EFTA01103701

J.P. Morgan North America Corporate Research 03 November 2014 Neutral Ryanair RYA.I, RYA ID Price: E7.62 FQ2:15 Results - 60 Second Update - ALERT 31 October 2014 RYA FQ2 (fiscal year ends March) Net Income missed JPMe and US & European Airlines/Equity company consensus by a touch on the back of in-line Revenue. Jamie Baker Ac Management lifted F15 Net Income guidance, which implies an average of 13% upside to JPMe and 10% upside to consensus, reflective of stronger volume outlook, and better cost control than we previously expected. Bloomberg JPMA BAKER <GO> J.P. Morgan Securities LLC • Net Income of E598m was 2% below JPMe and 1% below Wenchang Ma, CFA consensus, on the back of €2.04bn Revenue (+7% yoy), which was in line with JPMe and 4% ahead of consensus. Both passenger revenue and JP. Morgan Sec es plc ancillary revenue were as we expected. Fuel cost in FQ2 was 2% less Nishant Mani than JPMe while 7% higher than consensus. • F15 Net Income guidance is lifted by an average of 17% to E750m- J.P. Morgan Securities LLC 770m from €650m. The updated guidance implies upside of 12-15% to European Credit Research current JPMe of €671mn, and 8-11% to consensus E694mn. Upside from Danielle Ward, CFA guidance is driven by stronger H2 traffic outlook and better unit cost — Ryanair management now sees 16% yoy H2 traffic growth vs. JPMe 9% yoy; F15 unit cost is expected to be -4% yoy (vs. JPMe -0.5%), or flat J.P. Morgan Securities plc ex-fuel (JPMe +3.5%). • Valuation: RYA currently trades on 2015e EV/EBITDAR of 7.5x and PIE of 13.6x, vs Eli multiples of 6.6x and 11.3x, and 5.1x/8.1x for legacy peers average. • Credit perspective: Ryanair's net cash position improved from E158m at FYE14 to E618m as of 30-Sep, with lease-adjusted leverage now 0.1x (flat from Q1). Ryanair's board has approved the payment of a €520m special dividend (announced with FQ1 results), to be paid in Feb'15. Capex over H114 was E293m (flat YoY), primarily relating to aircraft pre-delivery payments, spare engine purchases and two aircraft deliveries. The group's order for 200 additional Boeing Max aircraft (100 firm + 100 options, to be delivered from 2019) is subject to EGM approval in November, as part of the group's policy to maintain a young (average <5yrs) and cost-efficient fleet. We are Overweight Ryanair credit, 2021 notes mid-price 101.5, Z-spread 98bp, close 31-Oct. • Conf call at 11:00 GMT. Dial-in: Pin 5995 2585. I See page 2 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. witen.jpmorganmarkets.com s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103701 Jame Baker North America Corporate Research 03 November 2014 J.P.Morgan 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 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: JPMS makes a market in the stock of Ryanair. • Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in Ryanair. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Ryanair. • 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: Ryanair. • Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Ryanair. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium sports and all J.P. Morgan— covered companies by visiting haps:/rjpmm.com/researchidisclosures calling 1-800-477-0406, or e-mailing anearch.disclosure.inquiries0jpmorgan.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 1-800477-0406 or e-mail research.disclmure.inquiries(Wipmorgan.com. Ryanair IRYA.I. RYA ID1Price Chart 13 12 - 11 Friel OW Date Rating Share Price Price Target IC) (C) 10 I NCA OW 03-Mar-05 OW 01-Mar-10 OW 4.22 3.50 7.00 9 8 I chvINI NO OWO.S OW Nat 21-Jun-10 N 28-Sep-11 N 3.66 3.28 3.60 Pricarr) 09-Nov-11 N 3.60 3.80 5 01-Feb-12 N 4.24 4.00 4 05-Jun-12 UW 3.93 4.25 05-Nov-12 UW 4.89 4.75 2 17-Jul-13 OW 7.07 8.50 04-Sep-13 OW 6.00 8.00 25-Nov-13 OW 6.01 7.00 0 2744ay-14 OW 7.22 8.15 Sap Mar Sep Mar Sep Mar 06 08 09 11 12 14 06-Oct-14 N 7.53 8.50 Source:ark:amber° and J.P. Morgan. 44104001.1 adIuSt00 Ice Mak UpInt and 6vId4006. area In coveraQe Mai 01.2010 • Jun21.2010. The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW Overweight, Na, Neutral, UW Underweight, NR •• Not Rated 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 underperfonn 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 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103702 North America Corporate Research Jamie Baker 03 November 2014 J.P.Morgan 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: Baker, Jamie: AerCap Holdings N.V. (AER), Air France-KLM (AIRF.PA), Air Lease Corp. (AL), Aircastle Limited (AYR), Alaska Air Group, Inc. (ALK), American Airlines (AAL), Delta Air Lines, Inc. (DAL), FLY Leasing Ltd. (FLY), IAG (IAG.MC), JetBlue Airways Corp. (JBLU), Lufthansa (LFIAG.DE), Ryanair (RYA.I), Southwest Airlines Co. (LUV), United Continental Holdings, Inc. (UAL), easyJet (EZJ.L) J.P. Morgan Equity Research Ratings Distribution, as of September 30, 2014 Overnight Neutral Underweight (buy) (hold) (sell) J.P. Morgan Global Equity Research Coverage 46% 42% 12% IB clients° 57% 49% 34% JPMS Equity Research Coverage 46% 48% 7% IB clients' 76% 67% 51% •Percentage of investment banking clients in each rating category. For purposes only of FINRANYSE 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 arc 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 nrnort at Intp://vAvw.jpinorganmarkets.com contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inauiriesffeinmorgan.com. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan— covered companies by visiting httpsi/ipmm.com/researclt/disclosures calling 1-800477-0406, or e-mailing nNearch.disclosure.inouiriesat inmorgan.coto 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 1-800477-0406 or e-mail mearch.disclosure.inouiriesatinmorean.com. Explanation of Credit Research Ratings: Ratings System: J.P. Morgan uses the following issuer portfolio weightings: Overweight (over the next three months, the recommended risk position is expected to outperform the relevant index, sector, or benchmark), Neutral (over the next three months, the recommended risk position is expected to perform in line with the relevant index, sector, or benchmark), and Underweight (over the next three months, the recommended risk position is expected to underperfonn the relevant index, sector, or benchmark). J.P. Morgan Emerging Markets Sovereign Research uses Marketweight, which is equivalent to Neutral. NR is Not Rated. In this case, J.P. Morgan has removed the rating for this security because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating no longer should be relied upon. An NR designation is not a recommendation or a rating. NC is Not Covered. An NC designation is not a rating or a recommendation. Analysts can rate the issuer, the individual bonds of the issuer, or both. An issuer recommendation applies to all of the bonds at the same level of the issuer's capital structure, unless we specify a different recommendation for the individual security. For CDS, we use the following rating system: Long Risk (over the next three months, the credit return on the recommended position is expected to exceed the relevant index, sector or benchmark), Neutral (over the next three months, the credit return on the recommended position is expected to match the relevant index, sector or benchmark), and Short Risk (over the next three months, the credit return on the recommended position is expected to undetperfonn the relevant index, sector or benchmark). Valuation & Methodology: In J.P. Morgan's credit research, we assign a rating to each issuer (Overweight, Underweight or Neutral) based on our credit view of the issuer and the relative value of its securities, taking into account the ratings assigned to the issuer by credit rating agencies and the market prices for the issuer's securities. Our credit view of an issuer is based upon our opinion as to whether the issuer will be able service its debt obligations when they become due and payable. We assess this by analyzing, among other things, the issuer's credit position using standard credit ratios such as cash flow to debt and fixed charge coverage (including and excluding capital investment). We also analyze the issuer's ability to generate cash flow by reviewing standard operational measures for comparable companies in the sector, such as revenue and earnings growth rates, margins, and the composition of the issuer's balance sheet relative to the operational leverage in its business. 3 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103703 Jame Baker North America Corporate Research 03 November 2014 J.P.Morgan J.P. Morgan Credit Research Ratings Distribution, as of September 30, 2014 Overweight Neutral Underweight Global Credit Research Universe 26% 58% 17% IB clients° 72% 64% 56% Note: The Credit Research Rating Distribution is at the issuer level. Please note that issuers with an NR or an NC designation arc no; included in the table above. *Percentage of investment banking clients in each rating category. 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EFTA01103706 J.P.Morgan Global Corporate Research 30 April 2015 Neutral IAG lAG.MC, IAG SM Price: E7.76 60 Second Update - ALERT 29 April 2015 IAG beat relatively low expectations this morning, though by a wider Airlines & Aircraft Leasing/Equity margin than peer, AF (which is down pre-market on the results). The press Jamie Baker AC conference call seemed to have focused on fuel, capacity and Aer Lingus, but we look for the analyst call at 9am BST for more details on guidance. Bloomberg JPMA BAKER COO> • IAG QI results beat. IAG's E25m of operating profits beat our lower J.P. Morgan Secunbes LLC end estimate of -E25m and consensus at -em. Higher than expected Nishant Mani revenues for all segments drove a top line beat, including 8.1 points of positive currency impacts. Meanwhile expenses, which saw improved J.P. Morgan Secunbes LLC employee unit costs and productivity in the face of lower average Naa•Sakle Akuete number of employees and lower fuel costs, rose by a lower proportion relative to our forecasts. J.P. Morgan Secunbes LLC • IAG Guidance. Though the rate of improvement in Q2 will be slower European Airlines Credit than Q1 (due in part to FX related fuel increases), expect full year Danielle Ward, CFA AC operating profit over E2.2bn (slightly below consensus at --€2.3bn). Management maintains that while Aer Lingus talks are ongoing, they are not a distraction for the group, which instead touched on its Iberia J.P. Morgan Securities plc transformation and best-in-group margins at Vueling. Note that IAG has not joined the chorus of Gulf carrier opposition, and at least for now, fuel remains the bright spot in a region hard hit by revenues pressured by Middle East expansion. Walsh reiterates an emphasis on long term fleet/capacity plans (especially in light of potential Q2 fuel increases), guiding to a 5.5% increase in 2015 ASKS. • Credit Review: IAG further improved its adjusted net leverage position to I.7x as of 31-Mar, from 1.9x at 31-Dec-14. BA's cash position was €4.0bn (of the group's total; cash of €6.0bn). We are Neutral British Airways CDS (5y mid I 20bp, close 29-Apr) and expect CDS spreads to continue to reflect uncertainty over future issuance plans from British Airways PLC after the maturity of the 8.75% Aug-2016 notes. We note that British Airways' rating was upgrade by Moody's earlier this month to Ba2/Stable (from Ba3), reflecting the group's improved operating performance. Moody's commented that it continues to rate BA on a standalone basis but takes into account the potential for more debt at the IAG holding level owing to the offer to acquire Aer Lingus, which Moody's considers could reduce debt capacity at British Airways. • Conference Call Details: 9am BST +44 (0) 20 3427 1909; ID: 3615768 I See page 2 for analyst certification and important 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 s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103707 Jame Baker Global Corporate Research 30 April 2015 J.P.Morgan 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: (I) 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 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 IAG, British Airways. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: IAG. • 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: IAG. • 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 IAG. • Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from IAG. • Other Significant Financial Interests: J.P. Morgan owns a position of 1 million USD or more in the debt securities of British Airways. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all I.P. Morgan—covered companies by visiting hups://jpitun.contiresearch/disclosures, calling 1-800-477-0406, or e-mailing nNearch.disclosure.inquiriesOremorgan.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(tmorgan.com. IAG RAG.MC, IAG BM Price Chart is - OW (2.3 N42 37 Date Rating Share Price Price Target 14) 28-Sep-11 OW 1.77 130 Ow 42.2 FIC22 12 10-Nov-11 OW 1.67 120 09-Feb-12 OW 2.15 130 Price(0 OW 0.3 NCI 3 OW43.1 Ow as OW 0.35 OW as N 0.5 14448y-12 N 2.00 130 10-Aug-12 N 1.90 120 13-Nov-12 N 2.11 137 24-Jen-13 OW 2.59 110 17-Jul-13 OW 3.18 150 25-Nov-13 OW 4.48 535 06-Oct-14 OW 4.66 5.50 0 I I I I A g 06-Apr-15 N 8.16 8.50 May Feb Nov Aug 11 12 13 13 Soucca. Sloomearg and J.P. Madan; pea data adjusted to slotlt sp:Its and dividends. Initiated COVOri a Sep 28.2011. The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW - Overweight, N- Neutral, UW in Underweight, NR in Not Rated 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 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103708 Jame Baker Global Corporate Research 30 April 2015 J.P.Morgan 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 ofeither 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: Baker, Jamie: AerCap Holdings N.V. (AER), Air France-KLM (AIRF.PA), Air Lease Corp. (AL), Aircastle Limited (AYR), Alaska Air Group, Inc. (ALK), American Airlines (AAL), Avolon Holdings (AVOL), Delta Air Lines, Inc. (DAL), FLY Leasing Ltd. (FLY), IAG (IAG.MC), JetBlue Airways Corp. (JBLU), Lufthansa (LHAG.DE), Ryanair (RYA.1), Southwest Airlines Co. (LUV), United Continental Holdings, Inc. (UAL), Win Air (WIZZ.L), easyJet (EZJ.L) J.P. Morgan Equity Research Ratings Distribution, as of March 31,2015 Overnight Neutral Underweight (buy) (hold) (sell) J.P. Morgan Global Equity Research Coverage 43% 44% 13% IB clients' 55% 49% 37% JPMS Equity Research Coverage 44% 48% 9% IB clients' 75% 68% 54% *Percentage of investment banking clients in each rating category. For purposes only of FINRANYSE 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 Into://www.inmorpnmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiries(riipmorgan.com. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan—covered companies by visiting huns://inmm.com/researeh/disclosures, calling 1-800-477-0406, or e-mailing anearch.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.inouiriesaipmorgan.com. British Airways - J.P. Morgan Credit Opinion History Date Action Rating/Designation Ticker/ISIN Issuer 10 May 13 Downgrade Neutral lAGLN 5yr CDS 10 May 13 Initiate Neutral The table(s) above show the recommendation changes made by J.P. Morgan Credit Research Analysts in the subject company and/or instruments over the past 12 months (or, if no recommendation changes were made during that period, the most recent change). Notes: Effective September 30, 2013, J.P. Morgan changed its Credit Research Ratings System. Please see the Explanation of Credit Research Ratings below for the new definitions. The previous rating system no longer should be relied upon. For the history prior to September 30, 2013, please call 1-800-447-0406 or e-mail rtnearch.disclosurt.inquiries@jpmorgan.com. Explanation of Credit Research Ratings: Ratings System: J.P. Morgan uses the following issuer portfolio weightings: Overweight (over the next three months, the recommended risk position is expected to outperform the relevant index, sector, or benchmark), Neutral (over the next three months, the recommended risk position is expected to perform in line with the relevant index, sector, or benchmark), and Underweight (over the next three months, the recommended risk position is expected to underperform the relevant index, sector, or benchmark). J.P. Morgan Emerging Markets Sovereign Research uses Marketweight, which is equivalent to Neutral. NR is Not Rated. In this case, J.P. Morgan has removed the rating for this security because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating no longer should be relied upon. An NR designation is not a recommendation or a rating. NC is Not Covered. An NC designation is not a rating or a recommendation. Analysts can rate the issuer, the individual bonds of the issuer, or both. An issuer recommendation applies to all of the bonds at the same level of the issuer's capital structure, unless we specify a different recommendation for the individual security. When we change the issuer-level rating, we are changing the rating for all of the issues covered, unless otherwise specified. For CDS, we use the following rating system: Long Risk (over the next three months, the credit return on the recommended position is expected to 3 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103709 Jame Baker Global Corporate Research 30 April 2015 J.P.Morgan exceed the relevant index, sector or benchmark), Neutral (over the next three months, the credit return on the recommended position is expected to match the relevant index, sector or benchmark), and Short Risk (over the next three months, the credit return on the recommended position is expected to underperform the relevant index, sector or benchmark). Valuation & Methodology: In J.P. Morgan's credit research, we assign a rating to each issuer (Overweight, Underweight or Neutral) based on our credit view of the issuer and the relative value of its securities, taking into account the ratings assigned to the issuer by credit rating agencies and the market prices for the issuer's securities. Our credit view of an issuer is based upon our opinion as to whether the issuer will be able service its debt obligations when they become due and payable. We assess this by analyzing, among other things, the issuer's credit position using standard credit ratios such as cash flow to debt and fixed charge coverage (including and excluding capital investment). We also analyze the issuer's ability to generate cash flow by reviewing standard operational measures for comparable companies in the sector, such as revenue and earnings growth rates, margins, and the composition of the issuer's balance sheet relative to the operational leverage in its business. J.P. Morgan Credit Research Ratings Distribution, as of March 31, 2015 Overnight Neutral Underweight Global Credit Research Universe 24% 58% 18% IB clients° 68% 63% 60% Note: The Credit Research Rating Distribution is at the issuer level. Please note that issuers with an NR or an NC designation arc not included in the table above. *Percentage of investment banking clients in each rating category. 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Morgan North America Equity Research 07 May 2015 Overweight Priceline.com PCLN, PCLN US Price: $1,264.15 Solid 1Q Beat w/ 29% FXN Intel Bookings Growth but Price Target: $1,352.00 Lower 2Q Profit Outlook; Recommend Buying Any Pullback, Reiterate OW Priceline reported better-than-expected IQ results with 26% ex-FX gross bookings Internet growth, 19% gross profit growth, and non-GAAP EPS of $8.12 (vs our $7.96). 2Q Doug Anmuth AC guidance for 15%-22% FXN gross bookings growth—driven by 17%-24% FXN growth in Intl bookings—was in line with expectations and suggests continued strong trends despite FX. We note that the EBITDA outlook ($715M-765M) was softer than Bloomberg JPMA ANMUTH <GO> our/consensus $851M/$865M, driven by advertising spend (including lower online Diana R Kluger, CFA ROls and spend in new markets), while non-advertising OpEx deleverage is expected to diminish in 2H IS. We continue to be impressed by momentum in bookings growth, room nights, and propeny count (+40% Y/Y). We remain confident in James (Zhaokun) Ma PCLN's ability to drive further global share gains reiterate our Overweight rating. We believe the current sell-off is overdone and recommend buying the pullback in J.P. Morgan Secuntee LLC share& Our EBITDA estimate goes down 3.5% in 2015 and comes up 1% in 2016, and our Dec-15 PT of $1,352.00 is based on —20.5x 2016E PF EPS of $66.17. • Solid IQ results. Priceline reported IQ FXN gross bookings growth of +26% Y/Y, ahead of our +22% Y/Y estimate, with Domestic bookings growth of +2.4% WY and International FXN growth of +29% Y/Y, as Booking.com continues to gain share with +40% Y/Y accommodations growth in a healthy European travel 911 environment. Room nights reached 100M+, up +25% WY from +24% Y/Y in 4Q. litspla k144 MM FS'S VatiS Rental car days accelerated to +18% Y/Y from +16% in 4Q14. ADRs grew +2% — PCLN slut* iwIce if) SILP500 (ramem WY ex-FX. IQ EBITDA of $532M (32% margin on gross profit) was 3.4% ahead YTO 1m 3m 12m of our $514M, as a strong top-line beat drove earnings, despite higher S&M spend. ribs 10.9% 6.7% 216% 12% RN I 9.9% 6.7% 22A% 32% • Outlook. 2Q guidance implies continued FXN bookings growth strength, including 15-22% FXN globally and 17-24% FXN internationally (in line with our 24% Y/Y estimate). We note that the guided FX impact on bookings growth of 1,500bps is worse than our previous expectation for —1,154bps. 2Q EBITDA guidance of $715M-$765M was below our/consensus $851M/$865M and implies —550bps of deleverage in non-GAAP operating margin WY. However, PCLN expects non- advertising OpEx pressure on margins to significantly diminish in 2H15. Assumptions in PCLN's 2Q guide include 1) continued FX pressure, including 2Q EUR rates -19% Y/Y vs. the USD and GBP -11% Y/Y, 2) marketing spend assumes lower online net ROls and increased investment in offline advertising, including rolling out campaigns in new markets, 3) FXN ADR growth of <2% WY, 4) no substantial change to take rates, and 5) continued declines in Name Your Own Price. PrIcellne.com (PCLN;PCLN US) FYE Dec 2013A 2014A 2015E 2015E 2016E 2016E Company Data (Prow) (Curd (Prey) (Curd Price (5) 1,264.15 EPS - Reported (5) Date Of Price 06 May 15 01 (Mar) 5.76 7.81 7.96 8.12A 52-week Range (5) 1,329.90- 02 (Jun) 9.70 12.51 12.86 11.56 990.69 03 (Sep) 17.30 22.16 22.70 22.30 Market Cap (5 mn) 66,928.53 04 (Dee) 8.85 10.85 11.43 11.53 Fiscal Year End Dec FY 41.62 53.33 54.95 53.51 64.40 66.17 Shares 0/S (mn) 53 Bloomberg EPS FY ($) 41.12 52.60 - 56.69 67.63 Price Target (5) 1,352.00 Source: Company data. Bloomberg. J.P. Morgan estimates Price Target End Date 31-Dec-15 See page 9 for analyst certification and important 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.jpmorganmaricets.com s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103713 Douu Anmum North America Equity Research 07 May 2015 J.P.Morgan What we liked: • International bookings growth. Priceline's IQ international FXN bookings growth of +29% was strong and above guidance for +17-24% and our +25% estimate. PCLN also provided some positive color around the health of the European market and continues to feel optimistic about its business there. • Solid increase in property count and vacation rentals. Priceline ended IQ with 635k hotels and other accommodations (+40% WY) on its platform, and vacation rentals nearly doubled WY to 275k instantly bookable and confirmable properties. We believe vacation rentals represent a large opportunity for PCLN over time, but it is still very early and the company is working on reaching single owners (a very different type of customer for PCLN) and balancing out the supply and demand. • Booking.com. Booking.com continues to increase its worldwide supply, with over 635K hotel and other accommodations (+40% Y/Y). While the property continues to make progress in the US, we believe it is still very early. In IQ, Booking.com launched its Booking Now mobile app for spontaneous bookers, and BookingSuite, a partner- facing software services platform. • Solid room night and rental car day growth. In IQ room nights booked were up +25% Y/Y, slightly accelerating from +24% in 4Q and rental car days grew +18% WY, also accelerating from +16% in 4Q. • IQ adj. EBITDA upside. IQ EBITDA of $532M represented a 32% margin on gross profit, in line with the 32% margin in 1Q14. EBITDA came in 3.4% ahead of our $514M estimate and 8.0% ahead of the mid-point of the guide, as a strong top-line beat drove earnings despite higher S&M spend. What concerned us: • 2Q operating deleverage. 2Q EBITDA guidance implies —550bps of deleverage in non-GAAP operating margin WY, driven in part by online marketing deleverage (online advertising came in at 38.5% of gross profit in 1Q15, up from 37.0% in 1Q14). Priceline expects to continue advertising investments in 2Q with a focus on L-T sustainability, though we believe the cost of growth is slowly increasing. 2Q advertising expectations include assumptions for continued pressure in online advertising net ROIs and increased offline advertising investments, including campaigns in new markets. However, we note that PCLN expects non-advertising OpEx pressure on margins to significantly diminish in 2H15. • Increasing competition. We believe competition is increasing from EXPE, where PCLN IQ global room nights growth of 25% WY came in slightly below EXPE's organic —28% Y/Y. We acknowledge that the global TAM is significant (—$1-I .3T) and both players together still represent <10%. Further, we highlight that PCLN is often setting the low bar on take rates in Europe (PCLN's commissions are typically in the teens and EXPE may sometimes be 20%+), and we expect that expect EXPE will continue to lower its own take rates going forward to be more competitive. • Name Your Own Price softness. Priceline noted that its opaque travel business "Name Your Own Price" was once again down year over year due to limited availability of discounted rates. PCLN expects the headwind form NYOP to continue to negatively impact revenue growth rates in Q2. 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103714 Doug Azimuth North America Equity Research 07 May 2015 J.P.Morgan Summary of the Quarter i ure 1: Priceline 1Q Performance vs. J.P. Morgan Estimates per share data) 1Q15 Difference (%) JPME Actuals Gross bookings 13,580 13,776 1.4% Domestic bookings 1,693 1,672 -1.3% Intl bookings 11,887 12,104 1.8% Revenue 1,823 1,841 1.0% Gross profit 1,614 1,672 3.6% EBITDA 514 532 3.4% PF EPS $7.96 $8.12 2.0% Source: J.F. Morgan estimates. Company data. 3 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103715 Doug Anmuth North America Equity Research 07 May 2015 J.P.Morgan Adjusting Estimates Given Priceline's 1Q15 results, we are adjusting our estimates as follows: igure 2: Adjusting J.P. Morgan Estimates Priceline 2Q15 JPME 3Q15 JPME 4O15 JPME 2015 JPME 2016 JPME ( in millions) Old New Old New Old New Old New Old New Gross Bookings 14.334 14.289 14.857 15,072 11.526 11,736 54.296 54,874 64,350 65,104 Y/Y Growth 5.9% 5.5% 7.5% 9.0% 8.1% 10.1% 7.9% 9.1% 18.5% 18.6% % change vs. old -0.3% 1.4% 1.8% 1.1% 1.2% Domestic Bookings 1,993 1.892 1,903 1,836 1,558 1,511 7,147 6.910 7,771 7,068 Y/Y Growth 7.4% 1.9% 9.2% 5.3% 9.3% 5.9% 7.3% 3.7% 8.7% 2.3% % change vs. old -5.1% -3.5% -3.1% -3.3% -9.0% International Bookings 12,341 12.397 12,954 13,236 9,967 10,226 47.149 47,963 56,579 58,036 WY Growth 5.6% 6.1% 7.2% 9.6% 8.0% 10.8% 8.0% 9.9% 20.0% 21.0% % change vs. old 0.5% 2.2% 2.6% 1.7% 2.6% Net Revenue 2.284 2.263 3,000 3,082 2,004 2,028 9.111 9.214 10,623 11,171 Y/Y Growth 7.5% 6.6% 5.8% 8.7% 8.9% l0.2% 7.9% 9.1% 16.6% 21.2% % change vs. old -0.9% 2.7% 1.2% 1.1% 5.2% PF EBITDA 851 758 1,482 1,431 749 729 3.597 3.450 4,292 4,337 Y/Y Growth 5.2% -6.4% 17% 0.1% 5.2% 2.5% 3.8% -0.4% 19.3% 25.7% Margin on Gross Profit (%) 41.9% 37.7% 53.4% 50.1% 41.2% 39.6% 43.7% 41.2% 44.7% 42.9% % change vs. old -11.0% -3.5% -2.6% -4.1% 1.0% PF EPS $12.86 S11.56 $22.70 $22.30 $11.43 $11.53 $54.95 $53.51 $64.40 $66.17 Y/Y Growth 2.8% -7.6% 2.5% 0.6% 5.3% 6.3% 3.0% 0.3% 17.2% 217% % change vs. old -10.1% -1.8% _ 0.9% -2.6% 2.8% Source: J.P. Maw estimates. 4 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103716 Doug Anmuth North America Equity Research 07 May 2015 J.P.Morgan Investment Thesis, Valuation and Risks Priceline.com (Overweight; Price Target: $1,352.00) Investment Thesis We continue to believe Priceline is the best-positioned company in the online travel space and will continue to gain share in international markets. We look for strong International bookings growth in 2015, driven by Booking.com, Agoda, KAYAK and Rentalcars.com, along with a more stable European macro environment. We believe there is still meaningful room for European hotel share gains, as Booking.com likely has -.IVA+ of total European hotel nights, and we look for greater contribution from high-growth opportunities in LatAm and APAC. Valuation We remain Overweight with a year-end 2015 price target of $1,352 per share. We believe Priceline deserves a higher multiple that reflects the underlying momentum in the business, as the reported EPS numbers are impacted by unfavorable FX impact. Our price target of $1,352 is based on 20.5x our 2016E PF EPS of $66.17, which we believe is reasonable given a 2014.17E PF EN CAGR of 16%. We expect Priceline to trade at a premium to its OTA peers given its higher growth profile and ow forecast for margin expansion. Priceline continues to gain material share of the hotel reservations business, particularly through Booking.com in Europe, APAC, and in the U.S., and is expected to be a primary beneficiary of an improving global travel market. Risks to Rating and Price Target Downside risks. Priceline shares could underperform other companies in our coverage universe if I) international bookings growth decelerates dramatically; 2) Priceline is pressured by competition from other OTAs or suppliers; 3) marketing costs increase due to competition; 4) Priceline is unable to obtain supply of inventory; and 5) macro or security-related risks impact the overall travel environment. 5 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103717 Doug Anmuth North America Equity Research 07 May 2015 J.P.Morgan Figure 3: Priceline Income Statement i 20I3A 3114A 6114* W144 12/14A 2014* 3115A 4115E 0715E 12115E 2015E 2018E Omes Bookings 30.172 12,210 13,531 13.023 10.435) 50.300 13.770 14.209 11.072 11.734 54974 05.104 Ruiertis (68,96 173% 134% 16.7% 20.5% 173% 168% 134% 15.8% 204% 168% 17.2% houel Revenues 8795 1.842 3.124 2.038 1,640 8,442 1241 2.203 3032 2.0213 9,214 11.171 Coto al Revenuen 1077 235 241 217 115-5 858 188 253 228 189 839 1061 Oro.. Prof% 4716 1,401 1.663 2,820 1.275 7.584 1272 2,000 2354 1,840 4375 10.110 02Ortten9 expeneey Adveiturn - onlro 127 53 55 72 48 231 64 84 97 03 307 354 Mvenitin9 - Onlne 1.790 521 840 700 50) 2.360 643 718 822 580 2.763 3.296 % of tea spent Mine 936% 90.7% 913% 90.7% 91.2% 91.1% 91.0% 89.5% 69.5% 90.2 90.0% 90.3% Total 80~68% 1926 574 698 771 548 2.592 707 003 919 842 3.070 3.650 Sates and rratte:ro 293 64 75 86 ea 311 82 se 97 96 369 425 Person,. i 568 156 187 213 208 764 205 217 248 234 904 1.062 Gencgai a,i ad m in r.tra:, c. 253 73 91 98 91 353 100 113 123 105 440 516 Inbeu5G, frclirelo.jy 72 23 24 25 25 97 25 30 31 29 116 121 SIXA nempettArtnnerp6A... 141 39 35 46 ee 188 54 46 63 81 244 283 Cropeccutun & anion:51u, 118 35 40 58 72 208 66 61 62 76 264 291 To's' “.!strviemp,-nes 3.303 968 1.150 1.297 1.098 4.511 1235 1.354 1542 1.263 5,397 8,347 GAAP Operating Income (loss) 2412 439 733 1,322 670 3.073 434 554 1,212 177 2.171 3.763 PF °prelim; Ii10201•11es% 2509 478 718 1,308 645 3259 515 702 WI 858 3.2. 4046 To181Olher income (0~10) 1116) 123) on (17) (27) (74) 1271 (48) 1481 (Or 1170) (151) Earner Res) More 46498 Maxey emote 2297 418 718 1.30$ 562 2.990 407 608 1264 529 2.808 3.612 tram tax bone% (expemel 1404) (85) 11391 (243) 11C0 (568) ( 74 ) (109) (2271 (95 (603) (651) MO». lax We 176% 204% 195% 18.6% 18.2% 18.9% 182% 180% 180% 18.0 18.0% 180% Equty In occareqloss)ol rnosleas d mina, 101 • • • - • - • • . • Not acorn,(loss) 1093 331 576 1.062 452 2.431 333 498 1035 434 2.302 2 951 Pre( 6/941( OvINet Inc Silt to noncentroii • GASP Nee Meows (less) 61.893 2331 $576 51.062 1452 52.431 1333 5498 51.936 5434 51302 52.961 GAAP Net meerli Nisei per *ban - Midi« 33410 KM 310.09 320.03 II 56 $45.111 $136 59.51 11917 $8.28 $4392 $56.22 ~glued average common sham GAAP Elonn 509 522 524 524 52.3 519 51.9 51.9 51.9 519 52.2 GAAP Caned 523 530 530 530 52.9 524 52.4 514 52,4 524 52.7 PF Adjusted Ns income (Wee) 2.197 41$ 917 1,103 577 2243 429 407 1.12. 000 21411 3.502 P9 Adfusted Diluted EPS 41.62 17.51 $1/61 222.111 $1066 $53.33 5112 $15.66 522.30 $11.61 $63.61 $66.17 PF /tarried nitre) tAtr.yr. nnt)tn.).., 53 53 53 53 53 53 53 53 52 52 52 53 Pro Ponsla EBITDA MU 513 Kg 1,429 712 3,4134 532 75$ 1.431 729 3.450 4337 20134 3I14A Ma 9/14A 12/14.4 2014* 3/15A 4115E WISE 12115E 2015E 2018E WY GROWTH Gross Bookings 37.7% 342% 118% 214% 16.7% Me% 512% 5.5% ar" 10.1% 9.1% MC% Aimee, 29.1% 211% 213.4% 249% 19.4% 244% /2.1% ILO% 17% 10.3% 9.1% 21.2% COE 01to 001..) .95% 49.5% -196% 229% 20.4% .204% .204% 13% 63% 14.0% -22% 26.6% OM« P1001 400% 39.3% 311% 317% 25.6% 327% 549% 27% 19% al% 10.4% 20.7% Achertnana • OM no 259.1% 928% 8045% 79.5% 74.0% 81.5% tag% 45.0% 35.0% 30.0% 32.7% 15.2% Ademein - °nine 47" 29.2% 38.7% 31.3% 25." 31.2% 235% 123% 17.4% 119% 27.1% 193% Celia tetwoon °nine ad youth and GP 1.3% "0.1% 20% .04% .0.4% •1.5% 4.6% 5.6% 8.5% 6.1% 6.6% 44% YntrIAUnnlying 471% 333% 40.9% 348% 28.4% 345% 231% 150% 191% 172% /85% 18.9% sa..”..r.i ma uct.n3 expense 20.4% 231% 25.4% 31.9% 463% 31.8% 27.4% 125% 12.7% 11.9% 85.5% 113% Per:cerei 41.7% 384% 42.2% 40.5% 280% 368% 31.6% 163% 16.4% 12.3% 88.4% 17.4% Genet' 6 ecrniestratUe expense 46.1% 455% 403% 551% 2/.6% 395% 37.3% 238% 25.3% v5 3% 24.8% 171% information lecmoiegy expense 64.0% 756% 41.8% 338% 9.7% 356% 9.2% 234% 26.6% 14.4% 89.0% 4.6% letel OpemM3 ememe 46.6% 363% 38.7% 377% 31.6% 365% 280% 17.7% /8.9% 152% 89.6% 17.8% PF Operating income 317% 40.1% 30.3% 236% 13.8% 260% 7.8% .8.6% 0.4% 2.0% 2(5% OF Adjvale0 Nel Income 36.3% 401% 31.3% 285% 22.4% 294% 2.9% 40% 40% -75% 250% PF Adjusted IMS (muted) 33.0% me% 29.0% 283% 22.6% 261% 3.9% 4.6% 06% 6.3% 0.3% 217% EBITDA 35.9% 394% 30.3% 2273% 211% 212% 16% 44% 0.1% 25% .0.4% 257% Scuce: J P Morgan estimates. Company data. 6 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103718 Doug Anmuth North America Equity Research 07 May 2015 J.P.Morgan i ure 4: Priceline Revenue Analysis 20134 2114A 47144 I 12114* 20144 3115A MISE 9115E 12115E 20158 20164 Oren 15,74.1.1» by Own» -.. l~ 41~4 Doines114 Booking* 5373 1.637 1256 1.743 1.426 6.662 1.672 1292 1136 1.511 6.810 7.060 vre 9.00v, 75.5% 195% 207% 99% 34% 134% 21% 1.9% 5.3% 5.9% 37% 23% 00 warm 107% 734% 4.1% -112% /73% 111% 40% •17.7% % of xtple00.00 110% 133% 13.7% 125% 13.4% II 12.1% 112% 122% 12.9% 12,6% 109% inlernallenal 9441Ings 33.299 10.643 11.482 12.010 9233 43231 12.101 12297 13235 14226 47.943 »OM NY goNt 42,5% 397% 36.2% 31.6% 190% 31.0% 13.7% 61% 96% 199% 9.0% 21.0% NY /84076 4...FX )00.» 42.5% 390% 360% 320% 270% 310% 290% 250% 250% 24,0% 25.145 21.0% 00 warm 37.2% 10% 34% -231% 311% 24% 58% 0.0% % el Korliax1aNs 6.10% 05.7% 919% 67.4% 5111% 066. 67.0% MO% 87.8% 67.1% 87.4% 89.1% 14400.445 llookIng4 »272 12,2» 114» 13.823 14,409 50,340 132» 142» 15172 112» Ms» GIS v7Y grown 17.7% 34.2% 330% 214% 117% 264% 722% 05% 90% 70.1% 0.1% 166% Y/Y /86476 im.FX owe( 37.6% 352% 328% 38.7% 214% 361% 25.4% 21.8% 22,6% 21.6% 22.9% 166% 00~ 34.4% 102% 2.916 .229% 29.2% 17% 56% -22.1% Agency &ohm» $2172 10.516 11.601 11.821 81174 421/1 11.906 12247 12.925 91611 46143 55.800 33v pro" 40.3% 37.5% 37.5% 31.0% 196% 31.36 112% 58% 9,3% 9.0% 94% 169% 00p~~ 308% 161% 2.916 .24,1% 327% 29% 56% .23.7% %Pawl bx.77)45 854% US% 655% 834% 84.2% 033 MA% 85.7% re" 84.1% 11.5% MY% Meets% lookn” 5501 1354 1957 2.0O2 1195 7.4(4 1.847 2.012 2.149 1.872 7.910 0.301 WY 474418 25.7% 77.2% 157% 14.9% 7.9% 74.0% 5.0% 4.3% 7.3% 11.1% 7.1% 17.3/4 004~61 129% 10.9% 23% .155% Ian 9.4% 53% 42,9% /4 0/ %IA 1«...ngf. 16,6% 144% 14.5% 145% 118% 14. 13.8% 14.3% 14.3% 15.9% 14,5% 14,3% ToU113/4.74 Boales »273 12.2» 13.534 13.423 11250 50,399 11,774 Mai 14472 11.738 54274 66,164 NY grp.fn 37.7% 342% 33.9% 214% 166% 294% 122% 55% 90% 10.1% 9.1% 196% 00~m 34.4% 702% 2.1% 429% 292% 17% 55% -22.1% 11884•100.24ancy/184ithan/ Illg M NoonRevalue 4.411 1.011 1.474 2299 1121 5245 1.199 1227 2299 1.410 6.425 7.715 1910nostn 40,3% 352% 915% 311% 211% 325% 15.2% 16% 90% 748% 99% 21.2% 730 groan 4.7% 411% 42.4% 41" 41% 27.3% 419% -18.4% 4.5%91A0encyb:obruf 13,5% 99% 127% 178% 13,7% 136. 10,1% 125% 17.7% 14.9% 19,7% 14.0% % of loeM finance 44.9% 63.4% 69.4% 740% 66,9% BR 662% 675% 74,3% 69.5% 69.7% 69,7% ~Pent Rpm» 2211 527 547 614 470 2.194 495 572 HO 474 7.2» 2,375 WV womb 5.7% 43% 4.2% -71% 47% 48% 41% 06% 0.4% 40% 7.0% 00% 00 90401 94% TO% 12% -220% 3.4% 156% 7.7% -22.0% 04%01010,01004 00:40-90 34.0% 299% 290% 190% 214% 296 215% a" 217% 213% 28,1% 215% % of »NI ro..nuo 326% 32.1% 357% 218% 26.0% Ifi. . 26.9% 253% MO% 23.4% 24,2% 21.3% 471.7471161.41Cay».101herNmel OPEN) 171 74 82 42 72 316 147 164 177 144 612 1.011 va, grain /178.1% 78926% 117.0% 136% 21,0% 01,2% 09.1% 1000% 1150% 100.0% 120.% 6001 009~61 214% 11.2% 0.6% -123% 1012% 11.7% 10% -184% % of »cal r0.0nuo 25% 4.5% 33% 29% 19% 1 BA% 72% 5.7% 7.1% 6.9% 9.1% 14471Revenue 4.743 1242 1.124 1*14 IMO PAU 11411 2.211$ UN 2120 Um 11,171 0V gram 217% 211% 204% 249% 194% 24.3% 111% 16% 83% 70.2% 0.1% 21.216 on roam 65% 293% 318% 411% 00% 22.9% a3.2% 44.2% Naveila try 095.079/q - Mk S ilir 04.4.4,164 %WOW/ 014/111.1 1.748 »2 524 Ell 915 1997 473 579 547 495 2.094 2,367 WY gromb 2.7% 5.8% 90% 14.7% 292% 14,2% 9.0% MS% 2.0% 4.1% 4.0% 130% 00 ~in nu% 21.3% 2.4% 47% 4.3% 223% 4.6% -II% 1/010 Rase cr Domestic boa". 298% 204% 28.2% WE% 36.4% 28.3% 3.3.651 2.8% 32.8% 30.3% 33.5% % of To» nuanue 258% 253% 24,7% 189% 27.5% 21 25.7% 25.6% 17.7% 344% 22.7% 212% //i4~050/1/111 5244 1.210 MOO 2330 1.335 9.446 1.367 1,101 2.535 1.533 7.1» ZAK wy onDso 41.8% 353% 33.3% 27.8% 111% 27.8% 110% 5.3% 102% MO% 10.5% 217% Yee group 47FX roe« 29.9% 3704 340% 271% 167% 210% 240% .13% 10,2% 74.0% 191% 237% 00 gro~ 52% 322% 438% -420% 24% 232% 505% 4/1% TKO PaledInn boalcags 151% 11.4% 117% 19.0% 14.5% 148. 11,3% 116% 192% 15.0% 14.1% 152% % el manta 74.2% 73,7% 753% 81.1% 725% 763. 74.3% 744% 82.3% 75.4% 77,3% 783% Teed Revenua 4793 1,642 2.124 2234 1.840 IOC 12111 2.243 5.111.2 2.523 0.214 11,171 WV pow% 29.7% 217% 264% 249% 794% 242% r27% 16% 11% 10.2% 0.I% 27.2% WV gropth, 4 -FX vrw%1 220% 272% 261% 244% 194% 244% 232% 18% 83% 70.2% 91% 21.2)4 0/10764M 65% 293% 316% .311% 00% 229% 352% -34.2% Sane: J.P. Mayan es nacos. Company data. 7 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103719 Doug Anmuth North America Equity Research 07 May 2015 J.P.Morgan Priceline.com: Summary of Financials Income Statement -Annual MIA FY15E FY16E FY1TE Income Statement -Quarterly 1Q1SA 2015E 3015E 4015E Renames 8.442 9,214 11,171 - Revenues 1.841A 2.263 3.082 2.028 Operating income 3.073 2,978 3,762 - Operating income 434A 656 1.312 577 DM 208 264 291 - DM 65A 61 62 76 EBITDA 3281 3.242 4,054 - EBITDA 499A TIT 1,373 653 Net interest income/ (expense) (74) (151) (151) - Net interest income !(expense) (22)A (43) (43) (43) Other hcorre !(expense) (74) (170) (151) - Other income/ (expense) (27)4 (48) WI) (48) Pretax income 2.998 2,808 3,611 - Pretax inane 407A 608 1,264 529 Income taxes (569) (506) (651) - Income taxes (74)4 (109) (227) (95) Net Income 2.431 2,302 2,961 - Net Income 333A 498 1,036 434 Weighted average diluted shares 53 52 53 - Weighted average dluled shares 53A 53 52 52 Diluted EPS 53.33 5351 66.17 - Diluted EPS 8.12A 1136 22.30 11.53 Balance Sheet and Cash Flow Data MIA FY15E FY16E FY1TE Ratio Analysis FY14A RISE FY16E FY1TE Cash and cash equivalents 3.149 5,169 8.637 - Sales growth 24.3% 9.1% 21.2% - Accounts receirable 644 721 979 - EBITDA growth 29.2% (0.4%) 17.5% - Other current assets 333 625 625 - EPS growth 28.1% 0.3% 23.7% Current assets 5267 7.895 11.621 - PP&E 199 202 181 - EBITDA margh 41.0% 37.4% 36.3% Total assets 14.941 18.585 22.054 - Nel margin 33.7% 30.4% 31.3% Total debt 1.144 5,301 5.301 - Debt / EBITDA 0.3 1.5 1.3 Total liabilities 6.374 8.162 8.676 - Shareholders' equity 8,567 10.423 13,378 - Return on assets (ROA) 22.4% 16.7% 172% Return on equity (ROE) 36.7% 293% 29A% Net Incase (including charges) 2.422 2,302 2,961 - DM 208 264 291 - Enterprise value/ EBITDA 19.9 19.4 15.7 Change in workhg capital (25) (491) (27) - Enterprise value/ Free cash flow 242 28.1 17.7 Other - - PIE 27.7 28.8 22.6 Cash flow from operations 2.914 2,358 3569 Capex (132) (92) (101) Free cash flow 2.843 2,390 3,592 Cash flow from iwesting activities (2.349) (1202) (101) Cash flow from &mein activities 1.429 1.214 0 Dividends - Dividend yield - Sarre: Company reports and J.P. Morgan °stogies. Note: 3 n millions (except per-share clata).Fiscal year ends Dec 8 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103720 North America Equity Research Doug Azimuth 07 May 2015 J.P.Morgan 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 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: JPMS makes a market in the stock of Priceline.com. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Priceline.com. • Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Priceline.com. • 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: Priceline.com. • 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: Priceline.com. • Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking Priceline.com. • 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 Priceline.com. • Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Priceline.com. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan—covered companies by visiting hnps://innun.comfresearch/disclosures, calling 1-800-477-0406, or e-mailing nNearch.disclosure.inquiriestjrmorgan.com p 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.inquiriesOfdpinorgan.com. Date Rating Share Price Price Target Priceline.com (PCLN, PCLN US) Price Chart (S) (S) 02-Jan-08 OW 115.24 2.442 05-Jan-09 OW 75.00 86.00 OW OW OW 328 OW $6 OW OW $ OW $1,040 19-Feb-09 OW 68.74 91.00 2.035 -- 1 I 12-May-09 OW 108.88 120.00 O11 OW O11 OW OW $59 OW OW 44 OW $1,21( OV OW $1.3 05-Jun-09 OW 116.32 135.00 1.628 -- I 10-Aug-09 OW 131.32 179.00 ow 011 OW ON OW OW OW 7 OW3 OWI OW1 OW 31.9 27-Oct-09 OW 171.98 210.00 pricel3) 1.221 -- 10-Nov-09 OW 204.22 216.00 04-Jan-10 OW 223.96 260.00 18-Feb-10 OW 212.87 263.00 814 — 07-Apr-10 OW 259.81 300.00 09-Jun-10 OW 176.73 280.00 407 04-Aug-10 OW 230.67 326.00 30-Sep-10 OW 348.13 413.00 09-Nov-10 OW 388.58 484.00 OCI Apr Oc Apr Oct Apr 24-Feb-11 OW 425.99 496.00 06 08 09 11 12 14 06-May-11 OW 519.03 599.00 Sainte. Sicioneatarg ana J.P. Meteor.: peke data adjusted tot stock spats and dividends. 04-Aug-11 OW 483.34 610.00 InlUalod *satrap* AP 02. 2000. 05-Aug-11 OW 527.81 682.00 13-Jan-12 OW 482.43 672.00 9 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103721 North America Equity Research Doug Anmuth 07 May 2015 J.P.Morgan 28-Feb-12 OW 632.76 730.00 07-May-12 OW 736.06 810.00 06-Jun-12 OW 619.83 770.00 08-Aug-12 OW 562.32 650.00 02-Nov-12 OW 586.10 740.00 27-Feb-13 OW 695.91 835.00 1044ay-13 OW 765.41 830.00 05-Aug-13 OW 908.36 1040.00 09-Aug-13 OW 933.75 1130.00 08-Nov-13 OW 1073.20 1210.00 21-Feb-14 OW 13t5.65 1450.00 11-Aug-14 OW 1309.28 1575.00 04-Nov-14 OW 1097.70 1225.00 19-Feb-15 OW 1218.05 1375.00 18-Mar-15 OW 1153.57 1352.00 The chan(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW Overweight, Na, Neutral, UW •• Underweight, NR Not Rated 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: Anmuth, Doug: Amazon.com (AMZN), Bankrate Inc (RATE), Care.com (CRCM), Chegg, Inc. (CHGG), Criteo (CRTO), Everyday Health (EVDY), Expedia, Inc. (EXPE), Facebook (FB), Google (GOOG), Groupon (GRPN), HomeAway Inc (AWAY), King Digital Entertainment (KING), Linkedln Corp (LNKD), Netflix Inc (NFLX), Pandora Media Inc (P), Priceline.com (PCLN), TripAdvisor, Inc. (TRIP), TnieCar Inc. (TRUE), Twitter, Inc. (TWTR), Yahoo Inc (YHOO), Yelp Inc. (YELP), Zynga Inc (ZNGA), eBay, Inc (EBAY) J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2015 Overweight Neutral Underweight (buy) (hold) (sell) J.P. Morgan Global Equity Research Coverage 43% 44% 13% IB clients° 55% 49% 37% JPMS Equity Research Coverage 44% 48% 9% IB clients" 75% 68% 54% *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 arc 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 littp://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiriescOromorgan.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. Other Disclosures 10 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103722 Doug Azimuth North America Equity Research 07 May 2015 J.P.Morgan J.P. Morgan ("IPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. 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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 arc 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 strategics to particular clients. Thc 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 companics/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 March 28, 2015. Copyright 2015 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. 12 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103724 J.P.. Morgan North America Equity Research 19 May 2015 Neutral TripAdvisor, Inc. TRIP, TRIP US Price: $81.49 J.P. Morgan Conference Takeaways - ALERT 18 May 2015 TripAdvisor, Inc. Steve Kaufer, CEO, presented today at our J.P. Morgan Internet Global Technology, Media and Telecom Conference. Key takeaways: Doug Anmuth AC • Instant Book progress. TRIP noted that Instant Book has been fully rolled out to U.S. mobile users and currently includes 70+ connectivity Bloomberg JPMA ANMUTH <GO> partners, but acknowledges that the pace of adoption has been somewhat Diana R Kluger, CFA mixed and that challenge remains with persuading large hotel chains and OTAs. Management pointed to the reluctance among some large chains James (Zhaokun) Ma to accept TRIP as another distribution channel with the current offer, though it expects negotiations to continue as TRIP rolls out IB. Management also believes that, although TRIP welcomes the potential J.P. Morgan Socunbes LLC adoption by large OTAs, Instant Book can be successful without their presence as TRIP believes it can get a similar properties footprint through other partners. Kaufer acknowledged that his initial expectation for the time for securing major chains may have been aggressive, but not in his view for how the product would work over time. • Hotel shoppers. Management was pleased with the strong 26% WY hotel shopper growth in 1Q15, but indicated it came off a large base and may be difficult to sustain going forward. However, management noted that the mobile shopper tailwind has been particularly strong. TRIP also explained that top line can still be healthy without the mid-20s hotel shopper growth as it focuses on monetizing its existing shopper base further down the funnel. • Pricing and auction bidding. As TRIP laps the meta search benefits, management expects to roll out new products over time to enhance pricing and conversion. TRIP notes that it is still early in working to improve search personalization to support higher booking conversion and auction pricing. Management discussed that hotel auction bids are usually lower than those from large OTAs, since hotels lack the ability to cross-sell different properties. TRIP believes that IB could help to change the dynamics by increasing conversion on hotel properties and provide a higher value (and in turn price) per bid. • Opportunities around other travel verticals. TRIP highlighted its optimism around the restaurant and attraction opportunities with its recent acquisitions of LaFourchette and Viator. Management believes that LaFourchette is well positioned to capture the European online restaurant bookings market while Viator could become a major OTA for attractions, where competition is nascent and supply is highly fragmented. See page 2 for analyst certification and important 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 s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103725 North America Equity Research Doug Anmuth 19 May 2015 J.P.Morgan 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 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: JPMS makes a market in the stock of TripAdvisor, Inc.. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: TripAdvisor, Inc.. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all LP. Morgan—covered companies by visiting hnos://ipmm.comiresearchtdisclosures, calling 1-800-477-0406, or e-mailing research.disclwure.inauiriestaApmorgan.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 reseal LI: tlisclosure.inouiriesanininorgan.com. TrIpAdvleor. Inc. {TRIP. TRIP US) Price Chart -- I313 N $65 N 4100 Date Rating Share Price Price Target 140 (5) IS) 352 NSW 18-Jan-12 N 29.03 31.00 125 09-Feb-12 N 29.34 29.00 N 331 N 71 N 73 N S75 N $80 02-May-12 N 36.53 38.00 PricetS) 96 14-Feb-13 N 43.55 44.00 08-May-13 N 52.49 52.00 25-Jut-13 N 71.10 65.00 64 - 24-Oct-t a N 74.85 71.00 12-Feb-14 N 84.20 73.00 32 \e‘fir eftenaea rta 07-May-14 N 83.99 83.00 06-Jun-14 N 104.05 100.00 0 05-Nov-14 N 71.95 75.00 Dec Mar Jun Sap Dec Mar Jun Sep Mc Mar Jun Sep Dec Mar 07-May-15 N 78.47 80.00 11 12 12 12 12 13 13 13 13 14 14 14 14 15 Source: Sloomberg end J.P. Morgan: poor dela adjusted for mock 41:414 and dividends MNalaO covenigeJmi 1S 2012 The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW Overweight, Neutral, UW Underweight, NR - Not Rated 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] Undenveight [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, wn.jpmorganmarkets.com. 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103726 Doug Anmuth North America Equity Research 9 May 2015 J.P.Morgan Coverage Universe: Anmuth, Doug: Amazon.com (AMZN), Bankrate Inc (RATE), Care.com (CRCM), Chess, Inc. (CHGG), Criteo (CRTO), Everyday Health (EVDY), Expedia, Inc. (EXPE), Facebook (FB), Google (GOOG), Groupon (GRPN), HomeAway Inc (AWAY), King Digital Entertainment (KING), Linkedin Corp (LNKD), Netflix Inc (NFLX), Pandora Media Inc (P), Priceline.com (PCLN), TripAdvisor, Inc. (TRIP), TrueCar Inc. (TRUE), Twitter, Inc. (TWTR), Yahoo Inc (YHOO), Yelp Inc. (YELP), Zynga Inc (ZNGA), eBay, Inc (EBAY) J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2015 Overweight Neutral Underweight (buy) (hold) (sell) J.P. Morgan Global Equity Research Coverage 43% 44% 13% IB clients° 55% 49% 37% JPMS Equity Research Coverage 44% 48% 9% IB clients° 75% 68% 54% *Percentage of investment banking clients in each rating category. For purposes only of FINRANYSE 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 arc 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 littp://vAvw.jpniorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiriestdipmorgan.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. 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 JPIdorgan Chase & Co. and its subsidiaries. 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Morgan. 5 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103729 J.P. Morgan CAZ ENOVE Europe Equity Research 29 April 2015 Overweight Accor ACCP.PA, AC FP Price: E49.33 Pace, breadth, and depth of restructuring improving Price Target: 04.00 Accor today announced the sale and franchise-back of 29 hotels in European Beverages, Hotels & Germany and the Netherlands to Event Hotels, one of its existing Leisure fanchisees. The selling price of E209m amounts to €62k/room, which is in Jaafar Mestarl AC the range of previous Ibis/Mercure transactions and in line with the combined carrying amount of c.E206m. This acceleration of the Bloomberg JPMA MESTARI CO> restructuring should be taken positively by the market, in our view. Mike J Gibbs • Pace. Recall that Accor's Q115 revenue release on 161k April showed a relatively slow start to the year in terms of restructuring, with only 10 J.P. Morgan acuities plc hotels restructured at the time vs a target of 100 for FY 15. For Specialist Sales advice, please contact: • Breadth. This is the first material sale and franchise-back deal under Helena C Sykes CEO Sebastien Bazin and, in our view, confirms the breadth of options being evaluated by management and their agnostic/opportunistic approach to restructuring. Recall that Accor initially considered a total Sophie L Warrick of 600 hotels in its portfolio for restructuring. • Depth. Note that 27 of the 29 hotels sold today were acquired in June Pnce Performance 2014 as part of a deal with Moor Park, where Accor bought back SS - properties previously operated under lease contracts. These hotels were N- 4S - classified as held for sale with carrying amounts of E125m (Germany) 4 • - and €81m (Netherlands). An MGallery property in Zurich acquired as .n part of another 2014 portfolio deal with Axa had already been sold-and- N 04.$1 J411 614 &MS ken managed back earlier this year for €32m vs a carrying amount of E25m. - ACCP.PA than WIC* (4) Accor's ability to quickly chum those assets is very supportive, in our MSCI•Eu traeasan YTO Im 3m 12m view. Abs i 32.1% 1.3% 12.6% 39.6% Rel I 13.7% -02% 2.8% 18.6% • Valuation. Accor currently trades on a CY16e P/E of 20.8x vs European hotel peers on 20.6x, and on a CY15e EV/EBITDA of 9.9x vs peers on With this note we transfer coverage of 11.7x. Our DCF Apr-16 PT indicates 10% upside potential to the current Amor to Jaafar Masted share price. Accor SA (ACCP.PA;AC FP) FYE Dec 2014A 2015E 2016E 2017E Company Data AdJ.EPS FY (E) 1.89 2.02 2.37 2.73 Price (E) 49.33 Bloomberg EPS FY (E) 1.59 1.83 2.12 2.36 Date Of Price 28 Apr 15 Adj.P/E FY 26.1 24.5 20.8 18.1 Price Target (E) 54.00 Revenue FY (E mn) 5,454 5,751 6,283 6,729 Price Target End Date 28-Feb-16 EBITDA FY (E mn) 923 1,050 1,189 1,323 52-week Range (E) 51.65-28.87 EBIT FY (E mn) 602 701 812 923 Market Cap (E mn) 11,228.17 Net Income FY (E mn) 223 466 548 632 Shares OfS (mn) 228 DPS FY (E) 0.95 1.06 1.19 1.36 Source: Company data, Bloomberg. J.P. Morgan eatinates. See page 4 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 s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103730 Jaafar Mestari Europe Equity Research 29 April 2015 J.P.Morgan CAZENOVE Investment Thesis, Valuation and Risks Accor (Overweight; Price Target: (54.00) Investment Thesis Accor generates c.60% of group EBIT from the Eurozone, where Real RevPAR remains close to trough levels. In our view, it is well placed to benefit from any upswing in European GDP growth and any improvement could drive upgrades to our undemanding RevPAR growth forecasts for FY15/16 of 4%15% (following 4% in FY14). In time, we see further upside as the company continues with its asset restructuring strategy, cleaning up its asset-heavy Hotellnvest division. We see 16% upside to our FY17 EBIT forecast and 5% upside to our FY I7e EPS from the restructuring, which we believe could also drive a further re-rating by significantly improving profitability and reducing cyclicality and the cost of expansion. We remain OW. Valuation Ow DCF-derived Apr-16 Price Target is E54. We use a WACC of 7.6%, 4.0% medium-term growth, 2.0% terminal growth, flat margins at 14.2% after 2018e, and fade our capex in line with depreciation in the terminal period (vs 1.4x higher in FY 16e). Risks to Rating and Price Target The key risks arc: • European economic recovery. The biggest risk to our estimates and rating is macro-related, i.e. the recovery in hotel demand in the short term is related to the GDP cycle in Europe, particularly France. Our forecasts assume an acceleration in RevPar growth from 2015 to 2016, and a downturn would have significant negative implications for RevPAR. • Restructuring. Accor's management has provided only very limited targets for the asset restructuring programme, so our scenario analysis of it is heavily based on our assumptions. If these prove to be incorrect, or if management does not succeed in carrying out the restructuring, this could be disappointing. • Disclosure. Among the asset-light hotel stocks covered by J.P. Morgan and which we use as valuation benchmarks, there are several differences in the way in which income from franchisees and hotel owners is accounted for (particularly around contributions for capex and the loyalty programme). This somewhat limits visibility on a possible post-restructuring valuation for Accor. 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103731 Jaafar /.testare Europe Equity Research J.P. Morgan CAZENOVE 29 April 2015 Accor: Summary of Financials Profit and Loss Statement Cash flow statement E in millions. year end Dec FY13 FY14 FY15E FY16E FY17E E in millions. year end Dec FY13 FY14 FY15E FY16E FY17E Revenes 5.425 5.454 5.751 6283 6.729 EBIT 521 602 701 612 923 % mange VA' (4.0%) 0.5% 5.4% 9.3% 7.1% Depretiation 8 amatization 325 321 349 377 400 Change in working egal 136 103 41 73 61 EBITDA 846 923 1.050 1.189 1.323 Taxas - - % Ghanas YiY (0.5%) 9.1% 13.8% 13.2% 11.3% Other operatng cash flows 187 189 (11) (11) (tt) EBITDA Margin (%) 15.6% 16.9% 18.3% 18.9% 19.7% Cash Fbw from Operations 843 870 845 988 1.083 EBIT 521 602 701 812 923 % change Y/Y (1.0%) 15.5% 16.5% 15.8% 13.7% Capex (454) (1.575) (507) (534) (542) EBIT Margin (%) 9.6% 11.0% 122% 12.9% 13.7% Nol Interest (90) (52) (59) (55) (49) Net Intalad (90) (52) (59) (55) (49) Free Cash Flow 771 (547) 380 494 577 Eamings betoro Lax 256 419 671 785 902 Disposalt(ourdmse) 334 128 0 0 0 % change Y/Y 7.1% 63.7% 60.1% 17.0% 14.9% Tax (120) (175) (188) (220) (253) Equityraised 13 993 0 0 0 as % of EBT 46.9% 41.8% 28.0% 28.0% 28.0% Equity repad - Net Incoma (Analyst) 126 223 466 548 632 Debt ratad - % change Y/Y 55.6% 77.0% 109.0% 17.7% 15.3% Des repad (129) 716 (108) (197) (255) Shares Outstanding 228 230 231 231 232 Other (227) 37 0 0 0 EPS (Analyst) 1.59 1.89 2.02 2.37 2.73 Dividends Paid (187) (197) (219) (246) (276) % charma YA' 5.1% 18.5% 6.8% 17.5% 15.2% DPS 0.80 0.95 1.06 1.19 1.36 Balance sheet Ratlo Analysis E in millions. year end Dec FY13 FY14 FY15E FY16E FY17E E in millions. year end Dec FY13 FY14 FY15E FY16E FY17E Cash and case equivaient 1.910 2.677 2.677 2677 2.677 EBITDA Margin (%) 15.6% 16.9% 18.3% 18.9% 192% Others 519 475 500 545 583 EBIT Margin (%) 9.6% 11.0% 12.2% 12.9% 132% Currenl Assets 2.893 3.613 3.662 3.751 3.825 Nol Profe Margin (%) 6.7% 8.0% 8.1% 8.7% 9.4% Intangible assets - Dividend payout 144.5% 98.1% 52.7% 50.3% 49.8% Net Raid Assets 2.731 3.440 3.598 3.754 3.896 Total Assets 7.016 8.755 8.962 9207 9.422 Capexaales 8.4% 28.9% 8.8% 8.5% 8.0% CapexiDepreciahcn 1.4 4.9 1.5 1.4 1.4 Liabdities Nol Worting Capita/Sales 0.2 0.3 0.3 0.3 0.3 ST Loans 496 82 82 82 82 Dalers 964 966 1.019 1.113 1.192 Total Current Liabildies 2.071 1.738 1.828 1.990 2.125 Interest Coverage (x) 9.4 17.8 17.9 21.7 27.0 Net DebUEBITDA 0.4 0.2 -0.1 -0.3 -0.5 Long Term Debl 1.718 2.784 2.445 2247 1.993 Net Dobl to Equity 11.0% 4.9% (3.5%) (7.5%) (122%) Other Liar:snes 471 366 366 366 366 Total Liabilises 4260 4.888 4.639 4.603 4.484 Sales/Total Assets 0.7 02 0.6 02 0.7 Shareholdere Equity 2,539 3.654 4,110 4,391 4.725 ROCE 7.8% 6.2% 7.7% 8.8% 9.8% Sowco: Company repans and J.P. Morgan esbmates. 3 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103732 Jeerer Meetari Europe Equity Research 29 Apnl 2015 J.P. Morgan CAZ ENOVE 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 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 Accor. • Beneficial Ownership (1% or more): J.P. Morgan beneficially owns I% or more of a class of common equity securities of Accor. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Accor. • Client/Non-Investment Banking, Securities-Related: I.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: Accor. • Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Accor. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan-covered companies by visiting hnps://ipmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing nNearch.disclosure.inquiriestitcipmorgan.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.invirieskinmorgan.com. Date Rating Share Price Price Target (6) (C) 19-Jul-07 N 44.25 62.00 Accor (ACCP.PA, AC FP) Price Chart 28-Jan-08 N 33.83 47.00 19-Aug-08 N 29.20 37.00 11-Sep-08 N 28.65 33.00 17-Oct-08 N 18.84 27.00 23-Jan-09 N 19.35 15-Jul-10 OW 24.25 28.90 31-Aug-10 OW 24.21 30.50 28-Oct-10 OW 29.22 33.00 28-Jan-11 OW 33.58 40.00 19-Jan-12 N 21.97 25.00 22-May-12 NR 24.60 17-Oct-12 N 24.97 25.00 18-Jan-13 N 28.32 27.00 18-Feb-13 OW 28.84 32.00 15-Aug-13 OW 29.75 34.00 1 1 I I 1 29-Aug-13 OW 28.80 33.00 J I Jan Jul Jan Jul Jan 07 Og 10 12 13 15 21-Oct-13 OW 33.82 37.00 06-Dec-13 N 33.12 34.00 Sainte. 8I0Onitarg and J.P. Mager.: prig data adjust:41ot 140C. Spats and dividend... BM* In Cover a• Jan 21.2009. Jul 15. 2010. 23-Jan-14 N 35.75 36.00 24-Mar-14 OW 37.18 45.00 22-Jan-15 OW 40.86 44.00 20-Feb-15 OW 47.17 54.00 The chart(s) show IP. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW Overweight, Neutral, UW Underweight, NR Not Rated 4 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103733 Jaafar Montan Europe Equity Research 29 Apol 2015 JP.Morgan CA Z ENOVE 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 underperfonu 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: Mestari, Jaafar: Autogrill (AGL.MI), Compass Group (CPG.L), Dufry (DUFN.S), Elior (ELIOR.PA), Kuoni Reisen (KUNN.S), Merlin (MERL.L), SSP (SSPG.L), Sodexo (EXHO.PA), Till AG Germany (TUIGn.DE), TUI AG UK (TUIT.L), Thomas Cook Group (TCG.L), Whitbread (WTB.L), World Duty Free (WDF.MI) J.P. Morgan Equity Research Ratings Distribution, as of March 31,2015 Overweight Neutral Underweight (buy) (hold) (sell) J.P. 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Morgan CAZ E NOVE 28 May 2015 TUIGn.OE, TUM GR Overweight Price: €16.56 TUI AG Price Target: E18.00 Back to basics: 12% EBITA growth CAGR to 2018e is TUIT.L, TUI LN Overweight well backed. Remain OW. Price: 1,173p Price Target: 1,275p The relative stock underperfonnance since the 13ih May investor day offers an European Beverages, Hotels & attractive entry point in TUI shares, in our view (TUI -6% vs VISE +1%). Leisure While expectations of cash returns are on hold for now, and investments to Jaafar Masted AC date may appear underwhelming, the underlying earnings growth potential remains solid. We model 12% EBITA CAGR by 2018e vs guidance of "at least 10%", and see a 16% bull case. We raise our Jun-16 Price Targets to Bloomberg JPMA MESTARI <GO> £18.0 / 1,275p (+3% in EUR terms), reflecting a net of 7% higher EBITA Mike J Gibbs forecasts and lower expected cash position. This offers 9% upside potential to the current share price, with TUI trading on 14.0x CY16e P/E. J.P. Morgan Securities plc • CMD guidance offers EBITA upgrades, but cash story suspended. Following TUI's Capital Markets Day earlier this month, we upgrade our For Specialist Sales advice, please 2015e-2018e EBITA forecasts by 7%, to reach a 12% CAGR vs new contact: guidance of "at least 10%" EBITA growth in the next 3 years. On the Helena C Sykes negative side, investments to date, as well as a higher medium-term capex and interest guidance, mean that our FY17e net cash position is now only £277m (previously £1.7bn). Sophie L Warrick • Better visibility than feared on growth plans. The focus on Hotels and Cruises, in our view, de-emphasizes the critical importance of Source Markets, HotelBeds, Cost savings, and Specialists - together 78% of Figure 1: EBITA growth contribution absolute EBITA growth by 2018e. Within Source Markets, management's % or total 4410m EBITA. 2015e-2018e decision to remove explicit targets for Online and Unique holidays mix, as well as the lower degree of granularity by country, could have conveyed a Cruises sentiment of lower visibility. But we estimate that 57% of the EBITA Hotels & 8% Resods1 improvement should still stem from Passenger growth, Online mix, and cost 14% savings plans - all proven recipes. Source • Low implied returns: upside from investments in Hotels & Cruises. The SPecr" 4% Markets remaining 22% of EBITA growth in our forecasts assumes returns of only Central 8.0% - 8.8% on investments in Hotels and Cruises (vs internal cost of capital costs 123V hurdle of 11.0%). Three years of above-trend capex spend allow for £530m of total hotel growth capex by 2017e without putting pressure on Source Kotelesch 15% Markets capex. • Valuation is attractive. Our new DCF-derived June-16 Price Targets of Source: J.P. tenon estimates £18.0 / 1,275p (prey. £17.50/1,325p, Jan-16) leave 9% potential upside to the current share price. TUI trades on a CY16e P/E of 14.0x, compared to small-cap Tour Operators on 11.3x and to VISE 100 Leisure peers CPG, WTB, IHG, MERL, on 19.4x - 21.2x. TUI also offers a dividend yield of 3.9% vs FTSE 100 Leisure peers on 1.7% - 2.7%. Equity Ratings and Price Targets Mkt Cap Price Rating Price Target Co __Ln n N_y__La)__I Tidw 5 It CCT nric• Cur Prev Cut Frey TUI AG Genitally nm GR 10,699.12 EUR 16.56 OW Ns 18.00 17.50 TUI AG UK TUI LN 10,722.57 G8p 1,173 OW nt 1,275 1,325 Source- Cemparry data. BOarrterg J.P. /Arca, estimates nt r no change. MI prices as oI27 May 15. See page 19 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. winvjpmorganmaricets.com s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103737 !setae /.1estan Europe Equity Research 28 May 2015 J.P.Morgan C AZ ENOVE Figure 2: Revenue and EBIT margins TUI AG — company overview EURm. 54 TUI AG is the world's largest integrated tourism group, 25.000 7% combining Tour Operating businesses catering for a total 2Im passengers per annum, with 265 hotels and resorts 20.000 6% operated under brands such as Riu, Robinson, and Iberotel, 15.000 5% as well as 8 cruise ships under the Hapag Lloyd [ Kreuzfahrten and TUI Cruises brands (the latter a JV with 10,000 4% [ Royal Caribbean). Outside of its main Tourism segment, 5,000 3% r TUI is also active in the niche Specialist & Activity segment, as well as in the BtoB accommodation wholesaler z 0 2% business (HotelBeds). Stakes in shipping company Hapag 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e Lloyd, as well as online travel agent LateRooms.com, have i Mm Revenue EBITA margin [ been identified as non-core assets. Source: company data. JP. lAorgen asuman,' I Figure 3: EBIT margins by division Figure 4: EBIT contribution by division EURm 50% 1,500 — Hotels & Resorts U • HotelBeds 40% . Cruises 1,250 in . I i • Specialists 30% 1,000 - HotelBeds _El .. • Cruises 20% 750 —§-11—m — — — — • Hotels & Resorts - Source Markets 10% — • SourceMarkets • ••Specialists 500 0% 250 -10% — ITITIT 0 re 2013 2014 2015e 2016e 2017e 2018e Source: canpany data. J.P. Morgan eserrefes Source: company dela. J.P. Morgan estimates Figure 5: EBIT by quarter Figure 6: Shareholders EURm 1,200 Madashov 13% 1,000 Rill Hotels 800 4% 600 400 200 0 •200 .400 01 end Dec 02 end Mar 03 end Jun 04 end Sept Other 83% N2011 e2012 02013 N2014 02015e Source: Blomberg as of 26 May 2015 Sane: company data. J.P. Morgan esornalea 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103738 -Wafer ',tested Europe Equity Research J.P.Morgan CAZ ENOVE 28 May 2015 TUI AG — German listing Overweight TUI AG (TUIGn.DE;TUI1 GR) Company Data FYE Sep 2014A 2015E 2015E 2018E 2018E 2017E 2017E Price (€) 16.56 (Prey) (Curd (Prey) (Cu,,) (Prey) (Curr) Date Of Price 27-May-15 Adj.EPS FY (E) 0.60 0.67 0.95 0.92 1.13 1.04 1.35 Price Target (E) 18.00 Revenue FY (E mn) 18,715 19,010 19,662 19,491 20,343 19,991 21,173 Price Target End Date 30-Jun-16 EBITDA FY (E mn) 1,208 1,367 1,399 1,490 1,524 1,591 1,698 52-week Range (E) 17.93.9.38 EBITDA Margin FY 6.5% 7.2% 7.1% 7.6% 7.5% 8.0% 8.0% Market Cap (E bn) 9.84 EMT FY (E mn) 869 1,022 1,042 1,137 1,154 1,228 1,313 Shares 0/S (mn) 594 EMT Margin FY 4.6% 5.4% 5.3% 5.8% 5.7% 6.1% 6.2% Fiscal Year End Sep Net Profit FY (E mn) 105 402 348 572 543 639 720 P/E (x) FY 53.1 24.7 28.3 17.9 18.1 16.0 13.7 Source: Company data. Bloomberg. J.P. Morgan estimates. TUI AG — UK listing Overweight TUI AG UK (TUIT.L;TUI LN) Company Data FYE Sep 2014A 2015E 2015E 2016E 2016E 2017E 2017E Price (p) 1,173 (Prey) (Curd (Prey) (Curl) (Prey) (Corr) Date Of Price 27-May-15 Adj.EPS FY (E) 0.60 0.67 0.95 0.92 1.13 1.04 1.35 Price Target (p) 1,275 Revenue FY (E mn) 18,715 19,010 19,662 19,491 20,343 19,991 21,173 Price Target End Date 30-Jun-16 Adjusted EBITDA FY (E 1,208 1,367 1,399 1,490 1,524 1,591 1,698 52-week Range (p) 1,284-1,055 mn) Market Cap (£ bn) 6.97 EBITDA Margin FY 6.5% 7.2% 7.1% 7.6% 7.5% 8.0% 8.0% Shares 0/S (mn) 594 EMT FY (E mn) 869 1,022 1,042 1.137 1.154 1.228 1,313 EMT Margin FY 4.6% 5.4% 5.3% 5.8% 5.7% 6.1% 6.2% Net Profit FY (E mn) 105 402 348 572 543 639 720 P/E fx1FY 53.2 24.7 28.4 18.0 18.2 16.0 13.7 Source: Company data. Bloomberg. J.P. Morgan estimates. Relative valuation Table 1: European Tour Operators valuation Calendarised. as of 27th May dosing price PIE EV/EBIT Dividend yield FCF yield EPS growth 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E TUI AG 16.6x 14.0x 102x 8.7x 3.5% 3.9% 2.4% 4.8% nm 18.9% Thomas Cook Group 12.0x 10.0x 7.0x 5.9x 0.0% 0.0% 6.8% 7.0% 7.2% 19.4% Komi Raison 18.5x 14.7x 10.9x 7.9x 2.5% 2.9% -0.1% 10.5% 11.7% 26.4% Weighted average 15.7x 13.2x 9.5x 8.0x 2.6% 2.9% 3.1% 5.8% nm 19.6% Scuts Boomberg. JP. Morgan estirilates 3 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103739 Surfer ?Jested Europe Equity Research 28 May 2015 J.P.Morgan CAZENOVE The new medium-term guidance of "above I0%" EBITA ... but we now model only E277m net cash by 2017e growth drives 7% upgrades to our 20I5e-2017e EBITA (previously € I.8bn), driven by higher exceptionals, interest, forecasts, and 14% upgrades to our EPS forecasts... capex guidance, investments in cruises and aircraft. Figure 7: New vs old forecasts, 2015e-2018e (€m) Figure 8: Net cash bridge, 2017e (€m) 1,777 411 .52 421 ill -480 ir 300 -403 402 277 *172 sm. .. . . . 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e ' , if, it s. 1 ) Se -el) ste l t) ae* NOM MNew E8ITA et Old ■New EPS Source: J.P.Magen estimates Source: J.P. Morgan estimates The bulk of EBITA growth should continue to come from Within Source Markets, 57% of EBITA growth is from the Source Markets and HotelBeds, as well as from the same proven drivers as in 2012-2014. Consensus should relatively visible central cost cuts and merger synergies. progressively warm up to new drivers, such as long haul. Figure 9: Breakdown of total €410m Group EBITA growth, 2015048e Figure 10: Breakdown of total €194m Source Markets EBITA growth Cruises 8% Passenger Hotels & growth 21% Resorts 14% Source Other/new Specialists 4% drivers 43% Markets 47% .1110 Online rkstribution 10% Central costs 12% HotelBeds Cost savirqs 15% 26% Source JP Morgan estimates Source: J.P. Morganestimates There is I I% further upside to ow 2018e EBITA forecasts ... which could materialise as early as 2016e if the in a Bull case where TUI delivers an EBITA growth CAGR investment in hotels and cruises were to show better returns of 16% by 2018e (vs JPMe base case I2%)... than recent deals and than our forecasts. Figure 11: Bull vs Base case EBITA growth, 2015e-2018e, €m Figure 12: Implied post-tax returns on selected investments 284 12.5% 12.0% NJPMe 11.0% w Bull 5.5% 5.5% 84 85 56 61 35 50 15 22 50 50 ■Bull • Source Hotels& Cruises Specialists HotelBeds Central costs Europa II Hybrid Mein Schiff New TUI AG Markets Resorts Bald 5, 6, 7, 8 Hotels cost of capital J.P. Maven eabmates Source: J.P. Marganestenates 4 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103740 Jaafar Mestari Europe Equity Research 28 May 2015 J.P.Morgan CAZENOVE Figure 13: TUI AG - Group Structure Equity Debt Mordashov 13% Ri 4% u Freefloat 83% HY Bond €45Om Other €1.750m RCF,v.a. TUIAG Source Markets Northern Region 100% Central Region Western Region 50% Shops v.a. Planes (131) v.a. TU I Hotels & Resorts Non4Aainstream Specialists 100% 51% HotelBeds 100% 49% Robinson (23) 100% Held for sale Other (139) v.a. CSAV/ Hapag Lloyd 12.6% LateRooms.com 100% Source: J.P. Worsen S This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103741 Jaafar Mestari Europe Equity Research 28 May 2015 J.P.Morgan CAZENOVE EBITA growth in the new roadmap New growth roadmap TU1 AG expects to deliver "at least 10% underlying EBITA CAGR" through 2016e, 2017e, and 2018e. We model 12% EBITA CAGR as our JPME Base case, but believe that a full delivery of the separate divisional targets could entail as much as 16% CAGR in a Bull case. Table 2: TUI AG - Growth roadmap 2015e-2018e Division TUI AG targets JPMe Base case forecasts Source Markets >3% revenue CAGR 3.8% revenue CAGR OneAvialion plan E50m included > 10% EBITDA CAGR 8.5% EBITA CAGR Hotels >60 new hotels @ ti Am EBITA each 40 new hotels (4 E1.4m each Cruises 4 new ships @ €25m EAT each (50% share) 4 new ships a 07.5m each (50% share) HotelBeds 15%-20% EWA CAGR 15.0% EBITA CAGR Specialists EBITA CAGR in line with Tomem 8A% EBITA CAGR Central Costs ESOm by 2017e E5Orn by 2017e Soya: ampany data. J.P. Wpm estrnates JPMe base case: 12% EBITA CAGR In our base case, the absolute EBITA improvement over 2015e-2018e stands at €410m. This should be driven by a revenue CAGR of 3.9% (an absolute €2.4bn incremental revenue) and overall margin improvement of 130bp from 5.3% in 2015e to 6.6% in 20I8e. Table 3: TUI AG — JPMe divisional forecasts EURm. years to end September 2014 2015e 2016e 2017e 2018e 2015e-2018e CAGR Source Mantels 14.597 15,365 15,882 16.525 17.197 1.832 3.8% Hotels 8 Resons 516 578 595 625 650 72 4.0% Cruises 281 289 289 289 289 0 0.0% Specialists 1.626 1,788 1,824 1.860 1.897 109 2.0% HaeiBeds 1.000 1,100 1,210 1.330 1.464 364 10.0% Central costs 518 543 543 543 543 0 0.0% TOTAL REVENUE 18,537 19,662 20,343 21,173 22,040 Z378 3.9% Source Knots 643 701 742 812 895 194 8.5% Hotels 8 Resons 203 240 253 275 296 56 7.2% Cruises 10 62 77 88 97 35 16.0% Specialists 46 54 59 64 se 15 8.4% HcteiEleds 102 116 134 154 177 60 15.0% Central costs -133 -13t -111 -81 -81 50 -14.9% TOTAL EBITA 870 1,042 1,154 1,313 1,452 410 11.7% Source:company data. J.P. Morgan estmates In terms of divisions, Source Markets, HotelBeds Group, and the central costs savings should be the most material contributors, representing a combined 74% of EBITA growth, while the Specialist business should contribute 4% of the total growth. This leaves "only" E91m EBITA contribution to be generated in the Hotels & Resorts and Cruises divisions (24% of total EBITA growth). B This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103742 Jaafar Meelad Europe Equity Research J.P.Morgan CAZ ENOVE 28 May 2015 Figure 14: Breakdown of total €410m EBITA growth Figure 15: Bull vs Base case EBITA growth %, 2015e-2018e fm, 2015e-2018e Cruises a 8% Hotels & 284 Resorts 14% am NJPMe Source •Bull Specialists 4% Markets 47% 56 84 35 50 50 50 15 22 Central costs I 12% Source Hotels& Cruises Specialists HotelBeds Cenaal costs Markets Resorts HotelBeds 15% Some: J.P. lAcrgen esemates Source: J.P. Morgan esunates Note that our base case does not represent particular caution on any of the divisional targets, and that the bridge to a Bull case would offer upside across divisions. 7 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103743 Infer Mestari Europe Equity Research J.P.Morgan CAZENOVE 28 May 2015 Source Markets growth in detail Back to 2012 TU1 Travel's "growth roadmap" communicated in December 2012 is an interesting precedent. The Mainstream division (the predecessor to Source Markets) was expected to achieve €130m EBITA growth, or 70% of the total EBIT CAGR of 7%- 10%, with smaller contributions from Specialists and Accommodation Wholesaler (now HotelBeds). Within this, we note that divisional targets offered more granularity, with a breakdown ofMainstream profit growth along four separate drivers (passenger growth, Unique products mix, Online distribution, and cost savings), each with country-by-country targets. Figure 16: TUI Travel 2012 roadmap - Mainstream growth Figure 17: TUI Travel 2015 roadmap - Source Markets growth %of the total El 30m base case % of the total E194m base case Passenger growth 11% Passenger p higrowth 21% Cost savings 43% ra Unique products 15% Other/new drivers 43% .444 Online dostribution 10% AlOrin distribution Cost savings 31% 26% Scarce: J. P. Morgan •samaras Source: J. P. Mogen estimates Reconciling 2018e targets • Passenger growth Our forecasts assume 1.9% compound annual passenger growth between 2015e and 2018e in Source Markets, which, assuming constant average selling prices and margins, would yield c. €41m EBIT benefits, representing 21% of our total EBITA growth of €194m over the period. Passenger growth was only 11% of EBITA CAGR in the previous roadmap. • Unique mix Mentions of the mix of products described as unique (a combination of either differentiated or exclusive products, as opposed to the commoditized ranges) has now altogether disappeared from TUI AG's reporting. The new roadmap emphasizes the aim to deploy a "broader, more flexible customer offering". Our perception is that TU1 AG has walked away from any ideological commitment to differentiated and I or higher margin offers for their own sake, and will opportunistically grow business in lower-margin products. This should be reflected in passenger growth, so that we assume no separate benefit from any change in the Unique mix going forward. Unique mix was expected to drive 15% of EBITA growth in the previous roadmap. 8 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103744 -Wafer Mestari Europe Equity Research 28May 2015 J.P.MOrgarl CAZENOVE • Online The Northern region is now described as having "optimal levels" of direct and online distribution, so that would not assume any specific benefits from improving online mix anymore. We believe that the Central Region could increase its Online mix from 12% in 2014 by c.2-3pts per annum, potentially reaching 22% online distribution by 2018c. Assuming 2%-3% margin premium on online sales in line with previous comments, this could entail El 5m EBITA benefits. Similarly, we see the Western Region as capable of improving its Online mix at a lower pace of 2pts given its higher starting point, potentially reaching 53% online distribution by 2018e and yielding E5m EBITA benefits. Therefore only c. €20m or c.10% of our base case EBITA growth should be driven by Online mix, compared to 31% in the previous roadmap. • Cost savings TU1 targets a total E50m EBITA benefits from the new OneAviation plan. The main initiatives will consist of introducing a unified organization across the five airlines (Thomson Ainvays UK, TUIfly DE, Jetairfly BE, Arkefly NL, and TUIfly Nordics), centralizing engineering and maintenance for the 128 planes, and integrating procucrement on all contracts. If hilly delivered and retained, these benefits would drive 26% of our total E194m EBITA growth. The Business Improvement Program that ended in 2014, in comparison, was expected to drive 43% of EBITA growth in the 2012 roadmap. • Other / New driven Some €83m of our 2015e-2018e EBITA growth cannot, in ow view, be reconciled with previous growth drivers. This could be a source for concern in the short term as TUI AG builds a track record of growing its Source Markets EBITA outside of the 2012-2014 framework. We expect this €83m to be generated through a mix of operational efficiency / turnaround measures, and growth initiatives, and would expect consensus to progressively reflect those with more confidence as they start showing results. On the turnaround side, we note the following sources ofupside: I. Nordics margin was down -220bp in 2014, and recouping this on flat revenue could bring c. E25m EBITA. 2. The Russia and CIS joint venture was the largest contributor in the -€18m loss reported by the Emerging Markets operations in 2014. 3. France reported a E36m loss in 2014. On the growth side, TU1 AG's roadmap identifies the following drivers, which have yet to be quantified: I. Tailor-made, variable durations, and third-party flying products. 2. Long-haul expansion. 3. Modernised UK cruise offering. This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103745 Jaafar Masten Europe Equity Research 28 May 2015 J.P.Morgan CAZENOVE More on Unique & Online The removal of any explicit targets for Unique or Online mix when compared with the previous roadmap, in our view, is a combination of faster than expected execution on the Unique front (at the risk of neglecting potential growth areas in least sophisticated product lines), and slower than expected execution on the Online front (where a reiteration of the 50% target would have left the group pursuing online sales for their own sake). As a reminder, as of September 2014, TUI Travel was making strong progress towards its 2017e targets, with total Unique mix having improved by 6pts over two years, which looked on track to improve by another 5pts over the next 3 years. Online distribution on the other hand, had improved by 5pts over two years, and was facing a bigger stretch, with 2017e targets implying it could improve by another 12pts in the next 3 years. Table 4: TUI Travel — Mix improvement % of customer volumes 2012 2013 2014 delivered 2017e targets remaining (old) UK Unique mix 79% 83% 84% +5p1 85% 4. rpr Online nix 44% 47% 51% 47p1 60% «9pi Ncdics Unique mix 92% 93% 94% +2pt 97% 4.3pi Online ntix 65% 67% 70% 45p1 79% 4.9p1 Germany Unique mix 47% 51% 52% +5pt 66% +14p1 Online ntix 4% 8% 11% +7p1 25% +14p1 France Unique mix 74% 81% 89% +15pt 89% +0p1 Online mix 21% 18% 24% +3pt 35% +Opt Other Unique mix 62% 65% 69% 4.7p1 68% +0p1 Online mix 54% 50% 52% .2pt 65% +Om Total Unique mix 65% 69% 71% +6pt 76% +5pf Online mix 33% 35% 38% +5pt 50% +12pf Son: company data. J.P Maw esbmates 10 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103746 Jaafar Mestari Europe Equity Research 28 May 2015 J.P.Morgan CAZENOVE Cash, capex, and returns What happened to the cash We now model only E277m net cash by 2017e (previously EI.8bn), driven by higher cxceptionals, interest, capex guidance, investments in cruises and aircraft. Figure 18: Net cash bridge, 2017e EURm. year to end September 1 1,777 -111 at -52 -421 .Mnm U 1 -300 400 .92 277 *172 a ▪ 044) 404I I • " 43' Os 44r Scurce:J.P. Alcopen estimates Capex guidance leaves limited downside risk Based on TUI Travel and TUI AG's prior reporting, we estimate that Capex for all Tour Operating businesses (including Source Markets) has been trending around 6450m per annum since 2012. This will in our view be modestly reduced to E435m 6415m. Beyond that, we believe that management guidance for total group capex of E800m in FY I5e and E750m in FY I6e can accommodate the accelerated development capex in Hotels without the need to put on hold any investments in aircraft, shops, or IT / infrastructure in Source Markets. Table 5: Capex by division EURm years to end September 2010 2011 2012 2013 2014 2015e 2016e 2017e 2015-2017e Total capes 302 445 480 598 601 800 750 750 1300 100% Hotels 114 133 285 325 325 935 41% Maintenance 114 133 135 135 135 405 18% Growth nrn nm 150 190 190 530 23% Tour Ops 240 361 459 469 453 435 415 415 1,265 55% Source Markets • 361 344 344 1,050 46% Hotellleds • 30 29 29 89 4% Specials 26 25 25 76 3% Central / Other 17 17 17 51 2% Cruises 15 15 80 10' 10' 100 4% Sara: J.P. Morgan esametes Excluthe spicy cenetutisn forJUstips (JP1Ae (teem in each cif 2016e and 2017e) 11 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103747 Seeder Mestari Europe Equity Research J.P.Morgan CAZENOVE 28 May 2015 Undemanding implied returns offer upside Our base case EBITA growth forecasts detailed above imply that TUI can generate post-tax returns of 8.0% on new hotels, and 8.8% on new ships. This is below the group's stated cost of capital of 11.0%. This degree of caution is warranted, in our view, given the returns achieved on recent deals. Figure 19: Implied post-tax returns on selected investments 12.5% 12.0% 11.0% 8.8% 8.0% ■ JPMe 5.5% 5.5% Europa II Hybrid Meh Schiff New TUI AG Bond 5.6.7,8 Hotels cost of capital Scurce:J.P.Mcipan estimates • Europa II On 9th January 2015, TUI AG announced that it would assume ownership of the Europa II luxury Cruise ship, currently under charter agreement within Hapag Lloyd Cruises, for a consideration ofE278m (€67m cash paid + €211m debt assumed). This is expected to boost EBIT in the Cruise division by €20m in FY16e, a yield of 7.2% pre-tax and 5.5% post-tax. • Hybrid Bond On 25Th March 2015, TUI AG announced that it would redeem its outstanding E300m perpetual bond, previously accounted for as equity. This will allow TUI to save the E22m annual coupon, a yield of 7.3% pre-tax and 5.5% post-tax. • Mein Schiff ships 5, 6, 7, and 8 A total of 4 new ships are due to come on-stream in the TUI Cruises JV (one in each of 2015, 2016, 2017, and 2018). We have assumed that each ship contributes €17.5m post-tax, of which TUI consolidates a 50% stake, having invested E 100m in equity into the IV. This implies an 8.8% return, while TUI AG's target ofE25m post-tax contribution per ship would imply beating cost of capital, at a 12.5% return. • New Hotels Our forecasts assume €530m of growth capex in the Hotels & Resorts business in the next 3 years, which we expect to fund the opening of 40 new hotels (half of which will be owned). We have assumed that each hotel contributes €1.4m pre-tax, in line with TUI AG's targets. This implies an 8.0% return. While we would not expect TUI AG to be in a position to open more than 10-15 hotels per annum and for the guided capex, we note that if our €530m growth capex was enough to fund the opening of the full 60 targeted hotels at similar pretax contributions, the implied returns would be 12.0%. 12 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103748 Jaafar ?Jested Europe Equity Research J.P.Morgan CAZENOVE 28 May 2015 Valuation DCF valuation of €18 / 1,275p leaves 9% upside Our June-2016 DCF-derived price target is E18.0, which translates into I,275p at current exchange rates. We use a WACC of 10.3% (11.5% cost of equity, 4.5% cost of debt), 3.5% medium-term growth, 2.0% terminal growth, and assume flat underlying EBITA margins at 6.6% after 2018e. Table 6: TUI AG - DCF valuation EURm. years to end September Explicit Middle Terminal forecasts period period 2016e 2017e 20188 201% 2020e 2024e Turnover 20,343 21,173 22,040 22,746 22,811 25.797 Operating profit (EBIT) 986 1.210 1.349 1.396 1,506 1.703 Cash exceptions% -95 -30 -30 30 0 0 Add back Depredation & Amortisation 433 451 469 484 486 549 EBITDA 1,324 1,630 1,788 1,851 1,992 2,253 Taxation -193 -251 -284 -296 -361 -409 Wcflong Capital 46 56 58 47 0 0 Capex -750 -750 -661 -682 -486 -549 Free Cashflow for the Firm (PCPF) 428 885 901 920 1,145 1,294 Discount rate (WACC) (%) 10.3 Discount factor/multiple to Oct-15 0.91 0.82 0/5 0.68 2.23 5.51 Discount factor/ multiple to 0c1-16 0.00 0.91 0.82 0.75 2.46 6.08 11245 allika Derived EV 11,935 12,737 Net Cash at year-end 164 277 Assets held fix sale 503 500 0 Minorities 18x -1,245 -1,334 Pension liabilities -1.275 -1.275 Derived equity value 10.080 10.905 Weighted equity value, June 2016 10.668 No of shares (m) 594 Derived value per share (EUR) 18.0 Source:J.P.1Aorgan estimates In terms of sensitivities, every +/- 0.25% change in WACC would move our DCF value down/up by 4%. Every +1- 0.50% change in terminal growth would move our DCF value up/down by 5%. Table 7: DCF sensitivity to WACC and Terminal growth inputs WACC WACC 9.8% 10.0% 10.3% 10.5% 10.8% 9.8% 10.0% 10.3% 10.5% 10.8% Terminal 1.0% 17.7 17.0 16.5 15.9 15.4 Terminal 1.0% -2% -5% -8% -11% growth 1.5% 18.5 17.8 17.2 16.6 16.0 growth 1.5% 3% -1% -5% -8% 2.0% 19.4 18.7 18.0 17.3 16/ 2.0% 8% 4% 0% -4% /5% 20.4 19.6 18.8 18.1 17.4 2.5% 14% 9% 5% 1% 3.0% 21.6 20.7 19.9 19.1 18.3 3.0% 21% 15% 11% 6% Some: J.P. k organ estimates 13 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103749 Jaafar Meslari Europe Equity Research 28 May 2015 J.P.Morgan C AZ E NOVE The change to our previous SOP-based PT of E17.5 is a reflection of higher operating forecasts (combined EV of TUI Travel, Hotels & Resorts, and Cruises +E I.6bn ie +E2.2 per share), partly offset by a lower net cash position (-E I.3bn le - E2.2 per share). Our values for assets held for sale, minorities, and pension liabilities are largely unchanged. 14 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103750 Jaafar Masten Europe Equity Research 28 May 2015 J.P.Morgan CAZENOVE Investment Thesis, Valuation and Risks TUI AG Germany (Overweight; Price Target €18.00) Investment Thesis Please refer to our investment thesis for TUI AG below. Valuation Please refer to our valuation methodology for TUI AG below. Risks to Rating and Price Target Please refer to the risks we identified for TUI AG below. Investment Thesis, Valuation and Risks TUI AG UK (Overweight; Price Target 1,275p) Investment Thesis We view the now fully integrated TUI Group as well capable of delivering on its target of "at least 10%" EBITA growth by 2018e (IPMe base case forecasts 12%, bull case 16%). We expect a combined 78% of absolute EBITA growth by 2018e to come from Source Markets, HotelBeds, cost savings, and Specialists — all boasting proven track records, with the new roadmap building on the success of the 2012- 2014 period. We acknowledge that the remaining 22% of EBITA growth which we model in Hotels and Cruises are partly unproven and face the usual risks of accelerated capital deployment (JPMe €530m in Hotels, €220m in Cruises by 2018e), but our forecasts only imply 8.0% - 8.8% returns on those investments (vs internal cost of capital hurdle of 11.0%). Valuation Our June-2016 DCF-derived price target is E18.0 / 1,275p. We use a WACC of 10.3% (11.5% cost of equity, 4.5% cost of debt), 3.5% medium-term growth, 2.0% terminal growth, assume flat underlying EBITA margins at 6.6% after 2018e, and value Hotel minorities at I 8x Earnings and the Hapag Lloyd stake at E500m. Risks to Rating and Price Target • Execution. Our forecasts include 100% of the guided cost and tax synergies by 2017e. While we expect "proven recipes" such as Online sales will still drive the bulk of EBITA growth, management's decision to remove explicit targets for Online and Unique products reduces medium-term visibility. • Capital deployment. TUI AG's ambitious targets of opening over 60 resorts under the TUI Hotels & Resorts brand, while allowing JV partner Riu to pursue 3.4 projects per year and also exploring opportunities in the Cruises portfolio, may ultimately put the company's balance sheet flexibility to the test. • European macro. Adverse economic conditions could further hurt the prospects for TUI AG's main reported division Source Markets. A marked economic downturn would also hurt the value of TUI AG's remaining stake in container shipping line Hapag-Lloyd, making a disposal difficult. 15 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103751 Jaafar /.testan Europe Equity Research 28 May 2015 J.P.Morgan CAZENOVE TUI AG Germany: Summary of Financials Profit and Loss Statement Cash flow statement E in millions. year end Sep FY14 FYI5E FY16E FY17E E in millions. year end Sep FY14 FYI5E FY16E FYI7E Revenues 18.715 19.662 20.343 21.173 EBIT 869 1.042 1.154 1.313 % change YN 1.3% 5.1% 3.5% 4.1% Deprecation 8 amortization 399 419 433 451 EBITDA 1.208 1.399 1.524 1.698 Change a working capital 146 64 46 56 % change WY 10.8% 15.8% 8.9% 11.4% Other Items ill) 74 74 74 EBIT 869 1.042 1.154 1.313 Cash Flair from Operations 937 970 1.165 1.375 % change WY 14.0% 20.0% 10.8% 13.8% Taxes - EBIT Margin (%) 4.6% 5.3% 5.7% 6.2% Capex (601) (800) (750) (750) Net Interest (229) (200) (180) (164) Accutsilions/dsposah - Earnings before tax adjusted 506 618 806 1.046 Net Interest (229) (200) (180) (164) % change WY 55.3% 22.3% 30.3% 29.8% Free cash flow 464 304 552 750 Tax (222) (204) (193) (251) as % of EBT 43.8% 33.0% 24.0% 24.0% Equity raisedkepaid (7) 309 0 0 Net Income Rep 105 348 543 720 Debt Raisedkepaid 46 140 20 (113) % change WY 2334.9% 232.2% 56.1% 32.7% Other (51) 0 0 0 Shares Outstanding 263 594 594 594 Dividends Paid (169) (408) (335) (412) FD EPS 0.31 0.59 0.91 1.21 Beginning cash 2.702 2.286 2.286 2.286 Adusted EPS 0.60 0.95 1.13 1.35 Ending cash 2,286 2.286 2.286 2.286 DPS 0.33 0.56 0.63 0.67 Net Change in Cash 168 (0) 0 (0) % change VA 120.0% 70.6% 12.0% 6.3% Net Debt (323) (183) (164) (2.072) Balance sheet Ratio Analysis E in millions. year end Sep FY14 FYI5E FY16E FY17E E in millions. year end Sep FY14 FYI5E FY16E FY17E Cash and cash equivalents 2.286 2.286 2.286 2.286 P/E (x) 27.7 17.4 14.7 12.3 Amounts Receivable 1.918 2.015 2.085 2.170 EV/EBITDA 6.6 5.8 5.4 3.7 Inventories 127 133 138 143 EV/EBIT (x) 9.2 7.8 7.1 4.8 Others 1.049 1.049 1.049 1.049 EV/Sales (x) 0.4 0.4 0.4 0.3 Current assets 5.379 5.482 5.557 5.648 FCF yield (%) 10.7% 3.1% 5.6% 7.6% Dividend Yield (%) 2.0% 3.4% 3.8% 4.0% LT eivestrnents - - - Price/Book (%) - Net fixed assets 2.837 3.218 3.535 3.834 Total assets 14.026 14.648 15.066 15.482 Interest coverage (x) 5.3 7.0 8.5 10.4 Net debt /EBITDA (x) (26.7%) (13.1%) (10.8%) (122.0%) Liabilises Net debt to equity (12.8%) (6.5%) (5.3%) (59.3%) ST loans 215 215 215 215 Payables 3.301 3.468 3.588 3.735 ROCE (%) 10.6% 15.2% 17.6% 22.9% Others 4.000 4.000 4.000 4.000 ROE (%) 7.0% 22.0% 23.5% 25.1% Total current babbles 7.515 7.682 7.803 7.949 Long term debt 1.748 1.888 1.908 - Other liabilities 3.994 4.133 4.153 4.040 Total liabilities 11.509 11.816 11.955 11.989 Shareholders' equity 2.405 2.721 2.998 3.381 BVPS - - - Smite: Company reports and J.P. Morgan estimates. 16 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103752 sear Masted Europe Equity Research 28 May 2015 J.P.Morgan CAZENOVE TUI AG UK: Summary of Financials Profit and Loss Statement Cash flow statement E in millions, year end Sep FY14 FY15E FY16E FY17E E in millions. year end Sep FY14 FY15E FY16E FY17E Revenues 18,715 19,662 20,343 21,173 EBIT 869 1.042 1,154 1,313 % change VA' 1.3% 5.1% 3.5% 4.1% Depreciation 8 amortization 399 419 433 451 EBITDA 1,208 1,399 1,524 1,698 Change in working caudal 146 64 46 56 % change YN 10.8% 15.8% 8.9% 11.4% Other items (11) 74 74 74 EBIT 869 1,042 1,154 1,313 Cash Flow from Operations 937 970 1,165 1,375 % change YfY 14.0% 20.0% 10.8% 13.8% Taxes - - EBIT Karol (%) 4.6% 5.3% 5.7% 6.2% Capex (601) (800) (750) (750) Net Interest (229) (200) (180) (164) Acquisilionskasposals - Earnings before tax adjusted 506 618 806 1,046 Net Interest (229) (200) (180) (164) % change YfY 55.3% 22.3% 30.3% 29.8% Free cash flow 464 304 552 750 Tax (222) (204) (193) (251) as % of EBT 43.8% 33.0% 24.0% 24.0% Equity raised/repaid (7) 309 0 0 Net Income Rep 105 348 543 720 Debt RaisticVrepaid 46 140 20 (113) % change Y/Y 2334.9% 232.2% 56.1% 32.7% Other (51) 0 0 0 Shares Outstanding 263 594 594 594 Dividends Paid (169) (408) (335) (412) FD EPS 0.31 0.59 0.91 1.21 Beginning cash 2,702 2,286 2,286 2,286 Adjusted EPS 0.60 0.95 1.13 1.35 Ending cash 2416 2.286 2,286 2,286 DPS 0.33 0.56 0.63 0.67 Net Change in Cash 168 (0) 0 (0) % change Y/Y 120.0% 70.6% 12.0% 6.3% Net Debt (323) (183) (164) (2,072) Balance sheet Ratlo Analysis E in millions, year end Sep FY14 FY15E FY16E FY17E E in MIlions, year end Sep FY14 FY15E FY16E FY17E Cash and cash equivalents 2,286 2,286 2,286 2,286 PIE (x) 27.8 17.5 14.7 12.3 Accounts Receivable 1,918 2,015 2,085 2,170 EV/EBITDA 6.7 5.9 5.4 3.7 Inventories 127 133 138 143 EVIEBIT (x) 9.3 7.9 7.1 4.8 Others 1,049 1,049 1,049 1,049 EV/Sales (x) 0.4 0.4 0.4 0.3 Current assets 5,379 5,482 5,557 5,648 FCF yield (%) 10.7% 3.1% 5.6% 7.6% Dividend Yield (55) 2.0% 3.4% 3.8% 4.0% LT iwestments 0 0 0 0 Price/Book (%) - Net fixed assets 2,837 3,218 3,535 3,834 Total assets 14,026 14,648 15,066 15,482 Interest coverage (x) 5.3 7.0 8.5 10.4 Net debt /EBITDA (x) (26.7%) (13.1%) (10.8%) (122.0%) Liatdikes Net debt to equity (12.8%) (6.5%) (52%) (59.3%) ST loans 215 215 215 215 Payatres 3.301 3.468 3,588 3,735 ROCE (%) 10.6% 15.2% 17.6% 22.9% Others 4,000 4,000 4,000 4,000 ROE (%) 7.0% 22.0% 23.5% 25.1% Total current kabilibes 7,515 7,682 7,803 7,949 Long term debt 1,748 1,888 1,908 0 Other liabilities 3,994 4,133 4,153 4,040 Total hatdities 11.509 11,816 11,955 11,989 Shareholders' equity 2.405 2,721 2,998 3,381 BVPS - - - Solace: Company reports and J.P. Morgan OSUMMOS. 17 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103753 Jaafar Mestari Europe Equity Research 28May 2015 J.P.Morgan CAZENOVE JPM 0 -Profile (2. Iobal Equity ()cant.] t v.. Iv I ' TUI AG (GERMANY! Consumer Discretionary) /401:11.004015 Orr eestswelime4P0w" Local Share Price Conant: 17.03 12 Mth Forward EPS Comae OM )0) 110 210 ... .... .. 110 110 em Om 450 111111i111111li gtLwi PE (1Yr Forward) Current: 10.0x PIE Relative to Germany Index Cures: In 1130 SIP • 141 200 I - 010 1014 I 101 2014 040 0.03 OP 451 8 § 50188,3§8198a8§11 8 riv ie kaligakalkiakaakaakal'ka Earn ngs Yield (& Local Bond Yield) Cunard: 6% Dividend Yield (Trailing) Currant: 1.97 0511 8121.1th MI EY — Gummy 144 10 161s 10 10 alb 40 10 10 30 01 10 10 00 a 11111111111gIlLwst5s Conant: 10.16 PrlcelBook (Value) Current: 7.7x sh 1144 Trading —P.9 keened set moo /pi MN 644 Sh 000 1tt 31 -10.64 2 40.0 S ate Qh $ 8d$$$d d$$$S$ itenZSS = ki7klakiak,i7k,inlIk$441 Summa MI AG As Of: 21110.15 GERMANY TICKER Till GR Local Price: 17.03 Consumer Discretionary EPS: 0.91 Latest Min Max Median Average 2 S.D.• 2 S.D.- %to Min % to Max % to Med % to Avg 12nith Forward PE 18.76s RB1/ (Paling) 7.69 0.40 7.69 1.16 1.44 3.59 .0.72 .95% 0% .85% 41% Dividend Yield ffraling) 1.97x 0.00 8.81 1.81 2.08 8.16 .2.05 .100% 348% .6% 4% ROE (Trading) 10.16 .27.60 19.49 4.51 0.44 28.83 .25.75 372% 92% -56% 46% Swot Bloombn. Ramo) CPAS &Mimosa ASES CONSENSUS JPLIercun Oututta114 4 OwfieMo Searcy 18 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103754 aaafar Masten Europe Equity Research 28 May 2015 J.P.Morgan C A Z ENOVE 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 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 TUI AG Germany, TUI AG UK. • Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering ofequity and/or debt securities for WI AG Germany, TUI AG UK within the past 12 months. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: TUI AG Germany, TUI AG UK. • Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: TUI AC) Germany, TUI AG UK. • 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: TUI AG Germany, TUI AG UK. • 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: TUI AG Germany, TUI AG UK. • Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking WI AG Germany, TUI AG UK. • 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 TUI AG Germany, TUI AG UK. • Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from TUI AG Germany, WI AG UK. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan—covered companies by visiting hnps://jmnm.com/reiearch/disclosures, calling 1-800-477-0406, or e-mailing nNearch.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.inquiriesqjpinorgan.com. 19 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103755 Surfer Mestari Europe Equity Research J.P.Morgan CAZ ENOVE 28 May 2015 TU1AG Germany (TUiGn.DE. TUI1 GR) Price Chart 32 Price Price Target 24- NES NE10 NE11.15 NR Date Rating Share (C) (C) 13-Nov-12 N 7.12 7.50 NE7.5 12-Dec-12 N 8.12 8.00 Omni() 16- 01-May-13 N 22-May-13 N 8.03 9.68 8.80 10.00 22-Nov-13 N 10.36 11.00 23-Jan-14 N 12.65 13.50 10-Jul-14 OW 11.31 14.50 15-Sep-14 NR 10.96 — 0 14-Jan-15 OW 14.46 17.50 Nov 09 Au10Ig May I I Nov Feb 11 12 12 I Ig Au 13 14 I May 15 Fob 15.2014 14.2015. for Source: 81°f:et.% sad J.P. Morgan: Woe data adjusted Brea In coverage Sap • Jan MOCA spats and dividends. WI UK(7U17.1.. AO MI L/4) Price Chart 2,052 1451- 1.710 1.539 IOW1,325p 1.365 OW1.365p 1.197 Prk449)1.026 Date Rating Share Price Price Target 555 14-Jan-15 OW (P) 1136 (13) 1365 664 04-Feb-15 OW 513 1151 1325 342 171 0 14 Dec 14 IS Dec IS IS Jan IS Fab Mar Ala 15 /MY II, 201$. poor Source' lboombetg and J.P. Morgan: Initlaled coverage Jan flock data adjusled to, spdts and dividends, The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW Overweight, N- Neutral, UW Underweight, NR - Not Rated 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 ofeither 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. 20 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103756 Jaafar Mental Europe Equity Research 28 May 2015 J.P Morgan CAZEN OVE Coverage Universe: Mestari, Jaafar: Accor (ACCP.PA), Autogrill (AGL.MI), Compass Group (CPG.L), Dully (DUFN.S), Elior (ELIOR.PA), InterContiriental Hotels (IHG.L), Kuoni Reisen (KUNN.S), Merlin (MERL.L), SSP (SSPG.L), Sodexo (EXHO.PA),71JI AG Germany (TUIGn.DE), TUI AG UK (TUIT.L), Thomas Cook Group (TCG.L), Whitbread (WTB.L), World Duty Free (WDF.MI) J.P. Morgan Equity Research Ratings Distribution, as of March 31,2015 Overweight Neutral Underweight (buy) (hold) OSIIL J.P. Morgan Global Equity Research Coverage 43% 44% 13% IB clients* 55% 49% 37% JPMS Equity Research Coverage 44% 48% 9% IB clients° 75% 68% 54% *Percentage of investment banking clients in each rating category. 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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 companicsandustrics based on company specific developments or 22 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103758 Jaafar Mouton Europe Equity Research 28 May 2015 J.P.Morgan CAZ ENOVE 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 March 28, 2015. Copyright 2015 Jrvforgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the mitten consent of J.P. Morgan. 23 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103759 Europe Equity Research J.P. Morgan CAZ E NOVE 29 May 2015 Overweight Elior EIJOR.FA, ELIOR FP Price: €18.38 0215 first take and conference call feedback - ALERT 28 May 2015 Elior has reported supportive Q215 results and reiterated its FY15 European Beverages, Hotels & guidance of "at least 2%" organic growth (JPMe 2.5%) and flat margins Leisure (JPMe flat). On the conference call, management hinted at preliminary Jaafar Mester' AC work to potentially launch a contract review across the group later this year, and announced an investor day to be held in September to detail a 5- Bloomberg JPMA MESTARI CO> year strategic plan to 2020 under new Chairman and CEO Philippe Salle. Mike J Gibbs • Q2 results supportive. Group revenue of E98m was driven by 2.2% organic growth (1.8% in Contract Catering and 3.5% in Concession J.P. Morgan SeCtribin plc Catering). Group EBITDA of €98m shows 10bp of margin improvement (-30bp in Contract Catering and +120bp in Concession Catering). For For Specialist Sales advice, please contact: HI as a whole, Finance costs were E35m lower year-on-year reflecting Helena C Sykes the December refinancing, while income tax came in at an implied rate of 44% vs 56% in HI14. Sophie L Warrick • Organic growth to re-accelerate. Organic growth decelerated in Q2 but management expects a stronger H2, driven by contract wins in Concessions: Q13.3% and Q2 2.2% compared to our FY I 5e forecasts of 2.5% and to FY15e guidance of "at least 2%". • Cash conversion strong. The working capital outflow of El 22m in HI was seasonal and only marginally higher year-on-year when adjusted for one-off payments in Spain in HI 14. Capex of E90m for HI was below budget and on the conference call management commented that it expects to remain below budget for FY15 (vs JPMe E180m capex, on budget). Cash tax of -El Om looks favourable compared to P&L tax of -E30m and management still expects P&L tax rate of 40% in FY15 to translate into only 30% cash tax rate. • Potential contract review. Elior has been more selective on retaining business in Q2, starting with Italy. Management will be reviewing "a large number of contracts" at the group level going forward, and any contract generating EBIT margins below 7% will be assessed for renegotiation or exit. This 7.0% threshold is not clearly set yet, and could be "8% or 6%", but looks ambitious, in our view, compared to our forecasts of 6.2% EBIT margins in Contract and 5.5% EBIT margins in Concessions for FY 15. This brings a risk of lower organic growth in the short term, but we note that similar contract reviews by peers Compass and Sodexo have been overall well received by the market (net of revenue loss and margin improvement). • Next event: Q3 results to be released on 2nd September 2015. i See page 2 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.jpmorganmaricets.com s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. 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For important disclosures for these companies, please call 1-800-477- 0406 or e-mail research.disclosum.inquiriesO ininorgan.com. Eta (EUCIELPA. ELIOR FP) Pace Chart Date Rating Share Price Price Target (t) (C) 21-Jul-14 OW 10.10 16.00 12-Dec-10 OW 12.65 15.50 22-Jan-15 OW 13.86 16.50 r i I I I i Jun al SW Na Jan Mr ar 14 41 II II IS It Shan arallerit MI JO. 144.001:11401 'Ma MOMS Wow toots ad aorta lamp atattp 4021.1414. The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW - Overweight, N- Neutral, UW in Underweight, NR - Not Rated 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 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103761 Jaafar Mestari Europe Equity Research 29 May 2015 IP Morgan CAZ ENOVE 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: Mestarl, Jaafar: Accor (ACCP.PA), Autogrill (AGL.MI), Compass Group (CPG.L), Dufry (DUFN.S), Elior (ELIOR.PA), InterContinental Hotels (IFIG.L), Kuoni Reisen (KUNN.S), Merlin (MERL.L), SSP (SSPG.L), Sodexo (EXHO.PA), TUI AG Germany (TUIGn.DE), TUI AG UK (TUIT.L), Thomas Cook Group (TCG.L), Whitbread (WTB.L), World Duty Free (WDF.MI) J.P. Morgan Equity Research Ratings Distribution, as of March 31,2015 Overweight Neutral Underweight (buy) (hold) (sell) J.P. Morgan Global Equity Research Coverage 43% 44% 13% IB clients• 55% 49% 37% JPMS Equity Research Coverage 44% 48% 9% IB clients' 75% 68% 54% •Percentage of investment banking clients in each rating category. For purposes only of FINRANYSE 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•. 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This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. 5 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103764 Europe Equity Research J.P. Morgan CAZ E NOVE 12 February 2015 Overweight Klepierre LOIM.PA, LI FP Price: E43.20 FY14 results in line but sticking to our guns on the Price Target: E45.00 dividend for 2015 - we expect €1.80 vs the street at €1.65 Klepierre's FY14 results were better on net current cash flow per share European Property (€2.07) vs JPMe (€2.04) and BB consensus (€2.05) but a tad light on NAV. Jan Willem Van Kranonburg AC LfL rents grew at 3.1%, and retail sales were up 13%. The dividend was proposed at €1.60, +3% yoy, 1% better vs BB consensus (€1.57), but was short vs our estimate ofEl 30. For '15 we stick to our guns that we expect a Bloomberg JPMA KRANENBURG <G0> significant dividend increase. As the '15 guidance implies a recurring EPS of Neil Green. CFA €2.10-2.15 (JPMe €2.12 and BB consensus at 62.11), we estimate it will come from E0.15-0.20cts of extra recurring EPS from a Corio debt accounting treatment on top of the guidance. As the dividend policy is firm in distributing Tim Leckie, CFA 80% of its recurring EPS, we estimate this could drive dividend up to €1.76- 1.83 for next year, 7-11% above current consensus. David Min • FY15 guidance net current cash flow E2.10-2.15, "driving further distribution per share increases", I% better vs JPMe (62.12) and BB J.P. Morgan Securities plc consensus (E2.11). Management guides for €20m of Corio synergies for '15, For Specialist Sales advice, please and looks on track to deliver the €60, synergies within 3 to 5 years. As contact Klepierre is currently integrating Corio, we did not expect any statements John Van Marie on a long-term guidance but stand by our case, calculating Klepierre should be able to post similar growth in recurring earnings vs Unibail (6-8%). Price Performance • Potential €0.15-0.20cts extra net current cash flow per share in 2015 key to a E1.76-1.83 dividend in 2015 (7-11% above consensus). Due to 42 — the accounting treatment of Corio debt (M2M of bonds) Klepierre is taking — 4 a €0.3bn hit on IFRS equity as anticipated during the due diligence. As a 31 — result of this hit, Klepierre can write back E0.15-20cts per share of this per 31 year via the P&L, which very likely will be part of the net current cash flow. Fob.11 lin44 keg Wynn kb.il As the current 80% dividend payout is set on this metric, we believe it will 101e. PA share price ((I MSCIEu (rebated) be paid out to shareholders. Assuming 80% of £2.25-2.35 net current cash YT0 1m 3m 12m flow (= the guidance plus the "Corio add on", Dividend for 2015 could be Abs I 21.3% 123% 26.9% 31.2% £136-1.83. This is some 7-11% above the current consensus estimate for Rel I 12.7% 2.3% 17.3% 19.2% '15, and in line with JPMe (El SO). Another way of looking at this would be that Klepierre in fact is increasing the dividend payout to 85% of NCCF excluding accounting treatment. Kleplerre (LOIM.PA.LI FP) FYE Dec 2012A 2013A 2014E 2015E 2018E Company Data Adj. EPS FY (E) 1.99 2.06 2.04 2.12 2.22 Price (E) 43.20 Adj P/E FY 21.7 20.9 21.2 20.3 19.4 Date Of Price 12 Feb 15 DPS FY (E) 1.50 1.55 1.70 1.80 1.90 Price Target (E) 45.00 Dividend Yield FY 3.5% 3.6% 3.9% 4.2% 4.4% Price Target End Date 28-Feb-16 Adjusted NAV ps FY (E) 34.0 32.2 33.0 34.9 38.6 52-week Range (E) 43.32-30.25 ROIC FY 4.4% 5.6% 8.4% 8.1% 9.8% Market Cap (E bn) 13.28 NAV premium (discount) 27.0% 34.0% 30.7% 23.7% 11.9% Shares O/S (mn) 307 FY WACC 4.4% Bloomberg EPS FY (E) 1.96 2.05 2.05 2.11 2.19 Source: Company data, Bloomberg. J.P. Morgan eatinates. See page 7 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.jpmorganmaricets.com s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103765 Jan Willem Van Kranenburg Europe Equity Research 12 February 2015 J.P.Morgan CAZENOVE • Net current cash flow per share 62.07, 1% better versus estimates, and compares to the guidance of E2.03-2.05 per share. The result was l% better vs JPMe (E2.04) and BB consensus (E2.05). We estimate that without the Carrefour divestment of €1.8bn of group share retail galleries, recurring EPS would have increased by c€l5cts (7%). • Dividend per share was proposed at 0.60, +3% yoy, and is I% better versus BB consensus (€1.57) but 6% below JPMe at 61.70 (but highest estimate in the market). We were expecting Klepierre to raise the payout ratio a bit (now 77%) to be more in line with Unibail (94% in '15E). Based on Klepierre's 2015 guidance, we believe there is a high likelihood this will be on the cards next year. • EPRA NAV came in at E32.1, up 4% vs 1H-14 but below our expectation of €33 per share. EPRA NAV was mainly below our expectation, as capital value growth was 1.5% in 2H-14 vs JPMe 2.2%. • Capital value growth was 1.5% for 211-14 vs 1H-14, which compares to our estimate of 2.2%. The 1.5% can be split into France (+1.2%), Scandinavia (+3.3% in local currencies), Iberia (+0.7%) and Central Europe (-1.2%). We were somewhat disappointed by the revaluation result, but during the conference call, management said appraisers have been slow adjusting market evidence in the appraisals, and hence there should be more upside to the valuations in 1H-15. • Like-for-like net rental growth +3.1%, with indexation contributing 0.6%. In France, NRI grew 2.0% like-for-like, and in Belgium 2.1%, driven by a large releasing program. In Scandinavia Ifl NRI grew 4.5%, led by Norway 6.9% and Sweden 5.6% with Denmark flat (0.3%). Italy saw lfl NRI growth of 1.7% and Spain was a solid 3.3% with Portugal 3.9%. Across Western Europe releasing efforts were cited as driving the NRI growth figure. • Central Europe +6% led by Czech Republic: In Poland, NRI was up 3.0% like-for-like, beating indexation of 0.9%. In Hungary rents were up 8.2% HI, driven by lower vacancy and cost reduction while in the Czech Republic, the strong +8.9% result was driven reletting activity. On a current foreign exchange basis, rental growth was 2.1% for the portfolio like-for-like, with Scandinavia being especially impacted by currency moves (4.5% to 0.3%). • Proforma (for acquisition of Corio) LTV of 'just below 40%, with 5.3 years duration and a liquidity position of €2.7bn. As of Dec-14 LTV was 37.6% (vs JPMe 38%), as the group's consolidated net debt stood at E5.3bn, €1.8bn lower than at the end of 2013. The key moving parts include cash proceeds of sales, offset by swap restructuring (El44m), investments of €205m and a dividend payment of €304m. The average duration of debt increased to 6 years (+1.1 years) while the group retains €2.1bn of available debt facilities and net cash. 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103766 Jan Wilem Van Wanenburg Europe Equity Research 12 February 2015 J.P.Morgan CAZENOVE • Retail sales up 1.5% year-on-year (like-for-like excluding extensions), although including extensions this was 2.6%. Extensions during the year including Vinterbro in Norway, Rives d'Arcins, Jaude Clermont-Ferrand in France and Romagna Centre in Italy. By area (exc. extensions), Iberia was very strong (+6.3%) with Spain up 7.6% and Portugal up 4.8%. Scandinavia was also up 2.9% with Sweden up 3.7% followed by Norway (+3.2%) and Denmark (+1.0%). Central Europe was up 3.3% as Hungary (+11.1%) and the Czech Republic (4.9%) offset Poland (-2.9%). French retail sales were a touch weaker (-0.4%) while Belgium saw positive retail sales growth of 1.8%. • Underlying trends in Corio already improved in 2H-14 also, with Corio reporting FY14 results at the same time. Direct EPS was €2.30 (€230m) which is in line with our estimates we have integrating Corio in Klepierre in 2015. LfL rents grew +0.9% (vs -0.1% in I H-I4) and the underlying vacancy in the retail portfolio remained flat at 5.2% (5.1% in I H-14). Tenant sales were stable (+0.1%). Corio (re)negotiated 497 relet or renewal leases in 2014 at 2.3% higher rent (vs-4.1% in 2013). Spain and the Netherlands continue to show negative reversion of respectively - 21% and -5%. Portfolio values fell 1.6% in 2H-14 vs Jun-14. 3 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103767 Jan Wlem Van Kranenhurg Europe Equity Research 12 February 2015 J.P.Morgan CAZENOVE Investment Thesis, Valuation and Risks Klepierre (Overweight; Price Target: €45.00) Investment Thesis We are OW on Klepierre based on our positive stance on continental retail, which should benefit Klepierre given its 100% retail exposure. We believe the company could be able to grow underlying recurring camings by 6.9%, whilst the shares are trading at a 15% discount to Unibail-Rodamco based on NAV multiples. Valuation Our Feb-16 target price for Klepierre 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 Klepierre, we calculate a value creation spread of 3.9% 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. Please contact your J.P. Morgan representative for more information. Risks to Rating and Price Target Klepierre's performance would be negatively impacted by disappointing retail sales, a failure in the development pipeline and less than expected improvement in the investment market. Upside risks include better than expected improvement in the continental retail environment. 4 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103768 Jan Mem Van Kranenhurg Europe Equity Research IP. Morgan CAZENOVE 12 February 2015 Klepierre: Summary of Financials Profit and Loss Statement Per share data E in millions. year end Dec FY13 FY14E FY15E FY16E E in millions. year end Dec FY13 FY14E FY15E FYI6E Property income 1,087 932 1.331 1.351 Adjusted EPS 2.06 2.04 2.12 2.22 % Change YN 0.5% (14.2%) 42.7% 1.5% % change YN 3.7% (1.2%) 4.1% 4.7% Rental income 1.009 861 1.259 1,279 Indirect result 0.22 0.68 1.89 3.26 Other income 19 15 25 26 % change YN (140.0%) 208.2% 177.3% 72.8% EBITDA 819 693 1.029 1.055 EPS (IFRS) 2.29 2.72 4.01 5.49 %Change YN (0.3%) (15.4%) 48.4% 26% % change WY 62.1% 19.1% 47.3% 36.8% Net interest (272) (190) (261) (254) DPS 1.55 1.70 1.80 1.90 Earnings before tax 557 544 811 844 % change WY 3.3% 9.7% 5.9% 5.6% % change YN 4.5% (2.4%) 49.1% 4.0% Gross cash flow 2.07 2.04 2.12 2.22 Tax (24) (22) (23) (24) % change WY (4.7%) 6.5% (0.2%) 4.7% as %o( EST 4.3% 4.0% 2.9% 29% NNNAV (IFRS) 30.2 29.9 30.8 33.5 Minorities (130) (122) (120) (120) % change WY (3.6%) (1.3%) 3.2% 81% Adjusted net Income 404 400 668 699 Adjusted NAV 32.2 33.0 34.9 38.6 % change YN 3.9% (0.9) 66.9% 4.7% % change YN (5.2%) 2.5% 5.6% 10.6% Revaluabon (154) 343 825 1.425 Capital gain lax 0 0 0 Cash flow statement Other EBITDA 819 693 1.029 1.055 htinonties Gross cash now 391 417 668 699 Indirect profit 43 134 594 1,026 Total profit (IFRS) 447 534 1,281 1,725 Total cash flow requirement (304) (1,204) (93) (110) Balance sheet Ratio Analysis E in minims. year end Dec FY13 FY14E FY15E FY16E E in millions. year end Dec FY13 FYI4E FY15E FY16E Cash and cash equivalents 142 358 265 155 Operating ran 5.3% 5.2% 4.9% 4.7% Accounts receivable 303 305 305 305 Capital return 0.3% 1.2% 3.2% 5.1% Others 2.048 358 358 358 ROIC 5.6% 6.4% 8.1% 9.8% Current assets 2.494 1.021 928 818 EVA spread 1.3% 2.0% 3.7% 5.5% Property investments 13.308 12.534 20.374 22.162 ROE (recurring) 7.5% 7.3% 8.5% 6.5% Property not in operation 344 348 348 348 ROE (total) 8.4% 9.9% 12.9% 15.9% Total assets 16,531 15.077 22,824 24,502 Net debt / total assets 44.3% 37.9% 38.1% 36.0% Shod term debt 2.128 903 903 903 Net debt! equity 97.8% 75.3% 70.5% 63.5% Others 474 412 412 412 Equity/ assets 45.4% 50.3% 54.1% 56.7% Total current babilibes 2.712 1.445 1.445 1.445 Property income/assets 0.5% 0.5% 0.4% 0.3% Long term debt 5.344 5.164 8.064 8.064 Rental income! assets 6.0% 5.4% 6.6% 5.4% Other liabaties 949 857 939 1.082 EBITDA 1assets 5.0% 4.6% 4.5% 4.3% Shareholders' (Only % change WY 3.5% (7.2%) (2.0%) (4.5%) Group equity 7.497 7,581 12.346 13.881 Total liabilities and equity 16,531 15,077 22,824 24,502 WACC 4.4% Scne: Company reports and J.P. Morgan estimates. 5 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103769 Jan Willem Van Kranenburg Europe Equity Research 12 February 2015 J.P.Morgan CAZ ENOVE JPM 0 -Profile Global tguity Quantitative Analysis- Kleplerre SA (FRANCE / Financials) oa Of. Wet-Nis t.4.61.Mtuutur Local Share Price Current: 43.18 12 11th Forward EPS ItCurrent: 2.09 0160 6) 10) .. . • • ... 232 ... • are 10 600:1 Ib SOLO Im Ore lore em Oro 11 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 4."1 1 11 111111111 a PE (1Yr Forward) Current: 20.74 PIE Relative to France Index Current: 2.04 1111111111111I1Unini Earnings Yield (& Local Bond Yield) Current: 6% Dividend Yield (Trailing) Cunene: 5.88 12Mth hod EY France BY 80 V% 60 12% 20 60 0% SO 0% 40 30 20 2% luluiuilKlKluhlYll 1.0 " 111111111111111iiiiiiii I MOM; ROE (Trailing) Current: 32.15 Price/Book (Value) Current: 3.4x )40) um "so raw "on 'MO • SOO 11111111111111111111 Kleinert° SA As Of: 6-Feb.15 FRANCE TICKER U FP Local Prke: 43.18 Financials EPS: 2.09 Latest Min Nu Median Average 2 S.D.• 2 3.0. • %to Min %biles %toiled li to Avg 12rnth Forward PE 20.084 6.73 34.71 20.24 20.21 32.99 7.44 67% 68% .2% -2% P/BV (Trading) 3.40 1.11 4.03 2.16 2.32 3.67 1.07 417% 18% -36% -32% Dividend Yield (Tading) 5.884 1.88 9.05 3.05 3.77 7.03 0.51 458% 54% .48% -36% ROE (Trading) 32.15 2.49 32.15 7.25 8.45 19.79 .2.08 .92% 0% .77% .74% SOWCO. 600inberg. ROOMS GtoNV FinglimOnl" 19,65 CONSENSUS JP11avan 0.61.116.66 a Doneana Serology 6 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103770 Jan Willem Van Kranenburg Europe Equity Research J.P.Morgan CAZENOVE 12 February 2015 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 coven in this research) that: (I) all of the views expressed in this retort 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 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 Klepierre. • Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Klepierre within the past 12 months. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Klepierre. • Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Klepierre. • ClienUNon-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: Klepierre. • 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: Klepierre. • Investment Banking (past 12 months): 1.P. Morgan received in the past 12 months compensation from investment banking Klepietre. • 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 Klqiierre. • Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Klepierre. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all 1.P. Morgan—covered companies by visiting https://ipmm.cont/research/disclosures, calling 1-800-477-0406, or e-mailing nnearch.disclosure.inquiries(itjpmorgan.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.inquirin(djpinorgan.com. Kleplerre (LOIM.PA, LI FP) Price Chart Date Rating Share Price Price Target (C) (C) 08-Nov-06 N 38.71 140.00 06-Mar-07 N 46.20 155.00 30-Aug-07 N 36.65 43.00 03-Sep-07 OW 37.54 43.00 07-Dec-07 OW 34.29 41.00 07-Apr-08 N 38.42 43.50 03-Sep-08 N 26.88 29.00 30-Oct-08 N 17.14 20.00 12-Jan-09 OW 19.44 24.00 18-Mar-09 OW 13.07 15.00 20-Apr-09 N 16.00 16.50 01-Sep-09 N 26.22 26.00 09-Dec-09 N 27.94 30.00 01 Sep-10 N 24.10 29.00 Sep Mar Sep Mar Sep Mar 07-Dec-10 N 26.74 30.50 06 Os 09 11 12 14 30-Jun-11 N 28.46 32.00 SOWO. 13100M erg and JP Maga°. price eau adlustod for Mak spin and avIdends. 30-Aug-11 N 23.05 28.50 Irvwad cconiage Nor 08. 2106. 11-Jan-12 N 21.24 25.50 7 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103771 Jan Mem Van Krenenburg Europe Equity Research J.P.Morgan CAZ ENOVE 12 February 2015 15-Mar-12 N 26.38 30.00 01-Jun-12 N 24.84 28.00 04-Sep-12 N 25.60 29.00 08-Jan-13 N 30.19 31.30 06-Mar-13 N 32.04 34.00 02-Sep-13 N 30.46 33.00 14-Jan-14 N 33.64 35.00 31-Jul-14 N 35.35 39.00 14-Jan-15 OW 38.50 43.00 09-Feb-15 OW 41.86 45.00 The chan(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW - Overweight, N- Neutral, UW in Underweight, NR a, Not Rated 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 underperforni 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: Van Kranenburg, Jan Willem: Beni Stabili (BNSI.MI), Citycon (CTY I S.HE), Cofinimmo (COFB.BR), Corio (COR.AS), Deutsche EuroShop (DEQGn.DE), Eurocommercial Properties NV (SIPFc.AS), Fonciere des Regions (FDR.PA), Flanimerson (I1MSO.L), Icade (ICAD.PA), Immobiliare Grande Distribuzione (IGD.MI), Klepierre (LOIM.PA), Redefine International (RDI.L), Vastned (VASN.AS), Wereldhave (WEHA.AS) J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2015 Overnight Neutral Underweight (buy) (hold) (sell) J.P. 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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 November 29, 2014. Copyright 2015 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not he reprinted, sold or redistributed without the written consent ofJ.P. Morgan. 10 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103774 J.P.Morgan CAZ ENOVE Europe Equity Research 05 May 2015 Neutral Aeroports de Paris (ADP) ADP.PA, ADP FP Price: E111.35 Q1 revenues in line; Management reiterates guidance, 04 May 2015 but visibility on ERA3 still limited - ALERT ADP reported Q1 revenues broadly in line with expectations. The European Construction, Building company held a call at 8am GMT and maintained guidance for the year Materials & infrastructure (comments included below). Elodle Rail AC • Aviation revenues up 5.8%. Revenue from airport fees (passenger fees, landing fees and aircraft parking fees) was up 4.0%, to E214 million, Bloomberg JPMA RALL <GO> benefiting from the combined increase in tariffs (+2.95% on 1 April Hannah Lee 2014) and the growth in passenger traffic (+2%). Elsewhere, ancillary fees grew 14.5% due to higher de-icing fees from a harsher winter in Emily Biddulph 2015. • Retail strong, up 2.1% (note QI 14 were restated). Retail activities Rajesh Patki were up 8%, driven by the growth in traffic of highly contributive destinations, the opening of shops in Q4 and the positive FX effect vs. the euro. Retail sales per PAX grew 9.7% to E19.8 in Q1 15 (vs. 2015 JP. Morga SeP-M es plc guidance ofE19), although we note Q1 and Q4 are traditionally the best For Specialist Salons advice. performing quarters during the year. Performance in duty free shops was please contact: particularly strong. Car parks were down 3.3% on harder comps, but the Ian Mitchell company expects flattish revenues for 2015. • Elsewhere performance was in line with expectations. Real estate, international and other divisions are performing in line with expectations. • Update on ERA. The company is expecting an advice from the regulator at the end of June and is still planning to sign an agreement in July. Airlines have already got back to the regulator, but the company didn't comment on the reactions. The company is to present 2020 targets at the investor day in Q4. • Guidance maintained for the year. Traffic guidance is unchanged at 2.6% for 2015 while the company indicated Q1 confirmed the company's original guidance for the year (EBITDA ofEl.lbn-1.2bn, JPMe El .2bn). Table 1: Summary of ADP Q1 revenue results Ern Q115 actual JPMe 01 15 0114 actual* YoY %change Aviation 398 389 376 5.9% Retail 210 229 205 2.4% Real Estate 64 65 65 -1.5% Others 45 47 47 2.1% International and *port developments 18 20 16 12.5% Eliminations -76 -91 -73 4.1% Total Revenues 662 659 637 3.9% Source company and JPM °serrates. '01 14 restated See page 2 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.jpmorganmaricets.com s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103775 Elea. Rah Europe Equity Research J.P.Morgan CAZ ENOVE 05 May 2015 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: (I) all of the views expressed in this rirnort 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. 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Morgan. For important disclosures for these companies, please call 1-800-477- 0406 or e-mail msearch.disclosure.incluiriestitinmorgan.com. Aoropons de PAPS IADPI (ADP.PA. ADP FPI Pita chart 116 Nolo Date Rating Shara Price Price Target Its - Kr) (r) N 010 06-May-11 OW 64.69 75.00 11-Oct-11 N 57.59 70.00 19-Jun-12 N 58.36 65.00 27-Nov-12 LW 59.00 58.00 09-Aug-13 N 78.44 82.50 01-Apr-14 N 90.51 96.00 10-Jul-14 N 96.50 101.00 19-Dec-14 N 96.17 104.00 06-Mar-15 N 106.70 118.00 Noe Nq µy Feb Nov Asa 26-Mar-15 N 112.50 110.00 1 11 12 13 11 14 ": VorrOo:11104nettO •N •I. mope. pap, OP• Ml••4• IN .40.1•10.1'ands BINS ammo am The chan(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW - Overweight, N- Neutral, UV, in Underweight, NR in Not Rated 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 underperforni the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Not Rated (NR):1.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: Rah, Elodie: Abenis (ABE.MC), Aena (AENA.MC), Ammons de Paris (ADP) (ADP.PA), Atlantia (ATL.MI), Bras Monier (BMSA.DE), CRH Plc (CRH.I), Eiffage (FOUG.PA), Fraport (FRAG.DE), Holcim Ltd (HOLN.VX), Lafarge (LAFP.PA), Saint-Gobain (SGOB.PA), Tarkett (TKTT.PA), Vinci (SGEF.PA) 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103776 Electle Ras Europe Equity Research 05 May 2015 J.P.Morgan CAZENOVE J.P. 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Morgan CAZ E NOVE Europe Equity Research 14 May 2015 Neutral Aena (AENA SM) Price: €69.16 13 May2015 Feedback from Q1 conference call: Visibility on Price Target: €91.00 PT End Date: 01 May 2016 regulation remains low but operations solid Aena hosted a conference call for analysts and investors this morning. Overall we think management confirmed that underlying, the business is performing well operationally and that cost control on several fronts could continue through the year. However, we would flag that airports are seasonal businesses, and given a lack of reporting history, we think it is potentially too early to extrapolate Q1's strong trends in terms of FY estimates. The main focus, however, is on the ongoing regulatory issues with the CNMC, against which the company confirmed that they have filled legal proceedings, but no clarity was given with regards to the timing of any outcome. • Legal proceedings filed against CNMC but no timing given. Aena confirmed on the call that it has launched legal proceedings against the CNMC in relation to the cost allocation decision. No details around the potential timing of an outcome were given, however. The company is still in negotiations with the airlines with regards to 2016 tariffs, and we learnt on the call that Aena's proposal is based on the accumulation of a deficit in the prior two years (although an exact figure was not given), i.e. the tariff proposal is for 0% as opposed the fall of 2% to 3% discussed by the CNMC. • Reassuring that uplift in Commercial not entirely reliant on MAGs. We were reassured on the call that the 46.3% uplift in Duty Free revenues was not all due to the MAGs, and management confirmed that the contribution from MAGs totaled just -€5m, compared to Duty Free sales of €41m. We think this bodes well for the underlying trend. • Cost control is a positive on several fronts. Elsewhere operationally, we think Aena is progressing well. As we flagged in our reaction to the results release last night, costs progressed just 0.9%, vs. the overall growth in group revenues of 8.4% (ex-Luton impact). Management also flagged that there is potentially an opportunity to further fix interest costs on some of its revisable rate debt, which we think could help keep financial costs down, and note that Q1 financial expenses have already fallen 10.9% yoy. On the subject of capex, management mentioned that it does not expect to spend the maximum allowed €450m capex this year and instead is likely to invest closer to --€350m. Investment Thesis Aena is the world's largest airport operator as measured by passengers carried. In 2014, Aena handled 195.9m passengers across the 46 airports it owns and operates in Spain. The three main airports within Aena's network: Madrid Barajas, Barcelona El Prat and Palma de Mallorca make up more than half of Aena's total passenger traffic and each serves as a hub to different airlines. Our investment case for Aena is based on: I) the group's gearing to potential traffic recovery in Spain. As of the end of 2014, traffic on the Spanish network was 7% below peak levels, compared to European airport peers, which have already rebounded above previous peaks. Domestic traffic in particular is depressed at 35% below previous peak levels. 2) A regulatory regime that is less dependent than peers on negotiations with airlines for fee increases in that Aena expects no tariff increases in the future, given its subdued capex profile going forward. The airports can rely on previous over-expansion for growth capacity. 3) Free cash flow profile and dividend potential. Due to capex spend over the next ten years comprising roughly half of depreciation, we note, on our hups://jpmm-internal.pmchase.net/research/ArticleServlet?doc--GPS-1712605-0&action.... 6/19/2015 EFTA01103780 Page 2 of 5 estimates, that Aena becomes very FCF generative, which we feel provides headroom for an increase to the 50% dividend payout in the future. We however rate the shares as Neutral given at present we feel the market is starting to factor in a partial re•rating of multiples on the retail division and we remain cautious on near term regulatory issues. Valuation We value Aena using the same methodology we apply to the other companies in the European airport space. Our methodology takes 50% of our DCF per share valuation of f106 and 50% of our SOTP per share valuation of €77. Our DCF valuation is predicated on the same 1% long-term growth rate assumption we use for the other European airports and an applied WACC of 5.8%. Our SOTP valuation methodology is based on a 0.9x RAB multiple and values the retail business on 12x EV/EBITDA, in line with where Duty Free players trade. International interests are accounted for using book value, or market value in the case of GAP. Risks to Rating and Price Target The main risks to our Neutral recommendation are: 1) a decline in traffic•related to weaker Spanish or global GDP, 2) tariff shocks related to geopolitical events or unexpected events in the airline industry, 3) changes to the regulation, 4) strong inflation, as tariffs are not directly linked to CPI, 5) unfavorable M&A in the international airports division, 6) uncertainty related to litigation claims, 7) the potential for traffic to grow much faster than anticipated and 8) the potential for retail spending and Commercial revenues to materially outperform. European Construction, Building Materials & Infrastructure AC Elodie Rail Bloomberg JPMA HALL <GO> Hannah Lee J.P. Morgan Securities ptc www.tpmorganmarkets.com https://jpmm-internal.pmchase.net/research/ArticleServlet?doc--GPS-1712605-08zaction.... 6/19/2015 EFTA01103781 Page 3 of 5 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: (0 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 KOFIA requirements. that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention. 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 farm 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. Important Disclosures • Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in Aena. • Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Aena within the past 12 months. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Aena. • Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Aena. • Investment Banking (past 12 months): 1.P. Morgan received in the past 12 months compensation from investment banking Aena. • 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 Aena. CompanySpecific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan—covered companies by visiting Intps://jpmin.com/research/disclosures. calling I- 800-477-0406. or e-mailing research.disclosure.incluiries@Minorgan.cont 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@ipmorgan.com. Aena (AENA.MC. AENA SN) Price Chart 1St Nal 132 110 — Date Rating Share Price Prim (C) (C) 28-Mar-15 OW 80.68 90.01 tt 30-Mar-15 OW 89.48 94.01 15-Apr-IS N 98.50 98.a 44 Oa-May-15 N 88.52 91.01 U 0 I I I I I I I I I I I I Fb Feb Feb Feb Mat Ma Mu Apr Apr Apr May May May May is is is is is is is is is is is is is Source: sioomterg as JP.Nova; price cloth &Mad toe stook spits and dividends. intratod savnnas Mar 243.2•16. The chart(s) show J.P. Morgan's continuing coverage of the stocks.. the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight. N= Neutral. UW = Underweight. NR = Not Rated 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 teams) 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. hups://jpmm-internal.pmchase.neUresearch/ArticleServlet?doc--GPS-1712605-08zaction.... 6/19/2015 EFTA01103782 Page 4 of 5 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, wwwjpmorganmarkets.com. Coverage Universe: RaIl, Elodie: Abertis (ABE.MC). Aena (AENA.MC), Aeropons de Paris (ADP) (ADP.PA). Atlanta (ATL.MI). Braas Monier (BMSA.DE). CRH Plc (CRH.I). Eiffage (FOUG.PA), Fraport (FRAG.DE), Holcim Ltd (HOLN.VX). Lafarge (LAFP.PA). Saint-Gobain (SGOB.PA). Tarkett (TICTT.PA). Vinci (SGEF.PA) J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2015 OverweightNeutral Underweight (buy) (hold) (sell) J.P. 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Morgan. hups://jpmm-internal.pmchase.net/research/ArticleServlet?doc--GPS-1712605-08zaction.... 6/19/2015 EFTA01103784 Europe Equity Research J.P.Morgan CAZENOVE 08 May 2015 Overweight Atlantia ATL.MI, ATL IM Price: 023.54 Q1 Results: Underlying performance in line but results OS May 2015 hit by one-offs - ALERT Atlantia reported QI results this afternoon. Overall revenues of £1,134m were European Construction, Building broadly in line with our estimates but EBITDA of €686m missed our forecast Materials & Infrastructure by 1.7% due to slightly higher winter costs and a one-off unfavorable Elodle Rail AC settlement with a service provider. Net Income of £32m missed our estimate for £65m, again largely due to one-offs. Notably, the group ended the quarter with net debt of £10.1bn, a reduction of £455m on the previous year and Bloomberg JPMA RALL 4.001. comparing favorably to our 2015 FYe for El0.2bn. Guidance for traffic Hannah Lee stabilization on the toll roads and growth at the airports remains unchanged. • Traffic grew as expected in Italy at 0.9% in Q1. Atlantia reported an Emily Biddulph improvement on Italian toll road traffic of 0.9% (vs. JPMe 0.9%) in Q1 2015, driven by a 2.4% improvement in heavy vehicles as light vehicles grew just 0.6%. Traffic growth of 9.1% at the Rome airports was already Rajosh Patki reported while road traffic grew 6.7% (vs. JPMe 6.5%) in Chile and fell 2.4% in Brazil (vs. JPMe -2%). J.P. Morgan Securities plc • Revenues in line but EBITDA slightly weaker. Reported revenues of For Specialist Sales advice please £1,134m came in as expected (JPMe £1,144m), although EBITDA of contact £686m missed our estimates by 1.7% due a negative settlement with an oil Ian Mitchell service provides, a £4m increase in winter related costs and an increase in labour costs (staffno. up 7% yoy) as more projects were in sourced at ADR and in Brazil. • Financial one-off costs weigh on net income. Atlantia reported attributable net income of €32m (missing our estimates for £65m by 50%) due to negative impacts from 1) lower discount rates used in provisions for construction services, 2) higher than expected financial expenses of €326m vs. JPMe £319m due to bigger than anticipated one-off costs related to bond buybacks and 3) higher tax rates (41% vs. JPMe 36%). • Guidance unchanged but still broad. Management guidance for a stabilization in toll road traffic and continued growth in airport traffic in Italy is consistent with their statements at the FY. Atlantia is now also guiding for an overall improvement in operating results. Table 1: Summary of Atlantia C11 results Em Q12015 actual JPMe Q12015 Consensus Q12014 actual Change Ye? Toll Revenue 831 828 802 3.6% Aviabon Revenue 110 108 102 7.8% Contract Revenue 18 19 19 Other Operating Revenue 175 188 188 Total Revenues 1,134 1.144 1.147 1.111 2.1% EBITDA 686 698 693 674 1.8% EBIT 413 444 426 417 -1.0% Par 87 129 242 -64.0% Attributable Net Profit 32 65 58 128 -75.0% S<Ur(i- P Vo,gan estmeres. Company data. abater° consensus See page 2 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.jpmorganmaricets.com s being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103785 Elope Rai Europe Equity Research 08 May 2015 JP.Morgan CAZ ENOVE 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 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 Atlantia. • Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Atlanta. • 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: Atlantia. • Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking front Atlantia. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan-covered companies by visiting huns://intum.com/research/disclosures, calling 1-800-477-0406, or e-mailing research.disclosure.inquiries(djpmorgan.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.inouiries(dinmorean.com. Date Rating Share Price Price Target Atiantia (ATL.M1, ATL 1M) Price Chart (C) 30-Mar-07 LaN 24.00 19.19 29-Aug-07 LaN 23.94 19.21 10-Sep-07 LAN 23.62 21.35 21-Jan-08 LAN 22.94 23.98 01-Mar-10 OW 17.36 -- 18-Mar-10 OW 17.26 24.00 22-Feb-11 OW 16.47 20.00 Pricelf) 14-Mar-11 OW 16.22 21.00 27-Jun-11 OW 14.35 20.00 22-Jul-11 OW 13.49 17.00 12-Jan-12 N 11.95 13.80 30-Mar-12 N 12.37 14.20 134Aay-13 N 14.11 15.30 02-Dec-13 OW 16.43 19.00 13-Jan-14 OW 17.18 20.00 Aug Feb Aug Feb Aug 07 08 10 11 11 14-Mar-14 OW 17.94 21.00 23-May-14 OW 18.40 23.00 Source. gioomborg and J.P. Magnet: price data adjuMad for stock sputa and al...Wends. Etreal4 In downy) MM 01.2010. My 18.2010. 30-May-14 OW 19.84 24.00 19-Mar-15 OW 24.30 28.00 The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW Overweight, N- Neutral, L1W Underweight, NR •• Not Rated 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) 2 This document is being provided for the exclusive use of JOCELYN CHOKKATTU at JP MORGAN CHASE & clients of J.P. Morgan. EFTA01103786 Beebe Rag Europe Equity Research 08 May 2015 J.P.Morgan CAZENOVE 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 ofeither 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 ofa 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.jpniorganmarkets.com. Coverage Universe: Rail, Elodie: Abertis (ABE.MC), Aena (AENA.MC), Aeroports de Paris (ADP) (ADP.PA), Atlantia (ATL.MI), Braas Monier (BMSA.DE),C1211 Plc (CRH.I), Eiffage (FOUG.PA), Frapon (FRAG.DE), Holcim Ltd (HOLN.VX), Lafarge (LAFP.PA), Saint-Gobain (SGOB.PA). Tarkett (TKTT.PA), Vinci (SGEF.PA) J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2015 Overweight Neutral Underweight (buy) (hold) (sell) J.P. Morgan Global Equity Research Coverage 43% 44% 13% IB clients• 55% 49% 37% JPMS Equity Research Coverage 44% 48% 9% IB clients• 75% 68% 54% •Percentage of investment banking clients in each rating category. For purposes only of FINRPJNYSE 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 arc not included in the table above. 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