s dominant holdings
in these locations allow them to manage tenant offerings in order to create themed
destinations. Shaftesbury aims to grow rents through optimising tenant mix and
United Kingdom
bringing in new and exciting retailers to its destinations, while undertaking
European Property
AC refurbishment and reformatting space to meet evolving market needs.
Tim Leckie, CFA
(44-20) 7134-4477
History
Bloomberg JPMA LECKIE <GO> Shaftesbury was formed in 1986 and listed on the LSE in 1987. Shaftesbury has
J.P. Morgan Securities plc consistently and unerringly followed a strategy of disciplined portfolio focus only in
the heart of London's West End.
Price Performance
660
Shaftesbury’s £1.9bn portfolio is located in Carnaby Street (33%), Covent Garden
p
620 (35%), Chinatown (22%), Soho (7%) and 3% in Charlotte Street. The portfolio
580
generates c£83m of annualised income, with £19.7m reversionary potential of 23.8%
above current rents. Capturing this reversionary potential through lease management
540 is a key driver of cash rental growth and supports rental growth throughout the cycle.
YTD 1m 3m 12m
Abs 4.8% 0.1% 0.8% 7.8%
Outlook
Shaftesbury is a prime ‘defensive’ play, and at this point in the cycle, we prefer
higher operational gearing through development pipelines. Due to the nature of
Management
Shaftesbury’s assets, a maximum of c.8% of the portfolio can be developed at any
Chairman Jonathan Lane
CEO Brian Bickell given point. Furthermore as UK economic growth picks up, the marginal benefit to
CFO Chris Ward Shaftesbury’s London portfolio is lower when compared to sectors such as industrial
IR na or regional retail. Shaftesbury is an exceptionally well managed company and
Major Shareholders
generally beats performance expectations. We estimate five year CAGR in NAV of
Blackrock 10% 6.8%.
Norges 8%
Ameriprise Financial 5%
Co-op Insurance 5%
Threadneedle 5%
Underweight
Shaftesbury (SHB.L;SHB LN)
Company Data FYE Sep 2011A 2012A 2013E 2014E
Price Target (p) 630 DPS FY (p) 11.90 12.00 12.48 12.98
Price Target End Date 30-Sep-14 Dividend Yield FY 2.1% 2.1% 2.2% 2.3%
52-week Range (p) 670-547 Adjusted NAV ps FY (p) 462.5 497.9 546.3 590.1
Market Cap (£ bn) 1.51 ROIC FY 10.8% 9.4% 10.5% 9.2%
Shares O/S (mn) 227 NAV premium (discount) 23.5% 14.7% 4.5% (3.2%)
FY
224
(44-20) 7742-3681 02 January 2014
Shaftesbury
12% 3%
8%
Retail Carnaby
37% 35%
16% Covent Garden
Restaurants & Leisure 24%
Chinatown
Offices
Soho
Residential Charlotte
35% 30%
Figure 634: Adjusted NAV

Pence
600.0 537.9
474.5 493.8
500.0 445.1
420.6
380.3
400.0
316.1
300.0
200.0
100.0
0.0
225
(44-20) 7742-3681 02 January 2014
Smiths News
Overweight
Wakefield House, Pipers Way, Swindon, SN3 1R. T: 01793 563 641
SNWS.L,NWS LN Business activities
Price: 224p The Smiths News Group operates in three distinct but complementary markets;
Price Target: 236p newspaper and magazine wholesaling, Smiths News, book wholesaling, Bertrams
and education supplies, The Consortium.
United Kingdom
History
Victoria Prior, CFA
AC Smiths News can be traced back to 1792. In 2006, the group announced the intention
(44-20) 7134-5912
to separate the WH Smith Retail and News Distribution businesses via a demerger.
victoria.prior@jpmorgan.com The newspaper and magazine distribution industry was continually examined by the
Bloomberg JPMA PRIOR <GO> OFT to determine whether it was anticompetitive in nature, but it was eventually
J.P. Morgan Securities plc decided that the current structure was appropriate. Smiths acquired Bertram Books
(previously part of the Woolworths Group) in 2009. In 2011, the group further
Price Performance expanded its book wholesaling activities through the acquisition of Dawson Holdings
220
for a total consideration of £20m. In 2012 Smiths News acquired the Consortium.
200
p
180
Smiths News comprises four business units: 1) Smiths News, which is the largest
160 distributor of newspapers and magazines in the UK (John Menzies is the second
140 largest); 2) Media & Marketing, which supplies airlines and travel points; 3)
Bertram’s, a wholesale supplier of books and e-books; and 4) The Consortium, a
YTD 1m 3m 12m
Abs 31.1% 4.9% 17.0% 38.0%
supplier of education and care home supplies.
Outlook
Management
Chairman Dennis Millard
Over the years, Smiths News has proven its ability to cut costs within its newspaper
CEO Mark Cashmore and magazine wholesaling business, taking out c. £46m of costs over the past eight
CFO Nick Gresham years. We believe that there is more to go in the near term with management
IR Gillian Bonthron targeting profits in news/mags at least flat throughout our forecast period. In
Major Shareholders addition, the group has made good progress diversifying the business away from
Silchester 10% news/mags into other areas with a target of generating > 50% of profits from other
Ameriprise 9% activities by FY16E. We believe this is likely to be delivered through further
Henderson 8% earnings enhancing acquisitions, an area where the group has a good track record.
M&G 6%
Aberforth 5%
Overweight
Smiths News Plc (SNWS.L;NWS LN)
Company Data FYE Aug 2012A 2013A 2014E 2015E 2016E
Price Target (p) 236 Adjusted EBITA FY (£ mn) 51 56 59 62 64
Price Target End Date 1-Dec-14 EBITA Margin FY 2.8% 3.1% 3.3% 3.5% 3.7%
EV/EBITDA FY 8.1 7.7 7.2 6.6 6.2
P/E (x) FY 14.7 13.1 10.2 9.9 9.5
226
(44-20) 7742-3681 02 January 2014
Smiths News
4% 2% 3% 1%
10%
Newspaper & magazine wholesaling

United Kingdom
Book wholesaling
Europe
Education and care
Rest of World
Media
84%
96%

2,000 1,830 1,811 1,782 1,755 4.0% 3.7%

1,734 1,804 3.5%
1,731 3.3%
1,800 3.5% 3.1%
1,600 2.9% 2.8%
1,326 3.0%
1,400 1,241 2.4% 2.4%
1,200 2.5% 2.0%
1,000 2.0%
800 1.5%
600
1.0%
400
200 0.5%
0 0.0%

25.0 22.6 23.6 2.5x

22.4 22.0
19.9 1.9x
20.0 2.0x 1.7x
15.5 1.6x
14.5 13.8 14.6
15.0 1.5x 1.3x 1.3x
1.2x
1.0x 1.0x 1.0x
10.0
1.0x
5.0
0.5x
0.0
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E 0.0x
227
(44-20) 7742-3681 02 January 2014
SOCO International
Neutral
48 Dover Street, London, W1S 4FF. T: 0207 747 2000
SIA.L,SIA LN Business activities
Price: 390p SOCO is a production biased full cycle E&P company with development assets in
Price Target: 407p Vietnam and exploration assets on- and offshore West Africa. Its main producing
asset is the Te Giang Trac (TGT) field with secondary production from the Ca Nu
Vung (CNV) field.
United Kingdom
European Oil & Gas
AC History
James Thompson
(44-20) 7134-5942
SOCO has a history of discovering oil and gas resources and progressing them to the
james.a.thompson1@jpmorgan.com production phase before divesting. In recent times the focus has been on
Bloomberg JPMA THOMPSON <GO> development of its Vietnamese operations.
Price Performance
2013 saw the TGT field production exceed nameplate capacity, leading the company
440
to engage it work to investigate expansion of the facility. The strong cash generation
420
from the field along with modest exploration and development costs has put SOCO
p
400
in a robust cash generating position. This led to the announcement that the company
380
would commit to a sustainable return of capital, starting in 2013. The initial return,
360 priced at 40p/share was above market expectations and contributed further to the re-
340 rating of the shares. 2013 also saw the start up of the Talisman operated HSD/HST
fields, which share facilities with the TGT field. Finally in the second half of the
YTD 1m 3m 12m
Abs 5.7% -2.7% -7.3% 9.1%
year, the company discovered additional resources on TGT in the H5 fault block. The
flow test produced some of the best results seen on the field to-date and is expected
to lead to accelerated development of the fault block.
Management
Chairman Rui de Sousa Outlook
CEO Ed Story
CFO Roger Cagle
There are a number of key data points in 2014. The second return of capital will be
of significant investor interest. In our view a return around 7-9% is sustainable in the
Major Shareholders current oil price environment, and is at a suitable premium to large cap oil stocks.
Pontoil Intertrade Ltd. 24% We also look to the capacity test on the FPSO Bumi Armada. If successful this could
Director & Related 9%
Chemsa Ltd. 7%
lead to sustained production at 70 kbopd, further enhancing the cash generating
BlackRock 4% ability of the asset – potentially leading to higher returns.
Treasury Shares 3%
Neutral
SOCO International (SIA.L;SIA LN)
Price (p) 390 Revenue FY ($ mn) 622 623 620 615
Date Of Price 17 Dec 13 Net Profit FY ($ mn) 207 212 207 200
Price Target (p) 407 Adj.EPS FY ($) 0.62 0.65 0.63 0.61
Price Target End Date 31-Dec-14 Adj.P/E (x) FY 10.2 9.8 10.1 10.4
52-week Range (p) 419-309 Debt adj. CF FY ($ mn) 336 291 278 233
Market Cap (£ mn) 1,278.80 EV/DACF (x) FY 5.5 6.4 6.5 7.9
Shares O/S (mn) 328 Net debt / (cash) FY ($ mn) (258) (202) (245) (221)
Ave. Prod. (kboepd) FY 15.0 16.6 18.4 19.2
228
(44-20) 7742-3681 02 January 2014
SOCO International
10%
2%
Vietnam
Mongolia Vietnam
Cash
88% 100%

$ in millions
700 622 623 620 80.0% 72.1%

615 69.0% 67.0% 68.4% 66.3%
571 70.0% 64.5%
600 60.2% 60.9%
500 60.0% 54.5%
50.0%
400
40.0%
300 234
30.0%
200 131 20.0%
100 55 48 10.0%
0 0.0%

450 40%
400 (0.4)x (0.5)x (0.5)x (0.5)x
30% 0.0x (0.5)x (0.7)x (0.5)x
350 (0.5x)
20% (1.0x) (1.4)x
300
(1.5x)
250 10%
(2.0x)
200 0% (2.5x)
150 (3.0x)
-10% (3.5x)
100 (4.0x) (4.5)x
50 -20% (4.5x)
0 -30% (5.0x)
Core NAV (p/share) LHA Source: J.P. Morgan estimates, Company data.
229
(44-20) 7742-3681 02 January 2014
Songbird Estates
Overweight
One Canada Square, Canary Wharf, London, E14 5AB. T: 0207 418 2312
SBD.L,SBD LN Business activities
Price: 161p Songbird owns 69% of Canary Wharf Group (CWG), which specialises in property
Price Target: 171p development, investment and management primarily at the Canary Wharf estate, and
more recently expanding into the City (e.g. 20 Fenchurch Street) and central London
(e.g. the Shell building).
United Kingdom
European Property History
AC
Tim Leckie, CFA CWG floated in April 1999 at 330p with a market cap of £2.2bn. The original
(44-20) 7134-4477 strategy was to develop and let the Canary Wharf estate on long leases to strong
timothy.leckie@jpmorgan.com covenants, gear up the balance sheet and then return capital to shareholders. The
strategy held up well until the London office market slowdown of 2002-03. In
September 2009 Songbird announced a £1.03bn capital raise in order to simplify
Price Performance
capital structure. The proceeds were also used to acquire an additional 8.5% stake in
170 CWG bringing the total now to 69.3%. The raising was split into a £620m issue of
160 ordinary shares, £275m of preference shares and a £135m new shareholder credit
150 facility. Songbird’s stake in CWG is not only financed by ordinary equity, but also
p 140 by preference shares and warrants.
130
120
110 Songbird’s recent 1H 2013 results were strong, with adj. NAV of 223p, driven by
better capital growth across the board (+2.3%) with retail up strongly (+6.7%) as a
YTD 1m 3m 12m
Abs 33.8% 3.4% 1.6% 36.0%
result of some yield hardening (20bps) while offices rose too (+1.6%). The group
continues to deliver development progress at 20 Fenchurch street (57% let with a
further 100,000 sq ft in negotiations), Jubilee Place (92.3% pre-let/in solicitors) and
Management (Canary Wharf Group) Crossrail retail (50% pre-let/in solicitors) while it also secured a positive planning
Chairman & CEO George Iacobescu
Co. secretary John Garwood
outcome at its Heron Quays West site. Promisingly, management also talked of a
strong pickup in requests for space.
Major Shareholders
Qatar 28% Outlook
Glick Shareholders 26% In our opinion, Canary Wharf Group is a great company exposed to an interesting
Land Breeze 16% subsector of the London office market, in our view. However, Songbird’s structure is
MS Shareholders 8%
Third Avenue Mgmt 3% not ideal and in our view this issue needs to be resolved before value is unlocked and
we don’t see any near term catalyst for this. However, the company remains in great
shape, with a promising development projects (e.g. Churchill Place and Fenchurch
Street). The stock trades at a 29% discount to our 2013E NAV; this is too cheap for
us.
Overweight
Songbird Estates plc (SBD.L;SBD LN)
Market Cap (£ bn) 1.19 NAV premium (discount) (21.6%) (29.2%) (32.3%) (37.3%) (41.7%)
ROIC FY 5.5% 8.5% 6.1% 7.4% 6.9%
ROE FY 0.3% 1.8% 0.3% 0.2% 0.3%
230
(44-20) 7742-3681 02 January 2014
Songbird Estates
London Real Estate UK
100% 100%

450 428 414 100.0% 89.5%

394 83.5% 82.5% 85.2% 84.4% 84.5% 84.8% 84.9%
400 90.0%
350 80.0% 68.2%
300 270 278 70.0%
251 261 256 259
60.0%
250
50.0%
200
40.0%
150 30.0%
100 20.0%
50 10.0%
0 0.0%

40.0 35.3 18.0x 16.2x 16.7x 16.9x

16.0x 14.7x
35.0
12.9x 13.1x
30.0 14.0x
12.0x 10.7x
25.0 9.6x
8.8x
20.0 10.0x
15.1
8.0x
15.0
6.0x
10.0
2.7 4.0x
5.0 0.5 0.4 0.3 0.6 0.8 2.0x
0.0 0.0x
231
(44-20) 7742-3681 02 January 2014
St. Modwen Pr
Overweight
7 Ridgeway, Quinton Business Park, Birmingham, B32 1AF. T: 0121 222 9400
SMP.L,SMP LN Business activities
Price: 361p St Modwen is a national developer focusing on commercial and increasingly
Price Target: 375p residential development in the regions. Key development schemes include
Longbridge, New Covent Garden Market (London) and Swansea. The group owns
and actively manages an income producing portfolio that covers the majority of the
United Kingdom
costs to the business (i.e. operating and interest) as well as a significant land bank for
European Property
AC commercial and residential development.
Neil Green, CFA
(44-20) 7134-4478
History
Bloomberg JPMA GREEN <GO> St Modwen was founded in 1966 by Sir Stanley Clarke CBE.
Price Performance
At the groups recent IMS (October 2013) the key takeaways in our view were (1)
380
management saying there was “a notably more positive market outlook than we have
340 seen for some time.” (2) “Demand for our residential land continues to grow with
p 300 active land transactions indicating some upside against our book valuations,” and (3)
“our income producing portfolio is performing well as a result of both improving
260
sentiment in the commercial property market and our ongoing ability to extract
220 maximum value from our assets.” In terms of profits from residential development,
they remain inline with management’s expectations.
YTD 1m 3m 12m
Abs 53.2% 5.9% 19.5% 62.1%
Outlook
In our view, St Modwen’s outlook is positive. As indicated in the groups recent IMS,
Management land values are rising (52% of £1.1bn portfolio) and its residential development
Chairman Bill Shannon business in the regions is going from strength to strength. Commercial development
CEO Bill Oliver
CFO Mike Dunn
is still contributing although we see upside in this space should economic growth
IR pick up. In addition, a well managed income producing portfolio valued off a 9.2%
equivalent yield looks undervalued to us in such an improving economic
Major Shareholders environment and the flow of capital searching for (higher) yields.
Clarke Family 9.1%
Aberforth 6.5%
Blackrock 5.0%
Co-Op 3.8%
Overweight
St. Modwen Properties PLC (SMP.L;SMP LN)
Company Data FYE Nov 2012A 2013E 2014E 2015E 2016E
Date Of Price 17 Dec 13 ROIC FY 7.8% 8.1% 9.8% 16.3% 7.9%
Price Target (p) 375 LTV FY 40.0% 33.3% 30.9% 29.8% 28.9%
Price Target End Date 30-Oct-14 Adjusted NAV ps FY (p) 271.7 293.6 330.0 415.6 450.3
52-week Range (p) 378-220 Capital growth FY (0.4%) 1.4% 3.8% 3.3% 3.3%
Market Cap (£ bn) 0.72 NAV premium (discount) 13.6% 5.1% (6.5%) (25.8%) (31.5%)
Adjusted EBIT FY (£ mn) 49 50 51 51 52
EVA spread FY 1.0% 1.4% 3.0% 9.6% 1.1%
232
(44-20) 7742-3681 02 January 2014
St. Modwen Pr
Property UK
100% 100%

45 43 160.0%
38 136.5% 139.4% 139.1% 138.6% 138.1%
40 36 36 36 37 37 140.0% 123.4% 129.0%
34
35 120.0%
30
100.0%
25 67.5%
80.0%
20
60.0%
15
10 40.0%
5 20.0%
0 0.0%

450.0 415.6 12.0x 11.1x

400.0
330.0 10.0x
350.0 7.6x 7.6x 7.4x
293.6 6.8x
300.0 271.7 8.0x 6.5x 6.4x 6.6x
249.6
250.0 218.8 228.8
6.0x
200.0
4.0x
150.0
100.0 2.0x
50.0 0.0x
233
(44-20) 7742-3681 02 January 2014
Stagecoach
Overweight
10 Dunkeld Road, Perth PH1 5TW. T: 0173 844 2111.
SGC.L,SGC LN Business activities
Price: 365p Stagecoach generates 66% of its EBIT from UK regional (deregulated) bus services,
Price Target: 390p 9% from London bus, 19% from UK rail, and the remaining 6% from bus and coach
services in North America (including commuter and charter services, Megabus,
sightseeing, shuttle services and school bus operations). The company operates two
United Kingdom
UK rail franchises on its own (Southwest, East Midlands), and owns 49% stake of
Logistics Virgin Trains (JV with Virgin Group), operator of the West Coast franchise.
AC
Wenchang Ma
(44-20) 7134-5918
History
wenchang.ma@jpmorgan.com Started with two buses in Perth, Scotland in 1980, Stagecoach has grown into an
Bloomberg JPMA WMA <GO> international operator with a fleet of over 11,000 buses and coaches. The company
J.P. Morgan Securities plc acquired three National Bus Company businesses during the privatisation in 1987,
and expanded significantly during the 1990s through a number of acquisitions made
Price Performance
in UK, Portugal, Australia, New Zealand, Hong Kong, and US. The company was
380
listed on the London Stock Exchange since 1993. During the first decade of the 21st
360
century, Stagecoach consolidated its business portfolio, exited from most of the
p
340 international markets and concentrated on UK and North America.
320

280 Stagecoach has the largest exposure to deregulated UK Bus market among peers,
with c.66% of EBIT generated from this segment, which we expect to be supported
YTD 1m 3m 12m
Abs 16.1% 2.8% 8.9% 19.8% by underlying economic improvement in the UK. Despite IAS19 headwinds, we
expect Stagecoach to continue to deliver industry-leading EBIT margins in UK Bus,
with potential profitability improvement in North America due to management
Management efforts to progress in Coach America integration, and improve Megabus margins.
Chairman Sir Brian Souter
CEO Martin Griffiths
CFO Ross Paterson Outlook
IR Bruce Dingwall The stock has tended to trade at a premium to peers historically, which we view as
justified given the company's consistent track record of earnings beat. Currently the
Major Shareholders shares are trading at a calendarised 2014e ex-Rail EV/ EBIT of 14.8x, or c.24%
Highland Global Trans 26%
Director & related 26%
premium over peers average. Our base case assumes 2% revenue growth for
Brian Souter 15% deregulated UK bus in Fiscal 2014e. Every 100bps incremental revenue growth
Threadneedle 7% translates into c.2% upside to our group EPS estimates.
JP Morgan 6%
Overweight
Stagecoach Group plc (SGC.L;SGC LN)
Company Data FYE Apr 2012A 2013A 2014E 2015E 2016E
Price Target End Date 30-Apr-15 EBIT FY (£ mn) 210 199 220 226 246
52-week Range (p) 377-285 DPS (Net) FY (p) 7.10 8.60 9.33 9.89 10.61
Market Cap (£ bn) 2.10 Div Yield FY 1.9% 2.4% 2.6% 2.7% 2.9%
EV/EBITDA (x) FY 10.2 12.5 12.0 11.5 10.8
234
(44-20) 7742-3681 02 January 2014
Stagecoach
15% 15%
UK Regional Bus
34%
London Bus
UK North America
UK Rail
43% North America

8%
85%

£ in millions
3,500 3,228 12.0%

3,083
2,948 9.8%
3,000 2,805 9.2%
2,591 10.0% 8.4% 8.1%
2,390 7.6% 7.6%
2,500 2,103 2,164 8.0% 7.1% 7.4% 7.3%
2,000 1,764
6.0%
1,500
4.0%
1,000
500 2.0%
0 0.0%

Pence
35.0 2.0x 1.7x 1.8x

29.7 1.8x
30.0 1.5x 1.5x
25.4 25.8 26.7 1.6x 1.4x
23.8 24.6 1.3x 1.3x
25.0 22.9 1.4x 1.2x
20.3 18.7 1.2x 1.0x
20.0 1.0x
15.0 0.8x
0.6x
10.0 0.4x
5.0 0.2x
0.0x
235
(44-20) 7742-3681 02 January 2014
Synthomer Plc
Neutral
Temple Fields, Harlow, Essex CM20 2BH. T: 0203 603 5220
SYNT.L,SYNT LN Business activities
Price: 238p Synthomer produces chemicals and formulations to a wide range of industries
Price Target: 244p including, for example, industrial coatings, building products, gloves, carpets, paper,
adhesives and plastics. Specifically, the company’s products are generally based on
petrochemicals with chemicals such as nitrile rubber and styrene butadiene rubber,
United Kingdom for example, supplied to the automotive and construction industries. Geographically,
European Chemicals Europe is the largest region with c59% of sales with Asia contributing c28%.
Ben Scarlett
(44-20) 7742-9678
History
ben.scarlett@jpmorgan.com The Holliday Chemicals acquisition in 1998 for £256m broadened the company’s
J.P. Morgan Securities plc operations and enabled the company to gain access to higher-end markets such as
dyes, pigments and pharmaceutical active ingredients. Subsequent to the acquisition,
Price Performance
it undertook restructuring to address underperforming assets, including the sale of the
260 Building Products division. In 1999 and 2001, the company bought out the remaining
240
50% stakes in its two joint ventures. It then made further efforts to restructure and
220
divest non-core assets. In December 2010, Synthomer announced a major acquisition
p of a German latex business, PolymerLatex, for £376m.
200

160 The structural supply demand appears to be improving following concerns in 2012
over new competitor activity in the Asia nitrile rubber markets. With plant utilisation
YTD 1m 3m 12m
Abs 20.5% 5.3% 0.7% 27.9%
rates across the business currently at c85%, we estimate, there should be scope to
increase prices next year. In the shorter term, however, Synthomer has suffered from
relatively weak demand in its cyclical European markets, particularly construction,
which will likely continue to weigh on sentiment.
Management
Chairman N A Johnson Outlook
CEO A M Whitfield Synthomer remains a recovery play on Europe. The stock is one of our preferred
CFO D C Blackwood
plays in the cyclical space given its ability to hold cash margins and the improving
Major Shareholders supply/demand environment in its core markets. We remain Neutral given short-term
Kuala Lumpar Kepong BHD 19% earnings volatility, and the fact the company has seemingly seen little recovery in
Standard Life 12% demand in Europe.
UBS 11%
Old Mutual 4%
Schroders 4%
Neutral
Synthomer Plc (SYNT.L;SYNT LN)
Price Target (p) 244 Adj.EBITDA FY (£ mn) 119 127 126 134 139
52-week Range (p) 262-170 Adjusted PBT FY (£ mn) 81 96 91 99 106
Market Cap (£ mn) 806.89 FCF Yield FY 4.0% 3.2% 5.8% 8.4% 8.9%
EV/EBITDA (x) FY 7.3 6.8 7.8 7.0 6.5
236
(44-20) 7742-3681 02 January 2014
Synthomer Plc
4% 5%
28% 8% Western Europe
Polymer Europe & North
America Asia
Africa & Middle East

55%
Polymer Asia & Rest Of the 28% North America
World
72% RoW

1,400 12.0%
1,167 10.0%
1,200 1,117 1,112 1,089 1,133
10.0%
1,000 7.5% 7.7%
8.0% 7.0% 6.7% 7.0%
800
583 6.0% 4.9%
600 538
467 3.4%
4.0%
400
200 2.0%
0 0.0%

30.0 3.5x 3.2x

3.0x
24.0 3.0x
25.0 22.1 22.0 22.1
20.4 2.5x 2.1x
18.8
20.0 16.8 2.0x 1.6x
14.3 1.4x
15.0 1.5x 1.0x
0.9x
10.0 1.0x
0.5x
0.5x
5.0
0.0x
237
(44-20) 7742-3681 02 January 2014
Telecity
Overweight
4th Floor, 2 Harbour Exchange Square, London E14 9GR. T: 0207 001 0000
TCY.L,TCY LN Business activities
Price: 662p Telecity is a European network neutral data centre operator positioned as a provider
Price Target: 1,100p of high-specification internet connectivity and storage facilities to companies in need
of resilient data centre space, with links into the full range of telecoms providers. The
group’s breadth of connectivity to individual telecoms providers, and its ability to
United Kingdom
deliver high levels of power to a densely networked data centre portfolio differentiate
European Telecoms
AC it from wholesale storage vendors as well as from those telcos who offer storage.
Carl Murdock-Smith
(44-20) 7134-4947 History
carl.murdocksmith@jpmorgan.com
Bloomberg JPMA MURDOCKSMITH <GO>
Telecity opened its first data centre in Manchester in 1998, followed by European
expansion. Telecity was floated in 2000, but overambitious build-out plans and
deteriorating pricing led the company to be taken private again by 3i and Oak Hill in
Price Performance 2005. Telecity then added scale and increased managed services capabilities through
the acquisitions of Redbus and Globix in 2006, before relisting in October 2007.
1,000
Telecity has subsequently resumed its expansion, adding further geographies across
900 its European footprint.
p
800
700
Telecity’s H1 results in July 2013 mildly disappointed with revenue 1% below
600
consensus. UK pricing slowed to flat (later restated as +2%) vs +11% at FY-12 &
YTD 1m 3m 12m +13% at
Abs -19.0% -0.2% -19.0% -21.2% H1-12. Along with reduced guidance at Equinix (not rated, covered by US analyst
Sterling Auty) and a mixed quarter from Interxion (not covered), this has led to
industry-wide concerns and a significant reduction in Telecity’s share price. This was
further compounded in October 2013 by the announcement that the CFO would be
Management leaving. As such, issues currently weighing on the stock are: UK pricing concerns,
Chairman John Hughes
mix dilution (more volume being added in new, lower pricing sites), power efficient
CEO Michael Tobin
IR Matthew Springett chips and servers disrupting pricing, new capacity coming to market.

Norges 8% There are many concerns weighing on the stock currently, but we believe there are
Standard Life 5% explanations and/or mitigants to provide comfort. Against this, Telecity is positively
Oppenheimer 4% exposed to data as a secular long-term growth driver, and has strong barriers to entry.
Butterfield 4%
As such, we remain positive on the long-term potential of the story, although we
recognise it will take time and demonstrated execution for the shares to perform.
2014 is likely to represent the beginning of this healing process.
Overweight
Telecity Group PLC (TCY.L;TCY LN)
Price Target (p) 1,100 Revenue FY (£ mn) 240 283 328 365 404
52-week Range (p) 1,026-633 EBITDA Margin FY 44.3% 45.8% 46.6% 47.5% 47.8%
Market Cap (£ bn) 1.35 Bloomberg EBITDA FY (£ 105 130 155 177 201
Fiscal Year End Dec Net debt FY (£ mn) 164 254 299 299 269
Adj.P/E FY 26.6 21.3 18.2 16.1 14.4
238
(44-20) 7742-3681 02 January 2014
Telecity
45%
Colocation & related services UK Rest of Europe
55%
100%

500 442 60.0%

48.8%
450 404 45.8% 46.6% 47.5% 47.8%
400 365 50.0% 42.5% 44.3%
350 328 37.7%
283 40.0%
300 30.4%
240
250 196 30.0%
200 169
133 20.0%
150
100 10.0%
50
0 0.0%

60.0 2.5x
51.9 2.0x 2.0x
50.0 45.9 2.0x 1.7x
41.0 1.5x
36.4 1.4x
40.0 1.5x
31.0
30.0 24.9 0.9x 0.9x
21.1 1.0x 0.7x 0.7x
20.0 16.2
0.5x
7.8
10.0
0.0x
239
(44-20) 7742-3681 02 January 2014
Ultra Electronics
Neutral
417 Bridport Road, Greenford, Middlesex, UB6 8UA. T: 0208 813 4321
ULE.L,ULE LN Business activities.
Price: 1,843p Ultra Electronics is an electronics company that sells over 300 technologies in 4 core
Price Target: 1,920p segments: defence (54% of 1H13 sales), security & cyber (24%), and transport /
energy (22%).
United Kingdom
European Aerospace & Defence
History
David H Perry, CFA
AC Ultra Electronics was subject to a management buy out in 1993 as it demerged from
(44-20) 7742-5606
the TI Group. Ultra Electronics was then publicly listed in 1996 and had an 11%
david.h.perry@jpmorgan.com sales CAGR through to 2011. This growth was through organic growth as well as
Bloomberg JPMA PERRY <GO> c40 acquisitions. Organic Growth slowed significantly in 2012 and 2013E (-4% in
J.P. Morgan Securities plc both years) as the US defence downturn began to bite. Ultra Electronics believes that
organic growth can resume from 2014 due to growth in non-US defence products and
Price Performance from new technologies it is bringing to market.
2,000
1,900
p
1,800
Ultra Electronics is not a capital intensive business. Ultra Electronics has only 0.75
1,700
production engineers for every design engineer. Its design engineers often have
1,600 transferable skills that can be applied across its various end markets. Ultra’s products
1,500 contain a high amount of software coding and/or electronic capability. This is
reflected in the fact that it spends c6% of sales pa on self funded R&D whereas
YTD 1m 3m 12m
Abs 9.1% 1.5% -3.0% 12.3%
capex is only c2% of sales pa.
Outlook
Management We expect organic sales growth to be -4% in 2013. Ultra Electronics is more
Chairman Douglas Caster confident on organic growth for 2014 onwards. Defence has been hit hard by a c75%
CEO Rakesh Sharma drop in US army demand for tactical radios from FY11-FY13 but this segment
CFO Mary Waldner should bottom this year. Whilst it is hard to pin down a growth rate for defence, Ultra
Electronics is confident of medium-term demand for its next generation radios for
Major Shareholders
the US Army and also for sonobuoys for the US Navy. Ultra Electronics expects mid
Schroders 7%
M&G 6% single digit growth in security & cyber over the medium term and transport / energy
Mondrian 5% should benefit from improving GDP growth and new programmes. Ultra Electronics
Artemis 5% has managed the 2012-2013E decline in sales by cutting costs and this has stabilised
Ameriprise 5% its EBITA margins at just over 16%.
Neutral
Ultra Electronics Holdings plc (ULE.L;ULE LN)
Company Data FYE Dec 2012A 2013E 2014E 2015E 2016E
Price (p) 1,843 Adj. EPS* FY (p) 124.5 125.6 127.4 131.0 134.3
Price Target (p) 1,920 JPM def. clean EPS FY (p) 123.6 115.1 122.4 126.0 129.3
Price Target End Date 31-Dec-14 JPM def. clean P/E FY 14.9 16.0 15.1 14.6 14.3
52-week Range (p) 2,003-1,552 EV/EBITA FY 10.3 12.4 11.5 10.9 10.3
Market Cap (£ mn) 1,281.84 Div yld FY 2.2% 2.3% 2.5% 2.6% 2.7%
Shares O/S (mn) 70 Sales FY (£ mn) 761 747 762 770 784
EBITA FY (£ mn) 122 122 123 126 128
240
(44-20) 7742-3681 02 January 2014
Ultra Electronics
19% 15%
30% UK
Aircraft & Vehicle Systems
39%
Rest of Europe
Information & Power Systems
North America
Tactical & Power Systems 7%

Other
42% 48%

900 17.0% 16.7%

761 762 770 784
800 732 747 16.3% 16.4%
710 16.5% 16.3%
700 651 16.1% 16.1%
600 515 16.0%
15.5%
500
15.5%
400 15.0% 15.0%
300 15.0%
200
14.5%
100
0 14.0%

160.0 1.0x 0.8x

134.3
140.0 127.4 131.0 0.8x
120.2 124.5 125.6
0.6x 0.4x
120.0 107.9 0.3x 0.3x 0.3x
96.4 0.4x
100.0 0.1x
80.1 0.2x
80.0 0.0x (0.2)x
(0.3)x
60.0 (0.2x)
(0.4x) (0.6)x
40.0
(0.6x)
20.0
(0.8x)
241
(44-20) 7742-3681 02 January 2014
Unite Group
Overweight
Swan House, 17-19 Stratford Place, London, W1C 1BQ. T: 0117 302 7000
UTG.L,UTG LN Business activities
Price: 400p Unite is the largest provider of student accommodation, with 42,000 beds in over 120
Price Target: 435p properties across 23 of the UK’s strongest university cities. Unite owns property
directly on its balance sheet, as well as co-investing in four specialist funds with
investment partners that it manages. Unite also is an active developer of student
United Kingdom
accommodation, with £130m regional development program in addition to London
European Property
AC exposure.
Tim Leckie, CFA
(44-20) 7134-4477
History
Bloomberg JPMA LECKIE <GO> Unite was founded in Bristol in 1991, to execute on University of West England
J.P. Morgan Securities plc research on the potential to renovate redundant inner city offices into student
accommodation. Unite opened its first student accommodation in Bristol in 1992. In
Price Performance 1998 the first London properties were opened, and in 1999 Unite listed on AIM,
420
before floating on the LSE in 2000.
380
p 340
Unite operating 42,000 beds across 23 cities. Unite focuses on active management of
300
its existing portfolio, delivering high quality student accommodation and driving
260 rental growth. We estimate c20% CAGR in recurring cash earnings over the coming
three years. Furthermore, developments of new sites contribute development profits
YTD 1m 3m 12m
Abs 38.0% -0.3% 10.4% 42.4%
on completion, while adding to the rent roll.
Outlook
Management
Chairman Phil White After weathering the introduction of student fees for UK students, and changes to the
CEO Mark Allan application process which have disrupted student leasing patterns, Unite is now
CFO Joe Lister seeing occupancy return to historic high levels and is forecasting rental growth of
IR Sally Quigg 3-4%. Regional developments are expected to deliver returns of 30% +, and London
Major Shareholders continues to perform strongly.
Fidelity 13%
Old Mutual 11%
FMR 9%
JPAM 7%
Scottish Widows 5%
Overweight
Unite Group plc (UTG.L;UTG LN)
Market Cap (£ bn) 0.65 ROIC FY 3.2% 13.8% 8.2% 8.9% 9.6%
Shares O/S (mn) 163 NNNAV ps FY (£) 286.32 330.13 361.37 403.27 454.51
Adj. EPS growth FY 108.8% 59.5% 29.4% 9.6% 30.4%
NAV premium (discount) 21.8% 10.6% 2.0% (8.2%) (18.1%)
FY
242
(44-20) 7742-3681 02 January 2014
Unite Group
25%
London
41% Sheffield
Student Housing Liverpool
12% Leeds
Other
11% 11%
100%

120 89.0% 88.3% 88.5% 88.6%

101 87.4%
88.0%
100 90
86 87.0%
77
80 86.0% 84.8%
61 64
85.0%
60 83.4%
84.0%
40 83.0%
82.0%
20
81.0%
0 80.0%

500.0 472.3 14.0x 12.1x

450.0 421.0 10.7x
379.1 12.0x
400.0 349.6 9.6x 9.1x 9.3x
350.0 317.6 10.0x 8.1x
294.5
300.0 8.0x
250.0 6.0x
200.0
150.0 4.0x
100.0 2.0x
50.0 0.0x
243
(44-20) 7742-3681 02 January 2014
Vectura
Overweight
One Prospect West, Chippenham, Wiltshire, SN14 6FH. T: 0124 966 7700
VEC.L,VEC LN
Business activities
Price: 121p
Vectura is a healthcare company focused on the development of inhaled therapies for
Price Target: 155p the treatment of respiratory diseases, such as chronic obstructive pulmonary disease
(COPD), a growing market that is currently estimated to be worth in excess of $25bn.
United Kingdom Vectura’s key assets are royalties on Novartis’ branded COPD therapies, Seebri and
European Healthcare (Pharma, Ultibro, and potential royalties on a number of generic respiratory applications,
Biotech) including Novartis’ European generic Advair application.
AC
James D Gordon
(44-20) 7742-6654 History
james.d.gordon@jpmorgan.com Vectura was formed in 1997 with VC funding to develop and commercialise drug
Bloomberg JPMA GORDON1 <GO>
formulation and delivery technology. The company was AIM listed in 2004 and
entered into its first global commercialization and development agreement with
Price Performance
Novartis for NVA237 in 2005. This was followed by several other collaborations
130 such as those with Boehringer Ingelheim and GSK. To date, Vectura has been
120 involved in development of seven approved products marketed by various
110 pharmaceutical partners and has a broad inhaled therapeutics pipeline with a range of
p 100 proprietary pulmonary delivery technologies.
90
80
70
The group has two key divisions, Branded and Generic. Within the Branded division,
YTD 1m 3m 12m the company has started to receive royalty income on Novartis' Seebri and Ultibro
Abs 42.8% 11.0% 5.2% 44.0% treatments for COPD (smoker's cough), where we forecast combined peak in market
sales of $1.9bn, on which Vectura is entitled to a c.5% royalty. In addition, Vectura
Management is entitled to a c.15% royalty on generic respiratory drug applications, where we see
Chairman (NE) Jack Cashman peak sales potential of a further $1bn.
CEO Chris Blackwell
CFO Paul Oliver Outlook
Senior Indep. John Brown
Director
Over the next few years, we anticipate strong branded royalty growth, from roll-out
of Seebri and Ultibro in the US. On top of this, we expect eventual US Seebri and
Major Shareholders Ultibro approvals, as well as EU and US generic approvals, to open up further lines
Legal & General Inv. 12% of royalty income. Beyond these partnered assets, we see the late stage pipeline
Franklin Resources 10% expanding, as Vectura accelerates business development, putting their £66m of cash
Invesco Ltd. 9% to work. We expect an update on these business development plans at the Q1’14
JP Morgan Chase 8%
strategy update.
AXA 8%
Overweight
Vectura Group Plc (VEC.L;VEC LN)
Price (p) 121 Revenue FY (£ mn) 42 33 31 34 50
Date Of Price 17 Dec 13 Gross Profit FY (£ mn) 40 31 30 34 49
Price Target (p) 155 Admin Expense FY (£ mn) (16) (12) (11) (11) (10)
Price Target End Date 30-Sep-14 R&D Expense FY (£ mn) (38) (33) (31) (31) (31)
52-week Range (p) 124-76 Operating profit FY (£ mn) (14) (14) (12) 5 7
Market Cap (£ mn) 398.45 Net Income FY (£ mn) (9) (4) (6) 3 5
Shares O/S (mn) 329 Diluted EPS FY (p) (2.86) (1.34) (1.78) 0.96 1.58
Net cash FY (£ mn) 74 79 70 63 79
244
(44-20) 7742-3681 02 January 2014
Vectura
2% 1%
12%
Royalties
USA
Product licensing 37%
43%
Technology licensing 50% UK
Pharmaceutical and
development services
Device sales Europe excl. UK
42%
13%

80 60.0% 39.5%
69
70 40.0% 15.6% 14.5%
60 20.0%
50 0.0%
50 42
40 -20.0% (38.1)%(32.5)%(42.1)%(38.0)%
40 31 33 34
31 -40.0%
30 25 (67.0)%
-60.0%
20 -80.0% (99.0)%
10 -100.0%
0 -120.0%

10.0 8.4 10.0x 7.8x 8.6x

6.9x 6.4x 6.9x
8.0 8.0x 5.4x
6.0x
6.0 4.0x
4.0 2.3 2.0x
1.7
2.0 0.0x
(2.0x) (3.9)x
0.0 (4.0x)
(2.0) (6.0x)
(1.3) (1.8) (9.3)x (9.1)x
(4.0) (8.0x)
(3.2) (2.9)
(10.0x)
(6.0) (12.0x)
(5.2)
(8.0) (6.0)
245
(44-20) 7742-3681 02 January 2014
Vesuvius
Overweight
165 Fleet Street, London, EC4A 2AE. T:0207 822 0000
VSVS.L,VSVS LN Business activities
Price: 470p The group has two divisions that supply refractory materials. The Steel Division
Price Target: 497p (Vesuvius), can be split into two segments: steel flow control and advanced
materials. Steel flow control provides consumable products, systems and services to
United Kingdom
regulate and protect the flow of steel (at temperatures above 1,300°C) in the
European Capital Goods
continuous casting process. In this area, we estimate that Vesuvius has a around a
AC 50% global market share. The advanced materials business provides installation
Glen Liddy
expertise and materials that withstand high temperatures (typically above 1,000°C).
(44-20) 7134-4570
glen.liddy@jpmorgan.com
The iron and steel industry accounts for ~75% of the sales of the advanced materials
Bloomberg JPMA LIDDY <GO> business area; other important end markets include cement production and
J.P. Morgan Securities plc hydrocarbon processing.
Price Performance
The Foundry division produces consumable materials used in casting metals for a
500 wide variety of engineered products. About 40% of castings are produced for the
vehicle sector (~25% for cars/light trucks and ~15% for heavy trucks. Other markets
450
for foundry castings include construction, agriculture and mining machinery, power
p 400 generation equipment, pipes and valves, railroad and general engineering equipment.
350
History
300 Vesuvius was created in 1916. In 2012, Vesuvius plc became a separately listed
company as a result of the demerger from Cookson Group plc. The disposal of the
YTD 1m 3m 12m
Abs 31.9% -3.4% 1.2% 47.8%
Precious Metals division was completed in 2013.
This year, Vesuvius has been one of the best performing stocks in our industrial
Management universe, up 35% year to 5 December 2013, vs the FTSE250 up 23%. We believe a
Chairman John McDonough key driver of the good share price performance has been the management delivering
CEO Francois Wanecq
CFO Chris O'Shea on expectations set at the time of the demerger. While revenue is set to decline in
IR Maddy Cox-Smith 2013E, by ~3% y/y, trading profit is poised to rise by 4% on the back of effective
cost-cutting and productivity-improvement programmes.
Major Shareholders
Cevian Capital 21% Outlook
Artisan Partners 10%
Morgan Stanley 8%
Going forward, we believe that benefits of cost cutting/productivity programmes
Pelham Capital 6% should translate into further margin expansion in 2014, even if the recovery, in
AXA 6% volume terms, is relatively subdued. Beyond seeking to improve operating
performance, management is also focused on improving the balance sheet structure
on the back of tight working capital controls and the return of capital to shareholders.
Overweight
Vesuvius Plc (VSVS.L;VSVS LN)
Price (p) 470 Analyst Adjusted Basic 27.47 30.96 34.86 38.36
Date Of Price 17 Dec 13 EPS FY (p)
Price Target (p) 497 Net Revenue FY (£ mn) 1,548 1,505 1,565 1,628
Price Target End Date 31-Dec-14 DPS (Gross) FY (p) 9.50 14.75 15.75 17.00
52-week Range (p) 530-300 EV/Revenue FY 1.0 1.0 0.9 0.9
Market Cap (£ mn) 1,303.78 EV/EBIT FY 11.4 10.7 9.5 8.5
Shares O/S (mn) 277 P/E (x) FY 1.9 15.2 13.5 12.3
Div Yield FY 2.0% 3.1% 3.4% 3.6%
Net debt / (cash) FY (£ mn) 295 265 242 198
246
(44-20) 7742-3681 02 January 2014
Vesuvius
4%
25%
NAFTA
Steel Flow Control 23%
34% 35%
South America
Advanced Refractories Europe

7%
Asia
Foundry
RoW
31% 41%
Figure 697: Revenue Figure 698:Trading profit margin

£ millions £
2,000 1,825 12.0% 10.9%

1,686 9.9% 9.8% 10.2%
1,800 1,565 1,628 9.2%
1,548 1,505 10.0% 8.6%
1,600 1,431
1,400 8.0%
1,200
1,000 6.0% 5.1%
800
600 4.0%
400 2.0%
200
0 0.0%

45.0 4.0x 3.7x

39.2 39.4 38.4
40.0 34.9 3.5x
35.0 31.0 3.0x
30.0 27.5
2.5x
25.0 1.7x 1.6x
2.0x 1.6x 1.4x
20.0 1.5x 1.2x
0.9x
15.0 1.0x
10.0 5.9 0.5x
5.0 0.0x
247
(44-20) 7742-3681 02 January 2014
Victrex
Neutral
Victrex Technology Centre, Thornton Cleveleys, FY5 4QD. T: 01253 897700
VCTX.L,VCT LN Business activities
Price: 1,675p
Victrex is the world’s leading producer of polyaryletherketone (PEEK), a high
Price Target: 1,550p performance plastic with properties enabling its application in a number of
industries. Victrex’ largest division, Victrex Polymer Solutions caters for industrial
United Kingdom applications such as aerospace, automotive, electronics and oil & gas for example.
European Chemicals The second division, Invibio Biomaterial Solutions provides biocompatible PEEK
AC with applications including spinal, dental and knee implants, for example.
Martin Evans
(44-20) 7134-5958 History
martin.evans@jpmorgan.com
PEEK was developed by ICI in 1978 and commercially launched in 1981. In 1993,
Bloomberg JPMA EVANS <GO>
Peter Rowley and David Hummel (then ICI senior managers) led an MBO of the
PEEK business. Victrex was floated in December 1995 at a price of 170p. Dr
Price Performance Rowley retired and was replaced as chairman by Peter Warry at the AGM in January
1999. In 2000, Michael Peacock took over as Finance Director, and resigned in
1,750 December 2010 to be replaced by Peter Bream. He was then succeeded by Steve
1,650
Barrow, who recently resigned, to be replaced in January 2014 by Louisa Burdett.
p
1,550
Victrex has reported 1% volume growth this year in a challenging macro
1,450 environment, particularly in Europe where a number of chemical companies have
seen volume declines. The recent Q4 results highlighted a return to growth in Invibio
YTD 1m 3m 12m
Abs 2.5% 7.2% 1.8% 3.4% (which had seen a 5% decline in H1 volumes) and encouraging demand from the
transport sector for Victrex Polymer Solutions. In the longer term, Victrex remains
confident in the growth profile and is adding a new £90m PEEK plant which will add
2,900 tonnes capacity, increasing total capacity to 7,000 tonnes.
Management
Chairman Anita Frew Outlook
CEO Dave Hummel Victrex should be able to demonstrate stronger volume growth than that seen this
CFO Louisa Burdett
year. We believe the strong project pipeline, and relative ease of securing new
IR Andre Hanson
contracts now Victrex is in the process of expanding its capacity should drive this
Major Shareholders growth. In the longer term, Victrex’s investor day highlighted continued
Blackrock 15% opportunities for growth in demand for PEEK driven by the strong pipeline of new
Mondrian Investment 6% products and applications with the company highlighting, for example, small space
Schroders PLC 5% acoustics and braking systems as potential growth areas for VPS. In Invibio, new
Kames 4% division CEO Martin Court highlighted areas such as dental and knee as being future
Schroder IM 4%
growth areas.
Neutral
Victrex Plc (VCTX.L;VCT LN)
Company Data FYE Sep 2011A 2012A 2013A 2014E 2015E
Price Target (p) 1,550 Adj.EBITDA FY (£ mn) 103 104 104 106 109
Price Target End Date 31-Dec-14 Adj.EBIT FY (£ mn) 94 94 94 95 98
52-week Range (p) 1,791-1,457 Pretax profit adjusted FY (£ 94 95 95 96 98
Market Cap (£ mn) 1,404.64 mn)
Shares O/S (mn) 84 EV/EBITDA (x) FY 10.3 10.4 12.4 12.4 11.9
Adj P/E FY 19.6 19.5 19.4 18.9 18.2
FCF Yield FY 4.1% 2.8% 2.8% 1.3% 3.3%
248
(44-20) 7742-3681 02 January 2014
Victrex
18%
23%
Europe
VPS Invibio 50% Americas
32% Asia
77%

250 227 233 50.0%

216 220 222 43.5% 42.8% 42.4% 42.0% 41.9%
45.0% 38.7% 39.5%
200 189 40.0%
35.0%
141
150 30.0% 24.2%
104 25.0%
100 20.0%
15.0%
50 10.0%
5.0%
0 0.0%

100.0 88.7 92.0 0.2x 0.1x

85.3 85.7 86.5 0.1x
90.0 0.1x
80.0 0.0x
70.0 65.1
(0.1x)
60.0 (0.2x)
47.9
50.0 (0.3x) (0.4)x
(0.4)x (0.5)x
40.0 (0.4x)
30.0 21.7 (0.5x) (0.6)x (0.6)x
20.0 (0.7)x
(0.6x)
10.0 (0.7x)
249
(44-20) 7742-3681 02 January 2014
WH Smith
Overweight
180 Wardour Street, London, W1F 8FY. T: 01793 616 161
SMWH.L,SMWH LN Business activities
Price: 1,000p WH Smith operates 673 stores in its Travel division (of which 579 are in the UK and
Price Target: 1,085p 94 overseas) and 615 UK High Street stores. The group predominantly sells News &
Impulse products, Stationery (including greeting cards) and Books.
United Kingdom History
European Retail
AC
WH Smith has a long history dating back to its first store opened by Henry Walton
Matthew Webb Smith in 1792. WH Smith now consists of two divisions, Travel and High Street. The
(44-20) 7134-9743
group has a very strong record of operational performance. Between FY07 and FY13
matt.webb@jpmorgan.com
Bloomberg JPMA WEBB <GO>
WH Smith delivered CAGRs of 9% for operating profit, 11% for PBT, 17% for EPS
and 19% for DPS. This has been despite a 4% negative CAGR in LFL sales CAGR,
in part driven by the withdrawal from the Entertainment category. In 2013 Kate
Price Performance Swann stepped down and Stephen Clarke, previously MD of the High Street
division, was appointed as her replacement.
1,000

p
800 At the end of FY13 the group operated 579 Travel stores in the UK and 94
700
internationally (with around two-thirds of the international stores operated via
franchise agreements). The Travel division stores are largely in airports, railway
600
stations, motorway service stations (franchise stores), hospitals and workplaces.
YTD 1m 3m 12m They therefore enjoy strong positions with high footfall and limited competition.
Abs 53.0% 1.9% 17.5% 48.9% Turnover rents and what are effectively semi-variable staff costs result in limited
operational gearing in this division reducing its vulnerability to unexpected macro
events. The High Street division faces more competition, from bricks & mortar as
Management well as online competitors. However, the group has consistently demonstrated its
Chairman Henry Staunton ability to change its product mix to reflect changing consumer demand and also to
CEO Stephen Clarke achieve meaningful ongoing cost savings. Indeed the performance of the highly-
FD/ COO Robert Moorhead
IR Mark Boyle
incentivised management team on this metric has been very strong, with savings
consistently beating expectations. The Travel and High Street businesses are run
Major Shareholders independently.
Standard Life 15%
Threadneedle 7% Outlook
Scottish Widows 6%
Schroders 5% Although we forecast the High Street division to continue to experience mid single
Lloyds 5% digit negative LFL sales in the medium term, we do not expect to see a decline in
profits in this division. In Travel, opportunities for expansion remain and some
tentative signs that passenger numbers have been improving provides upside risk.
Overweight
WH Smith Plc (SMWH.L;SMWH LN)
Company Data FYE Aug 2012A 2013A 2014E 2015E
Price (p) 1,000 Adj.EPS FY (p) 59.70 64.25 71.73 78.92
Price Target (p) 1,085 Adj.EBITDA FY (£ mn) 141 144 149 155
Price Target End Date 1-Dec-14 Pretax Profit Adjusted FY 102 103 108 114
52-week Range (p) 1,027-570 (£ mn)
Market Cap (£ mn) 1,270.00 Adj.P/E FY 16.8 15.6 13.9 12.7
DPS (Net) FY (p) 26.90 30.70 33.00 36.00
Div. Yield FY 2.7% 3.1% 3.3% 3.6%
250
(44-20) 7742-3681 02 January 2014
WH Smith
1%
39%
High Street Travel UK International
61%
99%

1,600 12.0% 11.1%

10.4%
1,352 1,340 1,312 9.7%
1,400 1,273 1,243 9.0%
1,186 1,151 1,129 10.0%
1,200 1,111 8.2%
7.3%
8.0% 6.8%
1,000 6.2%
5.5%
800 6.0%
600
4.0%
400
2.0%
200
0 0.0%

100.0 0.1x 0.0x

86.5
90.0 78.9 0.0x
80.0 71.7 (0.1)x (0.1)x
70.0 64.3 (0.1x) (0.2)x
59.7
60.0 51.4 (0.2)x
45.3 (0.2x) (0.3)x
50.0 41.3
40.0 35.3 (0.3)x
(0.3x) (0.4)x
30.0
20.0 (0.4x) (0.5)x
10.0 (0.5x)
251
(44-20) 7742-3681 02 January 2014
Wincanton
Underweight
Methuen Park, Chippenham, Wiltshire, SN14 0WT. T: 01249 710 000
WIN.L,WIN LN Business activities
Price: 130p Wincanton is a leading provider of outsourced logistics and transport solutions. The group’s
Price Target: 110p aim is be the supply chain provider of choice – working collaboratively with customers to
provide value through more efficient, flexible and cost-effective supply chains.
United Kingdom
History
AC Wincanton was formed in 1925 as a subsidiary of the West Surrey Central Dairy
Victoria Prior, CFA
Company. From the 1950s, Wincanton started to carry out milk haulage and other
(44-20) 7134-5912
victoria.prior@jpmorgan.com
tanker distribution, including fuels. Wincanton demerged from Uniq in 2001 and
Bloomberg JPMA PRIOR <GO>
acquired P&O Trans European for £153m in cash in 2002 which it then built upon to
form a Mainland European operation. However, this proved to be a challenging
market place and the group eventually ended up refocussing its operations back to
Price Performance the core UK business with a sale of Mainland Europe in January 2012. Eric Born,
140 Chief Executive Officer, joined in 2010.
120

p
80 The group’s largest segment Contract Logistics (85% revenue) offers logistics
60
services including supply chain management and warehousing to a wide range of
40
blue chip organizations in the Construction, Defence, FMCG, Fuels and energy,
Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Public sector and Retail markets. Specialist Services (15% revenue) consists of three
YTD 1m 3m 12m businesses; Pullman which offers fleet management and maintenance services;
Abs 85.7% 25.3% 66.7% 83.7% Wincanton Records Management which offers document and data storage, document
shredding and scanning and Containers which offers transport and storage logistics.
Management
Chairman Steve Marshall Outlook
CEO Eric Born
CFO Adrian Colman
In our view, management is making good progress on turning the business around
albeit there continue to be challenges in FY14E. The business remains cash
Major Shareholders constrained with onerous lease payments, high average debt levels (albeit these are
Threadneedle 12% reducing) and pension commitments restricting investment into growing the
Aberforth 10%
Standard Life 9%
business. As a consequence, in the short-term we believe earnings momentum and
Wincanton Pensions 9% debt paydown is likely to be limited. However, with good medium-term growth
Henderson 6% opportunities, particularly if a recovery in the UK economy takes hold, and a strategy
of moving up the value chain as more complex logistics solutions are targeted, it is
possible to become more optimistic on the group’s prospects looking further out.
Underweight
Wincanton PLC (WIN.L;WIN LN)
Price Target (p) 110 Adjusted EBITA FY (£ mn) (33) 39 39 41 43
Price Target End Date 31-Mar-15 EBIT Margin FY (2.7%) 3.6% 3.6% 3.6% 3.7%
EV/EBITDA (x) FY 6.2 6.3 6.0 5.6 5.2
Adj. P/E FY 7.2 6.4 9.2 8.8 8.2
Net Yield FY 0.0% 0.0% 0.0% 0.0% 0.0%
252
(44-20) 7742-3681 02 January 2014
Wincanton
6% 2%
Contract - retail grocery
7% 22%
Contract - retail general
8% Contract - FMCG
Contract - tankers & bulk UK & Ireland
Contract - construction
10%
Contract - other
21% Specialist - containers
11% Specialist - Pullman services 100%
13% Specialist - records mgmt

1,400 1,328 4.0% 3.6% 3.6% 3.6% 3.7%

1,203 1,174
1,200 1,107 1,140 3.5%
1,087 2.9% 3.0%
1,000 3.0%
2.5%
800
2.0%
600
1.5%
400 1.0%
200 0.5%
0 0.0%

25.0 2.5x 2.2x

19.6 20.4
1.9x
20.0 18.0 2.0x 1.7x
15.9 1.6x
14.7 1.5x
14.1 1.4x
15.0 1.5x
10.0
1.0x
5.0
0.5x
0.0
FY11 FY12 FY13 FY14E FY15E FY16E 0.0x
Source: J.P. Morgan estimates, Company data. FY11 FY12 FY13 FY14E FY15E FY16E
253
(44-20) 7742-3681 02 January 2014
Wolfson Micro
Neutral
26 Westfield Road, Edinburgh EH11 2QW. T: 0131 272 700
WLF.L,WLF LN Business activities
Price: 127p Wolfson Microelectronics is a fabless semiconductor company and supplies mixed-
Price Target: 150p signal semiconductor ICs predominantly for consumer electronics market.
United Kingdom
History
European Semiconductors Wolfson was founded in 1984 by David Milne and Jim Reid and was listed on the
Sandeep Deshpande
AC LSE in 2003. In 2007 after David Milne decided to step down, David Shrigley was
(44-20) 7134-5276
appointed as the CEO of Wolfson. In 2008, Mike Hickey was appointed as CEO
sandeep.s.deshpande@jpmorgan.com Designate and was appointed CEO in 2009.
Bloomberg JPMA DESHPANDE <GO>
Highly integrated audio chips for fast growing smartphone, tablet markets and other
Price Performance
consumer electronics market is the main revenue contributor for the company. The
240
220
company has also recently seen robust design in traction for its MEMS products
200
which are already ramping currently.
p 180
160 Outlook
140 Wolfson's sales were weak in 2H13 due to weak demand from its top customer
120
(Samsung) and project cancellations at another customer (Blackberry). While the
YTD 1m 3m 12m
company is unlikely to see any further negative impact from Blackberry, any
Abs -31.8% -5.6% -25.4% -31.4% acceleration in Wolfson's sales growth in 1H14 will depend on the market share
recovery of Wolfson at its top customer, Samsung, for its flagship models and there
is low visibility on this yet. Expanding Wolfson’s revenue exposure outside main
Management customer Samsung is a key part of the growth potential for Wolfson. This growth
Chairman Micheal Ruettgers
CEO Mike Hickey
could come from the core audio DAC/ADC products and audio hub chips as well as
CFO Mark Cubitt from traction for Wolfson's MEMS microphone chips.
IR Harry Chathli
One factor impeding further growth at key customer Samsung is Samsung’s use of
Major Shareholders
FIL 19% the paired product with Qualcomm’s application processor. As Samsung begins to
Blackrock 10% use more of its own Exynos application processors, the market opportunity for
Majedie Asset Mgmt 7% Wolfson will increase. Due to the inventory correction in the high end handset
L&G 7% market as well as due to cancellation of projects at customer Blackberry, Wolfson is
Henderson 6%
currently experiencing order softness.
Neutral
Wolfson Microelectronics Plc (WLF.L;WLF LN)
Price (p) 127 Adj.EPS FY ($) (0.05) (0.01) (0.08) 0.02 0.10
Date Of Price 17-Dec-13 Revenue FY ($ mn) 157 180 182 200 228
Price Target (p) 150 Adj.EBIT FY ($ mn) (8) (3) (11) 3 12
Price Target End Date 31-Dec-14 Adj.EBIT Margin FY (4.8%) (1.6%) (6.2%) 1.7% 5.2%
Market Cap (£ bn) 0.15 EV/EBITDA (x) FY 394.5 50.8 NM 21.1 11.3
Shares O/S (mn) 117 Adj.P/E FY NM NM NM 91.7 21.5
Bloomberg EPS FY ($) -0.04 -0.00 -0.07 0.09 0.16
254
(44-20) 7742-3681 02 January 2014
Wolfson Micro
1%
12%
25%
Asia
Audio Hubs 40% UK
16%
Americas
Japan
Discrete and Power products
75% RoW
31%

250 228 10.0% 7.4%

5.2%
198 200
200 180 182 5.0%
0.7%
157 157
0.0%
150 121 (5.2)%
-5.0% (7.2)%
100 (10.4)%
-10.0% (12.6)%
(15.4)%
50 -15.0%
0 -20.0%

20.0 50.0x 31.7x 7.5x

(3.4)x 5.1x (8.4)x
15.5
15.0 0.0x
9.6 (50.0x) (100.4)x
10.0
(100.0x)
5.0 2.3 (150.0x)
0.4
0.0 (200.0x)
(1.0) (250.0x) (283.5)x
(5.0)
(3.7) (4.9) (300.0x)
(10.0) (8.0) FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
255
(44-20) 7742-3681 02 January 2014
Workspace
Overweight
1-3 Brixton Road, London,SW9 6DE. T: 0207 138 3300
WKP.L,WKP LN
Price: 504p Business activities
Workspace is a predominantly London office REIT with a particular focus on the
Price Target: 540p
fringe areas of London (i.e. Clerkenwell, Old Street, Southbank) which are
increasingly attracting interest from the growing TMT occupiers in London. The key
United Kingdom tenant type of Workspace’s portfolio is Small and Medium Enterprises in London. In
European Property addition to a London office portfolio in interesting locations (where we expect strong
AC
Neil Green, CFA rental growth), the group also refurbishes its offices and seeks to capitalize on the
(44-20) 7134-4478 alternative uses for its portfolio (i.e. recent change of use in Poplar from industrial to
neil.d.green@jpmorgan.com residential and business space).
Workspace Group plc (formerly known as London Industrial plc) was established in
Price Performance
1987 as the vehicle for the privatization of part of the former Greater London
550
Council’s industrial property portfolio. With capital of £17 million subscribed by a
500
450
group of 12 institutions, it acquired from the London Residuary Body a portfolio of
p 400
18 small-unit multi-tenanted industrial estates comprising some 710,000 sq. ft. of
350 floor space. The estates were all located in Greater London, predominantly in East
300 London.
250
YTD 1m 3m 12m Workspace reported very strong HY results with NAV of 404p, up 16% in 1H-14
Abs 65.0% 1.3% 16.5% 61.1% already well ahead of our FY estimate of 390p (which we believe was towards the
top end of consensus). All areas performed well with rent roll up 3.8%, occupancy up
1.0% and total property value growth of 12% (c.20bps of yield compression in the
Management
Chairman Daniel Kitchen
core portfolio with a strong contribution from redevelopment schemes). Workspace
CEO Jamie Hopkins continues to be our preferred play on London fringe.
CFO Graham Clemett
IR Outlook
The group is focused on the most exciting London office markets (fringe locations)
Major Shareholders where tenants are increasingly looking to relocate given lower rents (vs. West End)
Roditi 27%
Blackrock 11% and improving transport connectivity (i.e. Crossrail). As a result, we expect rental
Standard Life 7% growth and yield compression in the portfolio (valued off an undemanding 6.8%
Invesco 5% yield). In addition to favorable underlying markets, we also see Workspace
F&C 5%
continuing to create value via its redevelopment/refurbishment activities.
Overweight
Workspace Group plc (WKP.L;WKP LN)
Price (p) 504 Ad. EPS FY (p) 16.90 12.54 13.87 17.33 20.19
Price Target (p) 540 Adjusted NAV ps FY (p) 307.6 347.7 389.8 440.1 489.6
52-week Range (p) 513-296 NAV premium (discount) 54.8% 36.9% 22.1% 8.2% (2.8%)
Market Cap (£ bn) 0.74 FY
Shares O/S (mn) 146 ROIC FY 12.4% 14.3% 14.3% 13.7% 12.8%
Capital growth FY 0.0% 0.0% 4.8% 4.9% 5.4%
EVA spread FY 6.4% 7.2% 6.8% 6.1% 5.4%
256
(44-20) 7742-3681 02 January 2014
Workspace
Property UK
100% 100%

80 75 78.0% 76.1%
70 66 76.0% 74.4%
61
60 51 54 74.0%
50 49 71.3% 71.8%
50 72.0% 70.2%
69.1%
40 70.0% 67.8%
30 68.0%
20 66.0%
10 64.0%
0 62.0%

500.0 12.0x 10.8x 11.0x

440.1
450.0 9.0x
389.8 10.0x 8.8x
400.0 347.7 7.8x
350.0 307.6 8.0x 7.1x
294.6 6.0x
300.0
250.0 6.0x
200.0 4.0x
150.0
100.0 2.0x
50.0 26.7
0.0x
257
(44-20) 7742-3681 02 January 2014
Young & Co.'s Brewery A

Neutral
Riverside House, 26 Osiers Road, Wandsworth, London SW18 1NH. T: 0208 875 7000
YNGa.L,YNGA LN
Price: 990p
Business activities
Young & Co.’s operates a London-focused estate of 240 pubs, of which 163 are
Price Target: 980p
managed (including 16 hotels) and 77 are tenanted. Of the managed pubs, 35 operate
under the food-led Geronimo format (acquired in FY11). In FY14, we expect
United Kingdom managed pubs to account for over 90% of group EBIT. We expect the estate to
European Beverages, Hotels & continue to shift more towards the premium end of the market, driven by
Leisure refurbishments in the existing estate and single-site acquisitions. There is also
AC
Victoria A Greer considerable scope to add hotel rooms to the existing estate.
(44-20) 7742-2509
Bloomberg JPMA GREER <GO>
Young’s brewery was founded in 1831 in Wandsworth. Following the sale of the
brewery in 2006 and the sale of the brewing JV (Wells & Young's) in 2011, Young's
Price Performance is now purely a pub operator. The Young family shareholding (over both share
classes, YNGA LN and YNGN LN), continues to support long-term decision making.
1,050

p
850 The high-quality London managed pub estate has significantly outperformed the
750 Peach tracker of managed pub LFL sales growth, with Young’s LFLs at 6.0% in
650
H114 vs. the Peach tracker at around 1% over the same period. We expect this to
Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 continue, as the strong London pub market, and Young's continuing programme of
YTD 1m 3m 12m refurbishments, supports both price and volume growth. Young’s also continues to
Abs 39.5% -1.7% 2.1% 41.5% add hotel rooms to its pub estate, (400 rooms at H114 up from 347 in FY10), and to
acquire individual pubs (with two new sites acquired in H114 and contracts
exchanged on a third).
Management
Chairman Nicholas Bryan Outlook
CEO Stephen Goodyear
CFO Peter Whitehead Following the sale of its stake in the brewing JV (Wells and Young’s), YNGA is
now a pure-play on the pub market in London and the Home Counties, where
Major Shareholders consumer sentiment has proved to be considerably more resilient to macroeconomic
(across both share classes)
Young family 32%
pressure than the rest of the UK. We expect Young’s top-quality London managed
Blackrock 11% pub estate to continue to outperform its peers in terms of LFL sales growth,
Lindsell Train 4% supporting the substantial (~70%) PE premium that Young’s commands vs. peers.
James Sharp 4%
Invesco 4%
Neutral
Young & Co.'s Brewery A (YNGa.L;YNGA LN)
Company Data FYE Mar 2013A 2014E 2015E 2016E
Price Target End Date 30-Nov-14 Revenue FY (£ mn) 194 206 212 217
52-week Range (p) 1,110-690 EBIT FY (£ mn) 29 32 33 34
DPS (Net) FY (p) 14.60 15.30 16.00 16.80
Div Yield FY 1.5% 1.5% 1.6% 1.7%
258
(44-20) 7742-3681 02 January 2014
Young & Co’s Brewery A

5%
Managed pubs
UK
Tenanted pubs
95% 100%

250 16.5% 16.3%

212 217
206 15.9% 15.8%
194 16.0% 15.7%
200 179 15.5%
143 15.5% 15.2%
150 126 128 14.9%
15.0% 14.6%
100
14.5%
50 14.0%
0 13.5%

50.0 46.2 4.5x 4.0x

43.7
45.0 41.3 4.0x 3.4x
40.0 36.1 37.8 3.1x
3.5x
32.6 2.8x
35.0 3.0x 2.4x 2.6x
27.8 28.2 2.3x 2.3x
30.0 2.5x
25.0 2.0x
20.0 1.5x
15.0 1.0x
10.0 0.5x
5.0 0.0x
259
(44-20) 7742-3681 02 January 2014
Investment Thesis, Valuation and Risks

Afren PLC (Underweight; Price Target: 180p)
Investment Thesis
Afren continues to build its strong position in Nigeria, driven by core projects and step out exploration. The company recently announced the Ogo discovery, a significant
find, although appraisal of the field is unlikely before the second half of 2012. Progress on production in Kurdistan and also on OML26 will become increasingly important as
Ebok reaches the end of the cost recovery period. Afren has deservedly outperformed recently.
Valuation
We perform a rigorous discounted cash flow analysis to derive a core net asset value (NAV). This remains our primary valuation yardstick for pure E&P companies. Our
Core NAV is based on commercial assets, ie producing assets and assets that will be developed. We apply our current oil price assumptions – Brent 2014E-2015E-2016E+
$105.5-$100.3-$90.0 per barrel, adjusted for asset specific oil price realization premia.
Our risked NAV or RENAV includes value for exploration and appraisal upside (based on contingent and prospective resources), taking into account the risk of achieving
that upside. Our PT to Dec-14 is 180p.
Risks to Rating and Price Target
The key upside risks to our Underweight rating are:
1. Oil price – as an E&P company, Afren’s share price is highly geared to changes in the oil price.
2. Asset monetization – earlier than expected monetization of assets could generate value for some of Afren assets ahead of current discounted market valuations.
3. Exploration success – above average E&A success could materially positively affect sentiment.
African Barrick Gold (Neutral; Price Target: 170p)

Investment Thesis
We maintain our Neutral recommendation on ABG primarily on valuation grounds, with the stock now trading at ~0.97x our base case NPV but close to loss making on the
current spot gold price.
Valuation
We base our 170p Dec-14 PT on a target Dec-14E P/NPV of ~1.0x (rounded to nearest 10p), in line with our valuation methodology for the rest of the mining sector. We do
not believe a premium to NPV is warranted given limited ABG’s growth outlook and poor operational track record since listing.
Upside risks include: An increase in gold prices relative to other commodities; Faster than expected approval of key growth projects, especially Bulyanhulu Upper East and
North Mara Underground; Meaningful cost reductions and improvements in operational consistency on the back of the company’s recently announced Operational Review.
Downside risks include: slower than expected restructuring, higher cost inflation, lower volumes and lack of positive resolution of ongoing VAT and withholding tax disputes
with Tanzania's Revenue.
APR Energy (Neutral; Price Target: 1,150p)

Investment Thesis
We have a Neutral recommendation on APR. On the positive side we believe that the structural potential of the temporary power market is considerable, caused by the
imbalance between electricity supply and demand, especially in emerging market countries. We also believe that the acquisition of GE’s rental business could offer
earnings upside and is very positive from a strategic standpoint. On the negative side, APR’s shares have risen strongly this year and since the GE acquisition so the
valuation no longer looks so compelling. There could also be integration risks around the GE acquisition.
Valuation
We derive our 1150p price target by applying a 15.9x P/E multiple to our 2014e EPS, which is a discount to the Business Services sector on 16.5x.
Upside risk to our Neutral recommendation
The temporary power market is structurally attractive and therefore contract potential is considerable.
The GE acquisition could offer earnings and strategic upside.
APR has had a very good rate of contract wins.
Downside risk to our Neutral recommendation
The specific timing of announced contracts coming into operation has a significant impact on current year revenues.
Rapid growth brings operational risks; APR must win enough new business to maintain utilisation levels of an expanding fleet, otherwise revenues will disappoint.
Libya comprises 21% of revenues and the security situation there remains volatile.
Atkins (WS) (Overweight; Price Target: 1,390p)

Investment Thesis
Overall, we believe the business continues to be more resilient than the market gives it credit for. In particular, in the short term, we believe the Energy, Water, Aerospace,
Rail and Security markets look attractive. While the Middle East market is experiencing some challenges, we believe the market remains attractive overall with a need for
infrastructure investment in the short term. Over the medium-long term we believe there remains a structural requirement for the UK and US markets to invest in their
infrastructure.
260
(44-20) 7742-3681 02 January 2014
The group continues to make progress on its strategy of investment in specific areas which along with margin progression we believe should generate high single-low
double digit earnings momentum over the medium-term.
Valuation
We value the group on an aggregate basis in line with the rest of our coverage universe.
Our Dec-14 Price Target of 1,390p is based on a 50/50 weighting to the implied value from peer group PER and EV/EBIT multiples as shown in the table below.
Per share value EV/EBITA 1429
Per share value PER 1352
EV/EBITA Support Services 50% 715

PER Support Services peers 50% 676
implied share price 1390

Source: J. P. Morgan estimates
The principal risk to our price target and Overweight rating is the prospect of more difficult trading in North America and the Middle East. In addition, management needs to
retain tight control of headcount, in our view, to maintain profitability in challenging markets.
AVEVA Plc (Neutral; Price Target: 2,450p)

Investment Thesis
AVEVA has leading design technology, strong market share, double-digit growth opportunities, and strong cash generation. In particular, we see Everything3D and AVEVA
NET as major growth drivers for the company. The company is making solid inroads into emerging markets such as Brazil, China and India. In addition, the company's high
recurring revenues (c.70% of total) provide downside protection when the end markets see cyclical lows.
Valuation
Our price target for September 2014 is 2450p, based on a 23.7x calendarised 2014E PER (EV/NOPAT of 22x), vs. the global software sector on around 18x. The premium
is based on high recurring revenues, large exposure to growth markets (power generation) and high market share. In addition, AVEVA has a large net cash position (and no
debt), representing around 8% of market cap, leaving the company plenty of room to grow through acquisitions or make further returns of value to shareholders in the
future. The valuation is backed up by our DCF, which suggests a fair value of €24.62, using a WACC of 7.9% and terminal growth of 1.5%.
Upside risks
 The new Everything3D product sees faster than expected uptake with existing or new customers.
 AVEVA NET revenue and profit contribution is faster than expected.
 Marine recovers faster than expected driving more upgrades.
Downside risks
 AVEVA NET pipeline is strong, but is the conversion rate is slower than expected, then revenues could be pushed further into the future (as happened in H1 2014).
Further investment could be required in AVEVA NET hurting profitability.
 Potentially slower than expected sales of Everything3D.
 Slower global growth could dampen the demand for power generation, slowing the development of new O&G or plant assets.
 Marine recovery could be slow, limiting initial license fee growth and margin expansion.
Balfour Beatty (Underweight; Price Target: 180p)

Investment Thesis:
We remain Underweight because of both the downside to our current valuation and what we view as on-going, material near-term risk to both earnings and the dividend.
Valuation:
Our PT of 180p is based on an average of our SOTP valuation of 195p and a PE of 7x 2014 earnings (implying 175p), in line with trough multiples in recent years. We
employ a SOTP method because we believe it best allows us to reflect the different trading multiples for each of the Group’s divisions, were they to be separate companies
in their respective sectors. We have employed current average forward one year EV/EBIT multiples from stocks we believe to be relevant peers for each division). We also
use a PER to reflect recent trading history given that the stock has always generally traded at a discount to SOTP valuations, in our view, largely because of a discount
applied to both construction companies cash balances and infrastructure portfolios. We therefore also employ a 7.0x 2014E PER multiple, which is at the bottom of the
range in recent years, which we believe fairly reflects current risk to earnings and the dividend.
Risks to Rating and Price Target:
The following factors are risks to our price target and Underweight rating on Balfour Beatty:
1. Material, sustainable upgrades to earnings, driven by either a faster than expected recovery in UK or US non-residential construction (in terms of both volumes and the
margins achievable in those markets).
2. A material improvement in free cash flow, driven by a reversal in the working capital pressures in recent years, if increasing volumes drove better payment periods for
the company.
3. A take out scenario, which we view as unlikely, given the scale of the pension liability and current cash consumption levels.
261
(44-20) 7742-3681 02 January 2014
BBA Aviation (Overweight; Price Target: 356p)

Investment Thesis
In our view, the medium-term outlook for the group remains positive with flying hours still some way off their 2007 peak (c. 15%) and the group looks well placed in a
fragmented market. The group remains focused on looking at acquisition opportunities albeit vendor expectations are still optimistic. While the timing of end market
improvement/acquisitions remains uncertain, we believe the current share price remains an attractive entry point for investors willing to take a six-month view.
Valuation
Our Dec-14 356p price target is equal to our sum of the parts (SOTP) valuation. This valuation applies an EV/EBIT multiple of 14.3x to the FY2014E operating profit for
Flight Support and 13.8x to the FY2014E operating profit for Aftermarket Services and Systems. These multiples are the average of the FY1 EV/EBIT multiples of listed
peers.
SOTP valuation
$ in millions, $, £
FY14E operating
profit Multiple Implied valuation
Flight Support 137.2 14.3x 1957.9
Aftermarket Services and Systems 104.5 13.8x 1442.5
Group 3400.4
Net debt (419.1)
Pension deficit (55.3)
Implied market cap 2926.1
Price target (USD) 5.69
Price target (GBP) 3.56
Implied FY14E P/E 19.2x
Source: J.P. Morgan estimates.
The principal risk to our Overweight rating and price target remains the pace of recovery in the group’s various markets. Specifically, we view the continuation of recovery in
B&GA flying hours as key to maintaining growth in estimates. Were economic conditions to deteriorate further, particularly impacting corporate profitability in the US, this
could result in our estimates being too high and cause the rating of the shares to fall.
Beazley Plc (Neutral; Price Target: 236p)

Investment Thesis
The company risk profile is higher than the industry average; however, we think this is partly cushioned by a stable casualty underwriting portfolio. With US casualty rates
now stabilizing and the outlook for the US insurance market improving, we believe the company is well positioned for a turnaround in the US specialty insurance market.
Valuation
Our June-14 price target is based on a DCF model of cash flows up to 2015e and a normalized cash flow in 2016e based on a x-cycle combined ratio of c.90%. We use
cost of equity of 12.5% based on a risk free rate of c.5.3% and a beta of 1.8x. The risk premium is 4%.
The main upside risk is better renewal rates. Downside risk remains a low interest rate environment and higher than usual losses.
Bellway (Overweight; Price Target: 1,450p)

Investment Thesis
 We remain Overweight on Bellway. The stock trades on 9.3x 2014e PER and 1.2x p/tangible NAV. Bellway remains our favoured small-cap stock in the sector.
 We believe the risk of Bellway numbers being conservatively guided to is higher than average for the sector. We still view Bellway as a high-quality relatively low-risk
play on the sector.
Valuation
We calculate our price targets based on 2015E EPS on a PER basis. We employ a 8.5x multiple, with the exception of BKG where we use 11x and PSN and TW where we
use 9.5x, given that we believe it is fair to reflect superior margins, cash returns and historic sustainability of earnings in our multiples.
We see the key risks to our valuations as follows:
1. Margins in our forecasts being too high, if either because house prices remain flat, or material build cost or land cost inflation offsets the positive margin benefit of
HPI. However, at this stage we are very comfortable with the land market outlook, given that companies still talk very positively on land buying conditions, and we
believe there is little likelihood of a sudden increase in competition in bidding from independents.
2. The multiple we are applying is too high, if 2015 turns out to be a peak year for earnings. While we see some risk that c.2015 - 2016 margins come under longer-
term pressure and land prices eventually rise, we believe there is still upside risk to volumes longer-term, and the risk that our 2015 are materially too low, offsets any
longer-term risk to earnings.
The following factors are risks to achieving our price target and our Overweight rating on Bellway:
 A slower UK consumer recovery than we anticipate.
 A deterioration in mortgage availability
 A sentiment overhang, if either, the market assigns housing market improvement to help to buy, rather than a genuine recovery, or concerns over market stability in an
interest rate growth environment.
262
(44-20) 7742-3681 02 January 2014
Berendsen Plc (Overweight; Price Target: 1,023p)

Investment Thesis
We have an Overweight rating on Berendsen. Management’s strategy is clear and they are delivering against it. Near-term growth is expected to remain positive and the
implementation of the strategic objectives should drive medium-term EPS growth in the high single digits. The group is seeing improved conditions in a number of its
markets, which should help to support the 2013 outlook.
Berendsen’s earnings are to some extent driven by the manufacturing cycle in Europe and increased hotels usage in the UK market. Its mainland Europe exposure is more
aligned with Northern Europe. Modest expectations on Eurozone GDP (and reflected in our forecasts) help to reduce downside risk to 2013 numbers.
We believe momentum in the core businesses should continue as self-help delivers, the higher growth areas become a larger proportion of the group, and market
conditions improve, which should place the risk to estimates to the upside over the medium term.
Valuation
Our Dec-14 multiples based target price of 1,023p is based on a 50/50 blend of peer group EV/EBIT and PER multiples, in line with the rest of our coverage universe. We
chose to use these metrics as we believe that they are the ones investors will be most familiar with and due to the diverse nature of the sector’s operations with varying
margins/growth profiles. Our price target applies a PER ratio of 17.4x and EV/EBIT of 13.2x to FY14E earnings. The breakdown of our price target is shown below.
Per share value EV/EBITA 1022

EV/EBITA 50% 511

PER 50% 512

Source: J.P.Morgan estimates
The main risk to our recommendation, earnings and price target remains the potential for a reversal or slowdown in the economic recovery which would have an impact on
some of the group’s more cyclical operations. In addition, a prolonged exit from the decontamination business could provide a drag on cash in the short-term, albeit these
losses have already been provided for.
Betfair (Neutral; Price Target: 975p)

Investment Thesis
In our view, the risk/reward around BET is currently evenly balanced, and we retain our Neutral recommendation.
Positives:
 We see Betfair’s exchange model as highly attractive and impossible to replicate, giving it a certain amount of natural market share in otherwise very competitive
markets.
 BET could increase its share of wallet from its largest customers through product development on the exchange, driving stronger growth than we expect.
 Changes to pricing on the exchange could deliver significant upside, although we believe that any changes will take time.
 We believe that the new management team is making impressive progress in broadening the appeal of Betfair’s sportsbetting products and, therefore, enabling
broader cross-sell into gaming products.
 There could be upside from acquisitions (as we estimate that BET will have £188m of net cash at FY14).
Negatives:
 Despite the attractions of the exchange, we believe that it is reaching maturity in the key UK market (notwithstanding any new pricing structure or product
development).
 The draw-down in unregulated (and currently highly profitable) markets will act as a significant drag on earnings over the next three years, although this drag should be
less significant than we had originally anticipated following BET's updated guidance.
 There is significant execution risk around BET's move to a more mass-market model, in our view, particularly as we expect competition to intensify in the UK online
market ahead of the changes to online gambling tax in 2015.
 BET’s exposure to unregulated markets (at around 25% of revenue in FY13) is higher than some of its peers (Paddy Power, William Hill, Ladbrokes), although it is
admittedly lower than others (Bwin.party, Playtech).
Valuation
We value BET on a PE basis, in line with our valuations of the other gambling stocks that we cover. BET trades on 24.4x CY14E PE. Excluding its £188m of net cash
(JPMe at FY14; 190p/share), it trades on 20.0x, a 25% premium to the gaming sector. Our Dec-14 price target is 975p, putting it at a 10% PE premium to the gaming
sector. We believe this is justified, as we think that BET should be largely unaffected by industry headwinds that we think will affect its peers in 2014.
We believe the key risks to our target price and Neutral rating are as follows:
On the upside:
 BET could cut costs by more than its current guidance of £30m.
 BET could take more share in the UK online gambling market than we anticipate, particularly if it is able to make the exchange more accessible to mainstream
consumers within a short period or if the conventional sportsbook product develops more quickly than we expect.
 Cross-selling sports-betting customers into casino and poker products could increase more quickly than we anticipate, improving gross win.
263
(44-20) 7742-3681 02 January 2014
 BET currently intends to draw down its operations in territories where it feels it has insufficient visibility on regulation. One or more of these territories could introduce
favourable online gambling regulation. If this were to happen, BET could continue operating in these territories, reducing the drag on revenue.
 Following CVC’s failed bid for BET in May 2013 (at 950p/share) there is always the possibility that BET could be the target of another approach.
On the downside:
 It may be more difficult for BET to take share in the UK online gambling market than we anticipate, particularly as we expect the UK online gambling market to become
more competitive as operators try to build share ahead of the UK online tax in 2015.
 BET’s conventional bookmaking product may not develop as quickly as we anticipate, which could also harm cross-sell into casino and poker products.
 BET currently intends to draw down its operations in territories where it feels it has insufficient visibility on regulation. One or more of these territories could introduce
unfavourable online gambling regulation, meaning that BET might have to exit these markets (creating a larger drag on revenue than we currently forecast).
Big Yellow Group Plc (Overweight; Price Target: 475p)

Investment Thesis
We are Overweight Big Yellow because of its quality portfolio, London focus and, in our view, five-star management team. In addition, the stock trades at a discount to NAV,
which we believe should close or translate into a premium, when the storage market further improves.
Valuation
Our Sep-14 target price for Big Yellow is based upon our total returns-based European Valuation Model, which takes into account whether a company creates or destroys
value. We argue that companies that have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a premium to NNAV,
whereas those with a negative spread should be priced below NNAV. For Big Yellow, we calculate a value creation spread of 2.0% between our forecast total return and
our WACC estimate. We apply this spread to the invested capital, discount back, and add/subtract to our NNAV forecast to derive our price target.
Downside risks to Big Yellow's price target and rating include a protracted downturn and delay in picking up of the storage market.
Bodycote Plc (Underweight; Price Target: 540p)

Investment Thesis
We believe Bodycote has a very strong position as the world leader in the Thermal Processing market. The substantial infrastructure investment required acts as a
significant barrier to entry and the group is the only global player, competing with a small number of regional players. The group’s size relative to its competitors allows it to
provide a broader service to customers and benefit from economies of scale on utilisation, energy and transport. Management estimate the total addressable market at
c.£4bn (c.20% of the total thermal processing market of £20bn market is outsourced) with Bodycote having a market share of c.12%.
We believe the group has been improved operationally under the current management team post the downturn. Of the improvements made to the fundamentals of the
business, we would highlight a more analytical and pro-active management of the cost base, but also improvements in customer contracting, a targeted approach to
winning new business and a greater emphasis on new treatment techniques. The shares have re-rated materially and we believe the market is crediting the stock with
improvements made to the business.
However we continue to see the business as inherently cyclical with volumes the key driver of investor sentiment. When demand is strong and volumes grow, the group
benefits from significant operational gearing and profitability increases materially on even modest volume growth – this is, in effect, the stock’s differentiator versus the peer
group. The opposite is also true however when volumes fall, and the group saw earnings fall by 98% in the last downturn.
Against a mixed macro backdrop, we do not see the stock's ability to better limit margin downside in a low or negative growth environment as being sufficiently attractive to
push the shares higher. We believe the share price move has credited the stock for its improvements made and volume expectations will now be the key driver. In the
absence of organic growth, we expect the shares to underperform and we have an Underweight rating on the stock.
Valuation
Our price target of 540p reflects 2014 forecasts and is to December 2014. We value the stock on a 9.0x EV/EBIT multiple, which represents a c.20% discount to the current
average FY14E EV/EBIT multiple of our UK capital goods peer group. Given the very volatile historic earnings profile we do not believe using historic multiples is
appropriate to value the group.
Improvement in the macro backdrop. For the shares to outperform we believe we need to see volume growth return. Given the group’s end market and geographic mix,
we think this would require an improvement in the macro, particularly in Europe. At present a number of key end markets remain weak.
Market continues to believe the business is being improved. The market could continue to re-rate the stock if margin progression continues, even in the absence of
volume growth. Improved financial performance could be driven by management having further opportunities to take cost out in markets where actions have already been
taken.
New product line growth exceeds expectations. The group has developed (and continues to develop) new technologies and product lines. These areas are contributing
to a richer revenue mix. Growth ahead of our expectations could see a stronger margin profile than we currently forecast.
Bovis Homes (Underweight; Price Target: 700p)

Investment Thesis
We have an Underweight rating on Bovis, as a relative call against the rest of the sector. Our unchanged price target implies 7% downside.
Over the medium term we believe there is scope for the Group to materially improve ROCE and therefore grow earnings at a faster rate. However, shorter-term, we still
expect the Group to lag the sector as management's ROCE improvement plan gradually takes hold. Were we to see near-term evidence of a improving asset turn, we
would potentially revise our view.
Valuation
We calculate our price targets based on 2015 EPS on a PER basis. We employ and 8.5x multiple, with the exception of BKG where we use 10x and PSN and TW where
we use 9.5x, given that we believe it is fair to reflect superior margins, cash returns and historic sustainability of earnings in our multiples.
264
(44-20) 7742-3681 02 January 2014

 Margins in our forecasts being too high, if either because house prices remain flat, or material build cost or land cost inflation offsets the positive margin benefit of
 The multiple we are applying is too high, if 2015 turns out to be a peak year for earnings. While we see some risk that c.2015 - 2016 margins come under longer-
term pressure and land prices eventually rise, we believe there is still upside risk to volumes longer-term, and the risk that our 2015 are materially too low, offsets any
longer-term risk to earnings.
The following factors present upside and downside risks to our Neutral rating on Bovis:
1. A significant improvement in mortgage availability, improving sales rates and selling prices and therefore profitability near term, faster than we expect
2. Faster than expected expansion of site numbers, driving earnings and asset-turn (assuming they are small, relatively low capital intensity sites), driving ROE and
therefore tangible NAV growth.
3. A failure of the government’s new house building incentive schemes to drive housing market volume growth and house price inflation.
4. Risk of material build cost or land price inflation.
BTG Plc (Overweight; Price Target: 510p)

Investment Thesis
We are Overweight BTG, with 20% potential upside to our 510p EmV derived PT. We believe BTG’s current share-price fails to reflect the value from Varisolve for the
treatment of symptomatic Varicose Veins, where we expect US approval Dec’13, nor the potential for Varisolve partnering for the US cosmetic and RoW symptomatic and
cosmetic markets. Beyond Varisolve, we also see underappreciated value in the Oncology beads business, in particular the potential for Asian expansion, and we expect
increased scale in interventional medicine thanks to the recent oncology seeds and thrombectomy acquisitions to drive synergies.
Valuation
We derive our Sep-14 £5.10 price target from our Embedded Value, a product by product NPV analysis that includes probability-adjusted estimates for pipeline projects, as
well as including corporate costs, R&D and Cash.
In our Embedded Value analysis, we value the revenues and royalties on BTG’s launched products at £3.80 per share, with Corporate Costs, R&D, Capex and Net Cash,
getting us to a base business valuation of £3.47.
We then add £1.19 for the value of US Varisolve (at 100% probability), with a further 30p for Varisolve in indications to be partnered, 9p for Uridine triacetate, and 5p for
Lemtrada. This gets us to our £5.10 Embedded value, on which we base our £5.10 Sep 2014 price target.
 Varisolve Clinical, regulatory or reimbursement issues. Across indications, Varisolve accounts for 29% of our BTG EmV. Failure to bring Varisolve to market, or
delays would significantly reduce our BTG valuation.
 Potential CroFab competition on the horizon. BTG’s CroFab is currently the only FDA approved therapy for Crotalid snake bites. However Bioclon, a Mexican anti-
venom manufacturer, are conducting a trial for their anti-venom, Antivipmyn. We believe these results could be sufficient to get FDA approval by end ’13 potentially
denting CroFab sales.
 Further increased competition from Xtandi to forecast Zytiga royalties. Should Xtandi dominate the pre and post chemo Prostate cancer markets, our Zytiga
royalty forecasts could prove to high.
 Failure of clinical trials and/ or failure to find a partner for un-partnered projects. Ex-Varisolve, we include nothing for un-partnered projects in our model and
valuation. Failure of unpartnered trials could be a hit to sentiment, but would not imply any downside to our valuation.
C&W Communications (Neutral; Price Target: 43p)

Investment Thesis
CWC offers investors a diversified portfolio of businesses, most of which have strong market positions. We believe these businesses should generate substantial cash flow
over time to provide for shareholder returns. The company’s strategic plan is to generate growth and value through: 1) delivering operational excellence, 2) expanding the
product offering through new services, and 3) developing core regional hubs. The group is also positioned to benefit from any recovery in the economy, especially the
Caribbean where a fall in tourism has led to a sharp fall in profitability.
Through its recent disposal announcements, CWC is delivering on its promise to reshape towards a tighter geographical focus (while achieving attractive exit multiples).
However, with c. 30% of the future business unknown (management retaining disposal funds, with a stated desire to reinvest), we believe much remains uncertain: what will
it buy, how much for, and how successfully? As such, it is challenging to build a compelling buy case until reinvestment in known.
Valuation
Subsidiary valuations DCF-based, then collated into a group SoTP. Assumptions used as detailed: Jamaica (Tax 33%, WACC 11%, Terminal growth 0.5%); BTC (Tax 0%,
WACC 11%, Terminal growth 0.5%); Other Caribbean (Tax 20%, WACC 11%, Terminal growth 0.5%); Panama (Tax 25%, WACC 10.5%, Terminal growth 3%); Monaco as
at agreed sale price with Batelco. Assumptions based on local tax rates and subjective judgement of individiual geography profiles (eg GDP, political stability). WACC is
high due to high cost of interest and lack of gearing tax shield.
Downside risks:
We believe the key risks facing CWC include a failure to compete effectively, new market entrants, poor macro conditions, negative political actions, currency movements,
cash repatriation and a failure to deliver operational improvements through efficiency measures.
Upside risks:
The main upside risks relate to a stronger macro recovery in the Caribbean than currently anticipated. The other main upside risk is that CWC executes very successful
M&A, adding considerable value to the group.
265
(44-20) 7742-3681 02 January 2014
Cairn Energy (Overweight; Price Target: 360p)

Investment Thesis
Our recommendation on Cairn is Overweight. We believe the current valuation is undemanding. Whilst the reinvestment risk remains high, Cairn has constructed a wide
portfolio of exploration and development assets, where the upside opportunity is material, in our view. Cairn appears well financed to see it through to first oil on its
development assets and retain a high degree of option value. In addition, we see a long tail of additional prospectivity not included in NAV which suggest Cairn’s high
impact exploration model is healthy and sustainable.
Valuation
Core NAV is based on commercial assets; ie, producing assets and assets that will be developed. We apply our current oil price assumptions – Brent 2014E-2015E-
2016E+ $105.5-$100.3-$90.0 per barrel, adjusted for asset specific oil price realization premia.
that upside.
We base our Dec 2014 PT of 360p around our RENAV, incorporating a premium/discount for factors such as diversity of drilling programme and management track record,
our PT is set at a 15% discount to RENAV.
The key risks to our OW rating are:
1. Exploration disappointment – a material exploration disappointment or could negatively affect the share price.
2. M&A – a dilutive acquisition by Cairn could impact the share price positively or negatively.
3. Oil price – as an E&P company Cairn is materially exposed to changes in the oil price.
4. Project execution – delays to non-operated projects could affect forecast future cash flow predictions.
5. Cairn India – A significant portion of Cairn's value is held in Cairn India shares, these could fluctuate materially dependent on local market effects.
Cape (Neutral; Price Target: 288p)

Investment Thesis
Cape provides Scaffolding, Insulation and Painting (SIP) services to the Oil & Gas and Power industries. The company works both on construction projects, particularly at
the commissioning stage, and on their subsequent maintenance. We view Cape as having excellent growth opportunities in global markets, particularly in the Far East,
where both Offshore and LNG markets are growing rapidly. Cape faces limited competition and has a strong safety track record, which we believe continues to distinguish it
amongst peers. While we view Cape as undervalued compared to its UK and European Oil Services and Equipment peers, the business faces a very challenging 12-
months, in our view.
New management has successfully implemented a number of improvements to the business, but competitive headwinds in key markets (UK/Middle East) are likely to put
pressure on margins. In addition, while the restructuring of the Australian business continues, we believe this process will take longer than initially expected. We see the
conclusion of problematic contracts, restructuring in Australia and a recovery in the project-based order backlog potentially rekindling investor appetite for this stock and
driving a material multiple expansion in 2014. However, at this stage we believe it is right to exercise greater caution, especially following strong share price performance
and material multiple expansion YTD 2013.
Valuation
Our Dec-14 price target of 288p is based on our 2015E EPS of 36.0p and our target PER of 8x (behind the sector average due to the slower recovery in Asia Pacific and
competitive pressures in the UK and Middle East).
The main downside risks to our Neutral view on Cape relate to project delays (we see particular risk in Australia) and the competitive dynamics – both related to competitors
bidding aggressively, and clients self delivering. The main upside risk to our recommendation is a contract win at either the Wheatstone and/or Ichthys LNG projects in
Australia, additionally we believe Cape could win incremental work in its core UK market.
Capital & Regional (Overweight; Price Target: 49p)

Investment Thesis
We are Overweight Capital & Regional on valuation grounds and on what we see as conservative estimates forecast upside of more than 30%. We think management are
on the right track (deleveraging) while operational results in 2012 have been stable. In addition, the group generates more than 3p/share p.a. in recurring earnings, offering
a buffer against potential valuation declines.
Valuation
Our Sep-14 target price for Capital & Regional is based on our total returns-based European Valuation Model, which takes into account whether a company creates or
destroys value. We argue that that companies that have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a premium to
NNAV, whereas those with a negative spread should be priced below NNAV. For Capital & Regional, we calculate a value creation spread of -1.8% between our forecast
total return and our WACC estimate. We apply this spread to the invested capital, discount back, and add/subtract to our NNAV forecast to derive our price target.
We believe the key risks that could keep our rating and price target from being achieved include the following downside risks: a sharp drop in retail sales, a weaker than
expected investment market, and potential refinancing issues.
266
(44-20) 7742-3681 02 January 2014
Carillion (Neutral; Price Target: 300p)

Investment Thesis
We are Neutral, despite the relatively inexpensive valuation (8.3x 14E P/E), given that we continue to see risk to our earnings estimates (that are broadly flat out to 2015)
and at this stage, we struggle to build bull-case scenarios that we see as realistic (material growth from the Middle East is in estimates already, UK construction margins are
likely to decline on mix (even if market margins improve) and the failure of Green Deal & ECO is currently limiting Support Services growth).
Valuation
We value CLLN at 300p / share, based on 8.3x 2014E P/E, the average since 2009 (which we view to be reasonable, on the basis that we see earnings visibility and risk as
unchanged on the average over that period of time).
Upside risks to our Neutral recommendation include;
1. Faster than expected earnings growth in UK support services, Middle East construction and Canadian PPP markets.
2. On-going achievement of an exceptionally high UK construction margin.
Downside risks include;
1. A material slowdown in the Middle East or Canadian construction markets.
2. A failure to maintain a higher than normal UK construction margin in 2014.
3. Further weakness in the Green Deal and ECO markets.
Catlin (Overweight; Price Target: 595p)

Investment Thesis
In our view, Catlin shares offer an attractive organic growth option under improving market conditions thanks to a scalable international hub platform. The company has
surplus capital available to fund a significant increase in its exposures, combined with access to third-party capital. We believe the strategic advantage of Catlin’s organic
growth platform is not reflected in valuation, let alone the potential upside that the scalability of the hub franchise has to offer as market conditions improve. We remain
Overweight the stock.
Valuation
Our Dec-14 595p target price is based on a DCF model that discounts future cash flows at a cost of capital of 10.6% (cost of equity of 12.2%) based on a risk free rate of
c.5% and a beta of 1.8x. The risk premium is 4%.
The main risk to our view is driven by potential catastrophe losses that may exceed Catlin’s capital thresholds. Other risks include: 1) that it is not able to benefit from areas
outside of Lloyd’s market where it is starting to build up scale, 2) insurance and/or reinsurance rates decline, and 3) continued low interest rate environment.
Charlemagne Capital (Underweight; Price Target: 13p)

Investment Thesis
Charlemagne is a specialist manager of mainly emerging market equity products. Its small scale has led to problems of operating leverage to the downside during a period
of fund outflows. Its balance sheet is, however, robust, in our view.
Valuation
We determine a target price using relative forward PERs, comparing the company with a broad peer group and taking into account factors such as profitability and balance
sheet structure. On this basis, we assume a peer group rating to the sector 12.4x CY14E and include an estimate of surplus capital on the balance sheet at end 2014E to
derive a price target of 13p.
As with any asset manager, the salient risk to our investment thesis is a different outcome for market levels compared with our estimates. This would inevitably affect assets
under management, but also, potentially, estimates of future flows, with consequences for the group's revenues. The business model has inherently high operational
gearing so the effect on profits would be more pronounced and so earnings could prove to be materially higher than we assume.
Chemring (Neutral; Price Target: 260p)

Investment Thesis
FY12 was a year for Chemring to forget. Deteriorating conditions in Defence markets and poor execution led to a series of profit warnings and management change.
However, we see this change in management as the catalyst for a self-help programme to drive significant operational improvement and a change in culture.
There is clearly significant work for the new management team to do in order to restore investor confidence, in our view, and this rehabilitation will take time, but we see the
potential for a compelling turnaround story with expectations rebased and a more realistic view on the group’s end markets.
Forecasting remains a challenge and we do not expect Defence market uncertainties to ease in the short-term, but we see the current valuation capturing these risks.
Valuation
We use an EV/EBIT multiple to set our target price. We prefer to use a multiples based approach rather than the theoretically more accurate DCF valuation as given the level of
uncertainty in the outlook for the Defence market we would have low conviction in outer year cash flows. In addition, we use multiples for ease of communication as our client
base predominantly looks at the stocks on a multiple basis.
We prefer, where possible, to use a multiple based on recent historical performance. However given the significant changes to the group's end markets, financial profile and
operational performance we do not believe historical valuation metrics would be appropriate and we use a sector relative multiple.
We base our valuation on an unchanged 10.5x EV/EBIT multiple, in line with the current average one-year forward EV/EBIT multiple of our UK Defence peer group
(comprising BAE, Cobham, QinetiQ and Ultra). We see the average multiple as appropriate given the peer group all face the same challenges of uncertainty in key end
267
(44-20) 7742-3681 02 January 2014
markets and the associated forecast risk. We see the opportunity for self-help to improve profitability at Chemring and move closer to historical margin levels (which have
been above peer group average).
Risks to Our Price Target and Rating
We identify the key upside risks to our price target and rating as:
 Greater than expected frequency and magnitude of contract wins. Contract awards serve to improve the earnings outlook and investor sentiment. Awards in either
frequency or size ahead of expectations could move the shares higher.
 Faster than expected improvement in US defence spending. Current market, and our, expectations for the US defence market remain low. Any improvement or
easing of downwards pressures would strengthen the market backdrop and be a driver of positive sentiment on the defence space and potentially drive stronger
earnings.
 Asset divestments that generate more cash than anticipated. Given the uncertainty on the number, identity, size and timing of divestments there is the opportunity
for a surprise on the proceeds.
 Corporate activity. The group was approached by a potential buyer in 2012. We would not rule out corporate activity.
We identify the key downside risks to our price target and rating as:
 Defence market uncertainty. Defence markets remain challenging on both sides of the Atlantic, with visibility particularly limited in the US at present.
 Key customer budget pressure. Pressure on government budgets in the US, UK and Europe has led to an increasingly cost-conscious approach to Defence
procurement. We expect pressure on margins to continue.
 Forecast risk. Against a backdrop of wider uncertainty in Defence spending, we do not expect forecasting to become easier. However, we do expect a more realistic
approach to managing of the market's expectations under the new management team.
 Further operational issues. We expect the new management team to effect significant operational improvement. However, in the short-term particularly, there is the
risk that issues exist within the group of which the new management team is not yet aware.
Cineworld (Overweight; Price Target: 425p)

Investment Thesis
We reiterate our Overweight rating. We regard Cineworld as well placed to deliver positive organic growth through network expansion and increased ticket prices and retail
spend, against the backdrop of resilient consumer demand for cinema. As well as positive growth prospects, the stability of Cineworld’s cash flows allows it to pay a steadily
progressive dividend.
Valuation
Our price target is 425p, dated December 2014. Our price target is the average of our DCF and SOTP valuations.
Derivation of price target
£ in millions, pence
Value Weighting Weighted Value
DCF 473p 50% 236p
Multiples-based 377p 50% 188p
Total 100% 425p
Implies FY14E PE 17.7x

Our DCF applies a WACC of 7.2% to explicit estimates to 2020. Our terminal growth rate is 1%. Our WACC uses an equity beta of 0.69. Our SOTP valuation applies a
multiple 8.7x to FY14E EBITDA. This is equivalent to the FY2 EV/EBITDA of a group of peer companies as shown below.
Multiples-based valuation
$ in millions
FY14E EBIT
EBITDA Multiple Value
Enterprise value 79.7 8.6x 691.1
Less: Last reported net debt (126.9)
Equity value 564.2
Value per share 389p
Peer company valuation
Ticker Name FY2 EV/EBIT
RGC US Equity Regal Entertainment Group 8.2x
CNK US Equity Cinemark Holdings Inc 8.8x
CGX US Equity Cineplex 5.6x
RTN LN Equity Restaurant Group Plc 10.6x
PRZ LN Equity Prezzo Plc 10.1x
Average 8.7x
Source: Bloomberg
The key risks to our price target and Overweight rating are:
268
(44-20) 7742-3681 02 January 2014
 Declining cinema attendance;

 Poor film line-up;
 Adverse weather;
 Loss in market share;
 Poor execution of cinema network expansion strategy;
 Failure of the advertising market to sustain its recovery; and
 A deterioration in consumer discretionary expenditure.
Clarkson (Neutral; Price Target: 1,990p)

Investment Thesis
We are positive on the long-term prospects of Clarkson given: 1) its leading position in the shipbroking services with expertise spanning a host of segments from traditional
dry bulk and tanker shipping to the more niche markets such as LNG and offshore; 2) its core offering is underpinned by market intelligence generated by an industry
leading research platform; 3) its solid balance sheet should provide support for growing dividend and taking up growth opportunities. However, shares have had a strong
rally YTD and the current chare price implies a premium to our base case fair value.
Valuation Methodology
Our Dec-2014 price target is based on a DCF methodology with detailed annual cash flow forecasts through 2023 and 1% terminal growth assumption. The target multiple
suggests a premium to peers Braemar and ACM (neither stock is covered by J.P. Morgan) which we consider is likely justified given the industry leadership position and
more diversified growth opportunities.
Key risks to both upside and downside include high gearing to volatile time charter and spot rates across a number of maritime trades, FX fluctuations (Clarkson operates in
a USD denominated industry, but reports in Sterling), supply and demand of major commodities such as iron ore, coal and grains.
Close Brothers (Overweight; Price Target: 1,242p)

Investment Thesis
We have an Overweight rating on Close Brothers because the company offers strong earnings growth, a high return on equity and an appreciable dividend yield (that is well
covered), yet the stock trades on undemanding ratings, in our view. The balance sheet is liquid, well funded and strongly capitalised to support profit growth, and less
capital-intensive businesses have the potential for profit recovery.
Valuation
We value Close Brothers using a sum-of-the-parts model. This assumes a peer multiple on net income from Asset Management of 14x and Securities of 12x, and a
warranted price to tangible NAV valuation on Banking of 3.3x. Group NAV is included at face value and group costs capitalised at 12x (unchanged). This leads to a
December 2014 target price of 1242p.
The principal risk to our investment thesis is a deterioration in UK economic conditions, which would render our estimates too optimistic. In addition, market levels will affect
funds under management, which will influence profitability in the asset management business.
Colt (Neutral; Price Target: 115p)

Investment Thesis
Colt has a 44,000km pan-European telecoms network across 22 countries, with fibre directly built into 19,000 buildings. Traditionally a telecoms operator, Colt has struggled
with insufficient scale to generate significant cash returns. Colt is shifting its focus towards increasingly differentiated managed services and data centre operations where it
has the opportunity to compete increasingly on service proposition, rather than on price in commoditised telecoms services. This slow shift towards great client partnership,
if successfully executed, may enable Colt to increase its historically poor returns on capital, but may also require significant further investment to support this change in
direction. As such, we rate Colt Neutral.
Valuation
Our DCF-derived price target for Dec-2014 is 115p (WACC 11%, terminal growth 3%). Our 3% terminal growth assumption reflects Colt’s more growth-focused strategy and
current high investment levels. We use a relatively high WACC of 11% to reflect Colt’s inefficient balance sheet.
Upside risks would include: Colt successfully reducing capex intensity without impairing profitability, thus boosting cash flows; Colt moving to a more efficient capital
structure over time, maybe including some debt; Colt’s sunk capex in data centre investments and managed services supporting greater growth than we currently forecast;
sterling weakening versus the euro.
Downside risks would include: Colt's operations being heavily impacted by a more negative macro outlook; higher levels of investment being required both to invest in new
areas, and support existing operations; any price war in Enterprise telecoms, in which Colt does not have scale to compete; euro weakness.
Computacenter (Neutral; Price Target: 500p)

Investment Thesis
Our Neutral rating reflects a strong positive view on the UK business, but significantly less optimistic outlook for the French business, where macro weakness and structural
issues in Computacenter's business there suggest continued tough times ahead. Meanwhile, Germany is likely to finally be on the uptrend (after the "problem contracts"
finally seem fully provisioned) and macro weakness in.
269
(44-20) 7742-3681 02 January 2014
Valuation
Our December 2014 price target of 500p is based on a 2014e average EV/EBITDA of 6.2x, which is in line with the European IT Services sector average of 6.2x, and at a
slight premium to the sector on a PE basis in 2014E (Computacenter PT 11.8x, sector average 13.1x). In addition, the steady cash generation, FCF yield of more than 5%,
and dividend yield of c.3% should sustain the stock at a basic level.
We believe the advantages of Computacenter’s strong cash generation should be given equal and offsetting weight against the disadvantage of its lower margin, which
stems from having a heavier component of (lower margin) product resales than most IT Services companies. We consider Computacenter valuation multiples relative to the
UK and European IT services sector, as well as compared to Computacenter’s own historical trends. We also consider revenues and earnings momentum in the context of
the European macroeconomic environment, as well as Computacenter’s individual sales prospects and management's expense discipline.
The key risks that could prevent our thesis on Computacenter from being achieved are:
 The company’s product and professional services revenue streams are dependent upon trends in government and corporates’ IT spending patterns, which are
themselves dependent upon the outlook for the macro economy.
 Government cost cutting in Computacenter’s main geographies (UK, Germany and France) could impact the sales of new product in the short term.
 Managed services contracts can face implementation or run-time issues (as recently seen in the German operations), which cause the gross margin over the life of the
contract to be lower than anticipated.
 To the upside, there is risk that German contracts improve faster than expected, or that conditions in France improve faster than expected.
CSR Plc (Overweight; Price Target: 650p)

Investment Thesis
CSR, post the sale of handset connectivity, does not carry its historical overhang. The market should know exactly how much legacy business is there and its decline
trajectory, while we expect growth to come from businesses such as voice and music where it is market leader, and from steady-growth markets, such as automotive, and
from new technologies such as Bluetooth Smart with substantial growth potential. Thus, we have an OW rating on the stock.
Valuation
Our Dec-14 price target of 650p is based on 20x ’14 EPS. The multiple of 20x is a discount to 28x (EPS CAGR of 28% from '12-'15). We factor a discount for prudence.
Key downside risk is further weakening in the macro, which could result in downside to estimates and the share price. Share loss in the automotive and voice & music
segments could result in downside to estimates and the stock price. Key upside is better-than-expected macro which could result in upside to our 2013 estimates and the
stock price. Additionally, if the revenue from recent design wins for automotive and voice/music segments is stronger than expected, there could be upside to estimates.
Dairy Crest (Overweight; Price Target: 583p)

Investment Thesis
We have an Overweight rating. The key reasons for our view are:
Opportunity to fund value enhancing acquisitions
Dairy Crest is one of the largest and most established food producers in the UK. Its end markets are mature, but Dairy Crest has demonstrated the potential of a strategy of
selective brand development to deliver earnings growth and generate improved margins and greater stability of returns. Having sold the profitable St Hubert business in
2012, Dairy Crest has not only de-risked a balance sheet that has been subject to some stress in prior years, but has also created capacity to finance future investments.
Strong brands
Dairy Crest owns some of the most successful brands in the UK dairy industry. Most notably, these include Cathedral City – a brand of cheddar cheese recently adjudged
the tenth most popular brand (of any product) in the UK.
Retail sales of Dairy Crest's four key brands
£ in millions
500
450
400
350
300
250
200
150
100
50
0
2008 2009 2010 2011 2012
Cathedral City Clover Country Life FRijj
Source: Company reports. Note: Periods refer to the moving annual total retail sales to July each year.
They also include the vegetable oil-based spread Clover, Country Life butter and FRijj flavoured milk. All four of these key brands have achieved significant growth in retail
sales in recent years.
270
(44-20) 7742-3681 02 January 2014
The growth of the key brands does not need to stop here
In our opinion, there is the potential for Dairy Crest to continue to grow these brands. Cathedral City is strong enough, in our opinion, to support expansion of the brand into
other formats (snacking, children’s cheese, spreadable cheese) and maybe even to non-Cheddar cheeses. Country Life is the only British brand of butter to be found in
most UK supermarkets (Lurpak is Danish and Anchor originates in New Zealand), a fact that Dairy Crest may emphasise to increase its 20% share of the everyday butter
category. Dairy Crest has identified FRijj as a brand capable of doubling its retail sales in five years. This will likely involve continued development of the UHT version of
FRijj currently being piloted. Dairy Crest is also building its business in whey. Whey is a by-product of cheese production and has multiple use in food manufacturing, health
supplements, baby food and pharmaceuticals. Dairy Crest plans to invest £45m in its whey processing facilities to grow its presence in this market segment.
Restructuring of Dairies could put upward pressure on earnings
Rationalisation of its production facilities and depots could potentially improve the profitability of the Dairies division, Dairy Crest’s largest generator of revenue, but least
profitable division. This, together with plans to build on the market leading position of FRijj and to reduce exposure to commodity risk and the middle-ground market,
underpins Dairy Crest’s ambition to restore the return on sales in Dairies to 3%.
Valuation
Our price target is 583p, dated December 2014. The price target is the average of our DCF and SOTP valuations.
Derivation of price target
Pence per share
DCF 648p 50% 324p
SOTP 518p 50% 259p
Total 100% 583p
DCF
Our DCF valuation is 648p, based on explicit estimates to FY2020, a WACC of 6%, equity beta of 0.6 and terminal growth rate of 1.2%.
Sum of the parts
Our SOTP valuation is 518p and is based on the application of EV/EBIT multiples of 11.2-12.4x to FY14E earnings (based on sector averages). We apply 12.4x to Spreads
and Cheese, which is equivalent to the weighted average of the peer group. We apply 11.2x, a 10% discount to the peer group, to Dairies to take account of the lower
growth potential of the milk processing business.
Sum of the parts
£ in millions
FY14E EBIT
EBIT Multiple Value
Spreads 15.8 12.4x 196.7
Cheese 38.3 12.4x 475.6
Dairies 17.8 11.2x 198.9
Corporate (0.4) 12.4x (5.0)
Enterprise value 866.3
Less: Net debt (74.9)
Less: Pension deficit (83.8)
Equity value 707.6
Source: J.P. Morgan estimates
Peer company multiples
Ticker Name Country FY1 EV/EBIT FY2 EV/EBIT
ABF LN Associated British Foods PLC UK 16.6x 15.5x
BH FP Bongrain SA France 8.2x 7.7x
CWK LN Cranswick PLC UK 10.9x 10.0x
BN FP Danone SA France 14.7x 13.9x
DF US Dean Foods Co USA 12.2x 10.8x
EMMN SW Emmi AG Switzerland 12.7x 12.1x
GLB ID Glanbia PLC Ireland 20.5x 18.5x
KYG ID Kerry Group PLC Ireland 16.1x 14.9x
PFD LN Premier Foods PLC UK 8.5x 7.9x
TATE LN Tate & Lyle PLC UK 11.2x 10.7x
Source: Bloomberg.
The key risks to our Overweight rating, price target and earnings estimates are:
Loss of major supermarket supply contracts
Dairy Crest’s liquid milk customer base is highly concentrated, with significant volumes sold to the major supermarket chains. Were it to see its supply contracts
downscaled, notably those with Waitrose and Marks & Spencer, for which it is the exclusive supplier, but also to Sainsbury’s and Morrison, it would have a significant effect
on revenues and the profitability of the Dairies business. We note significant investment in plant undertaken by both Wiseman and Arla, which could affect competitiveness.
271
(44-20) 7742-3681 02 January 2014
Decline in global commodity prices

The sharp decline in the price of commodity cream during 2012 put pressure on the profitability of Dairies. The processors generally have a degree of flexibility over their
input costs to mitigate this risk through variation in farmgate prices. Events of 2012 demonstrated that this is a far from perfect mitigant, particularly when farmers
themselves are under pressure due to poor yields and high feed costs. Commodity prices have since recovered and so near-term risks appear minimal.
Competitive pressure on key brands
Dairy Crest has made significant advances in building the brand equity of key products such as Cathedral City and FRijj. Our earnings assumptions are based on the
expectation that Dairy Crest will maintain and strengthen the market position of these key brands. An intensification of competitive pressure could result in a loss of volume
or an increase in marketing expenditure to combat such pressure.
Manufacturing disruption
Dairy Crest is a manufacturing business reliant on a primary industry (agriculture). Disruption to the availability of raw milk or internal operational difficulties could impact
productivity, volumes and earnings.
Daisy (Underweight; Price Target: 160p)

Investment Thesis
Daisy’s strategy is to create, through a combination of acquisitions and organic growth, the natural alternative to BT in the SME space in UK telecoms. Daisy intends to
provide its customers with a product set including access, hosting, voice, managed services and mobile, all from a single operating platform and on a single bill.
Management believes the SME segment of UK telecoms is highly fragmented and that, with the exception of BT, few, if any, other UK business telecoms operators
currently provide such a comprehensive offering to SME and mid-market customers. Daisy also seeks to cross-sell new products to existing customers, creating a “one-
stop-shop” for converged communications solutions, which will also help to reduce churn. We believe there are considerable cost synergies to be achieved through the
inorganic element of this strategy. However, we remain less certain of the organic strategy, while the macro environment also appears to be impacting Daisy's operating
performance. Ultimately, we regard this as a high-risk investment case, and as such, we believe a discount should be applied, which currently, it is not clear is evident.
Valuation
Identifying an underlying financial base for Daisy and, so, valuing the company, is difficult given its acquisitive aggregation of multiple high-churn customer bases, all with
recent change of control and disruption. At the same time, while Daisy's rate of acquisitions has slowed, it is still likely that by our terminal year of 2017/18, further
acquisitions will have been made, altering our current forecasts. We use a traditional DCF valuation to value the company as at March 2015, using a WACC of 10% and
terminal growth of -1%, reflecting the high risk associated with Daisy's acquired customer bases. Looking at similar companies, for Colt we use a WACC of 11% and
terminal growth of 0% and for KCOM we use a SoTP with WACCs of 7-9% and terminal growth of 1-2%.
Upside risks are: that Daisy navigates acquisition risks effectively with minimum disruption; exposure to macro being less than we now anticipate; cross-selling strategy
turning more successful than we anticipate.
Darty Plc (Underweight; Price Target: 85p)

Investment Thesis
The majority of Darty’s markets remain challenging including ongoing uncertainty in its core market of France. Consequently we remain concerned on the short and medium
term outlook.
Valuation
Our Oct-14 PT is 85p. This is a 10% discount to the current sector multiple and is based on our forecasts following the announced agreement on the disposal of its loss
making Turkish business.
We see the key upside risks to our Underweight stance as: (1) a sustained improvement in the consumer environment in France; (2) higher than expected synergies from
the acquisition of pureplay website Mistergooddeal.com and; (3) announcement of incremental cost savings.
De La Rue (Overweight; Price Target: 974p)

Investment Thesis
We retain an Overweight recommendation.
De La Rue is, by its nature, subject to variations in revenue as a result of timing differences in contract realisation. Its contracts are lumpy and negotiation with central banks
can often be protracted. Nonetheless, we believe the company has a strong market position in an industry that exhibits a rational competitive structure with high barriers to
entry. In our opinion, De La Rue is likely to benefit from long-term structural growth in global demand for banknotes, which is not significantly affected by economic cycles.
In addition to this, we believe there are a number of important organic growth opportunities including the introduction of a polymer banknote product, the supply of security
features to central banks who print their own notes and lateral diversification. For this reason, we see De La Rue as well-placed to maintain and increase its share of a
growing market.
Valuation
Our price target is 974p, dated 31 December 2014. The derivation of this target is shown below.
Price Target Derivation
DCF 1052p 50% 526p
SOTP 897p 50% 448p
Total 100% 974p
272
(44-20) 7742-3681 02 January 2014
DCF valuation
Our 1,052p DCF valuation applies a WACC of 8.1% to explicit free cash flow estimates to FY20. A terminal growth rate of 1% is applied thereafter. The equity beta is 0.90.
SOTP valuation
Our 897p SOTP valuation applies a 12.7x EBIT multiple to FY15E earnings estimates for Currency and Identity Systems. This is the average 1-year forward EV/EBIT
multiple (using consensus earnings estimates) for the group of UK-listed peers shown in the table below. It applies 11.5% to CPS and Security Products, a 10% discount to
the peer group average to reflect the more difficult market position.
Peer Company FY1 EBIT Multiples
Name Bloomberg ticker x
G4S GFS LN Equity 13.1
Serco SRP LN Equity 10.9
Domino Printing DNO LN Equity 13.0
PayPoint PAY LN Equity 13.9
Mean 12.7
Source: Bloomberg.
Derivation of SOTP valuation
£ in millions
FY14E EBIT
EBIT Multiple Value
Currency 58.7 12.7x 747.5
Cash Processing Solutions (0.2) 11.5x (1.8)
Security Products 11.3 11.5x 129.0
Identity Systems 20.9 12.7x 265.9
Enterprise value 1,140.7
Less: Net debt including pension (245.8)
Equity value 894.9

Source: J.P. Morgan estimates, Bloomberg.
We see the key risks to our investment thesis as:
 Failure to execute on the Improvement Plan resulting in guidance being reduced further;
 Short-term decline in central bank demand for banknotes and contract delays;
 Further issues around quality and certification;
 Failure to gain a meaningful share of the market for polymer banknotes;
 Failure to retain the print contract with the Bank of England;
 Loss of key management;
 Pressure on printed note and substrate pricing and volumes following development of additional capacity by competing commercial and state-owned suppliers; and
 Rising raw material costs.
Debenhams (Overweight; Price Target: 118p)

Invesment Thesis
In our view, Debenhams has significant opportunities to grow the top line over the medium term, and tangible evidence of these is starting to emerge. Given these
opportunities, the magnitude of the discount at which the stock trades to the rest of the sector (c.35%) is undeserved in our view.
Valuation
Debenhams continues to trade at a significant discount to the sector on a CY14E PER of 9.9x. This represents a discount of 35%. In our view, the magnitude of this
discount is underserved given the operational gearing into a UK consumer recovery and the much improved balance sheet. To derive our TP, we apply the long run sector
average PER multiple, representing a 20% discount to the current sector average.
We see the following downside risks to our Overweight rating and target price: 1) a step-up in promotional activity across the High Street which puts pressure on margins,
leading to a reduction in gross margin estimate; 2) competition online is more fierce than expected resulting in a smaller uplift than anticipated from online sales and; 3)
disruption to peak trading from the Oxford Street refurbishment is greater than expected.
Development Securities (Neutral; Price Target: 220p)

Investment Thesis
We are Neutral on Development Securities on valuation grounds. In our view, the company has done well to dispose of assets acquired in 2009-11 – crystallising profits
and we hope to see more. However, the company holds a non-prime investment portfolio that we think is at risk of further negative revaluations.
Valuation
Our Sep-14 target price of 220p for Development Secs is based on our total returns-based European Valuation Model, which takes into account whether a company creates
or destroys value. We argue that companies that have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a premium to
273
(44-20) 7742-3681 02 January 2014
NNAV, whereas those with a negative spread should be priced below NNAV. For Development Secs, we calculate a value creation spread of -2.8% between our forecast
Downside risks include a significant weakening in valuations for secondary retail property, a protracted slump in the UK economy impacting consumer sentiment, although
this would also impact the viability of several development projects. Upside risks include the company managing to dispose and crystallise higher profits than anticipated.
Devro (Overweight; Price Target: 357p)

Investment Thesis
Longer-term, we believe Devro is well placed to benefit from structural trends that favour the increased use of collagen casings and has the opportunity to deliver a step-up
in future earnings though investment in the US and China.
Valuation
Our December 2014 price target is 357p. Our price target is the average of our DCF and SOTP valuations. Using a discounted cash flow methodology, we value Devro at
421p. This applies a WACC of 7.0%, derived using a risk-free rate of 3.0% and an equity beta of 0.91. We base our valuation on explicit estimates to 2020 and apply a
terminal growth rate of 1.0%. Our SOTP valuation is 292p. This applies various multiples to the 2014E operating profit of the three divisions with reference to the average
FY2 EBIT multiple of a group of twelve key domestic and international peer companies.
 Americas: 13.0x, a 10% premium to the peer group to reflect the medium-term upside potential to earnings from the investment in the US operations.
 Asia-Pacific: 13.0x, a 10% premium to the peer group to reflect the upside potential to earnings from a possible investment in China.
 Europe: 12.4x, a 5% premium to the peer group, to reflect the superior market position of the business in this geography.
SOTP valuation
£ in millions, pence
FY14E EBIT
EBIT Multiple Value
Americas 5.5 13.0x 71.8
Asia-Pacific 6.0 13.0x 78.0
Europe 38.8 12.4x 480.2
Corporate (4.6) 12.5x (58.1)
Enterprise value 571.9
Less: Net debt (FY2013E) (39.0)
Less: Pension deficit (FY2013E) (45.5)
Equity value 487.5

Source: Bloomberg, J.P. Morgan estimates.
Peer company multiples
Ticker Name FY1 EV/EBIT FY2 EV/EBIT
ABF LN Equity Associated British Foods 16.3x 15.2x
AAC AU Equity Australian Agricultural Co 41.9x 16.4x
BRFS3 BZ Equity Brasil Foods 19.5x 15.0x
CWK LN Equity Cranswick Plc 11.1x 10.2x
DCG LN Equity Dairy Crest Group Plc 13.5x 11.5x
BN FP Equity Danone 14.9x 14.0x
MRFG3 BZ Equity Marfrig Alimentos 9.2x 8.4x
PFD LN Equity Premier Foods 8.3x 7.7x
829 HK Equity Shenguan Holdings Group 9.2x 8.1x
TATE LN Equity Tate & Lyle 11.4x 10.8x
VIS SM Equity Viscofan 13.7x 12.4x
Average 15.4x 11.8x
Source: Bloomberg.
The key risks to our rating and price target include execution risk (with regard to capital investment projects), technological obsolescence, input cost rises, manufacturing
risks; adverse FX movements and an increase in pension contributions.
Dixons Retail Plc (Neutral; Price Target: 50p)

Investment Thesis
In the medium to long term we see a number of opportunities for upgrades to forecasts. These include LFL growth in white goods if encouraging signs in the housing
market continue, growth in the fast growing small kitchen appliances category, and the possibility for a lower interest charge if an opportunity arises for early redemption of
the group’s bonds. We forecast an increasing net cash position and hence see the group as having flexibility on balance sheet structure. However, with our target price
implying no further upside potential, we maintain our Neutral recommendation.
Valuation
We apply the current sector multiple of 15.5x to our FY15E forecasts. This drives a target price of 50p.
274
(44-20) 7742-3681 02 January 2014

We see the following key downside risks to our Neutral stance: 1) trading in the UK deteriorates and; 2) online penetration in the Nordics increases, resulting in
unexpected medium term margin pressure in the region.
We see the following key upside risks to our Neutral stance as: 1) a greater than expected benefit to UK LFL as a result of an improving consumer; 2) the launch of new
as yet unanticipated technology which drives new sales growth.
Dunelm Group plc (Neutral; Price Target: 1,000p)

Investment Thesis
Dunelm is, in our view, one of the best quality stocks in the sector (genuine space roll-out opportunity, high ROCE, robust balance sheet and cash generative). However,
the premium of c.20% (CY14E PER of 18x vs General Retail sector 15.5x) reflects this. Whilst we do see the risk as lying to the upside (particularly from a potential
recovery in the housing market) there are, in our view, better value stocks in the sector through which to benefit from this.
Valuation
Our TP of 1,000p is based on a PER premium to the sector of 50% to reflect the group’s quality attributes and upside risk from a potential recovery in the housing market.
This implies a CY14E PER 23x and consequently drives a TP of 1,000p. Our multiples-based approach is underpinned by our DCF valuation of 1002p.
Downside risks to our rating include: 1) an incremental step down in the UK consumer environment; and 2) a lack of impact from new Government housing incentive
schemes. Upside risks to our recommendation include: 1) the internet driving LFL sales above current estimates; 2) an upgrade to the 2% per annum guided move into
direct sourcing; and 3) a material improvement in the UK housing market which drives significant earnings momentum.
Elementis (Overweight; Price Target: 284p)

Investment Thesis
Elementis’ diversified end market portfolio, heavy US exposure, strong balance sheet and high margin record drive our growth assumptions. Given Elementis’ valuation
multiples are similar to the wider Sector, we see significant scope for positive re-rating. We therefore remain Overweight.
Valuation
Our Dec-14 target price is 284p, based on our DCF valuation. Key assumptions are WACC of 8.9% and terminal growth rate of 2.5%.
We believe the key risks that could prevent our rating and target price being achieved include the following downside risks:
 a sudden downturn in the chromium market with volumes falling sharply
 a failure of the coatings market to recover thus resulting in weaker than expected demand for Elementis' range of specialty chemicals
 a sharp rise in input costs
 adverse currency moves
EnQuest (Overweight; Price Target: 185p)

Investment Thesis
We have an OW recommendation on EnQuest given an attractive valuation and a low risk business model. EnQuest’s strong cash generation profile and production base
ought to help it deal with cost inflation better than non-producing peers, in our view.
Valuation
Core NAV is based on commercial assets ie producing assets and assets that will be developed. We apply our current oil price assumptions – Brent 2014E-2015E-2016E+
that upside.
Our December 2014 PT is 185p, a 15% discount to our 2014 RENAV, incorporating a premium/discount for factors such as diversity of drilling programme and management
track record.
The key risks to our OW rating are:
1. Oil price – as an E&P company, EnQuest’s share price is highly geared to changes in the oil price. A weaker than expected oil price could cause EnQuest to
underperform, given above-average gearing.
2. Project execution – material delays to development could erode core NAV and negatively impact sentiment.
3. UK fiscal risk – any adverse changes to the UK fiscal regime would likely negatively affect EnQuest given its 100% exposure to the UK North Sea.
4. Exploration disappointment – although EnQuest is not highly exposed to E&A upside, E&A disappointments could negatively affect sentiment.
5. Third party infrastructure downtime – in the UK EnQuest is currently reliant on third party infrastructure to evacuate production from key fields, shut-downs or extended
maintenance could negatively impact production guidance.
Entertainment One (Overweight; Price Target: 280p)

Investment Thesis
We believe eOne’s Film Distribution and TV Production businesses give European investors unique exposure to the content entertainment industry. As distribution channels
are increasing and demand for digital content steps up, this new media landscape may provide opportunities for eOne to further monetize its library of rights which includes
275
(44-20) 7742-3681 02 January 2014
its own original TV content as well as blockbusters such as Twilight and The Hunger Games. On our current estimates eOne trades on PE14E/PE15E of 12.3x/11.1x and
EV/EBITDA14E/15E of 9.7x/8.9x.
Valuation
Our Dec’14 SoTP based price target is 280p.
Physical sales declines are not offset by growth in Digital rights
A large part of Home Entertainment spend is made up of physical sales of which the majority are DVDs. The DVD market is currently declining at a rate of 10% per annum.
It is not yet clear whether increases in digital sales will continue to be significant enough to offset the steady decline we expect in physical sales.
Loss of output deals with large producers
eOne has various output deals with large independent producers, which give it access to high profile content such as The Hunger Games and Twilight. If eOne fails to
renew these output deals revenues could be materially impacted.
eOne is exposed to the performance of its films
Box office results and viewing trends can be unpredictable. Although eOne's large portfolio of rights helps to mitigate its exposure to the performance of any one film there
is no guarantee its investments in content will earn a return.
Investment in content may be higher than we expect and cash generation lower
Following a period of rapid growth, we expect investment in content to stabilize, which should lead to improved FCF. However, it is possible that overall investment could be
higher than our forecasts, which could cause results and cash generation to fall below our estimates.
Marwyn could sell down its 28% stake. EOne’s largest stakeholder, Marwyn, could sell down its stake in the group.
Essar Energy (Neutral; Price Target: 125p)

Investment Thesis
We rate Essar Energy Neutral for the following reasons: (1) it is a leveraged play on India’s fast rising energy intensity per capita, (2) it offers a very strong growth profile
(Oil & Gas and Power), (3) it faces regulatory bottlenecks in the delivery of its growth projects – and has a history of timeline delays on key projects.
Valuation:
Our December-14 price target for Essar Energy is £1.25 which reflects the company's latest disclosures relating to its oil and gas and power assets – updated for end
FY2015 net debt. This is set at a c.30% discount to our SOTP as we do not expect significant sector relative recovery in the stock.
Risks to Rating and Price Target:
Execution risk - Bringing in large capital projects on time and on budget is crucial in the creation and/or preservation of shareholder value. The scale of the task is
amplified by the fact that company is executing ambitious growth projects in both power and refining business. We acknowledge that the presence of EPC contracting
capability within the Essar Group is a plus for the company’s expansion plans and would help the company in partially mitigating this key risk.
Sustained weakness in GRMs – we believe that a sustained weakness in GRMs could exert pressure on the company’s near term cash flows.
Fuel supply - We believe that the security of the fuel supply is very important for the company's expansion plans in the power sector. Despite the clearance of some of the
captive mine projects – we continue to see near term coal supply security risk.
Regulatory approvals for the captive mine projects – would resolve the fuel supply security overhang and the low coal costs would help the company lock-in the
margins on long term supply agreements .
Recovery in the merchant power prices – would be a strong plus for the merchant market exposure within Essar Energy's power portfolio.
Essentra (Neutral; Price Target: 847p)

Investment Thesis:
We have a Neutral recommendation as we believe that the current share price is already factoring in much of the potential upside from acquisitions and margin
improvement under management’s ‘vision for 2015’.
Valuation and Price Target:
Our Dec-14 price target of 847p is based on a blend of peer group PE, EV/EBITDA and EV/Sales multiples as, outlined in the table below.
Price target methodology
Method FY13E peer group multiple Implied share price
EV/Sales 2.3 948
EV/EBITDA 10.9 865
PER 16.7 729
Blended price based on above methodology 847

We chose to use these metrics as we believe that they are the ones that investors will be most familiar with and due to the diverse nature of the group’s operations with
varying margins/growth profiles.
We define the peer group to include a range of capital goods companies including GKN, Halma, Renishaw, Smiths Group, IMI, Morgan Crucible, Weir, Spectris and Rotork
as we believe that these are better valuation comparables than companies within the Support Services space.
276
(44-20) 7742-3681 02 January 2014
Risks to Our View :

We have a Neutral recommendation on Essentra.
Risks to the upside. Continued margin progression, organic growth ahead of expectations and acquisition spend driving earnings upgrades.
Risks to the downside. Economic and industrial production slowdown, particularly in Europe and North America where the majority of the group’s sales are. In addition,
loss of a customer within Filters in particular could reduce revenues and profitability in any one year (the group’s remaining customers are more broadly based).
Unsuccessful acquisition would raise questions over the broader strategy of complementing organic growth with acquisitions.
esure (Overweight; Price Target: 300p)

Investment Thesis
We believe esure is well placed to benefit from the opportunities in the UK insurance market. A low-risk underwriting portfolio, fully scalable infrastructure and the exposure
to the aggregator distribution channel should allow esure to profit from the opportunities that regulatory change is set to bring to the UK motor market. The accelerated
softening of UK motor rates now does not lend itself to growing exposures and the company plans to focus on maintaining discipline and delivering underwriting
improvements. Given esure’s distinctive portfolio of motor underwriting risks and a business model that drives ancillary revenue growth, we believe it has the flexibility to
underwrite profitably in the UK in a soft market and await a more benign rate environment.
Valuation
We value esure based on a DCF-based SOTP model in which we discount the expected cash flows from the business at a cost of equity of 10% (beta 1.5x). This gives us a
June-14 300p target price.
The risk to growth and returns is driven by: 1) market risk, i.e. signs of a softening pricing cycle, 2) regulatory risk with the UK regulator looking to address the sharp
increase in UK claims inflation and rates in the past few years, and 3) the CC and FCA review into add on sales which could pressure revenue growth.
F&C Asset Management (Neutral; Price Target: 118p)

Investment Thesis
F&C is currently undertaking a period of change and refocus under new management. Costs are being reduced to help mitigate the potential risk of mandate losses from
large (albeit low revenue margin) clients. As the restructuring continues, we believe that the market will apply a higher multiple to earnings estimates, which are likely to be
lower than prevailing estimates.
Valuation
sheet structure. On this basis, we assume a sector rating of 13.2x CY14E to derive a December 2014 price target of 118p.
As with any asset manager, the salient risk (both to the upside and downside) to our investment thesis is a different outcome for market levels compared with our estimates.
This would inevitably affect assets under management, but also, potentially, estimates of future flows, with consequences for the group’s revenues. The business model
has inherently high operational gearing so the effect on profits would be more pronounced.
Fenner (Neutral; Price Target: 405p)

Investment Thesis
We see Fenner as a solid long-term story. The Engineered Conveyor Solutions division has a market-leading, aftermarket driven position in the global mining market. The
Advanced Engineered Products division is a collection of niche product businesses with, typically, high gross margins. However trading has been mixed in both businesses
(though now looks to be strengthening in AEP) and the group‘s core mining markets remained mixed.
The US Coal market (the group’s single largest exposure) looks to be recovering steadily from a low base but the dynamic is more challenging and uncertain in Australia
(the second largest market). The group‘s major mining customers have looked to reduce costs across their operations, driving pricing pressure through the supply chain
which has impacted Fenner. Management are guiding to a stabilisation in Australia but we remain cautious given commentary from mining equipment peers.
Our Neutral recommendation reflects the balance between a solid long-term story and a still challenging short-term outlook for (organic) earnings still uncertain.
Valuation
Our December 2014 price target is 405p and is based on an EV/EBIT multiple of 8.8x applied to our FY14 forecasts (equivalent to a 13x FY14 PE multiple). Our chosen
multiple is in line with the stock's 5-year average 1-year forward EV/EBIT multiple. The higher multiple we now ascribe reflects the stabilisation we have seen in forecasts
for both divisions. We see Fenner as much improved over the last five years and, as a result, would be prepared to ascribe a premium to this historic multiple but at present
with forecast growth and margin progression only modest and our concerns over key mining markets, we struggle to justify one for now.
Risks to the upside
US coal recovers ahead of expectations. We recognise our FY14 assumptions on US Coal would be too bearish if the underlying market recovers ahead of our
expectations.
Australian pricing improves. As and when customer focus moves from cost to productivity this would drive demand for Fenner's downtime-reducing products and service
offering. This would – to some extent and perhaps slowly – reverse the pricing dynamic and support margin progression.
Earnings enhancing acquisitions. Management has expressed an appetite for further bolt-on acquisitions and believes a pipeline of attractive opportunities exist.
Fenner's balance sheet would support further bolt-on acquisitions.
Mining sentiment improves. A more positive tone from the mining majors (or equipment peers) would likely prove a catalyst to the share price.
277
(44-20) 7742-3681 02 January 2014
Risks to the downside

US coal market uncertainty. The US coal market looks to be making a modest recovery as gas prices increase and coal inventories are reduced. Forecasts are predicated
on continued recovery - a slower recovery or a reversal could lead to earnings risk.
Mining capex cuts/negative sentiment to weigh on share price. 85% of Fenner’s ECS revenues are aftermarket sales, driven by mining activity, so production levels are
more important than new project spend (unlike many of listed mining peers) but the relative importance of aftermarket sales is being lost in the significant negative
sentiment around mining more generally and also through the many moving parts in Fenner’s US and Australian markets. A further step-down in sentiment could see the
shares fall lower.
Australian pricing. The mining major’s focus on cost, the shape of the market and Fenner's commitment to maintaining market share has led to erosion in pricing in
Australia. Despite optimism that price-downs are done, it looks difficult for Fenner to protect pricing if customers looked for further reductions. This would further impact
Fenner's margins.
Pricing contagion. At present, pricing pressure has been solely in Australia. We see the risk this moves to South America (where the customer base is similar) should the
price of copper fall.
AEP cyclicality. We believe a number of product lines remain cyclical, a view supported by a 10% organic decline in the 1H13 (weaker than any of our Industrial peers).
We believe the AEP businesses as a group are able to achieve high margins but are likely to remain cyclical and could provide a downside surprise as consensus earnings
appear to be factoring in continued recovery.
Ferrexpo Plc (Underweight; Price Target: 150p)

Investment Thesis
We are UW FXPO because 1) we are concerned about the risk that high cost inflation will not be contained; 2) we expect declining realised iron ore prices over the medium
term; and 3) our base case P/NPV of 1.48x.
Valuation
Our December 2014 PT of 150p is based on 1x our FY14E year end NPV estimate (previously the average of our FY13E and FY14E NPVs), to which we add the value of
taxes owed by Ukrainian authorities to FXPO. Our valuation methodology is in line with the rest of the mining sector.
Upside risks to our Ferrexpo price target include a potential fall in gas prices charged to Ukraine by Russia given power is a significant component of the company's cost
base; similarly a sharp depreciation in the Ukrainian currency which is currently tightly controlled against the US dollar (70% of costs are in local FX) would be an upside
risk. Finally, higher than expected iron ore prices would see FXPO record higher than forecast earnings.
FirstGroup (Overweight; Price Target: 150p)

Investment Thesis
Our Overweight recommendation is based on: 1) a current market valuation that discounts only a fraction of savings targeted by management over the next four years; 2)
support from an improving UK GDP outlook; 3) a restored balance sheet (post rights issue); and 4) option value from exposure to UK Rail, where 2014 could deliver
incremental positives to the sector. At the heart of efforts to boost group ROCE to 10-12% (vs. 8% in FY13) is restoration of UK Bus and First Student margins to double-
digit levels. Our base-case earnings and valuation discount only c.40% success on these counts. Management also aims to deploy a dividend policy more closely aligned
with underlying financial performance.
Valuation
We derive our valuation from a DCF-based sum of the parts, yielding a FY14 (March) year-end PT of 150p, with implied valuation multiples and yields cross-checked
against those of peers. The implied group WACC and terminal growth at the group level is 6.5% and 1.0%, respectively, with a risk-free rate of 2.3% and an equity risk
premium of 6.4%.
Chief risks to our recommendation are: 1) a significant deterioration of the macroeconomic backdrop, 2) an inability to rebalance the UK Bus portfolio with an appropriate
level of volume/density, 3) failure to effectively enforce more stringent evaluation criteria for First Student contracts, 4) aggregate effects of lower than expected profitability
on group leverage levels, 5) higher fuel costs (offset by active hedging), and 6) weak free cash flow development expected over the medium term.
Gem Diamonds Ltd (Overweight; Price Target: 190p)

Investment Thesis
We maintain an OW rating on GEMD due to: 1) Value-accretive growth potential at the company’s flagship Letseng mine in Lesotho. The Letseng expansion and
optimisation (“Project Kholo”) remains under consideration, but if re-commenced could increase production by ~70% to c. 180-200kcts pa by 2017 through the addition of a
third plant and an improvement in grinding and sorting technology leading to higher recovered grades. 2) A long-term positive outlook for diamond markets, in our view.
Upcoming new rough diamond supply remains constrained, while we believe the late-cycle characteristics of jewellery and luxury goods in general should drive strong
demand from a burgeoning new set of middle-class consumers in key emerging markets such as China and India over the next decade.
Valuation
We use ~1.0x our FY14E year end NPV estimates to set a Dec '14E price target for GEMD at 190p (9% WACC, no terminal growth), in line with the methodology used
across the sector. Our price target and valuation methodology are unchanged.
The risks to Gem Diamonds are typical for most mining companies. However, we would highlight the following as particularly relevant to the company:
Project/Regulatory: Risks of not receiving approvals to develop projects.
Project delays: Cost over-runs and delays to growth projects.
Cost inflation and FX: persistently strong inflation and a strong ZAR/AUD could potentially erode the company’s profitability compared to its global peer group.
278
(44-20) 7742-3681 02 January 2014
Diamond prices: The performance of diamond prices vs other commodity classes

Funding: the company may need further funding to deliver on its growth ambitions.
Gemfields (Underweight; Price Target: 28p)

Investment Thesis
Our rating is Underweight.
Gemfields is a leading supplier of emeralds to the global jewellery industry. Demand for the coloured gemstones is intensifying, accelerated by increased marketing and
driven in particular by the economic powerhouses of Asia. We believe Gemfields is well placed to meet this demand with consistent, high quality supply following recent
efforts to optimise production processes at its mine in Zambia. Gemfields has no debt and is expected to increase its cash reserves significantly over the next few years.
This, we believe, will give the company the capacity to invest in the diversification of its operations into rubies and other coloured gemstones. The ability to utilise a single
distribution platform for multiple gemstones is, in our opinion, likely to be a significant source of long-term shareholder value.
The near-term outlook is clouded, however, by the Zambian government’s recent directive that decrees emeralds mined in Zambia may only be sold in Zambia. If ultimately
brought into law, this could affect the returns possible from Gemfields' Kagem output. We believe this uncertainty will cause shares in Gemfields to underperform until such
a point as a favourable solution is agreed.
Valuation
Our price target is 28p per share (December 2014). We value the discounted cash flows of the enlarged group at 29p per share. We then add the net present value of the
gemstone inventory (8p), Fabergé inventory (4p) and the net cash on the balance sheet (1p) before applying a 33% discount to the blended valuation to arrive at a price
target of 28p. The discount is intended to capture the impact of the Zambian Government sales restrictions, the execution risks of the Fabergé integration and the
operational risks inherent in mining.
Blended valuation
USD in millions US cents per share GB pence per share
Discounted cash flows to FY31 247 46 29
Discounted inventory - Gemfields 68 13 8
Discounted inventory - Fabergé 31 6 4
Net cash on balance sheet 8 1 1
359 66 41
Discount 33%
Price target 28p
The key risks to our Underweight rating and 28p per share December 2014 price target are:
 Resolution of sales restriction. The key risk to our Underweight rating is the rapid lifting of the Zambian sales restrictions.
 Expansion of mining operations. Gemfields could benefit from an expansion of its mining operations to diversify its source of upstream mine production.
 Better than expected execution of Fabergé growth strategy. Should Gemfields outperform on the expansion of Fabergé and its earnings delivery, there could be
upside risk to our price target.
Go-Ahead (Overweight; Price Target: 1,800p)

Investment Thesis
Our Overweight recommendation is based on: 1) upward UK GDP revision, which should be supportive, as an improving UK economy is positive for growth in deregulated
UK bus, which contributes to roughly 40% of EBIT; 2) the fact that we believe the current share price does not factor in full success of the management targeted EBIT gain
by F2015/16; 3) Relatively low financial gearing and positive earnings growth prospects, which are supportive of at least maintaining current dividend, with potential for
growth; and 4) our belief that net risk from UK Rail franchising as biased towards the upside.
Valuation
We derive our valuation from a DCF-based sum of the parts, yielding a FY14 (June) year-end PT of 1,800p, with implied valuation multiples and yields cross-checked
against those of peers. We apply individual WACC and terminal growth rate assumptions for each individual division, with a flat risk-free rate of 2.3% and an equity risk
premium of 6.4%.
Major downside risks include: 1) economic risks, as pressure on UK GDP and an upturn in UK unemployment may cause a reduction in both Bus and Rail volumes; 2)
political and regulatory risks, as GOG operates in both regulated and deregulated markets, and receives subsidies from the government as a public transport operator; 3)
Cost inflation, especially higher than any expected increase in wage cost and fuel cost, could put downward pressure to GOG’s margin; and 4) Failure to make progress
towards management’s mid-term management EBIT target.
Grainger (Overweight; Price Target: 225p)

Investment Thesis
Grainger is a diversified UK residential property company with a focus on South East England. House price inflation, led by London and now radiating out into Greater
London is growing in the high single digits, and further growth is expected in the regions. We expect capital growth in the portfolio to surprise to the upside going forward.
Overweight
Valuation
Our Sep-14 target price of 225p for Grainger is based on our total returns-based European Valuation Model, which takes into account whether a company creates or
destroys value. We contend that companies that have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a premium to
279
(44-20) 7742-3681 02 January 2014
NNAV, whereas those with a negative spread should be priced below NNAV. For Grainger, we calculate a value creation spread of -0.7% between our forecast total return
and our WACC. We apply this spread to the invested capital, discount back, and add/subtract to our NNAV forecast to derive our price target.
Downside risks include an exogenous shock to mortgage rates and availability, or an unexpected slowdown in south-east England house price inflation.
Greene King (Neutral; Price Target: 880p)

Investment Thesis
GNK has the largest estate of the pub stocks that we cover, with its managed pub division the key driver of group earnings growth (66% of group EBIT in FY14E). GNK’s
managed estate continues to outperform its peers among the national pub operators, in our view driven by its very well invested estate and its exposure to the strong
London pub market (c.15% of the estate). We expect GNK's shift towards managed pubs to continue as the tenanted pub and brewing divisions decline, with managed
pubs contributing 70% of group EBIT by FY16E. This leaves GNK well placed to benefit from the growing trend towards eating out in the UK. However, following a 29% PE
re-rating over the past 12 months, GNK is now trading ahead of its 03-06 average of 12.7x, and we think that the shares are fairly valued.
Valuation
GNK trades on 13.4x CY14E PE, a 7% discount to the pubs sub-sector. Our Dec-14 price target of 880p is based on a 5% discount to the sector, which we think is
appropriate for GNK given the continued outperformance of its managed estate, but taking its comparatively high level of debt (FY14E net debt/EBITDA of 4.5x) into
account.
Our 880p price target is supported by a DCF valuation of 875p. The key assumptions for our DCF remain a WACC of 6.7% and a terminal growth rate of 2.0%, in line with
our assumptions for peers.
The risks to our recommendation are as follows:
Upside risks:
 GNK’s managed pub estate could benefit more materially than we anticipate from an improving UK consumer environment, driving stronger LFL sales growth than we
forecast and potential modest margin expansion.
 Tenanted pubs could see some trading uplift from a stronger consumer environment.
Downside risks:
 A further decline in on-trade beer consumption could further reduce the number of viable tenanted pubs.
 GNK may be unable to pass price increases on to consumers, resulting in margin pressure.
 GNK’s relatively high financial gearing (we forecast net debt/EBITDA of 4.4x at FY14) could exacerbate any slowdown in top-line growth or margin pressure.
 GNK could over-pay in a transaction, particularly if it seeks to acquire small packages of pubs.
Halfords (Neutral; Price Target: 460p)

Investment Thesis
The focus at Halfords’ strategy update is on driving the top line through a halo effect of better service, stronger product range and a stronger multi-channel offering. Near
term investment is significant; however, this should be impactful in driving the top line forward in the longer term. The opportunities in Cycling alone, in term sof market
growth and share gains, should underpin the group’s targeted group revenue of £1bn by FY16E. We therefore continue to like the long term investment case. However, we
see near term opportunities as already encapsulated in current forecasts, hence our Neutral recommendation.
Valuation
Our target price of 460p is based on a 20% premium to the long run sector average of 12.5x, applied to our FY16E forecasts. Our DCF valuation of 467p underpins our
multiples-based approach.
We perceive the following downside risks to our view and price target: 1) Incremental opex does not drive top line as expected and; 2) Existing players in the cycle PACs
market react to Halfords’ initiatives to gain share, causing pricing and margin pressure. We perceive the following upside risks to our view and price target: 1) weather
conditions become much more favourable (ie colder) throughout Q3 driving a better than expected LFL and; 2) impact of advertising spend on LFL growth is greater than
expected driving upgrades.
Hays (Neutral; Price Target: 118p)

Investment thesis
We have a Neutral recommendation on Hays. On the positive side we believe that the recruitment industry has a large structural growth opportunity, especially outside of
the UK. However, we think that the industry will take longer to recover from the 2007 recession than prior recessions and therefore believe that Hays’s valuation looks fair
for this stage of the cycle.
Valuation
Our multiples-based price target to Dec-14 is based on applying a 18.0x rating to calendar 2014e earnings, a slight premium to the Business Services sector average of
16.5x.
The key risk on both the upside and the downside is the macro outlook. Our estimates currently factor in a modest Eurozone recession – a deeper recession, or one with a
material impact on the group’s Asia-Pacific business which generates the majority of the group's profits are a source of further downside risk to both estimates and
sentiment. Conversely, a more positive macro viewpoint is not factored into the current share price, with better macro data likely to reduce the perceived risks to estimates
and bring about a re-rating.
280
(44-20) 7742-3681 02 January 2014
Helical Bar (Neutral; Price Target: 295p)

Investment Thesis
We are Neutral on Helical as at current levels development profits from key projects are largely priced in, trading inline with its FY13 NAV of 269p. We expect further
announcements of developments and acquisitions, but due to the limited visibility of earnings streams from these activities we await confirmation before factoring them into
our price target.
Valuation
Our Sep-14 target price for Helical Bar is based on our total returns-based European Valuation Model, which takes into account whether a company creates or destroys
whereas those with a negative spread should be priced below NNAV. For Helical Bar, we calculate a value creation spread of +0.1% between our forecast total return and
Upside risks include greater than expected development profit share from 200 Aldersgate and Brickfields projects, as well as further announcements of property
development projects and better than expected results from the asset management business. Downside risks include worse than expected capital growth and failure to
acquire profitable devopment sites, or a delay in development profits coming through.
HellermannTyton (Overweight; Price Target: 335p)

Investment Thesis
HellermannTyton is the global leader in the manufacture and supply of high performance cable management products and solutions to the Electrical, Automotive and
Datacom markets. The group has a proven business model with significant barriers to entry and has delivered consistently strong financial performance. We believe the
group can continue to deliver growth ahead of industrial production and maintain its margin profile, a level of performance not reflected in the current valuation.
We believe future performance will be supported by:
 Business model proven to outperform market growth rates. Since 2007, the group has consistently outperformed industrial production and GDP growth rates.
 Well positioned in growth markets. The group expects to continue to exceed macro growth rates given the growth drivers underpinning key end markets and
customer specific demand trends.
 Significant barriers to entry. We identify a number of significant barriers to entry: 1) strong brand reputation, 2) global presence, 3) embedded customer
relationships, 4) extensive product range, and 5) flexible, highly automated and efficient manufacturing processes.
 Established, blue-chip customer base. The group has well established customer relationships some of which stretch to over 30 years.
 Broad spread of revenues. The group’s revenues are well spread across geographies with c50% of sales in the EMEA region and the remainder split evenly across
the Americas and in Asia. Across the Electrical segment, no single end market accounts for more than 5% of sales and Automotive segment sales are spread across
vehicle types. The group’s largest customer represents less than 6% of group sales.
 Well-invested asset base. Since 2007, €124m has been invested in maintenance and growth capex, representing 108% of depreciation over the period. A further
€32m has been invested in the expansion of facilities in response to demand.
 Attractive financial profile. The group has achieved above-market revenue growth, c20% EBITDA margins and strong cash generation over the past three years.
The group’s flexible cost base helped to support financial performance through the 2008/09 downturn.
Valuation
We use an EV/EBIT multiple to set our target price. We prefer to use a multiples-based approach rather than the theoretically more accurate DCF valuation for three
reasons: first, the multiple allows us to take into account macro cycles - capital goods stocks have tended to overshoot and undershoot fair value both materially and for a
sustained period; second, using multiples allows us to adjust for what we see as softer differentiators between stocks such as track record, market sentiment and catalysts;
third, for ease of communications, as our client base predominantly looks at the stocks on a multiple basis.
We prefer, where possible, to use a multiple based on recent historical performance. However, given the group’s short trading track record we do not believe this is
appropriate.
We derive our price target by applying a 5% discount to the UK Capital Goods peer group average EV/EBITA multiple (previously 5%). We believe the reduction in the
discount from 10% to 5% is fair given another quarter of strong delivery and the momentum seen in both trading and orders. We believe the discount is reasonable given
the remaining share overhang and the lack of listed track record. We increase our December 2014 price target to 335p (from 295p).
We identify the following key risks to our Overweight rating:
 Cyclical downturn in industrial production. The demand for HellermannTyton’s cable management products is underpinned by industrial production.
 Pressure on prices. HellermannTyton operates in a competitive global cable management market. Many customers maintain dual or multi-source arrangements so as
to maintain a level of pricing tension over their suppliers. OEMs, particularly those in the automotive industry, also have ‘cost down’ arrangements in place.
 Failure to maintain long-term relationships. HellermannTyton has long-term relationships with key customers. Future earnings would be at risk were the group to
fail to renew these contracts as they fall due on reasonable terms.
 Technological change. The focus of HellermannTyton’s business is on the manufacture of plastic fixings and associated products. There is a risk to future earnings in
the event that alternative technology is developed that reduces demand for such products.
 Manufacturing disruption. Disruption to the efficiency of production, whether through technology or equipment failure or supply chain issues, could impact earnings
and potentially damage customer relationships.
 Foreign exchange translation. HellermannTyton reports its earnings in Euros. We estimate that 66% of group revenue is denominated in currencies other than the
euro, particularly the US dollar and Japanese yen. Reported earnings could be materially affected on translation by a significant change in foreign exchange rates.
281
(44-20) 7742-3681 02 January 2014
Heritage Oil (Neutral; Price Target: 245p)

Investment Thesis
We have an Neutral recommendation on Heritage. The company acquired a substantial producing asset onshore Nigeria, OML30. This has transformed Heritage’s portfolio,
but brings with it considerable risk, in our view. We look for tangible evidence that NPDC are committed to investing in the asset as a potential buy signal, but for now we
see the discount applied to HOIL’s share price remaining.
Valuation
Core NAV is based on commercial assets ie producing assets and assets that will be developed. We apply our current oil price assumptions – Brent 2014E-2015E-2016E+
that upside.
Our PT to Dec-14 is 245p, maintaining the 10% to our core NAV that we previously employed.
The key risks to our Neutral rating are:
1. Minority interest risk – Heritage's main asset is the OML30 licence. This is operated by NPDC, a Nigerian state entity, which has a poor record on execution. NPDC’s
inability to execute development plans submitted by the joint operating committee could negatively impact the share price; on the flip side should NPDC show itself to
be a committed operator this could trigger a substantial re-rating in the stock.
2. Exploration success/disappointment – a material exploration success or disappointment could positively/negatively affect the share price. Heritage has a good track
record of exploration success in frontier regions.
3. Fiscal/political risk – Heritage’s assets tend to be located in relatively high risk regions, ie Nigeria, Libya (and formerly Kurdistan, Mali).
Hochschild (Neutral; Price Target: 135p)

Investment Thesis
We are N on Hochschild primarily on valuation grounds following recent share price weakness as well as incorporating JPM’s LT silver price forecast of $24/oz (versus our
previous assumption of $17.50/oz). While the company still faces headwinds in the form of ongoing free cash burn as the company continues to develop the new
Inmaculada project, relatively short mine-lives at the company’s existing assets in Peru and Argentina, and increased balance sheet gearing post the recent acquisition of
IMZ (minority partner at Inmaculada and Pallancata), we believe these issues are now more appropriately reflected in the company’s share price.
Valuation
We base our 135p Dec ’14 PT on ~1.2x our Dec ‘14E NPV estimate, in line with our valuation methodology for FRES. Our PT and valuation methodology are unchanged.
Our previous 120p Sep ‘14E PT was based on 1.7x our previous Dec ‘14E NPV; in-line with FRES, we have lowered our target NPV multiple to account for adjustments to
our LT gold and silver price assumptions.
Upside risks to our recommendation and price target include precious metals prices outperforming industrial metals, most likely associated with a further deterioration in the
global economic outlook which would impact investors’ willingness to hold risk assets and would increase demand for silver and, particularly, gold. Other risks include an
acceleration of the delivery of organic growth or any M&A activity within the industry. Downside risks include lower than expected gold and silver prices, capex overruns or
delays on the company’s key Inmaculada growth project, and refinancing risks around the $340m acquisition bridge loan to fund the IMZ purchase, $70m of which comes
due in H1 14 with the balance due in early 2015.
Homeserve (Neutral; Price Target: 295p)

Investment Thesis
We have a Neutral recommendation on Homeserve. Despite the near-term challenges in the UK, we believe that the international story remains intact, with the US, in
particular, offering potential for meaningful earnings momentum over the medium term. However, in the near term, growth in the international businesses is likely to be
outweighed by the anticipated decline in the UK operations as the group refocuses the business and addresses the issues highlighted by the FCA investigation.
While the FCA investigation is not complete, we believe that a line in the sand has been drawn with respect to any potential fine that the group may receive with a provision
of £6m made with the FY13 results. Following the strong share price performance YTD, with renewals/profits being heavily weighted to the second half and a manageable
outcome from the FCA investigation already being factored into the share price, we believe a Neutral recommendation is appropriate at this stage.
Valuation
Our Dec-14 price target is based 50/50 on peer group multiples and a DCF valuation. With few listed competitors, we look at a broad base of Support Services peers and
apply the average CY14 PER multiple to the group's earnings. We also choose to use DCF to value the group as feel that this captures the growth potential in the
international businesses without penalizing the group for investment in newer markets. The breakdown of our PT is shown in the table below.
Price Target construction
weighting Valuation
Per share value DCF 328
DCF 50% 164

PER 50% 131
282
(44-20) 7742-3681 02 January 2014

The main risks to our estimates/rating/price target on the downside include:
 Lack of newsflow on the FCA investigation creating uncertainty.
 A larger than provided for fine from the FCA on conclusion of the investigation (the group made a provision of £6m at FY13 of which £1.7m was utilized in FY13).
 Failure of the group to stabilize the UK business at 1.9m customers.
 Loss of an affinity partner.
 Increased regulatory pressures on the business.
In addition, our estimates for all geographies are based around a series of assumptions for customer growth, policy prices, customer retention and number of new policy
sales. Failure to meet any of these assumptions could result both a downgrade to our estimates (and thus have a knock on impact on our price target) and an impact on the
group’s rating.
The main risks to our estimates/rating/price target on the upside include:
 A faster rate of growth in the US business, which could provide upside risk to our estimates and improve sentiment towards the group.
 Private equity interest in the group.
 Signing of a new partner in France providing a step change to growth in this business.
Hunting (Underweight; Price Target: 752p)

Investment Thesis
Through its three divisions, Well Construction, Well Completion and Well Intervention, Hunting provides an integrated service across the phases of development and
maintenance of the wellbore. The business is therefore highly levered to drilling activity. In the near term, we are concerned about US onshore drilling activity (Hunting’s
largest market), which, combined with a weak spending outlook for independent oil companies in 2013, and a premium valuation weighs on our view of Hunting.
Valuation
Our December 31 2014 price target of 752p is based on a 2015E EPS of 68.4p and a target 2015 PER of 11.0x for Hunting. Our target PER is primarily dictated by our
estimate of earnings revision risk, we retain near-term concerns over the US rig count and onshore US spending outlook.
We note three upside risks to our target price: (i) stronger than expected growth in US drilling activity; (ii) stronger than expected earnings accretion from M&A; and (iii)
improved efficiency and hence margin.
Imagination Technologies (Overweight; Price Target: 425p)

Investment Thesis
We are OW on Imagination due to the potential we see for significant growth in earnings continuing over the mid to long term due to the company’s strong share in the
graphics IP for fast growing smartphone and tablet markets. In addition Imagination’s IP is also being increasingly adopted in other markets such as DTV, and other
consumer electronics markets, and potentially in embedded markets in the future which should result in a strong royalty and earnings growth for the company in mid-to-long
term, in our view. Thus, we believe the stock has considerable upside on a mid term view.
Valuation
Our Apr ’15 price target of 425p based on ~44x our FY15E EPS of 9.6p. The multiple of 44x is higher than our previous multiple of 30x. However, given the weakness in the
market, there has been a substantial cut in our estimates. Technology companies trade at higher multiples at the bottom of the cycle and hence, a higher multiple is
justified, we believe.
 Imagination’s royalty revenues depend on the success of customers’ semiconductors and the end-products in which these ship. Hence, IMG is exposed to the success
of end products using chips with IMG technology.
 IMG is also exposed to the volatile consumer electronics market.
 Licensing revenues are lumpy by nature and one or several deals not closing before the end of the reporting period can have a negative impact on earnings.
 We view newsflow relating to the success of competitor graphics as potentially having a negative impact on the shares.
 Share loss to competing 3rd-party graphics IP technology providers or to semiconductor companies using in-house graphics IP (such as Qualcomm, Nvidia) could
result in a downside to our estimates and PT.
Imperial Innovations (Neutral; Price Target: 350p)

Investment Thesis
Imperial Innovations builds and invests in technology and healthcare businesses based on or associated with leading scientific research from the UK’s four leading
universities: Imperial College London, Cambridge, Oxford and University College London. In particular, IVO is able to access technology through a technology pipeline
agreement out to 2020 which secures IVO rights to all IP emanating from Imperial College. Since admission to AIM in 2006, IVO has raised over £200m to invest in and
grow technology and healthcare businesses based on research undertaken at the four focus universities. The company has invested £121m in this time, in a portfolio of
companies that has raised £408 million
We rate IVO Neutral, based on the difficulty in valuing IVO’s current and potential future portfolio companies, which are challenging to value due to their early stage of
development, and by definition innovative nature. IVO’s limited liquidity also leads to potential volatility, though we believe most IVO investors are likely to have a long-term
perspective on their investment which may mitigate this.
283
(44-20) 7742-3681 02 January 2014
Valuation
We value IVO using an SOP approach. We include: (1) 184.5p per share for the Net Asset Value (NAVs) of IVO’s portfolio. (2) 66.3p per share for IVO’s cash, (3)
-17.9p for debt and other liabilities, and (4) 116p per share from a DCF of IVO’s current and future portfolio. Summing these three parts together we get to a Dec 2014
valuation of c.350p per share, 1% below IVO’s current share price of 355p.
Risks to Our Rating and Price Target
Upside risks
• Significant exit from a spin-out well in excess of BVCA value.
• Difficulty of valuing early start ups and pipeline.
• Maturing license portfolio.
• Small size means that Innovations would be highly geared to a ‘blockbuster’ technology.
• Extension of TPA beyond current 15-year agreement.
Downside risks
• Difficulty of valuing early start ups and pipeline.
• Loss of key staff or academics
• Termination of TPA
• Significant write down to portfolio
• Change in UK tax law (treatment of substantial shareholdings exemption) could lead to a change in Innovations’ tax charge).
Intermediate Capital Group (Neutral; Price Target: 497p)

Investment Thesis
Intermediate Capital is a provider of mezzanine finance, leveraged credit and minority equity provided from third-party investors and its own balance sheet. It is one of the
largest independent mezzanine providers in the world, with a global presence. It has one of the longest track records of any institutional investor in European senior loans
and high yield bonds. The mezzanine market continues to attract investor interest as an uncorrelated asset class which offers potentially higher returns. The inherent risks
of investing in this area, however, tend to push investors to a collective investment scheme of the type offered by Intermediate Capital.
Valuation
We approach valuation as a sum of the parts, assessing the equity value of the company’s own balance sheet (less an allocation of capital to its fund management
operations) on a price:book basis, and valuing its third-party asset management business on a PER approach with reference to listed asset management peers. On the
basis of 1x price:book on the estimated value of the loan book and a PER of 13.0x calendar 2014E earnings from asset management, we derive a December 2014E price
target of 497p.
The key risk to our investment thesis and price target for Intermediate Capital centres on the economic outlook. Growth may be more pronounced than reflected in our
estimates, leading to material portfolio realisations, lower impairment charges, and consequently higher profits and book value. Conversely, a marked deterioration in
economic conditions would render our estimates too optimistic. The company has substantial exposure to euro-denominated assets and so profit estimates are sensitive to
the Sterling exchange rate.
International Personal Finance (Neutral; Price Target: 665p)

Investment thesis
The potential profit growth in IPF’s markets is high, in our view, but is associated with variability of returns and risks associated with new market(s) entry. While the core
business has performed well over time, the evidence of success in newer markets is mixed. Our preferred stock for exposure to sub-prime consumer lending is Provident
Financial.
Valuation
We use a warranted price/book model to derive a target price for International Personal Finance. Based on a 2014E NTAV of 215p per share, a 21% ROTE and a 10.5%
cost of capital, we set our December 2014E price target at 665p.
The obvious risk to our investment thesis and price target is a different rate of economic growth, or a contraction, in IPF’s core markets and consequently higher or lower
profits than we forecast. Additionally, as we have written previously, management’s plans for geographic expansion present additional risks.
Interserve (Overweight; Price Target: 660p)

Investment Thesis
We have an Overweight recommendation on Interserve. While Construction is unlikely to surprise significantly on the upside in the short term, we believe UK Support
Services (c. 60% of FY14 EBITA) offers real opportunities for organic growth. UK Construction has proven more resilient than previously feared and the Equipment Services
division appears to be recovering well with its operations in a number of growth markets including the more buoyant Middle Eastern markets.
The group has a stable order book and good visibility over a large proportion of consensus revenues. Following the disposal of the PFI portfolio, the group has replaced the
earnings using just £52m of the £125m cash proceeds. It still therefore has over half of the PFI funds, allowing plenty of headroom should the group wish to enhance earnings
with bolt-on acquisitions. The shares trade at a significant discount to the sector, which we believe is unwarranted.
Valuation
We have adopted a sum-of-the-parts valuation methodology that applies EV/EBITDA to the forecast EBITDA of each division. The multiple used for each division is equal to the
adjusted average calendarised 2014E EV/EBITDA multiple of a group of peer companies in support services, construction and equipment services, using Bloomberg consensus
estimates.
284
(44-20) 7742-3681 02 January 2014
Interserve SOTP
£ in millions unless stated otherwise
FY2014E FY2014E FY2014E
EBITA Depreciation EBITDA Multiple (x) EV
Support Services 69.8 24.7 94.5 7.2 678
Construction 24.7 8.7 33.4 7.1 238
Equipment Services 21.9 7.8 29.7 5.5 164
Central costs (22.0) 0.0 (22.0) 7.2 (158)
Total 94.8 41.1 136.0 6.8 922
Net debt (FY14E) (70)
Pension deficit (FY14E) (10)
Implied market cap 842
Shares 128
Price target 660
In our view, one of the principal risks to earnings and, as a consequence, to the group’s share price, is the performance of the Equipment Services business given its high
levels of operational gearing, which could lead to further pressure on margins. In addition, Construction international has not been delivering on our expectations, and it is
possible this could continue. Given the group’s recent bolt-on acquisitions, there also exists some integration risk, although management have been conservative in their
estimates for the acquired businesses, in our view. Furthermore, large, long-term contracts that require upfront investment to cut costs, recoup their investment over a
period of years and the profile of profits is difficult to forecast.
John Menzies (Neutral; Price Target: 807p)

Investment Thesis
We have a Neutral recommendation on Menzies. While we believe Aviation offers the group growth in a growing and fragmented market, Distribution continues to be
challenging with a couple of warnings over the past 12 months.
We expect cash generation to remain robust and the company to continue to re-invest both in organic growth and selective acquisitive activity, particularly within Aviation.
Valuation
Given the differences between Menzies’ two principal divisions, Distribution and Aviation, we use a SoTP to arrive at our 807p, Dec-2014 Price Target
For Aviation, we use the average EV/EBIT multiple of a listed peer group of ground handlers and other aircraft servicing businesses. For Distribution, we use the EV/EBIT
multiple of Smiths News (Menzies Distribution’s closest competitor), but we choose to value Menzies Distribution at a 10% discount to that level. This is to reflect our view of
greater opportunities from acquisitive growth at Smiths News Group as a whole than the Menzies Distribution division on its own.
The table below shows the derivation of our 807p Dec-14 PT:
Derivation of Price Target
£ in millions unless indicated otherwise
Division CY14 Operating Profit Multiple EV
Distribution 24.9 7.4x 185
Aviation 39.8 11.4x 456
Central costs (2.4) 9.9x (24)
Group 62.3 617
Minus net debt (108)
Implied market cap 509
Number of shares (#m) 63.1
Implied share price 807p
Source: J.P. Morgan estimates, Bloomberg.
The main upside risks are:
 An accelerated pick-up in Aviation, driving LFL volumes ahead of current expectations.
 Further acquisition led earnings upgrades.
 Higher than anticipated cost savings in Distribution.
The main downside risks are:
 A stalling in the recovery in the aviation market, which would have a detrimental effect on earnings momentum.
 In addition, the group also has a high reliance on a relatively small number of customers within Aviation (albeit this reliance is reducing) and should one of these be
lost, due either to contract termination or airline administration, this could have a negative impact on earnings.
 Should the macro backdrop become more challenging, the cargo handling business would likely suffer more than other parts of Menzies given it is relatively
operationally geared.
 Within Distribution, an acceleration in the rate of decline within newspaper and magazine volumes or failure to deliver on targeted cost savings, would also negatively
impact earnings and our recommendation.
285
(44-20) 7742-3681 02 January 2014
Jupiter (Overweight; Price Target: 392p)

Investment Thesis
We have an Overweight recommendation on Jupiter because we believe the combination of relatively high profitability, consistently good investment performance (leading
naturally to strong client flows), a strengthening balance sheet and the quality of management justifies a premium rating.
Valuation
We determine our target price using relative forward PERs, comparing the company with a broad peer group and taking into account factors such as profitability and
balance sheet structure. On this basis, we assume a small (10%) premium valuation to the sector (12.7x CY14E), as discussed in our Investment Thesis above, to derive
our December 2014 price target of 392p.
under management, but also potentially estimates of future flows, with consequences for the group's revenues. The business model has inherently high operational gearing,
so the effect on profits would be more pronounced.
Kazakhmys Plc (Underweight; Price Target: 180p)

Investment Thesis
We are Underweight on shares of Kazakhmys primarily due to: 1) high cost inflation and diminishing margins in the legacy copper assets; 2) execution risk at the Bozshakol
& Aktogay projects; 3) limited balance sheet flexibility with ND/EBITDA and gearing expected to peak at over 4x and ~39% respectively; 4) valuation metrics which do not
appear to compensate investors for the risks to the investment case with the stock trading on a base case end ‘14E P/NPV of 0.86x and expected to be loss making in
FY14 & ‘15E on both JPMe and current spot commodity prices.
Valuation
Our Dec-14 PT is £1.80/sh, based on a simple average of: (1) 1x our end FY14E NPV; and (2) 6x our forecast FY14E EV/EBITDA. Our target multiples are is in line with the
stock’s average historical trading multiples.
As potential positive risks, we identify: (1) a value-enhancing restructuring of the company’s legacy copper mining business; (2) higher than expected copper, silver or
power prices, or a weaker than expected Kazakh Tenge. These are, in addition to those risks, generic to the mining sector (production rates, natural grade variability, fiscal
regimes etc).
KCOM (Overweight; Price Target: 115p)

Investment Thesis
We believe KCOM represents an attractive portfolio balancing cash cow with growth potential, supported by a strong conservative balance sheet. KCOM’s incumbent fixed
telecoms operator status in Hull and East Yorkshire provides a strong cash return on its sunk telecoms network investment. Meanwhile, national business communications
operator Kcom offers a source of long-term growth if it is able to continue taking market share. KCOM then balances solid shareholder returns with reinvestment to pursue
growth and support its pension obligations.
Valuation
Our SoTP DCF-derived price target for Mar-2015 is 115p. For the KC division, due to its very visible cash flows, low risk, and exposure to the positive UK fixed-line market,
we use WACC 7% and terminal growth 1%. For the Kcom business division, we use WACC 9% and terminal growth 2%. We then deduct Mar-15 net debt, as well as an
estimate of the pension deficit.
Downside risks to our view include: the business telecoms sector not recovering with sales cycles continuing to lengthen; Kcom's own underlying performance being
materially worse within the sector; Kcom's growth plans not being successful; capex needing to be substantially higher than at present; markets worsening substantially,
increasing KCOM's pension deficit; significant competition entering Hull; fixed-to-mobile broadband substitution more aggressive than currently expected.
Kenmare Resources (Neutral; Price Target: 24p)

Investment Thesis
We are Neutral on Kenmare as we believe valuation is appropriate. While KMR’s Moma mine is a world class resource with an attractively long mine life, in the current
market environment we believe the company would stuggle to attract the capital required to fund further phases of expansion, and therefore see little upside risk to our
24p/sh end ‘13E NPV, barring a significant reacceleration in mineral sands pricing. Furthermore, the company’s track record in delivering the Phase 2 growth project has
been poor, and we continue to see capex risk around the closure of construction contracts. We acknowledge however that FCF yields from FY14E onwards look
compelling, post Phase 2 completion.
Valuation
We arrive at our Dec ‘14 price target of 24p per share based on 1x the average of our FY13E and FY14E year end NPVs using a 12% nominal WACC.
The risks to KMR are typical for most mining companies. Downside risks to our Neutral rating include: residual capex risk around the company’s Phase 2 expansion project,
which is already significantly over-budget; a fall in demand for titanium feedstock and zircon if global growth slows further (offsetting this is the ongoing secular increase in
the intensity of use of titanium pigments due to rising living standards in EMs); and increased taxes or royalties in Mozambique.
Upside risks include: a strengthening in demand for titanium feedstock and/or zircon if global growth improves; introduction of a partner to help fund the Phase 3 expansion
of the Moma mine; further speculation regarding a potential takeover offer for KMR from a larger peer (see Irish Independent 14th Feb 2012 “Kenmare forges ahead by
8.7pc on takeover rumours”).
286
(44-20) 7742-3681 02 January 2014
Kier Group (Overweight; Price Target: 1,850p)

Investment Thesis
We are Overweight on Kier Group, given that we believe the valuation remains undemanding relative to the magnitude of potential earnings growth over the medium term.
We still believe there is potential upside risk to the May Gurney cost synergy targets of £15m by June 2015. We are also yet to factor in any additional growth from the
revenue synergies we believe are logical for the combined group. In addition, we are encouraged by the strength of the order book position coming into the new year, and
comments on seeing signs of end market improvement.
Valuation
Our Sep-14 price target is 1,850p, and despite strong performance through 2014 we still see absolute upside to the stock, and it remains our favoured UK construction
contracting stock. We value the Group on an average of our sum-of -the-parts valuation of 1760p and a one-year forward PER (pre-IAS19 change) of c13x, a c.10%
premium to the stock’s mid-cycle multiple, in order to place some value on the upside risk we see to earnings.
Kier Group valuation
EBIT EV/EBIT Valuation
£mn Multiple £mn
(x)
Construction 30.1 5.0 150
Support Services 61.6 9.0 554
Property 19.0 9.0 171
Central costs -4.1 7.0 -29
847
Average net debt 0

Land plots 135
PFI Directors valuation 35
Less Pension deficit -50
TOTAL (£M) 968
Per share (p) 1759
Value of 12.5x PER (ex-IAS 19) 1946

Average value 1853
1. A later than expected pick up in public sector outsourcing, leading to lower Services revenues
2. Further margin pressure in UK construction markets
3. Material working capital outflows in construction, limiting investment elsewhere in the group
Ladbrokes (Underweight; Price Target: 140p)

Investment Thesis
The crux of the investment thesis for LAD is the scope for a turnaround in its online business, in our view. We expect the deal with Playtech to materially improve
Ladbrokes’ online marketing and customer relationship management capability, and therefore to accelerate Digital revenue growth once migration is complete in FY14.
However, we think that it will be difficult to accelerate this growth beyond the mid-teens growth rate that we forecast in FY14/15, as we expect the UK online market to
become increasingly competitive as operators fight for market share ahead of the UK Point of Consumption tax in FY15, and we note that the shift to mobile is making cross
sell from sports to gaming materially more difficult. With only mid-teens Digital top-line growth, we think it will be difficult for LAD to avoid a significant fall in the Digital EBIT
contribution in FY15.
Valuation
LAD trades on 13.4x CY14E PE, a 14% discount to the gaming sub-sector. Our Nov-14 price target, of 140p, is based on a 30% discount to the gaming sub-sector. We
believe that this discount is justified by LAD’s limited exposure to online and the significant difficultly we believe it faces in turning round its online business.
We believe the key risks to our target price and Underweight rating are as follows:
 Ladbrokes’ online product development and marketing, together with the acquisition of Ladbrokes Israel and the support from PTEC, could deliver considerably higher
UK online growth than we anticipate.
 There could be a bid for LAD, or PTEC could build a larger stake.
 Playtech could opt to contribute some cash in FY14 for marketing spend, allowing LAD to increase marketing investment without affecting its reported numbers.
 The current weakness in LAD’s UK Retail business could reverse.
 The UK point of consumption tax could be delayed or introduced at a different rate. We currently assume it becomes effective from FY15 at a rate of 15% on online
gross win.
Laird (Overweight; Price Target: 272p)

Investment Thesis
We are Overweight on Laird. In our opinion, the company is well placed to deliver steady earnings growth driven by the proliferation of high-capability wireless-enabled
mobile devices despite recent slowdowns. The company is more diversified than it has been in the past and, at the current share price, trades at a discount to its peers.
287
(44-20) 7742-3681 02 January 2014
Valuation
Our price target is 272p and is calculated the weighted average of our DCF and SOTP valuations (see table below). Our SOTP is based on EV/EBIT, in line with similar
companies in our coverage.
Pence per share
DCF 244 50% 122
SOTP 301 50% 150
Total 100% 272
 Timeframe: September 2014.
 Inputs: (DCF) WACC 11.5%, TGR 0%; βe 1.3; (SOTP) FY14E EV/EBIT multiple of 11.6x for both reporting units, which is a 15% discount to the average of the
comparable ratio for a group of domestic and international peers (13.6x, see table below), on Bloomberg estimates. We apply a 15% discount to take account of the
lower comparative growth of forecast earnings.
Peer Company Multiples
Mkt. Cap P/E EV/EBIT EV/EBITDA Div. Yield
Ticker GBPm FY13 FY14 FY13 FY14 FY13 FY14 FY13 FY14
Capital Goods - UK
Fenner FENR LN 772 13.4x 12.4x 9.8x 9.1x 7.8x 7.4x 2.8% 3.0%
Halma HLMA LN 2121 21.3x 19.7x 17.2x 15.9x 14.8x 13.6x 1.9% 2.0%
Melrose MRO LN 3843 18.2x 16.2x 14.7x 13.5x 12.4x 11.5x 2.7% 2.9%
Morgan Advanced MGAM LN 886 13.7x 11.8x 10.2x 9.1x 7.7x 7.0x 3.4% 3.6%
Renishaw RSW LN 1316 18.8x 18.8x 15.1x 15.0x 12.1x 12.4x 2.3% 2.4%
Senior SNR LN 1130 14.7x 13.6x 11.1x 10.3x 9.1x 8.5x 1.9% 2.1%
Mean 16.7x 15.4x 13.0x 12.2x 10.7x 10.1x 2.5% 2.7%
Median 16.4x 14.9x 12.9x 11.9x 10.6x 10.0x 2.5% 2.6%
Electronic Hardware - UK
CSR CSR LN 841 17.7x 16.3x 12.1x 13.1x 8.5x 8.2x 1.6% 1.8%
Imagination Technologies IMG LN 930 36.8x 30.7x 31.1x 24.5x 25.4x 18.6x 0.0% 0.0%
Kofax KFX LN 348 21.8x 18.5x 14.9x 19.8x 11.0x 11.5x 0.0% 0.0%
Pace PIC LN 834 10.2x 9.3x 8.3x 8.5x 6.5x 6.1x 1.3% 1.6%
Spirent SPT LN 825 27.0x 18.4x 14.4x 10.0x 13.1x 9.7x 1.3% 1.5%
Wolfson Microelectronics WLF LN 204 NM 22.7x NM 18.0x 45.1x 11.3x 0.0% 0.0%
Mean 22.7x 19.3x 16.1x 15.6x 18.3x 10.9x 0.7% 0.8%
Median 21.8x 18.4x 14.4x 15.5x 12.0x 10.5x 0.6% 0.8%
International Competitors
Amphenol APH US 7674 20.6x 18.7x 14.6x 13.4x 12.7x 11.7x 0.7% 1.0%
BYD Company 1211 HK 8368 70.6x 45.9x 49.2x 39.1x 18.0x 15.6x 0.0% 0.0%
Foxconn 2317 TT 21219 10.7x 9.8x 10.0x 8.4x 6.3x 5.3x 2.0% 2.1%
Parker Chomerics PH US 10134 17.0x 16.1x 11.6x 10.4x 9.5x 8.7x 1.5% 1.7%
TDK Corporation 6762 JT 3159 NM 27.2x 30.6x 17.1x 5.9x 4.8x 1.9% 1.8%
Mean 29.7x 23.5x 23.2x 17.7x 10.5x 9.2x 1.2% 1.3%
Median 18.8x 18.7x 14.6x 13.4x 9.5x 8.7x 1.5% 1.7%
Adjusted average 19.0x 17.3x 14.0x 13.6x 10.7x 9.7x 1.6% 1.7%
Source: Bloomberg, J.P. Morgan estimates.
 Key customer risk. Laird derives 15-20% of its revenue from a single customer. There is a risk to our rating and price target should activity levels with this customer
decline.
 Currency mismatch of revenue and costs means Laird has both transaction and translation exposure. A significant revaluation of the RMB relative to the USD will likely
adversely impact group profits.
 Visibility stands at just four to six weeks, although established customer relationships mean Laird can estimate future demand with some degree of accuracy.
 OEMs are likely to continue to encourage competition to keep prices down and reduce risk on supply.
 High reliance on manufacturing in low cost countries reduces the group’s ability to further mitigate price deflation in its markets. Greater than expected cost inflation, in
particular in China, could negatively impact profitability.
 Ability to get Laird’s products onto next generation OEM products.
288
(44-20) 7742-3681 02 January 2014
Lamprell PLC (Overweight; Price Target: 175p)

Investment Thesis
We believe that Lamprell's ‘back to basics’ strategy is paying off. It could still take some time for the company to shake off its reputation for unexpected deteriorations in
financial performance, but we are more confident that the last of the profit warnings is now behind us, and we look forward to a sharp recovery in earnings this year and
next as 1) the last of the problematic legacy contracts (EDC1) is completed (Q3 2013), 2) the business mix improves, 3) corporate overheads are rationalized and 4) activity
benefits from a good demand outlook and attractive prospects for near-term backlog expansion.
With improved backlog coverage we believe the risk to earnings estimates has shifted to the upside. We now see the prospect for an earnings upgrade trend predicated on
incremental contract awards.
Valuation
Our Dec-14 PT of 175p is based on a 2015E EPS of 25.1c and a target PER of 11.0x. We believe this multiple is justified given potential upgrades to estimates predicated
on additional contract wins over the remainder of 2013. Valuation should be supported by greater certainty over backlog beyond 2014.
Lamprell’s share price is heavily dependent on contract awards and project execution. The main downside risks to our thesis are: 1) Lamprell wins substantially fewer
contracts than we forecast, 2) the supply chain issues recur, causing project timetables to slip, 3) increased competition from Asia, specifically Chinese yards, and 4) a
slowdown in offshore spending by Oil & Gas companies.
Lancashire (Neutral; Price Target: 804p)

Investment Thesis
We believe the Cathedral transaction is of significant strategic value to LRE in a the current more challenging market and offers long term growth options for the Co.
Cathedral will complement LRE’s core business model in London and Bermuda and its LCM fund arm with access to the worldwide risks that are being brought to Lloyd’s
by the global brokers. Cathedral has a solid underwriting track record in short tail specialty insurance and reinsurance lines but in niches that LRE has not previously
underwritten. In addition, the transaction allows LRE, through Cathedral, to use the worldwide licensing agreements at Lloyd’s and its efficient capital structure. Overall, the
transaction does not change LRE approach to opportunistic underwriting and shareholder friendly returns of capital through special dividends.
Valuation
Our Jun-14 804p price target is based on a DCF of group cash flows discounted at the cost of equity 12%, cost of capital 10.8%, based on a risk-free rate of c.4.8% and a
beta of 1.8x. The risk premium is 4%. The cross cycle combined ratio of 65%.
The downside risks to our view are that natural catastrophe losses exceed expectations or the company’s risk tolerances and opportunities to expand the business decline
and cost overruns exceed expectations.
The upside risk to our view is the prospect of material returns of capital in the form of special dividends to shareholders in a benign catastrophe year.
Liontrust Asset Management (Underweight; Price Target: 243p)

Investment Thesis
Liontrust has been in an extended period of rebuilding after the loss of key personnel. This has recently involved material acquisitions and a restructuring of remuneration
for the remaining staff. Our Underweight recommendation reflects the early stage and uncertain outcome of that restructuring plan.
Valuation
sheet structure. We set our December 2014 price target of 243p based on calendar 2014E EPS and a 15% discount to the peer group multiple of 12.4. The discount to
peers reflects the level of estimate uncertainty.
gearing so the effect on profits would be more pronounced.
London Mining (Overweight; Price Target: 195p)

Investment Thesis
We are our Overweight rating on LOND based on: 1) Near-term production growth from Marampa in Sierra Leone plus several further growth options in the form of the Isua
(Greenland) and Wadi Sawawin (Saudi Arabia) projects; 2) Logistical advantages at Marampa over West African peers due to the relatively short distance (40km) from the
mine to the barge loading point and 3) Compelling valuation - we estimate LOND trades on a 2014 P/NPV of 0.52x.
Valuation
We derive our Dec ‘14E target of £1.95/share using a DCF-based methodology, with a target 1x P/NPV multiple applied to our end ‘14E DCF valuations for Marampa to
6Mtpa. We then make adjustments for central costs and net debt. Our target-setting methodology is essentially unchanged, with the price target reduction reflecting the
reduction in our end FY14 NPV estimate.
The key risks to our Overweight recommendation are as follows:
Iron ore price - as an iron ore company, a downward movement in the iron ore price would undoubtedly have a negative impact on London Mining's share price. In our
opinion, the most important driver of the value of the company, however, is expectations of the long-term iron ore price.
Capex estimates - increases in London Mining's expected project capital expenditure budgets would have a negative impact on the value of the company.
289
(44-20) 7742-3681 02 January 2014
Operating cost estimates - an increase in the company's estimated operating costs at its assets in Sierra Leone or Greenland would have a negative impact on the value of
the company. However, this impact may be mitigated by an increase in long-term iron ore price expectations if the increase in costs is due to general mining sector inflation.
LondonMetric (Overweight; Price Target: 130p)

Investment Thesis
We are Overweight LondonMetric on valuation grounds. In addition, the group has significant firepower to invest, a management team that we see as top class and an
income producing portfolio with enviable characteristics (i.e. more than 10 years lease length).
Valuation
Our Sep-14 target price for LondonMetric is based on our total returns-based European Valuation Model, which takes into account whether a company creates or destroys
whereas those with a negative spread should be priced below NNAV. For LondonMetric, we calculate a value creation spread of +1.6% between our forecast total return
and our WACC estimate. We apply this spread to the invested capital, discount back, and add/subtract to our NNAV forecast to derive our price target.
We believe the key risks that could keep our rating and price target from being achieved include the following downside risks: a sharp drop in retail sales, tenant defaults, a
sharp rise in interest rates/bond yields and a weaker than expected investment market.
LXB Retail Properties (Neutral; Price Target: 130p)

Investment Thesis
LXB is run by a strong management team operating in the niche retail park sector. We expect the company to create value through development of schemes and it has
already amassed a pipeline of interesting schemes throughout the UK. We remain N on valuation grounds (less upside than the sector) and as we are more cautious on the
retailing environment.
Valuation
Our Sep-14 target price of 130p for LXB Retail Properties is based on our total returns-based European Valuation Model, which takes into account whether a company
creates or destroys value. We argue that companies which have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a
premium to NNAV, whereas those with a negative spread should be priced below NNAV. For LXB, we calculate a value creation spread of -7.5% between our forecast total
return and our WACC estimate. We apply this spread to the invested capital, discount back, and add/subtract to our NNAV forecast to derive our price target.
Downside risks to our view include LXB being unable to secure planning consent and pre-lets at its development sites. Other downside risks include being unable to secure
additional financing to develop out the schemes and a significant correction in the retail market. Upside risks to our price target include LXB being able to secure consents
and pre-lets quicker than expected and continue acquiring large schemes at attractive prices.
Man Group (Neutral; Price Target: 102p)

Investment Thesis
Man is a leading alternative asset manager in terms of assets under management. Its reliance on performance fees within its profitability arguably acts as a constraint on
valuation given the generally lower value placed on this form of income by the stock market.
Valuation
sheet structure. On this basis, we apply a 10% discount to the sector rating of 12.7x CY14E, and half that multiple for performance fee profits. We thereby derive a
December 2014 price target of 102p. The discount to peers reflects the level of estimate uncertainty.
As with any asset manager, the salient risk (both to the upside and the downside) to our investment thesis is a different outcome for market levels compared with our
estimates. This would inevitably affect assets under management, but also potentially estimates of future flows, with consequences for the group's revenues. The business
model has inherently high operational gearing so the effect on profits would be more pronounced.
Marston's (Neutral; Price Target: 160p)

Investment Thesis
MARS’s managed estate (Destination and Premium, 33% of group EBIT) continues to trade well, with LFL sales growth of 2.2% at FY13, and we expect it to benefit from
the improving UK consumer environment. With the FY13 disposal of 202 tenanted pubs, the ongoing programme of single-site disposals (about a further 400 pubs) and the
conversion of the remainder of the Taverns estate to the franchise model, we expect MARS’s pub estate to be almost entirely under managed/franchised formats by FY16.
While the pubs sub-sector is now trading at peak multiples, we see scope for some modest re-rating over time for MARS as the shift of its estate towards managed pubs
continues. We also see scope for modest upgrades to consensus forecasts driven by stronger managed LFLs (as the UK consumer continues to improve), and helped by
operational and financial gearing.
Valuation
MARS trades on 12.6x CY14E PE, a 13% discount to the pubs sub-sector. We believe that this discount is justified, given MARS’s relatively high level of financial gearing
(FY14E net debt/EBITDA 5.5x) and its comparatively low exposure to managed pubs. Our Nov-14 of 160p is based on a 10% discount to the pubs sector, reflecting the
accelerated shift towards managed pubs.
Upside risks:
 MARS’s managed pub estate could benefit from an improving UK consumer environment more materially than we anticipate, driving stronger LFL sales growth than
we forecast and potentially modest margin expansion.
 Tenanted pubs could see some trading uplift from a stronger consumer environment.
290
(44-20) 7742-3681 02 January 2014
 MARS’s disposal of its remaining tenanted pubs could proceed more quickly than we anticipate.
Downside risks:
 MARS’ bias to the West Midlands and North of England could leave it particularly exposed to a downturn in consumer sentiment.
 A further decline in on-trade beer consumption could reduce the number of viable tenanted pubs.
 MARS may be unable to pass price increases on to consumers, resulting in margin pressure.
 MARS’s high financial gearing (we forecast net debt/EBITDA of 5.5x at FY14E) could exacerbate any slowdown in top-line growth or margin pressure.
Mecom (Neutral; Price Target: 60p)

Investment Thesis
On July 19th 2012 Mecom announced that it would be conducting a strategic review that included CEO Tom Toumazis stepping down and potential further disposals. In our
view the impressive sales multiples Mecom achieved for its Norwegian assets (7.2x 2011 EV/EBITDA) and announced for the combined Polish and Autotrack businesses
(5x 2012 EV/EBITDA) clearly show the value upside for shareholders by the company engaging in value-accetive disposals which should reduce financial leverage and
provide higher cash return optionality. However, with no satisfactory offers received for its remaining core businesses, Mecom has now indicated that the Strategic review is
nearing its conclusion and current Chief Executive Stephen Davidson will step down by end of October. Mecom is now preparing to continue operating its major remaining
Dutch and Danish businesses. In the short term we think a key share price driver will be a weak Dutch print advertising environment and investors may still wait for more on
refinancing (which Mecom expects to complete by FY13 results), restructuring (mgmt expects to announce measures in Jan 2014) and therefore early signs of a return to
shareholder remuneration (we note no dividend will be paid for 2013).
Valuation
Our Jun-14E DCF fair value of 85p is based on a WACC of 9.5% and terminal growth rate of -3%. We apply a a 30% discount to our fair value to reflect our view that the
market may not fully recognise the value of the company until the prospect of cash returns to shareholders becomes more imminent – this results in our Price Target of 60p.
Mecom summary DCF (€m)
Summary DCF
WACC 9.5%
Terminal growth -3.0%
NPV of cash flows until 2016E 81
NPV of Terminal Value 161
Implied Enterprise Value 242
Net Debt 75
Contingent liabilities 42
Minorities 7
Number of shares (m) 118.7
Implied Equity Value 119
Fair value per share (€) 1.00
FX GBP/EUR 1.18
Fair value per share (p) 85
The key risk that could prevent the stock from achieving our price target and rating include the following:
Downside risks:
 A double-dip in the macro environment in Mecom’s key end markets, the Netherlands and Denmark, with further deterioration in ad spending;
 Accelerating pressure on Mecom’s newspaper circulation;
 Higher than expected launch costs for its new online initiatives; and
 Possible difficulties in the execution of transferring its print newspaper brands into online.
Upside risks:
 A better advertising environment than we have forecast;
 Any value-accretive disposals; and
 A stronger than we have expected execution of transferring its print newspaper brands into online.
Also, we note that Mecom’s reporting currency is euro-based, while Mecom’s share price is in GBP, with the result that the fair value of Mecom is highly dependent on the
euro/GBP exchange rate.
Michael Page (Neutral; Price Target: 424p)

Investment Thesis
We have a Neutral recommendation on MPI. The main positive point is that the structural opportunity is large due to sector and geographic growth potential in particular.
However, this structural growth can be masked by cyclicality and we feel that it will take longer for the company to recover from the 2007 recession than the previous two
downturns and that this is reflected in the valuation.
Valuation
Our price target of 424p represents a 2014e PER of 21.9x, a premium of 38% to the Business Services average of 16.5x, which we think reflects MPI’s structural growth
opportunity and the fact that earnings forecasts are still below the historical peak.
291
(44-20) 7742-3681 02 January 2014

Upside risks to our Neutral recommendation:
 Improving macro data, which would likely have a very important impact on sentiment towards MPI (with earnings upgrades tending to lag the shift in sentiment).
 Structural growth, especially from the relatively underpenetrated Americas and Asia Pacific regions.
Downside risks to our Neutral recommendation:
 The economic recovery from the 2007 downturn is likely to prove more protracted than the recovery from the 2003 and 1991 recessions.
 The industry may be carrying too much capacity, due to the steep downturn post 2007, which could place pressure on margins.
Micro Focus (Neutral; Price Target: 815p)

Investment Thesis
Micro Focus is a COBOL development and modernization stalwart, with more than 30 years of experience in COBOL (which powers c.85% of business transactions) and
over 1 million licensed users. The company generates strong and consistent cash flows with over 50% of revenues recurring and cash conversion exceeding 100% in FY
2012 and in FY 2011.
Micro Focus's policy is to deliver to investors a Total Shareholder Return (TSR) exceeding the company's weighted average cost of capital, achieved through buybacks,
returns of value and dividends.
Micro Focus offers investors steady income supported by strong cash generation, but, in our view, still needs to demonstrate that it can provide consistent license and
maintenance growth – in light of these factors, we remain Neutral. Following the recent CDMS product refresh and relaunch, we think that FY’14 will be a test of Micro
Focus’s license growth potential. We believe that consensus upgrades are possible if Micro Focus can demonstrate that it can deliver consistent license growth.
Valuation
In our valuation methodology we consider DCF as well as PE, EV/EBITDA and other multiples relative to the global IT services sector, along with Micro Focus's own
historical trends. We also consider revenues and earnings momentum in the context of the global macroeconomic environment.
Our 815p price target to December 2014 is based on our DCF, where we use a 10-year planning period, 1.0% terminal growth rate, a WACC of 8.9%, and a USD/GBP
exchange rate of 1.60. This also includes the lower share count due to the return of capital to investors and related share consolidation.
Key risks that could prevent our thesis on Micro Focus from being achieved include:
1. Macro economic conditions could be stronger or weaker than we anticipated, which would likely impact corporates' ability to invest in IT, which could impact Micro
Focus's license revenues, particularly around OEM licenses.
2. We believe that a main driver for Micro Focus going forward will be large modernisation deals, which can be lumpy in terms of timing, thus significant delays could
impact Micro Focus's ability to meet our expectations.
3. Currency headwinds could be stronger or weaker than anticipated.
Mitchells & Butlers (Neutral; Price Target: 400p)

Investment Thesis
Mitchells and Butlers’ estate of food-led, freehold managed pubs should ultimately leave it well placed to benefit from an improvement in the UK consumer environment. We
believe that the operational changes it is currently implementing could ultimately deliver high-single-digit upside to our FY15 EPS forecast if LFL sales growth were to
improve. However, these changes are still at an early stage and we believe it may be unrealistic to expect MAB to benefit from a stronger UK consumer environment as
materially as its peers while it is focused on reshaping the business for the long term. We also believe that the current PE discount to peers is unlikely to close in the short
term, given the lack of a dividend, ongoing pension issues and uncertainty over key shareholders’ intentions.
Valuation
MAB trades on 10.7x CY14E PE, a 19% discount to the pubs sub-sector and behind its 03-06 average (14.4x). We expect the lack of a dividend, ongoing pension issues
and uncertainty over key shareholders’ intentions to continue to weigh on the valuation in the near term. Our Nov-14 price target of 400p is based on a PE valuation set at a
20% discount to the pubs sub-sector.
We see the following risks to our Neutral recommendation.
On the upside:
 The new operational initiatives could drive improvements to LFL sales growth more quickly than we expect.
 Major shareholder Joe Lewis (who holds 26% of the stock through his Piedmont investment vehicle) could return with a higher bid. His September 2011 bid of 230p
was unsuccessful.
 Equally, Mr Lewis could decide to sell all or part of his stake. While this would create a significant overhang in the short term, we believe it could drive a re-rating over
the longer term by removing uncertainty around his intentions.
 MAB could reinstate dividend payments more quickly than we expect.
 An opportunistic acquisition could offer upside from synergies and require a reassessment of the investment case.
On the downside:
 MAB's change programme might not deliver the LFL sales growth improvement that we anticipate, or this could take longer than we expect.
 MAB may not decide to reinstate a dividend in FY14, as we currently forecast.
292
(44-20) 7742-3681 02 January 2014
Moneysupermarket (Neutral; Price Target: 192p)

Investment Thesis
Despite LT potential, after the recent slow-down in revenue growth (+13% in Q1, +10% in H1, flat in July), we acknowledge that a return to >10% growth may not be
straightforward as the near-term outlook is unclear (net impact of Google algorithm changes, Money vertical pressure, TV ad campaign). Should recent slow growth
continue, MONY’s growth-stock rating might face additional pressure. We remain Neutral.
Valuation
We apply a 5% discount to our fair value for low operating visibility, resulting in our Dec-14E DCF-based PT of 192p (WACC of 9%, g 2%).
The following risks could prevent the stock from achieving our target price and rating: 1) A stronger/weaker interest rate level or credit availability for consumers that will
result in higher/lower conversion rates for loans and mortgages, 2) higher/lower advertising costs than we have anticipated, 3) any value accretive/dilutive acquisitions.
Morgan Advanced Materials PLC (Overweight; Price Target: 330p)

Investment Thesis
Management has reshaped the group’s end market exposure in recent years, focusing on growth markets with attractive niches where the businesses can achieve a
number one or two market position. These target markets generate stronger margins and grow at rates ahead of global GDP. Management has also addressed the cost
base, shifting manufacturing to lower cost locations and addressing overheads.
A still weak macro backdrop has limited top-line growth and conditions across the group's broad range of end markets remain mixed. Any improvement in end markets and
the broader macro would help accelerate earnings growth. However, in the absence of top-line recovery, internal progress has driven margin expansion through 2013 and
margins are expected to continue to improve. Management is now more aggressively addressing the shape of the portfolio. We believe the actions and commentary are a
signal that further opportunities have been identified and see a more aggressive approach to portfolio change as likely to accelerate the pace of margin improvement.
The fundamental investment case looks stronger with a more pro-active approach to portfolio improvement and, with the shares trading at a significant discount to the
sector, we stay Overweight.
Valuation
Our December 2014 price target is based on a 1.35x EV/Sales multiple applied to our 2014 forecasts. We derive a 330p price target. We see the Morgan Advanced
Materials investment case as a margin story and see an EV/Sales multiple as a clear way to value the margin progression. We therefore value the stock on an EV/Sales
multiple based on the 2014 margin. Our price target is equivalent to 10.4x 2014 EV/EBITA.
Risks to Rating and Target Price
Further slowdown in economic growth. Group earnings remain sensitive to the economic cycle. We would expect earnings to prove more robust than during previous
downturns but a weakening of the macro backdrop would impact group performance.
Failure to address underperforming businesses. We believe management will make significant changes to any underperforming businesses (as we are seeing with
some product lines at present). However, failure to act could see poor financial performance and a negative reaction in the share price.
Portfolio change does not result in improved performance. Management is pursuing a more aggressive approach to reshaping the portfolio and this is a key part of our
investment case. Failure to deliver improved returns could disappoint.
Foreign exchange. The group’s broad geographical spread means it is exposed to currency rate fluctuations (notably the US Dollar and Euro).
Mothercare (Overweight; Price Target: 450p)

Investment Thesis
We have an Overweight rating. Our rating is based on our view that the new management team will restore the UK to a profitable run-rate by FY2015 and will drive
significant growth in International sales.
Valuation
Our 450p price target is the average of our 442p DCF and 458p SOTP valuations.
 DCF: Our 442p DCF valuation is based on forecast free cash flows to 2025, discounted to net present value at a WACC of 7.5%. We add a terminal item derived using
a terminal growth rate of 2%. The WACC is based on an equity beta of 0.90, a risk-free rate of 3.0% and an equity premium of 5.5%.
 SOTP: Our 458p sum-of-the-parts (SOTP) valuation applies an EBIT multiple of 11.4x to forecast operating profit for FY2015. The multiple is derived by taking the
average one-year forward EV/EBIT multiple for a group of domestic and international peer companies using Bloomberg consensus estimates. Those peers are (UK)
Debenhams, Halfords, Home Retail, Kingfisher, Next, Ted Baker and Sports Direct; and (International) Carter’s, Children’s Place and Pumpkin Patch.
The key risks to our Overweight rating and price target include:
 Failure to restore UK profitability in FY2015-16;
 Failure to return UK LFLs to positive territory;
 Slowdown in the pace of International space expansion;
 Failure to manage working capital and supply chain effectively;
 Greater than expected competitive pressure;
 Loss of key management; and
 A decline in consumer expenditure in key markets.
293
(44-20) 7742-3681 02 January 2014
National Express (Neutral; Price Target: 275p)

Investment Thesis
We are Neutral on NEX given share price outperformance YTD. NEX has the most diversified geographical exposure among the four peers, with c.24% of EBIT generated
from the deregulated UK Bus and Coach segment. We expect balance sheet burden to be relieved as capex comes down after last year’s acquisitions. We believe further
upside in the share price will be contingent on reduction of gearing level and evidence of progress in delivering the management’s growth strategy in both existing and new
business areas, with a focus on capital-lite opportunities. We believe risk from UK Rail franchising is biased towards upside for NEX in the near-term, despite the least
compelling relative to other UK peers.
Valuation
We derive our valuation from a DCF-based sum of the parts, yielding a FY14 (December) year-end PT of 275p, with implied valuation multiples and yields cross-checked
against those of peers. We apply individual WACC and terminal growth rate assumptions for each individual division, with a flat risk free rate of 2.3% and an equity risk
premium of 6.4%.
Downside risks could include: 1) economic risks, as general slowdown or recession of the economy and an upturn in unemployment in one of NEX’s key operating regions
may cause a reduction in transport volumes; 2) political and regulatory risks, as NEX operates in both regulated and deregulated markets, and receives subsidies from the
government as a public transport operator; 3) Cost inflation, especially higher than expected increases in wage and fuel costs, could put downward pressure on NEX’s
margin; 4) failure to reduce gearing level and generate sustainable FCF. Upside risks could include faster than forecasted economic growth, a more favourable regulatory
environment, lower than expected cost inflation, or quicker achievement of management targets.
New World Resources (Underweight; Price Target: 59p)

Investment Thesis
With limited growth forecast in coming years, we believe the subdued coking coal spot prices will continue to put pressure on NWR’s margins and balance sheet, and with
shares trading at a P/NPV of 1.30x (using a long-term coking coal price assumption of $160/t), we maintain our recommendation on NWR at Underweight.
Valuation
We value NWR based on 1x the average of our FY13E and FY14E year-end NPVs. Our NPV is based on production until 2030 and an unchanged WACC of 12%.
Upside risks include further migration of steel capacity from Western to Eastern Europe leading to tightening regional demand, further consolidation of the regional coal
industry giving more bargaining power to coal producers, and more regular repricing of thermal coal volumes (currently struck annually).
Ophir Energy (Overweight; Price Target: 440p)

Investment Thesis
We have an OW recommendation on Ophir given its exposure to the East African LNG play and the West African pre-salt play. We see several near-term drilling catalysts,
which we believe can materially help to prove up commercial quantities of gas in Tanzania and Equatorial Guinea, and potentially oil in its pre-salt Gabon acreage. Given its
significant acreage position in offshore East Africa, one of the most hotly contested parts of the world, we believe Ophir could command a valuation premium.
Valuation
We base our PT around our RENAV estimate, incorporating a small premium or discount based upon various factors such as management quality and timing and diversity
of drilling programme. In Ophir’s case the next 12-18 months contain several high impact wells; in addition, we rate Ophir’s management team highly and view their large
acreage position as particularly attractive in the event of regional industry consolidation.
In our view, recent delays to the drilling schedule mean Ophir’s ability to command a premium valuation have been diminished slightly. Our core NAV is 233p and our
RENAV is 434p. Our Dec-14 PT is 440p.
As an E&P company, Ophir carries a number of risks that may lead to above-average share price volatility. Those risks include:
1. Exploration risk – wells typically fail to discover oil or gas more often than they discover either;
2. Execution risk – mobilising an offshore rig and successfully drilling and completing a well presents a number of challenges, as does the development of an integrated
gas-to-LNG project which can lead to delays;
3. Cost inflation – Ophir is exposed to rising hardware and labour costs which could consume finite risk capital faster than budgeted, thus leaving Ophir unable to
complete its program without additional capital;
4. Political risk – Ophir operates in countries that have evolving democratic processes.
Paragon Group (Overweight; Price Target: 396p)

Investment thesis
We believe Paragon’s mortgage book is of high quality and in run-off can generate acceptable returns to shareholders for a prolonged period. However, there is
considerable upside to the share price (to at least book value, in our view) if Paragon can continue to obtain secured funding to grow the book and generate a high
incremental ROE from new lending. We therefore have an Overweight recommendation.
Valuation
We value Paragon using a P/NAV model. With the company having secured new funding, we expect the group to generate an ROE of at least 10% in 2014E and with an
assumed cost of capital of 8.5% we believe fair value is 1.2x NAV, or 396p for December 2014.
Risks to our price target and rating
The key risk to our investment thesis is deterioration in the UK economy leading to higher loan impairment charges and reduced demand for mortgage loans. Paragon's
loan growth is vulnerable to changing conditions in the term secured funding markets.
294
(44-20) 7742-3681 02 January 2014
PayPoint (Overweight; Price Target: 1,407p)

Investment Thesis
We like the PayPoint business model. PayPoint’s main operations are based around payment services with a number of different payment channels offered to
clients/consumers. The group continues to add new capabilities to its core UK & Ireland network with opportunities such as the money out proposition with the Simple
Payment Service contract leveraging the already installed base.
Overall, the group is developing a broad payment capability with sustainable growth in a number of areas, in our view. We believe that the medium and longer-term
potential for the group remains strong as it fully utilizes its ever-growing network of terminals, takes advantage of the opportunities in Romania and builds on its newer
operations. With a resilient earnings stream and the potential for medium-term momentum as the newer operations deliver, we believe a premium to the sector is justified
and remain comfortable with out Overweight recommendation.
Valuation
Our Dec-14 price target remains 1,407p which is based on a 10% discount to the group’s historic peak PER. We apply a 10% discount to reflect the fact that sector
multiples are also lower. We chose to look at the group’s historic valuation in setting our price target given there are no obvious quoted peers given the group’s unique
business. At 1,407p, the shares would be trading on a PER of 26x FY15E earnings.
The main risk to our view would be failure to continue to increase profitability in the group’s newer businesses. In addition, our estimates are built around a range of
assumptions and any failure to achieve these volumes would have a negative impact on our earnings estimates and the group’s rating.
Petropavlovsk (Underweight; Price Target: 70p)

Investment Thesis
We have an Underweight recommendation on POG due to:
1. The company’s excess leverage (with $1.08bn of net debt at 4th Oct' and $232m market cap);
2. An increased risk of a covenant breach if gold prices do not improve from current levels. POG’s bank covenants contain a maximum net debt / EBITDA covenant of
4.0x – JPMe 8.1x at YE’14 at current gold prices.
3. An increased risk that the POX development has to be further delayed impacting long-term gold production forecasts.
Valuation
We base our 70p end Dec ‘14E PT on ~0.75x our Dec ‘14E NPV estimate rounded to the nearest 5p. Our previous PT was 40p with the higher PT reflecting POG’s slightly
lower refinancing risk due to the indicative findings of its Strategic Review; we therefore regard a 25% discount to NPV is now warranted versus a 65% discount previously.
However we continue to believe a discount to NPV is warranted due to increasing risks of discounted recapitalisation in 2014E.
Upside risks to our UW rating include:
 An outperformance of gold relative to other commodities could cause the shares to outperform.
 A further sell down of POG’s stake in its iron ore subsidiary (IRC) for cash could mitigate balance sheet risks and reveal heavily discounted valuations within the
underlying gold business.
 A successful renogotiation of debt covenants or the signing of further debt facilities – although we believe the probabalility of either of these happening is low.
Promethean (Neutral; Price Target: 21p)

Investment Thesis:
Our recommendation is Neutral. We believe there is insufficient certainty around the timing of a recovery in Promethean's key markets to justify a more positive
recommendation, and its newer approach into software remains more of an opportunity for 2014 onwards in our view. At current levels, however, we believe there is some
long-term valuation support and regard a Neutral position as most appropriate. Promethean has net cash and is expected not to need to use its debt facilities as it cuts
operating expenditure. We believe Promethean’s technology is attractive over the longer-term, but regard the current climate for education spending to be unconducive to
the realisation of its full potential.
Valuation
Our price target is 21p per share, dated December 2014. This is the weighted average of our DCF and our multiples-based valuations. Our DCF valuation is 13p per share,
which applies a Cost of Equity of 9.3% to explicit earnings estimates to FY20E. Our Cost of Equity uses an equity beta of 0.9. A terminal growth rate of 2% is applied. Our
multiples-based valuation is 29p per share. This values Promethean on a CY13E EV/EBITDA basis inline with the average for selected peer companies in technology
hardware. We apply a 50% weighting to the DCF and 50% weighting to our multiples based valuation.
DCF Valuation
GBP in millions
Explicit cash flows 9.1
Terminal cash flows 17.6
Total equity value 26.7
Number of shares 201
Implied share price 13.3p
295
(44-20) 7742-3681 02 January 2014
EV/EBITDA-based Valuation
CY13E EBITDA (£m) 7.8
Peer group average CY13E EV/EBITDA 6.3x
Implied EV (£m) 49.5
Net cash (£m) 8.0
Implied equity value (£m) 57.5
Number of shares (#m) 201
Implied share price (p) 28.6p
Source: J.P. Morgan estimates and Bloomberg consensus.
DCF 13.3p 50% 6.6p
Multiples-based 28.6p 50% 14.3p
Total 100% 20.9p
Risks to Our Price Target and Rating
Upside risks to our recommendation and price target include:
 There is a chance that demand could return more quickly than anticipated to Promethean key markets in the US and Europe.
 A reduction in competitive pressure should Promethean’s competitors elect to reduce their own activity levels could allow the company to increase its share of the
market.
 The group’s software offerings take off more quickly than antipated.
Downside risks to our recommendation and price target include:

 Promethean’s revenues are affected by headwinds in US and European education budgets. Although we believe the longer-term prospects remain attractive, the near-
term risk centres around margin compression in the context of budgetary pressures on public funding for education.
 Promethean’s revenues might be impacted by competitive pressure from existing competitors (Smart) or from new entrants. Competitive pressure may arise from a
loss of cost competitiveness or technological differentiation.
 Licensing Promethean’s software to third party manufactures of rival hardware products could cannibalise sales.
PZ Cussons (Neutral; Price Target: 390p)

Investment Thesis
PZ Cussons is a focused HPC player with c60% of sales from emerging markets – c42% from Africa (Nigeria, Kenya and Ghana) and c18% from Asia (Indonesia, Thailand)
– and in our view remains best positioned to benefit from strong growth in these regions and expansion in new categories/portfolio roll-out. In the MT, we expect c5% LFL
along with 50-60bps pa margin improvement (on the back of strong leverage in Asia, Africa and improving mix in Europe) to drive c10% earnings growth. However, PZC
trades at what we view as a full valuation reflecting the strong growth potential for the company and thus we remain Neutral.
Valuation
Our May-14 DCF-based PT is 390p. We use a WACC of 8.5%, in-line with our coverage universe and LT growth rate of 2%.
We believe the key risks that could keep our rating and target price from being achieved include the following: 1) a weakening of the Nigerian Naira, dollar and the euro
against sterling, high raw material costs, 2) a deterioration in trading conditions in Africa (geo-political uncertainties), in Europe and Asia driven by weaker consumer
demand as well as heightened competition. Upside risks include a stronger than expected macro improvement in Europe and strong demand in Africa/Asia.
Qinetiq (Neutral; Price Target: 215p)

Investment Thesis
There are many positives to the QQ investment case, in our view. (1) Around 50% of revenues in QQ’s UK Services division are derived from long-term contracts with good
visibility and fairly stable revenues. (2) The UK MoD is reducing its civil service workforce by at least one-third from 2010 to 2015 and it is thus likely to rely more on outside
contractors for advice; QQ could benefit from this over the medium-term. (3) Potential high growth for emerging technologies that currently account for c10% of group sales
(eg. cyber intelligence; OptaSense - fibre-optic sensing for use in oil and gas fields and infrastructure protection; using off-the-shelf training and simulation technology to
reduce the cost of training for the military and also industry). (4) QQ has very impressive cash conversion. (5) QQ has a net cash position and only has a small IFRS
pension deficit.
There are also some investment concerns. (1) EPS in YE Mar 13 was boosted by some items unlikely to be repeated in YE Mar 14 (margin release on a mature UK
services contract, better than expected QNETs sales to the US Army), so we forecast EPS to fall c20% in Mar 2014. (2) Visibility in the US defence markets is very low, but
sales are very likely to decline if sequestration is implemented and remains in place. (3) QQ is confident that it can organically develop new business lines in its Global
Products division but this may prove harder than management expects.
Valuation:
Our GR2ADE framework (analysing Growth, Risk, Returns for Aerospace & Defence companies) suggests QQ should trade in line with its long-term average valuation
multiple. This means we apply a target 2014E P/E of 11.6x to both the QQ definition of underlying EPS and the JPM defined clean EPS, and a target 2014E EV/EBITA
multiple of 9x to our JPM defined Economic EBITA forecast. The average of these three methodologies gives us a Dec-14 fair value target of 187p. To this we add a 15%
premium for M&A (ie. we assume QQ could be acquired for a 30% premium to fair value and assign a 50% weighting to this), to derive a Dec-14 price target of 215p.
296
(44-20) 7742-3681 02 January 2014

Upside risks: (1) Faster than expected sales and EBITA growth in new business such as Optasense. (2) Better than expect sales of products to the US military in the next
12-24 months. (3) QQ has beaten market expectations for cost reduction and FCF in the last two years; the expectations bar has been set higher but we believe further
beats are possible. (4) A potential bid for the company: QQ has some attractive long-term outsourcing contracts and also technology niches. In our view, it is also possible
that management may at some stage seek to split QQ up, although this is not its stated plan. Downside risks: (1) Weaker than expected sales and EBITA progression in
new businesses. (2) Deeper than expected cuts to US and UK defence / government spending. (3) Drawdown of US troops from Afghanistan hits QQ’s Global Products
division even more than we expect.
Quintain Estates & Development (Overweight; Price Target: 110p)

Investment Thesis
We upgraded Quintain to Overweight following the disposal of the group's 40% interest in Greenwich, which lowers LTV to 25% and secures the company’s future ability to
deliver Wembley. We remain positive on Greater London house price inflation, and the progress at Wembley.
Valuation
Our Nov-14 target price for Quintain is based on our total returns-based European Valuation Model, which takes into account whether a company creates or destroys value.
We argue that companies that have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a premium to NNAV, whereas
those with a negative spread should be priced below NNAV. For Quintain, we calculate a value creation spread of -1.4% between our forecast total return and our WACC
estimate. We apply this spread to the invested capital, discount back, and add/subtract to our NNAV forecast to derive our price target.
Downside risks include worse than expected capital gowth for commercial and residential property and worse than expected movement in the land prices. Risks may also
include lower than expected house price inflation and/or slower than forecast sales of residential units.
Record Plc (Overweight; Price Target: 40p)

Investment Thesis
Record is the leading specialist manager of currency mandates. This asset class has the scope for material future growth, in our view, as its return characteristics are more
broadly understood by investment consultants. Although current levels of profitability have been under pressure from client losses, the business is soundly financed, in our
view.
Valuation
sheet structure. On this basis, we assume a sector rating of 12.9x CY14E and include the estimated value of surplus capital cash on the balance sheet to set a December
2014 price target of 40p.
gearing, so the effect on profits would be more pronounced.
Redrow (Neutral; Price Target: 260p)

Investment Thesis
We remain Neutral on Redrow. Our price target of 260p implies just 14% upside, vs. an average of 20% for our Overweight stocks.
Valuation
We calculate our price targets based on 2015 EPS on a PER basis. We employ an 8.5x multiple, with the exception of BKG where we use 10x and PSN and TW where we
use 9.5x, given that we believe it is fair to reflect superior margins, cash returns and historic sustainability of earnings in our multiples.
 Margins in our forecasts being too high, if either because house prices remain flat, or material build cost or land cost inflation offsets the positive margin benefit of
 The multiple we are applying is too high, if 2015 turns out to be a peak year for earnings. While we see some risk that c.2015 - 2016 margins come under longer-
term pressure and land prices eventually rise, we believe there is still upside risk to volumes longer-term, and the risk that our 2015 estimates are materially too low,
offsets any longer-term risk to earnings.
The following factors present risks to our Neutral rating on Redrow:
 A slower UK consumer recovery than we anticipate.
 A deterioration in mortgage availability
 A sentiment overhang, if either, the market assigns housing market improvement to help to buy, rather than a genuine recovery, or concerns over market stability in an
interest rate growth environment.
 The group’s leveraged London investment being more profitable near-term than our estimates assume.
 Another take out attempt (although we view this as unlikely)
297
(44-20) 7742-3681 02 January 2014
Restaurant Group (Overweight; Price Target: 665p)

Investment Thesis
RTN is the clear casual dining market leader in the attractive (and growing) UK retail park market. It consistently generates industry-leading returns from its new openings,
which it funds from its existing cash generative restaurants. We forecast a 13% EPS CAGR over the next three years, driven by 3-4% LFL sales growth and 7% estate
rollout. We see RTN as ideally positioned to benefit from an improving UK consumer environment, and see at least 3-4pp upside to our three-year EPS CAGR forecast,
driven by stronger LFLs and an accelerated rollout programme.
Valuation
RTN trades on 18.1x CY14E PE, a 28% premium to the pubs sub-sector. Although this is well ahead of RTN’s 2003-06 average of 15x, we note that the business is now
established as the market leader in UK retail parks and has only minimal exposure to the difficult high-street market, a change that was only just beginning in 03-06. RTN’s
average PE multiple in 2006-07 was 21x. We forecast 13% EPS CAGR for RTN over the next three years, with scope for at least low-single-digit percentage points of
upside from accelerating the rollout and stronger LFL sales growth, which we think can support an increased PE multiple. Our PE-based target price of 665p is based on a
50% PE premium to the pubs sub-sector. This is supported by our DCF-implied valuation of 720p, assuming a WACC of 6.9% and a terminal growth rate of 2.0%, in line
with our assumptions for peers.
Risks to our Overweight recommendation are as follows:
 With some pub companies now competing with RTN for leisure park sites, it could become more difficult for the company to find new sites that will deliver the high
returns that it has achieved in the past.
 While we believe that RTN would be better placed than its peers if the UK macroeconomic outlook were to deteriorate, it could still suffer from a slowdown in LFL sales.
The high operational gearing inherent in its leasehold model could excacerbate this. We estimate that a 1% change in LFL sales translates to a 4% change at the EPS
level.
 RTN may be unable to pass price increases on to the consumer, resulting in pricing pressure.
 As a restaurant operator with a higher proportion of sales from food, RTN is more exposed to food cost inflation than its peers among the pub companies. This could
lead to greater volatility in input cost pressure for RTN, as drink input cost pressure (particularly for beer) is currently relatively predictable.
RPC Group (Overweight; Price Target: 605p)

Investment Thesis
We have an Overweight recommendation. RPC Group is the leading supplier of rigid plastic packaging in Europe. The company supplies end markets that exhibit defensive
characteristics and allow it to generate cash at an efficient conversion rate. In our view, an investment in RPC gives exposure to the underlying growth in demand for rigid
plastic packaging. This is running at a higher pace than that of the broader packaging industry as FMCG manufacturers seek lighter and more versatile alternatives to metal
and glass.
In our opinion, RPC is also in a position to benefit from technology advances that allow increased customisation of packaging design and appearance and may underpin
structural improvements in operating margins. Despite its tangible prospects for long-term value generation, RPC trades at a P/E and EV/EBITDA discount to its key UK
and international peers. We see this discount as unwarranted.
Valuation
Our price target is 605p dated December 2014. Our price target is the weighted average of our DCF valuation (50%) and EV/EBITDA-based valuation (50%). It rises from
597p due to the increased estimates offset by lower peer company multiples.
DCF 711p 50% 356p
EV/EBITDA-based 499p 50% 250p
Total 100% 605p
DCF Valuation
Our DCF valuation of 711p per share uses explicit earnings estimates to FY2020, based on the assumption of cyclical trend progressions. We apply a WACC of 7.7% and a
terminal growth rate of 2%. The key variables are shown in the table below. Our implied equity beta is 0.95.
EV/EBITDA-based valuation
Our EV/EBITDA-based valuation applies a 7.2x multiple to FY2014E EBITDA. This is the average of the peer group shown below.
298
(44-20) 7742-3681 02 January 2014
Peer Company Trading Multiples

Name FY2 EV/EBITDA
Aptargroup Inc 9.1x
Ball Corp 8.9x
Bemis Co Inc 8.2x
British Polythene Industries Plc 5.6x
DS Smith Plc 7.5x
Fiberweb Plc 5.1x
Low & Bonar Plc 7.0x
Mondi Plc 6.4x
Owens-Illinois Inc 6.9x
Powerflute Oyj 4.9x
Rexam Plc 8.2x
Silgan Holdings Inc 8.2x
Smurfit Kappa Group Plc 5.3x
SCA 9.8x
Vetropack Holding Ag 5.1x
Vidrala Sa 8.2x
Vitrox 8.7x
Average 7.2x
Source: Bloomberg consensus. As at cob on 27 Nov 13.
Inability to pass on rising input costs
RPC has demonstrated a good track record of passing on increases in raw material input costs (especially polymer) to its customers within a reasonable period of time –
usually 3-4 months. In our view, there will always be the risk that sharp rises could impact short-term margins. A more significant risk would be that the company loses its
ability to pass on cost variations in full. The same is true for electricity and haulage, albeit to a lesser extent.
Loss of major customer relationships
RPC supplies packaging to some of the largest FMCG companies in Europe. Its customer base is fairly consolidated: its top ten customers account for approximately a third
of sales. Especially given the fragmented structure of the supply side, this raises the risk that the loss of a major customer relationship could have a materially detrimental
impact on earnings and the share price.
Execution of mergers and acquisitions
In our opinion, RPC is likely to continue to seek earnings growth and long-term value generation through strategic acquisition. This creates a risk that unsuccessful
execution of merger integration processes or inappropriate acquisition pricing could impact returns. In our opinion, RPC’s most recent acquisition – that of Superfos – was
successful and, in this sense, the bar has been set high.
RPS Group (Overweight; Price Target: 341p)

Investment Thesis
We have an Overweight recommendation on RPS. We regard RPS Group as a well-managed global multi-disciplinary consulting firm with good medium to long-term
potential for earnings appreciation. The key driver of growth in the near-term is likely to be the Energy business. We believe RPS has an excellent track record of value
generation through strategic acquisition and expect this to form an important part of future global expansion. We see current trading multiples as undemanding relative to
history and peers.
Valuation
Our Dec-14 price target is 341p based on a 50/50 blend of the group’s historic 10 yr average PER multiple 15.3x) and the peer group PER multiple of 13.8x (based on a
selection of business and oilfield services businesses) applied to our FY14E EPS estimate. At 341p the shares would trade on a PER of 14.6x for FY14E.
Per share value historic average (15.3x) 359
Per share value peer group PER (14.5x) 323
10 year historic av PER 50% 179

PER peer group 50% 161
Target price 341

Source: J. P. Morgan estimates
We believe the principal risk to our Overweight recommendation and Price Target is timing. The group has a strong balance sheet and should see strong cyclical recovery.
In particular a slow recovery in the UK economy or further slowdown in Australia could impact the group's BNE results.
299
(44-20) 7742-3681 02 January 2014
Serica Energy (Underweight; Price Target: 25p)

Investment Thesis
We maintain our UW recommendation on Serica, despite a discounted valuation, reduced funding risk and exposure to the Atlantic Margin play. In the near term, we see
the the share price capped pending 1) progress on sanction of the Columbus development, which requires Serica to find an alternative evacuation route to the Lomond
BLP, 2) the risk that BP abandons plans to drill off Namibia (where serica would be fully carried), and 3) the removal of uncertainty on future abandonment liabilities
associated with the exit from its Kambuna asset, which has recently stopped producing.
Longer term, we acknowledge that Serica is one of the most levered names into exploration success, with committed exploration wells in Morocco and the UK in 2013 and
potential exploration in Namibia and Ireland.
Valuation
Core NAV is based on commercial assets; i.e. producing assets and assets that will be developed. We apply our current oil price assumptions – Brent 2014E-2015E-
2016E+ $105.5-$100.3-$90.0 per barrel, adjusted for asset specific oil price realization premia.
that upside.
We base our end Dec-14 25p PT around our 2013 core NAV, incorporating a premium/discount for factors such as diversity of drilling programme and management track
record. The recent placing has rasied funds to execute the near term exploration program, but it has diluted the upside potential per share.
Key risks to our UW rating and our target price include:
1. Exploration success – a material exploration success/or disappointment could positively/negatively affect the share price, particularly the result of the 1st well in
Morocco in Q4 13.
2. Oil price – as an E&P company, Serica’s share price is naturally geared to changes in the oil price. However, Serica has below-average exposure to the oil price given
fixed gas contracts in Indonesia, and a gas bias in the UK North Sea.
3. Project execution – A quicker than expected resolution to the evacuation route for Columbus gas/condensate could reduce the risk of delays/cost creep on the
development, boosting valuation.
Shaftesbury (Underweight; Price Target: 630p)

Investment Thesis
We are Underweight on Shaftesbury on valuation grounds, as although Shaftesbury is extremely high quality, at current prices we believe likely levels of rental growth is
priced in and further yield compression is unlikely in our view. Furthermore, acquisitions are difficult to source and development activity is at a high point currently and as
such is unlikely to increase.
Valuation
Our Sep-14 target price for Shaftesbury is based on our total returns-based European Valuation Model, which takes into account whether a company creates or destroys
whereas those with a negative spread should be priced below NNAV. For Shaftesbury, we calculate a value creation spread of +2.5% between our forecast total return and
Upside risks include greater than expected rental growth in West End retail villages, driven by higher overseas visitor numbers and/or a pick-up in UK consumer confidence
driving an increase in retail sales. Further upside risk is from greater than expected development or acquisition activity.
Smiths News (Overweight; Price Target: 236p)

Investment Thesis
We have an Overweight recommendation on Smiths News. In our opinion, Smiths News is managing the decline in newspaper and magazine distribution effectively through
operational efficiencies. Steady cash generation from this business may be used to fund expansion of the group in other areas. We believe that there are sufficient
opportunities in the group's newer operations along with cost saving initiatives to provide medium-term profit growth which is not reflected in the group’s valuation.
Valuation
Our Dec-14 price target is 236p. We derive our price target from a 15% discount to the average of the PER and EV/EBITDA implied fair values for the group based on a
range of support services companies under our coverage as summarised in the table below. We believe a 15% discount to the wider support services peer group is
appropriate to reflect the fact that the newspaper and magazine industry (where the group currently generates the majority of earnings) is in decline albeit the group is
diversifying its business.
Smiths News Price Target
Methodology 15% discount to average multiple Implied per share value
PER 11.9 265
EV/EBITDA 6.8 207
Average 236
Source: J.P.Morgan
300
(44-20) 7742-3681 02 January 2014

The main risk to our earnings, PT and Overweight recommendation remains the impact of digital media on printed media volumes. While we believe that digital media will
continue to play an important part in the publishing industry, we do not believe that the current scenario suggests that printed media (i.e. magazines and newspapers) will
deteriorate at a significantly faster rate than is currently in estimates in the near term. In addition, any failure to capitalise on the acquisition of The Consortium could provide
a further risk to estimates in the near-term.
SOCO International (Neutral; Price Target: 407p)

Investment Thesis
We maintain our Neutral recommendation. SOCO has two material events in the coming months: H5 well results and the subsequent sizing of the proposed return of
capital. We anticipate that the shares may be supported around our estimated core NAV through these events although we see little material upside thereafter, hence our
Neutral recommendation.
Valuation
Core NAV is based on commercial assets, ie producing assets and assets that will be developed. We apply our current oil price assumptions – Brent 2014E-2015E-2016E+
that upside.
Our PT to Dec-14 is 407p and is based around our updated RENAV.
The key risks to our Neutral rating are:
1. Resource estimates – SOCO will provide an updated resource estimate on TGT in the near future. If this increases resources substantially, this may cause valuation
expansion.
2. Return of Capital – SOCO’s proposed return of capital could be set at a level above or below market expectations.
3. Oil price – as an E&P company, SOCO's share price is highly geared to changes in the oil price.
4. Project execution – material delays to developments could erode core NAV and negatively impact sentiment.
5. Exploration success/disappointment – a material exploration success or disappointment could positively/negatively affect the share price. The near term risk is around
the H5 well.
6. Political risk – SOCO has exposure to several African countries (ie DRC, Angola) which have a history of political instability.
Songbird Estates (Overweight; Price Target: 171p)

Investment Thesis
We are OW Songbird on valuation. The exposure to Canary Wharf Group is great, and the development projects (e.g The Shell centre) look promising.
Valuation
Our Sep-14 target price for Songbird Estates is based on our total returns-based European Valuation Model, which takes into account whether a company creates or
destroys value. We argue that companies that have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a premium to
NNAV, whereas those with a negative spread should be priced below NNAV. For Songbird Estates, we calculate a value creation spread of -1.0% between our forecast
Downside risks include weaker-than-expected future rental growth, delay in future developments and a higher-than-expected rise in interest rates/bond yields.
St. Modwen Pr (Overweight; Price Target: 375p)

Investment Thesis
Our Overweight rating is based on relative valuation, and strong underlying momentum in the business. The stock has been the best performer in our UK coverage year-to-
date bouncing back from an oversold position. Nevertheless, we continue to see good value trading at current levels, and remain Overweight.
Valuation
Our Oct-14 target price of 375p is based on our total returns-based European Valuation Model, which takes into account whether a company creates or destroys value. We
argue that companies that have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a premium to NNAV, whereas those
with a negative spread should be priced below NNAV. For St. Modwen Properties, we calculate a value creation spread of +3.3% between our forecast total return and our
WACC estimate. We apply this spread to the invested capital, discount back, and add/subtract to our NNAV forecast to derive our price target.
Downside risks include worse than expected capital growth for commercial and residential property and worse than expected movement in the land prices. In addition, the
group would suffer from a slowdown in the UK residential market as well as further negative yield movement on secondary commercial property (predominantly what its
income producing portfolio is). Upside risks include a stronger than expected recovery of UK residential but also specifically for St Modwen securing greater valuation uplift
on NCGM land and taking it to the balance sheet earlier than expected.
301
(44-20) 7742-3681 02 January 2014
Stagecoach (Overweight; Price Target: 390p)

Investment Thesis
Our Overweight recommendation is based on: 1) the fact that SGC has the highest exposure to deregulated UK bus (66% of EBIT contribution) which we expect to benefit
from underlying economic recovery, with a sector-leading margin which we consider as sustainable; 2) Strong growth and potential for further improvement of profitability in
North America; 3) a solid balance sheet, which is supportive of maintaining progressive dividend policy; and 4) our belief that net risk from UK Rail franchising is biased
towards the upside.
Valuation
We derive our valuation from a DCF-based sum of the parts, yielding a FY15 (April) year-end PT of 390p with implied valuation multiples and yields cross-checked against
those of peers. We apply individual WACC and terminal growth rate assumptions for each individual division, with a flat risk-free rate of 2.3% and an equity risk premium of
6.4%.
Major downside risks include: 1) economic risks, as a general economic slowdown or recession and an upturn in unemployment in the UK or North America may cause a
reduction in transport volumes; 2) political and regulatory risks, as SGC operates in both regulated and deregulated markets, and receives subsidies from the government
as a public transport operator; 3) cost inflation, especially higher than expected increases in wage and/or fuel cost, could put downward pressure to SGC’s margin.
Synthomer Plc (Neutral; Price Target: 244p)

Investment Thesis
Continued demand weakness in Europe and North America has now been compounded by a structurally more worrying downturn in Asia in nitrile rubber. Weak end-market
demand has been exacerbated by the impact of capacity additions from competitors, which in turn has led to price cuts and resulted in a “substantially lower operating
profit” in the Asian business, with no sign of relief. However, the shares now stand at a large discount to the European and UK chemical sectors, which may not be fully
justified given the success of the previous restructuring plan, the successful integration of the PolymerLatex acquisition, and the improved product portfolio and expansion
in emerging markets.
Valuation
Our Dec’14 DCF-based Target Price is 244p. Key assumptions of our DCF model are a WACC of 9.5% and terminal growth rate of 2.0%.
Downside risks include:
 A sharp rise in input costs that cannot be recovered
 Balance sheet weakens as working capital outflows increase
 End demand slows with volume recovery stalling
Upside risks:
 Improved demand in Asian Nitrile demand
 Better macro-outlook in Europe
 Relatively resilient selling prices allowing margin to expand as raw material prices fall.
Telecity (Overweight; Price Target: 1,100p)

Investment Thesis
Telecity sells data centre co-location and managed services in major European cities (key markets London, Amsterdam, Frankfurt, Stockholm, Paris, Manchester, Dublin,
Milan, Helsinki, Istanbul) to a customer base formed of telecoms operators and content-rich businesses. The customers use Telecity’s data centres to store high-power
servers, which due to their functions have to be in close proximity to internet exchange points and network connectivity. The growth of data is driving demand for Telecity's
services. Each data centre is operationally leveraged, with fairly fixed costs, and very high incremental margin revenue. As such, each site has potential to reach a mature
cash cow state, albeit currently the majority of these cash flows are being reinvested in building new sites.
Valuation
Our central DCF for December 2014 is 1100p, using a WACC of 8.5% and terminal growth of 2.5%. The greatest area of uncertainty is in attempting to determine the point
at which data growth slows, capex normalises and Telecity becomes a more steady-state business, rather than its heavy investment phase currently. This is a challenging
exercise to answer at this point, in our opinion, given the currently exponential rate of data growth which is Telecity’s main demand driver. Any near-term end to growth
certainly feels unlikely. As such, on a 10-year view, if the current structural growth persists, we recognise that it would be quite feasible for revenue to double from 2018 to
2023 (rather than the 13% total growth a 2.5% terminal rate would suggest; 2013E rev is c. 2.5x 2008 for reference).
Risks to our Overweight recommendation include: 1) oversupply leading to increased competition and destroying pricing strength; 2) latency requirements of customers
decreasing; 3) much greater server improvements enabling lower power usage; 4) introduction of restrictive regulation; and 5) credit markets improving such that other
entrants and private equity begin to invest more aggressively in the sector.
Ultra Electronics (Neutral; Price Target: 1,920p)

Investment Thesis
We see many positives to the Ultra investment case. (1) In 2012 Ultra derived 40% of its sales from security and cyber security (‘cyber’), whereas its European peers all derive
less than 5% of sales from cyber. The cyber market has not been immune to the pressures on government defence spending but cyber security remains a priority for many
western governments and corporations. (2) In 2012, Ultra derived 20% of its sales from growing commercial transport/energy markets. (3) Ultra consistently spends more of its
own money on R&D than any other European defence company (6.5% of sales in 2012), creating barriers to entry and helping it preserve its above average margins. (4) Ultra
has a very strong balance sheet, with almost no debt and 2012A interest cover of c23x. This gives Ultra significant flexibility to invest in its business and to make accretive bolt-
on acquisitions. (5) From 1996 to 2012 inclusive, Ultra’s average conversion of EBITA to operating cash flow was 96%, clearly a very impressive performance. Over the next
302
(44-20) 7742-3681 02 January 2014
several years, we expect Ultra to have a conversion ratio of around 80-85%. (6) Ultra has a number of attractive technology niches where it has strong market positions so we
cannot rule out a potential bid for the company. In particular, we believe that Ultra’s cyber assets could be attractive to a larger company.
There are also some investment concerns. (1) Ultra derives c40% of its sales from the US defence and security markets, where budgets are likely to fall for several more
years. (2) Ultra derives c10-15% of its sales from the UK defence market; internal reorgansiation of the MoD led to many contracts Ultra expected being delayed in 2012
and it is not clear if this situation will spill over into 2013. (3) As Ultra gets bigger it needs to make bigger acquisitions to move the dial and, for most companies in this
phase, RoCE is diluted. The challenge for Ultra will be to avoid any material RoCE dilution, although we think that further diversification into growing markets (transport,
energy, cyber) makes sense.
Valuation
Our GR2ADE framework (analysing Growth, Risk, Returns for Aerospace & Defence companies) suggests Ultra deserves a 5% premium to the long-term average valuation
multiple of Cobham (we use Cobham’s long-term average multiple because it was a listed company through the defence downturn of the late 1980s/early 1990s whereas
Ultra has only been listed since February 1997). This means we apply a target 2014E P/E of 13.8x to both the Ultra definition of underlying EPS and the JPM defined clean
EPS, and a target 2014E EV/EBITA multiple of 10.5x to our JPM defined Economic EBITA forecast. The average of these three methodologies gives us a Dec-14 month
fair value target of 1787p. To this we add a 7.5% premium for M&A (ie, we assume Ultra could be acquired for a 30% premium to fair value and assign a 25% weighting to
this), to derive a Dec-14 month price target of 1920p.
Upside risks: (1) Better than expected sales in non-defence markets. (2) A well received accretive acquisition by Ultra. (3) Ultra has a number of attractive technology
niches where it has strong market positions so we cannot rule out a potential bid for the company.
Downside risk: (1) Worse than expected cuts in US defence. (2) Weaker than expected sales in non-defence markets. (3) Overpaying for an acquisition and diluting the
group’s RoCE.
Unite Group (Overweight; Price Target: 435p)

Investment Thesis
We are Overweight on Unite as we see good value in the stock based on our expectations for high double digit growth in recurring EPS. We think the stock should maintain
its re-rated valuation as it concentrates on delivering further growth in recurring income – through moving to an investment model (increasing rents), portfolio rental growth,
cost controls and managing its cost of debt down.
Valuation
Our Sep-14 target price for Unite Group is based on our total returns-based European Valuation Model, which takes into account whether a company creates or destroys
whereas those with a negative spread should be priced below NNAV. For Unite Group, we calculate a value creation spread of +1.6% between our forecast total return and
The main risks to our thesis are:1) the concentration of assets in the student sector, leaving the company exposed to changing student numbers affecting demand for
accommodation; 2) Letting risk, due to the short-term nature of leases, while rental income is not certain over a longer horizon to the extent it is with a standard investment
company with long leases; 3) Inability to source and buy future development sites at sensible prices; 4) Unexpected sharp movement in valuation leading to covenant
breach.
Vectura (Overweight; Price Target: 155p)

Investment Thesis
We are Overweight Vectura, based on the 41% EmV potential upside to the stock, some of which should be realised upon successful ex-US launch of Seebri and Ultibro by
Novartis. We also see potential for significant outperformance, should Vectura/Sandoz’ generic Advair receive EU approval, around mid'14.
Valuation
Our Sep-2014 price target of 155p (prev Mar-14, 148p) is based on our Embedded Valuation (EmV) methodology.
This incorporates profit contribution out to 2027 for Vectura's key pipeline assets on a risk adjusted basis with no terminal value being assigned and using a Cost of equity
of 10%. We value the Branded business at 88p, the Generic business at 60p, and the Chinese Kinnovata venture at 4p. We then add 12p for other revenues, and subtract
32p for general costs. We then add 21p for the £70m YE13 cash balance, getting to our 155p EmV.
Downside risks to our positive stance are:
 Development risk to its branded pipeline drugs especially delays to US approval for NVA37 and QVA149, as a result of FDA dosing concerns.
 Competitive risk from alternative branded COPD therapies.
 Regulatory risk to the generic portfolio, due to the difficulties in gaining generic approvals for respiratory drugs.
Vesuvius (Overweight; Price Target: 497p)

Investment Thesis
We believe that the group is close to the low point in its earnings cycle and that our forecasts for 2013 and 2014 are conservatively stated. The company's track record
shows Vesuvius management addresses the cost base of the business on a very proactive basis. We expect the adoption of Vesuvius’s better technology solutions for steel
and foundry to increase in developing markets. Vesuvius’s strong market position in the Steel and Foundry market gives its businesses pricing power. We expect the group
to be cash generative despite the current downturn in end market demand, with net debt/EBITDA looking set to fall to no more than 1.0x at the end of 2014E from 1.4x at
the end of 2012. With upside risk to our medium-term forecasts, we are maintaining an Overweight recommendation.
303
(44-20) 7742-3681 02 January 2014
Valuation
We believe it is appropriate to benchmark the valuation of Vesuvius against its industrial peers that supply the steel/foundry market, such as RHI (the closest direct
peer/competitor) and the broader industrial sector. In our view, other appropriate valuation metrics include EV/sales vs EBITA margin and EV/EBIT and PE multiples. Based
on our current forecasts for the group, the shares are trading on 2013E EV/sales, EV/EBIT and PE multiples of 0.9x, 9.9x and 12.4x, respectively, at discounts relative to
our universe of between 12% and 30%.
Our price target of 497p is based on our 2015 EBIT forecast and an EV/EBIT multiple of 9.5x. The EV/EBITA multiple of 9.5x is in line with the historic average and
appropriate multiple given that we believe earnings for the group are close to a cyclical low and we see significant upside risk to our medium-term forecasts.
The key risks to our rating and price target are:
 Sharp changes to steel production: the Steel and Foundry divisions of Vesuvius primarily supply consumable products, with short lead times, to the global steel and
foundry industries. Should steel production or foundry activity fall significantly in the near term, there may be downside risk to our earnings expectations.
 Raw materials: Vesuvius purchases various raw materials such as aluminas, graphite, magnesites, silicon carbides and zirconias to produce refractories. While these
materials are critical to the production of refractories, Vesuvius (the largest producer of flow control products for the steel industry) is typically only a small consumer of
these materials on a global basis. While Vesuvius appears to have had strong pricing power historically, sharp rises in raw material costs or a shortage of supply could
have a negative impact on our profit and margin expectations.
 Exchange rate movements: Vesuvius’s products are typically produced in the region where they are consumed, with sales booked in the local currency. The
exchange rate risk for the group is primarily attributable to the impact from translation and not transactions.
Victrex (Neutral; Price Target: 1,550p)

Investment Thesis
We believe Victrex remains an attractive investment with its high margin, cash generative and innovative product base. Its core PEEK product range is benefitting from
secular growth and has a composite replacement from metal, while its bio-materials business, Invibio, is seeing a wide range of applications for its invasive composite
material. Uncertainty in end market demand drives our Neutral rating.
Valuation
Our DCF-based Dec-2014 TP is 1,550p. Our WACC assumption is 8.4% and terminal growth rate is 3%.
Upside risks:
1. End market demand remains stronger for longer
2. Volume growth therefore exceeds expectations helped by new end uses
Downside risks:
1. A sudden sharp double dip with volumes contracting as end markets weaken.
2. Medical device market for PEEK weakens as alternative composites are found.
WH Smith (Overweight; Price Target: 1,085p)

Investment Thesis
We believe that SMWH has a highly attractive and sustainable business model that will make it a through-cycle outperformer versus its General Retail peer group. We look
for companies with strong and defensible competitive positions that allow the generation of reliable, stable and growing cashflows, ideally combined with the opportunity to
invest incremental capital at returns well above the WACC. SMWH satisfies all of these criteria in our view. The combination of high-footfall store locations, buying power
through scale, and revenue and gross profit management capability creates high barriers to entry and return on capital (ROCE 20% in FY13 after capitalising operating
leases, or 88% unadjusted).
Valuation
Our December 2014 price target of 1,085p is based on applying a constant forward PE multiple (13.3x CY14E when the price target was set) to our CY15 EPS forecast.
Should the company continue to deliver consistent double-digit EPS growth, as we expect, we think that it could re-rate further, leaving upside risk to our price target. We
note that, even if SMWH were to move to this share price in the short-term, it would still trade at a c.5% discount to the peer group average (15.6x when the price target was
set).
We believe that the main risks to our Overweight recommendation and 1,085p price target are:
1 – A period of further strong performance from the more cyclical General Retail peers which could lead to a period of relative underperformance for SMWH.
2 – An acceleration of one of the negative structural trends facing SMWH (such as the decline in newspaper and magazine sales, or the growth of e-books at the expense
of printed books) that comes to outpace SMWH’s ability to react.
3 – A major event (whether natural or man-made) that disrupts national and/or international travel for a sustained period, particularly at a sensitive time (such as the
summer holiday season).
304
(44-20) 7742-3681 02 January 2014
Wincanton (Underweight; Price Target: 110p)

Investment Thesis
We have an Underweight recommendation on Wincanton. The group has made good progress on disposing of non-core assets and turning around the business (with the
FY13 numbers the first clean ones for some time). However, over the next couple of years it remains cash constrained which puts a limit on how fast it can grow, in our
view.
At the end of FY13, the group had £40m of onerous lease provisions of which c. £30m p.a. will be paid in the next couple of years. In addition, with continued high average
debt levels and a sizeable pension deficit to service (liabilities 12x the market cap and deficit 1.5x market cap), the group generates little FCF in our forecast period.
While we believe the group is well placed to benefit from better UK market conditions, with c. 55%-60% of contracts open book in nature, the drop through to the bottom line
should be limited. The group continues to win new business and the pipeline is said to be strong but new contracts tend to take some time to come through and mobilize.
Therefore, the ability to beat consensus estimates in the near-term or for the shares to re-rate, is limited, in our view. We see better opportunities elsewhere in the sector
and maintain our Underweight rating.
Valuation
Our March 2015 target price is 110p. We value Wincanton using PER and EV/EBITDA ratios. We set our March 2015 price target based on a 80% weighting to EV/EBITDA
and 20% weighting to the PER metrics of the peer group, which consists of UK logistics and distributors. We continue to apply a 25% discount to the broader peer group.
Wincanton Valuation
Implied WIN EV/EBITDA 5.3
WIN FY15E EBITDA (£m) 65
Implied EV (£m) 347
Less pension (120)
Less debt (100)
Implied Market Cap 126
Implied share price based on EV/EBITDA 108
Implied WIN PER 8.0

WIN FY15E EPS 14.7
Implied share price based on PER 117
Blended price target (80% EV/EBITDA, 20% PER) 110
Risks to our Underweight recommendation on the upside include:
 A faster recovery in the UK economy
 More companies looking to outsource their logistics activities
 Sector consolidation
 M&A activity
 Bond yields/asset returns leading to a reduction in the pension deficit
Wolfson Micro (Neutral; Price Target: 150p)

Investment Thesis
We have a Neutral rating on Wolfson as we believe that indications from the supply chain of the slowing demand momentum for the Samsung Galaxy S4 smartphone would
likely also impact near term sales momentum for Wolfson. We note that Wolfson supplies audio chips for some versions of the Galaxy S4 smartphone and Samsung is a
significant customer for Wolfson and accounted for 62% of Wolfson’s 1Q13 sales and 32% of FY12 sales.
Valuation
We maintain our PT of 150p based on ~25x our estimated 9.62 cents ’15 EPS. The multiple of 25x is lower than our previous multiple of 80x as we are now using ’15 EPS
to derive our PT. The multiple of almost 25x is higher than the median multiple of 18x for the stock (trading over the last 5-6 years). However it should be noted that the
company has been hit by the double whammy of an inventory correction at its most important customer Samsung and the just announced cuts at another customer, likely
Blackberry, in our view. The company has also seen delays in expected launch of new products using its MEMS microphones. Thus, as the inventory correction cycle ends,
company is likely to see an upgrade to estimates. Hence our use of the high multiple. We also shift our target price end date to Dec-14.
The key risks to our rating and price target includes:
i) Better than expected Galaxy S4 demand could result in an upside to estimates while further slowdown in the Galaxy S4 demand could result in a further downside to
estimates and the stock price.
ii) Share loss at Samsung would result in downside to estimates and share price.
iii) Higher/lower than expected volumes and sales from the recent design wins at multiple customers outside Samsung could result in upside/downside to estimates.
iv)Design wins at key OEMs such as Apple for high volume devices could result in a substantial upside to estimates and the share price.
v) no recovery or slower than expected recovery in gross margin would be negative for the stock price.
305
(44-20) 7742-3681 02 January 2014
Workspace (Overweight; Price Target: 540p)

Investment Thesis
Workspace offers office space to small and medium enterprise in London. Its underlying business of managing office assets is supplemented by refurbishments (to grow
rents and maintain occupancy) and its ‘new for old’ initiatives. The latter can be quite lucrative and typically sees Workspace partner homebuilders to develop mixed used
schemes (with residential components).
Valuation
Our Sep-14 target price for Workspace Group is based on our total returns-based European Valuation Model, which takes into account whether a company creates or
destroys value. We argue that companies that have a positive spread between returns and their weighted average cost of capital (WACC) should trade at a premium to
NNAV, whereas those with a negative spread should be priced below NNAV. For Workpace Group, we calculate a value creation spread of +5.1% between our forecast
Key downside risks to our Rating and Price Target include: any lack of demand for basic office space in the London and worse than expected capital growth.
Young & Co.'s Brewery A (Neutral; Price Target: 980p)

Investment Thesis
Following the sale of its stake in the brewing JV (Wells and Young’s), YNGA is now a pure-play on the pub market in London and the Home Counties, where consumer
sentiment has proved to be considerably more resilient to macroeconomic pressure than the rest of the UK. We expect YNGA’s top-quality London managed pub estate to
continue to outperform its peers in terms of LFL sales growth, supporting the highest EBIT margin of the peer group. However, we think that the shares are fairly valued,
trading on 23.4x CY14E PE.
Valuation
YNGA trades on CY14E PE of 23.4x, a 69% premium to the pubs sub-sector and a 7% premium to closest peer Fullers. On EV/EBITDA, YNGA trades on 11.7x, a 26%
premium to the pubs sub sector and an 8% discount to Fullers.
In our view, the EV/EBITDA and PE premiums to the sector are justified by YNGA’s high-quality London-based estate with the highest managed EBIT margin of the peer
group. We see the shares as fairly valued. Our Nov-14 price target is 980p, based on a 65% PE-premium to the sector.
The risks to our Neutral rating are as follows:
Upside risks:
LFL sales growth could be stronger than we anticipate, particularly given YNGA’s material exposure to the strong London pub market. This could support modest margin
expansion if LFL sales growth proved to be ahead of cost inflation.
Downside risks:
While YNGA is located in the most affluent area of the UK, a downturn in consumer sentiment could have a negative impact on our sales growth assumptions. YNGA has
been reasonably successful in passing cost increases on to consumers, but any renewed input cost inflation could put downward pressure on margins.
Trading is also sensitive to weather trends, even by the standards of the pub industry, with 14 riverside sites and outside space in over 70% of the estate.
306
(44-20) 7742-3681 02 January 2014
Other Companies Discussed in This Report (all prices in this report as of market close on 18 December 2013)
APR Energy (APREN.L/952p/Neutral), Afren PLC (AFR.L/163p/Underweight), African Barrick Gold
(ABGL.L/161p/Neutral), Atkins (WS) (ATKW.L/1385p/Overweight), BBA Aviation (BBA.L/320p/Overweight), BTG Plc
(BTG.L/573p/Overweight), Balfour Beatty (BALF.L/276p/Underweight), Beazley Plc (BEZG.L/249p/Neutral), Bellway
(BWY.L/1491p/Overweight), Berendsen Plc (BRSN.L/913p/Overweight), Betfair (BET.L/1079p/Neutral), Big Yellow
Group Plc (BYG.L/461p/Overweight), Bodycote Plc (BOY.L/627p/Underweight), Bovis Homes
(BVS.L/761p/Underweight), C&W Communications (CWC.L/53p/Neutral), CSR Plc (CSR.L/625p/Overweight), Cairn
Energy (CNE.L/260p/Overweight), Cape (CIU.L/264p/Neutral), Capital & Regional (CAL.L/43p/Overweight), Carillion
(CLLN.L/311p/Neutral), Catlin (CGL.L/539p/Overweight), Charlemagne Capital (CCAP.L/14p/Underweight), Chemring
(CHG.L/215p/Neutral), Clarkson (CKN.L/2009p/Neutral), Close Brothers (CBRO.L/1330p/Overweight), Colt
(COLT.L/125p/Neutral), Computacenter (CCC.L/641p/Neutral), Dairy Crest (DCG.L/528p/Overweight), Daisy
(DAY.L/174p/Underweight), Darty Plc (DRTY.L/105p/Underweight), De La Rue (DLAR.L/888p/Overweight), Debenhams
(DEB.L/78p/Overweight), Development Securities (DSC.L/238p/Neutral), Devro (DVO.L/287p/Overweight), Dixons
Retail Plc (DXNS.L/49p/Neutral), Dunelm Group plc (DNLM.L/918p/Neutral), Elementis (ELM.L/258p/Overweight),
EnQuest (ENQ.L/135p/Overweight), Entertainment One (ETO.L/258p/Overweight), Essar Energy (ESSR.L/72p/Neutral),
Essentra (ESNT.L/815p/Neutral), F&C Asset Management (FCAM.L/91p/Neutral), Fenner (FENR.L/440p/Neutral),
Ferrexpo Plc (FXPO.L/183p/Underweight), FirstGroup (FGP.L/117p/Overweight), Gem Diamonds Ltd
(GEMD.L/142p/Overweight), Gemfields (GEM.L/33p/Underweight), Go-Ahead (GOG.L/1700p/Overweight), Grainger
(GRI.L/200p/Overweight), Greene King (GNK.L/839p/Neutral), Halfords (HFD.L/439p/Neutral), Hays
(HAYS.L/119p/Neutral), Helical Bar (HLCL.L/320p/Neutral), HellermannTyton (HTY.L/298p/Overweight), Heritage Oil
(HOIL.L/146p/Neutral), Homeserve (HSV.L/259p/Neutral), Hunting (HTG.L/731p/Underweight), Imagination
Technologies (IMG.L/165p/Overweight), Imperial Innovations (IVO.L/368p/Neutral), Intermediate Capital Group
(ICP.L/415p/Neutral), International Personal Finance (IPF.L/599p/Neutral), Interserve (IRV.L/628p/Overweight), John
Menzies (MNZS.L/772p/Neutral), Jupiter (JUP.L/367p/Overweight), KCOM (KCOM.L/98p/Overweight), Kazakhmys Plc
(KAZ.L/195p/Underweight), Kenmare Resources (JEV.L/19p/Neutral), Kier Group (KIE.L/1822p/Overweight), LXB Retail
Properties (LXB.L/123p/Neutral), Ladbrokes (LAD.L/167p/Underweight), Laird (LRD.L/265p/Overweight), Lamprell PLC
(LAM.L/135p/Overweight), Lancashire (LRE.L/768p/Neutral), Liontrust Asset Management (LIO.L/248p/Underweight),
London Mining (LOND.L/100p/Overweight), LondonMetric (LMP.L/130p/Overweight), Man Group
(EMG.L/81p/Neutral), Marston's (MARS.L/144p/Neutral), Mecom (MEC.L/82p/Neutral), Michael Page
(MPI.L/462p/Neutral), Micro Focus (MCRO.L/788p/Neutral), Mitchells & Butlers (MAB.L/420p/Neutral),
Moneysupermarket (MONY.L/180p/Neutral), Morgan Advanced Materials PLC (MGAMM.L/292p/Overweight),
Mothercare (MTC.L/434p/Overweight), National Express (NEX.L/264p/Neutral), New World Resources
(NWRS.L/65p/Underweight), Ophir Energy (OPHR.L/321p/Overweight), PZ Cussons (PZC.L/366p/Neutral), Pace
(PIC.L/305p/Not Rated), Paragon Group (PARA.L/357p/Overweight), PayPoint (PAYP.L/999p/Overweight), Perform
(PER.L/230p/Neutral), Petropavlovsk (POG.L/75p/Underweight), Phoenix Group (PHNX.L/691p/Not Rated), Promethean
(PRWP.L/19p/Neutral), Qinetiq (QQ.L/211p/Neutral), Quintain Estates & Development (QED.L/95p/Overweight), RPC
Group (RPC.L/577p/Overweight), RPS Group (RPS.L/336p/Overweight), Record Plc (RECL.L/33p/Overweight), Redrow
(RDW.L/298p/Neutral), Restaurant Group (RTN.L/560p/Overweight), SOCO International (SIA.L/385p/Neutral), Serica
Energy (SQZ.L/18p/Underweight), Shaftesbury (SHB.L/597p/Underweight), Smiths News (SNWS.L/231p/Overweight),
Songbird Estates (SBD.L/164p/Overweight), Spirent (SPT.L/99p/Neutral), St. Modwen Pr (SMP.L/365p/Overweight),
Stagecoach (SGC.L/367p/Overweight), Synthomer Plc (SYNT.L/241p/Neutral), Telecity (TCY.L/668p/Overweight), UBM
(UBM.L/620p/Neutral), Ultra Electronics (ULE.L/1858p/Neutral), Unite Group (UTG.L/396p/Overweight), Vectura
(VEC.L/137p/Overweight), Vesuvius (VSVS.L/470p/Overweight), Victrex (VCTX.L/1691p/Neutral), WH Smith
(SMWH.L/1003p/Overweight), Wincanton (WIN.L/129p/Underweight), Wolfson Micro (WLF.L/135p/Neutral),
Workspace (WKP.L/505p/Overweight), Young & Co.'s Brewery A (YNGa.L/988p/Neutral), esure
(ESUR.L/242p/Overweight)
Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per
307
(44-20) 7742-3681 02 January 2014
KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
Important Disclosures
 Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in
Cineworld, Hochschild, Dairy Crest, De La Rue, Devro, Abbot Group, Afren PLC, African Barrick Gold, Balfour Beatty, Beazley Plc,
Bellway, Bodycote Plc, Bovis Homes, BTG Plc, C&W Communications, Cairn Energy, Cape, Carillion, Catlin, Chemring, Colt, Daisy,
Darty Plc, Debenhams, Dixons Retail Plc, Dunelm Group plc, Elementis, EnQuest, Entertainment One, esure, Fenner, Ferrexpo Plc,
FirstGroup, Gemfields, Halfords, HellermannTyton, Heritage Oil, Hunting, Imperial Innovations, Kazakhmys Plc, KCOM, Kier Group,
Laird, Lamprell PLC, Lancashire, Morgan Advanced Materials PLC, Mothercare, New World Resources, Ophir Energy, Pace,
Petropavlovsk, Phoenix Group, Promethean, PZ Cussons, Qinetiq, Redrow, RPC Group, Serica Energy, SOCO International, Spirent,
Telecity, UBM, Ultra Electronics, Vectura, Vesuvius, Capital & Regional, Charlemagne Capital, Close Brothers, Development Securities,
Essar Energy, F&C Asset Management, Intermediate Capital Group, LXB Retail Properties, Mecom, Moneysupermarket, Perform, St.
Modwen Pr, Synthomer Plc, Victrex, WH Smith, Workspace, APR Energy, Big Yellow Group Plc, Computacenter, CSR Plc, Gem
Diamonds Ltd, Grainger, Hays, Helical Bar, Imagination Technologies, International Personal Finance, Jupiter, Kenmare Resources,
Liontrust Asset Management, London Mining, LondonMetric, Man Group, Michael Page, Micro Focus, Paragon Group, Record Plc,
Wolfson Micro, Young & Co.'s Brewery A, Atkins (WS), BBA Aviation, Berendsen Plc, Betfair, Clarkson, Essentra, Greene King,
Homeserve, Interserve, John Menzies, Ladbrokes, Marston's, Mitchells & Butlers, PayPoint, Quintain Estates & Development, Restaurant
Group, RPS Group, Shaftesbury, Smiths News, Songbird Estates, Unite Group, Wincanton, Go-Ahead, National Express, Stagecoach.
 Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Cineworld,
Abbot Group, African Barrick Gold, BTG Plc, Entertainment One, esure, FirstGroup, HellermannTyton, Lancashire, Ophir Energy,
Phoenix Group, St. Modwen Pr, Big Yellow Group Plc, Jupiter, Unite Group within the past 12 months.
 Director: A senior employee, executive officer or director of JPMorgan Chase & Co. and/or J.P. Morgan is a director and/or officer of
Kazakhmys Plc.
 Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of Young &
Co.'s Brewery A.
 Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Cineworld, Hochschild,
Dairy Crest, De La Rue, Devro, Abbot Group, Afren PLC, African Barrick Gold, Balfour Beatty, Beazley Plc, Bodycote Plc, BTG Plc,
C&W Communications, Cairn Energy, Cape, Carillion, Catlin, Chemring, Colt, Dixons Retail Plc, Elementis, EnQuest, Entertainment
One, esure, Ferrexpo Plc, FirstGroup, Gemfields, Halfords, HellermannTyton, Heritage Oil, Hunting, Imperial Innovations, Kazakhmys
Plc, KCOM, Kier Group, Laird, Lamprell PLC, Lancashire, Morgan Advanced Materials PLC, Mothercare, New World Resources, Ophir
Energy, Pace, Petropavlovsk, Phoenix Group, Promethean, PZ Cussons, Qinetiq, Redrow, RPC Group, Serica Energy, SOCO
International, Spirent, Telecity, UBM, Ultra Electronics, Vectura, Vesuvius, Capital & Regional, Charlemagne Capital, Close Brothers,
Development Securities, Essar Energy, F&C Asset Management, Intermediate Capital Group, LXB Retail Properties, Mecom, St.
Modwen Pr, Victrex, WH Smith, APR Energy, Big Yellow Group Plc, Computacenter, CSR Plc, Gem Diamonds Ltd, Grainger, Helical
Bar, Imagination Technologies, Jupiter, London Mining, LondonMetric, Man Group, Michael Page, Micro Focus, Paragon Group, Record
Plc, Wolfson Micro, Young & Co.'s Brewery A, Atkins (WS), BBA Aviation, Berendsen Plc, Betfair, Clarkson, Essentra, Homeserve,
Interserve, Marston's, Mitchells & Butlers, PayPoint, Quintain Estates & Development, Restaurant Group, RPS Group, Shaftesbury,
Smiths News, Songbird Estates, Unite Group, Wincanton, Go-Ahead, Stagecoach.
 Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment
banking clients: Cineworld, Hochschild, Abbot Group, African Barrick Gold, Beazley Plc, BTG Plc, C&W Communications, Chemring,
Entertainment One, esure, Ferrexpo Plc, FirstGroup, Gemfields, HellermannTyton, Heritage Oil, Imperial Innovations, Kazakhmys Plc,
Kier Group, Lamprell PLC, Lancashire, New World Resources, Ophir Energy, Petropavlovsk, Phoenix Group, Vesuvius, St. Modwen Pr,
WH Smith, APR Energy, Big Yellow Group Plc, CSR Plc, Imagination Technologies, Jupiter, LondonMetric, Atkins (WS), BBA
Aviation, Berendsen Plc, Homeserve, Interserve, Quintain Estates & Development, Songbird Estates, Unite Group, Wincanton.
 Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following
company(ies) as clients, and the services provided were non-investment-banking, securities-related: Hochschild, Devro, Abbot Group,
Afren PLC, African Barrick Gold, Balfour Beatty, BTG Plc, C&W Communications, Catlin, Colt, Dixons Retail Plc, EnQuest,
Entertainment One, esure, Ferrexpo Plc, FirstGroup, HellermannTyton, Hunting, Kazakhmys Plc, KCOM, Ophir Energy, Petropavlovsk,
Phoenix Group, Qinetiq, Serica Energy, Spirent, UBM, Ultra Electronics, Vesuvius, Charlemagne Capital, Close Brothers, Essar Energy,
F&C Asset Management, Intermediate Capital Group, St. Modwen Pr, Victrex, WH Smith, APR Energy, Big Yellow Group Plc, CSR
Plc, Imagination Technologies, Jupiter, Man Group, Paragon Group, Young & Co.'s Brewery A, BBA Aviation, Betfair, Essentra,
Interserve, RPS Group, Songbird Estates, Unite Group, Go-Ahead, Stagecoach.
 Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients,
and the services provided were non-securities-related: Devro, Abbot Group, Afren PLC, African Barrick Gold, Balfour Beatty, C&W
308
(44-20) 7742-3681 02 January 2014
Communications, Catlin, Dixons Retail Plc, Entertainment One, Ferrexpo Plc, FirstGroup, Heritage Oil, Hunting, Kazakhmys Plc,
Lancashire, Qinetiq, Serica Energy, Spirent, UBM, Essar Energy, APR Energy, Man Group, Paragon Group, BBA Aviation, RPS Group.
 Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking
Cineworld, Hochschild, Abbot Group, African Barrick Gold, Beazley Plc, BTG Plc, C&W Communications, Chemring, Entertainment
One, esure, Ferrexpo Plc, FirstGroup, Gemfields, HellermannTyton, Heritage Oil, Imperial Innovations, Kazakhmys Plc, Kier Group,
Lamprell PLC, Lancashire, New World Resources, Ophir Energy, Petropavlovsk, Phoenix Group, Vesuvius, St. Modwen Pr, WH Smith,
APR Energy, Big Yellow Group Plc, CSR Plc, Imagination Technologies, Jupiter, LondonMetric, Atkins (WS), BBA Aviation,
Berendsen Plc, Homeserve, Interserve, Quintain Estates & Development, Songbird Estates, Unite Group, Wincanton.
 Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking
services in the next three months from Cineworld, Hochschild, Dairy Crest, De La Rue, Abbot Group, African Barrick Gold, Beazley Plc,
BTG Plc, C&W Communications, Cape, Catlin, Chemring, Dixons Retail Plc, Elementis, EnQuest, Entertainment One, esure, Ferrexpo
Plc, FirstGroup, Gemfields, HellermannTyton, Heritage Oil, Imperial Innovations, Kazakhmys Plc, Kier Group, Laird, Lamprell PLC,
Lancashire, Morgan Advanced Materials PLC, Mothercare, New World Resources, Ophir Energy, Pace, Petropavlovsk, Phoenix Group,
PZ Cussons, Qinetiq, RPC Group, UBM, Ultra Electronics, Vectura, Vesuvius, Capital & Regional, Close Brothers, Essar Energy, F&C
Asset Management, Intermediate Capital Group, LXB Retail Properties, St. Modwen Pr, Victrex, WH Smith, APR Energy, Big Yellow
Group Plc, CSR Plc, Gem Diamonds Ltd, Grainger, Helical Bar, Imagination Technologies, Jupiter, London Mining, LondonMetric,
Wolfson Micro, Young & Co.'s Brewery A, Atkins (WS), BBA Aviation, Berendsen Plc, Homeserve, Interserve, Marston's, Mitchells &
Butlers, PayPoint, Quintain Estates & Development, Restaurant Group, Shaftesbury, Songbird Estates, Unite Group, Wincanton.
 Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from Hochschild, Devro, Abbot Group, Afren PLC, African Barrick Gold, Balfour Beatty, BTG Plc, C&W
Communications, Catlin, Colt, Dixons Retail Plc, EnQuest, Entertainment One, esure, Ferrexpo Plc, FirstGroup, HellermannTyton,
Hunting, Kazakhmys Plc, KCOM, Ophir Energy, Petropavlovsk, Phoenix Group, Qinetiq, Serica Energy, Spirent, UBM, Ultra
Electronics, Vesuvius, Charlemagne Capital, Close Brothers, Essar Energy, F&C Asset Management, Intermediate Capital Group, St.
Modwen Pr, Victrex, WH Smith, APR Energy, Big Yellow Group Plc, CSR Plc, Imagination Technologies, Jupiter, Man Group, Paragon
Group, Young & Co.'s Brewery A, BBA Aviation, Betfair, Essentra, Interserve, RPS Group, Songbird Estates, Unite Group, Go-Ahead,
Stagecoach.
 Broker: J.P. Morgan Securities plc acts as Corporate Broker to Cineworld, Hochschild, Dairy Crest, De La Rue, African Barrick Gold,
Beazley Plc, BTG Plc, C&W Communications, Cape, Catlin, Chemring, EnQuest, Entertainment One, esure, Ferrexpo Plc, FirstGroup,
Gemfields, Halfords, HellermannTyton, Heritage Oil, Imperial Innovations, Kazakhmys Plc, Kier Group, Laird, Lamprell PLC,
Lancashire, Morgan Advanced Materials PLC, Mothercare, New World Resources, Ophir Energy, Pace, Phoenix Group, Promethean, PZ
Cussons, Qinetiq, Ultra Electronics, Vectura, Vesuvius, Capital & Regional, Close Brothers, Essar Energy, F&C Asset Management,
Intermediate Capital Group, LXB Retail Properties, Mecom, St. Modwen Pr, Victrex, WH Smith, APR Energy, Big Yellow Group Plc,
CSR Plc, Gem Diamonds Ltd, Grainger, Helical Bar, Imagination Technologies, Jupiter, London Mining, LondonMetric, Record Plc,
Wolfson Micro, Young & Co.'s Brewery A, Atkins (WS), BBA Aviation, Berendsen Plc, Clarkson, Homeserve, Interserve, Marston's,
Mitchells & Butlers, PayPoint, Quintain Estates & Development, Restaurant Group, Shaftesbury, Smiths News, Songbird Estates, Unite
Group, Wincanton.
 “J.P. Morgan is corporate broker and adviser to Dairy Crest on their strategic review of its French branded spreads business ("St
Hubert")”.
 “J.P. Morgan Cazenove is acting as financial advisor, sponsor and corporate broker to BTG plc in connection with the acquisition of
Nordion Inc’s Targeted Therapies division as announced on May 23rd, 2013. J.P. Morgan does not currently have a recommendation for
BTG Plc.” “J.P. Morgan Cazenove is acting as a joint bookrunner to BTG Plc in connection with its cashbox placing as announced on
May 23rd, 2013. J.P. Morgan does not currently have a recommendation for BTG plc. This report is not intended to serve as an
endorsement of the proposed transaction or to result in or recommend any course of action by a security holder.” “J.P. Morgan is acting as
financial advisor to EKOS Corporation in connection with the sale of the company to BTG Plc as announced on the May 23rd, 2013. J.P.
Morgan does not currently have a recommendation for BTG Plc. This report is not intended to serve as an endorsement of the proposed
transaction.”
 J.P. Morgan is acting as financial advisor to Cable & Wireless Communications Plc in connection with the approach received from
Bahrain Telecommunications Company (or Batelco) regarding a possible transaction involving its Monaco & Islands business unit.
 "J.P. Morgan Cazenove is acting as corporate broker to Chemring Group plc in relation to a preliminary discussion on a possible offer
for the company by The Carlyle Group, as announced on 17th August 2012. J.P. Morgan Cazenove does not currently have a
recommendation for Chemring Group plc and The Carlyle Group."
 J.P. Morgan is acting as financial advisor to Gemfields Plc with respect to the acquisition of Faberge from Pallinghurst Resources Ltd.
as announced on November 21, 2012. J.P. Morgan does not currently have a recommendation for Gemfields Plc. This report is not
intended to serve as an endorsement of the proposed transaction or to provide voting advice or to result in or recommend any course of
action by a security holder.
309
(44-20) 7742-3681 02 January 2014
 “J.P. Morgan is acting as corporate broker and financial advisor to Kazakhmys Plc in relation to the indicative proposal for Eurasian
Natural Resources Corporation PLC ("ENRC") made by the Consortium with regard to a potential public offer for the shares in ENRC
that the Consortium does not already hold. As the proposal by the Consortium includes Kazakhmys Plc shares as part of the consideration,
the Panel has ruled that Kazakhmys Plc should be treated as a party to the offer for the purposes of the City Code on Takeovers and
Merge., therefore J.P.Morgan is a connected adviser.”
 J.P. Morgan Cazenove is acting as Sole Financial Advisor and Sponsor to Lancashire Holdings Limited on their acquisition of
Cathedral Capital as announced on 7th August 2013. J.P. Morgan does not currently have a recommendation for Lancashire Holdings
Limited.
 J.P. Morgan Cazenove is acting as Financial Advisor, Sponsor and Corporate Broker to Ophir Energy Plc on the proposed sale of a
20% stake in Blocks 1, 3, and 4 offshore Tanzania to Pavilion Energy, a wholly owned subsidiary of Temasek as announced on 14th
November 2013. J.P. Morgan Cazenove does not currently have a recommendation for Ophir Energy Plc .
 J.P. Morgan Cazenove is acting as Financial Advisor, Sponsor and Corporate Broker to Pace plc on the proposed acquisition of Aurora
Networks, Inc. as announced on 23rd October 2013. J.P. Morgan Cazenove does not currently have a recommendation for Pace plc.
 “J.P. Morgan is acting as advisor to Phoenix Group on its preliminary discussions on a potential combination with Swiss Re's unlisted
UK business, Admin Re. as announced on 12th July 2013. J.P. Morgan does not currently have a recommendation for Phoenix Group
Holdings.”
 J.P. Morgan Cazenove is acting as Sole Financial Advisor and Joint Corporate Broker to APR Energy Plc (APR.LN) on its $314mm
acquisition of General Electric’s (GE.N) Turbine Power Rental Business. J.P. Morgan currently does not have a recommendation on APR
Energy Plc. This report is not intended to serve as an endorsement of the proposed transaction or to result in or recommend any course of
action by a security holder.
 J.P. Morgan Cazenove is corporate broker and advisor to CSR plc on the transfer of its handset development operations and
technology to Samsung Electronics Company Limited as announced on 17th July 2012. J.P. Morgan does not currently have a
recommendation for CSR plc. This report is not intended to serve as an endorsement of the proposed transaction or to result in or
recommend any course of action by a security holder.
Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–
covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing
research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may
screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail
research.disclosure.inquiries@jpmorgan.com.
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research
website, www.jpmorganmarkets.com.
Coverage Universe: Mees, Alexander: Cineworld (CINE.L), D S Smith (SMDS.L), Dairy Crest (DCG.L), De La Rue (DLAR.L), Devro
(DVO.L), Gemfields (GEM.L), Howden Joinery Group Plc (HWDN.L), Laird (LRD.L), Mothercare (MTC.L), Pace (PIC.L), Promethean
(PRWP.L), RPC Group (RPC.L), Regus (RGU.L), Spirent (SPT.L)
310
(44-20) 7742-3681 02 January 2014
J.P. Morgan Equity Research Ratings Distribution, as of September 30, 2013

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research Coverage 43% 44% 12%
IB clients* 57% 49% 39%
JPMS Equity Research Coverage 42% 50% 8%
IB clients* 76% 65% 57%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered
companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst
or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com.
Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based
upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.
Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US
affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS,
and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public
appearances, and trading securities held by a research analyst account.
Other Disclosures
J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing
name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.
All research reports made available to clients are simultaneously available on our client website, J.P. Morgan Markets. Not all research content is
redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your sales
representative.
Options related research: If the information contained herein regards options related research, such information is available only to persons who have
received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options,
please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf
Legal Entities Disclosures

U.S.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC. U.K.: JPMorgan Chase N.A., London
Branch, is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and to limited regulation by
the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from J.P. Morgan on
request. J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England & Wales No. 2711006. Registered Office 25
Bank Street, London, E14 5JP. South Africa: J.P. Morgan Equities South Africa Proprietary Limited is a member of the Johannesburg Securities
Exchange and is regulated by the Financial Services Board. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated
by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul
Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (JPMAL) (ABN 52 002 888 011/AFS Licence
No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated
by ASIC and is a Market, Clearing and Settlement Participant of ASX Limited and CHI-X. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a
participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private
Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock
Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI
Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities
(Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange
Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK.
Philippines: J.P. Morgan Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing
Corporation of the Philippines and the Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Brazil: Banco J.P.
Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de
C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and
Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited
(JPMSS) [MIC (P) 049/04/2013 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is
regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated
by the MAS. Japan: JPMorgan Securities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and
distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a
holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a
311
(44-20) 7742-3681 02 January 2014
member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia
Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and
custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad
Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial
Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.
Country and Region Specific Disclosures

U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc.
Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of
publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This
report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons
who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be
engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in
their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. This material does not take
into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to
any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term "wholesale client" has the
meaning given in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt
Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The
1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons
Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may
be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative
warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx
website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and
that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be
receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually
agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd.,
Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan,
Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to
from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of
the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures
section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued
and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the
purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in
accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without
the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an
advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any
province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to
file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively,
pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The
information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to
the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the
laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities
commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein
or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded
as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / ouvidoria.jp.morgan@jpmorgan.com.
General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co.
or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to
JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the
securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change
without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any
financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not
intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own
independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S.
affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or
announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P.
Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.
"Other Disclosures" last revised December 7, 2013.

Copyright 2013 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan. #$. #$J&098$#*P
312

UK Small

Caricato da

Informazioni sul documento

Descrizione originale:

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

UK Small

Caricato da

Copyright:

Formati disponibili

Europe Equity Research

UK Small and Mid Caps

in importance over the years. Victoria Prior, CFA

* Registered/qualified as a research analyst under NYSE/FINRA rules.

Figure 1: Sector distribution of the 2014 Annual Directory constituents

Source: J.P. Morgan.

Figure 2: Market cap dispersion of the 2014 Annual Directory constituents

Source: J.P. Morgan.

How to use this directory

 Business activities. Brief description of the business and its markets.

Investment thesis, valuation and risks

J.P. Morgan Cazenove in UK small and mid caps

Table 1: A selection of our corporate brokerships outside the FTSE 100

This page is intentionally left blank

110 Operational overview

AFR.L share price (p)

Cote d'Ivoire Cote d'Ivoire

Figure 5: Revenue Figure 6: Operating margin

2,500 60.0% 44.9% 44.7% 48.4% 40.0% 44.7% 45.6%

Figure 7: NAV tracker Figure 8: ND/EBITDA

African Barrick Gold

African Barrick Gold

Gold Other 52%

Figure 11: Revenue Figure 12: EBITDA margin

Figure 13: Adjusted EPS Figure 14: ND/EBITDA

80.0 0.6x 0.4x

Gas recip Middle East

Figure 17: Revenue Figure 18: Operating margin

600 35.0% 31.5%

Figure 19: Adjusted EPS Figure 20: ND/EBITDA

140.0 3.0x 2.5x

Asia Pacific and Europe Other

Figure 23: Revenue Figure 24: Operating margin

Figure 25: Adjusted EPS Figure 26: ND/EBITDA

AVV.L,AVV LN Business activities

2,200 Operational overview

Engineering & Design EMEA

Figure 29: Revenue Figure 30: PBT margin

Figure 31: Adjusted EPS Figure 32: ND/EBITDA

140.0 0.0x (0.1)x

100.0 89.0 (1.0x)

Figure 35: Revenue Figure 36: Adjusted operating margin

10,000 4.0% 3.5%

Figure 37: Adjusted EPS Figure 38: ND/EBITDA

APPH Rest of World

Figure 41: Revenue Figure 42: Operating margin

Figure 43: Adjusted EPS Figure 44: ND/EBITDA

Source: J.P. Morgan estimates, Company data.

Casulaty US Europe International

Figure 47: Net Earned Premium Figure 48: PBT margin

1,800 1,669 20.0% 17.8%

Figure 49: Adjusted NAV Figure 50: Combined ratio

350.0 100.0% 98.8%

Major Shareholders Outlook

Figure 53: Revenue Figure 54: Operating margin

Figure 55: Adjusted tangible NAV Figure 56: ND/EBITDA

1400.0 4.0x 3.3x

UK Flat Linen Denmark

Clinical Solutions & Decont. Norway

Figure 59: Revenue Figure 60: Operating margin

1,100 1,085 18.0%

Figure 61: Adjusted EPS Figure 62: ND/EBITDA