Morning Wrap

Today ’s Newsflow Equity Research 30 Aug 2016 Upcoming Events Select headline to navigate to article

Datalex Market expansion to drive growth Company Events Robust H1 performance; upgrading FY 30-Aug Datalex; Q2 2016 results Total Produce; Q2 2016 results forecasts by 2.5% 31-Aug 888 Holdings; Q2 2016 results ; Q2 2016 results Growing confidence in completions trajectory ICG; Q2 2016 results 06-Sep ; H116 Results FBD Holdings MIBI claims for uninsured drivers up 17% ytd Economic View Mortgage approval data for July show 24% growth Banks BOI extends mortgage cashback offer from 2% to 3%

Economic Events Ireland 30-Aug ILO Unemployment Rate Aug 2016 02-Sep Industrial Production M/M Jul 2016

United Kingdom 30-Aug BoE Mortgage Approvals Jul 2016 31-Aug GfK Consumer Confidence Aug 2016

United States

Europe

Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE

Goodbody Stockbrokers (trading as Goodbody) is regulated by the Central . For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate Goodbody Stockbrokers. Please see the end of this report for analyst certifications and other important disclosures. Goodbody Morning Wrap

Datalex Market expansion to drive growth

Datalex reported a 22% increase in H1 adj. EBITDA, ahead of our +20% estimate. This was Recommendation: Buy driven by an outperformance on revenues (+17% vs GBY +14%) as platform revenues - Closing Price: €3.45 driven by JetBlue, its recent Chinese go-lives and organic customers - all delivered, to offset Jack Diskin a contract which concluded at the end of 2015. +353-1-641 9193

[email protected] However, it is the new customer wins and business developments announced this morning which are most eye-catching. While FY16 guidance has been trimmed by c.$0.6m to reflect up-front mobilisation costs and scaling investment; the completion of a deal with the Group and further growth in China, both announced this morning, should support an upward revision to our FY18 forecast.

Our FY17/18 estimates had already built in expectation of new customer wins, and the signing of another Chinese carrier adds comfort to our FY17e EBITDA. However, the market expansion outlined today suggests the 20-25% multi-year growth trajectory may steepen, and that our FY18 estimate looks light.

We await more detail on the Lufthansa contract in the coming weeks to determine the scale of the upgrade. Beyond the direct financial from Lufthansa, we expect Datalex’s enhanced profile to provide opportunities with other legacy carriers. All of this is expected drive a re-rating of the stock, which currently trades at a 20% discount on a PEG multiple to its larger travel retail peers.

Home…

Page 2 30 Aug. 16 Goodbody Morning Wrap

Total Produce Robust H1 performance; upgrading FY forecasts by 2.5%

Total produce reported a strong H1 performance this morning, with adjusted EPS growth of Recommendation: Buy 11.6% which was 6% ahead of our forecast. Growth was driven across all divisions while the Closing Price: €1.56 finance charge was also slightly lower than forecast. Guidance for the FY has been raised to Patrick Higgins the top end of the 10.5-11.5 EPS range. We are likely to increase our current 11.3c by +353-1-641 0403 c.2.5% to 11.5c. [email protected]

As expected, the international division grew strongly, with adjusted EBITA of €4.9m, up 96% yoy. While the contribution from recently acquired Progressive Produce was the key driver of this strong growth, the underlying business also traded strongly.

The Eurozone division performed strongly in the period with revenue and adjusted EBITA up 4.4% and 8.9% respectively (3% and 7% ahead of forecasts). Key to the strong growth (and outperformance vs forecast) was the contribution of recent acquisitions, with LFL revenues up 2% (mainly volumes), and a slightly better margin performance.

In the non-Eurozone division, LFL sales grew 6% driven by increases in both volumes and price. While sterling weakness was a headwind, this was offset by the incremental contributions from acquisitions in the period. Specifically on the recent referendum in the UK, while acknowledging the macro uncertainty that it brings, management does not expect it to have a material impact on the Group.

Net debt came in better than forecast at €95.7m (€110m forecast), mainly due to increased trade receivables financing of €10m and good working capital management. With net debt/EBITDA at 1.1x, the Group has plenty of firepower to continue its acquisition focused growth strategy.

This morning’s results underpin our positive stance on Total Produce. We continue to see good upside from current levels given: i) its consistent earnings growth track record; ii) significant expansion opportunities in both Europe and the US; and, iii) a robust balance sheet. Home…

Page 3 30 Aug. 16 Goodbody Morning Wrap

Cairn Homes Growing confidence in completions trajectory

Cairn’s H116 results were ahead of expectations, highlighting strong momentum for H2 Recommendation: Buy completions at its Parkside site. We have raised our 2016 sales from 101 to 107. Cairn is live Closing Price: €1.04 on 5 sites and flags it will be working on a further 5 sites within 12 months. We are retaining Eamonn Hughes our c.350 unit run-rate for 2017 and c.790 for 2018. Cairn also indicated it had growing +353-1-641 9442 confidence of hitting its target 1,200 run rate in 2019 and 20% EBIT target. We have raised [email protected] our FY19f sales by 5% to 1,104.

Arguably, the Irish housing market backdrop has improved over the summer as there has been an improvement in mortgage approvals and a number of the banks have been reducing mortgage interest rates, which will aid affordability. At government level, a new National Housing Plan, including an infrastructure fund which may overlap with some of Cairn’s sites, is likely to be supplemented by incentives for developers and first time buyers in the Budget on October 11.

The stock has struggled over the summer, 11% off its Q2 highs, in hindsight, a case of sell in May and go away, and come back on St Legers Day. The latter is September 10, perfectly timed ahead of the upcoming Budget, which is likely to be the next key reference point for Cairn. In addition, mounting evidence of a rising completions trajectory will see the stock re-rate, in our view, with 2017 sales estimated at 3.5x 2016 levels and 2.2x growth in 2018. We reiterate our €1.31 PT.

Home…

FBD Holdings MIBI claims for uninsured drivers up 17% ytd

MIBI (the Motor Insurers’ Bureau of Ireland) published figures yesterday that motor Recommendation: Buy insurance claims involving uninsured or untraced drivers jumped 17% in the seven months Closing Price: €7.05 to the end of July. MIBI typically pays out c.€60m a year on claims on uninsured or untraced Eamonn Hughes drivers, with the Bureau warning that the 17% increase is a significant jump that will result +353-1-641 9442 in further premium rises for motorists. [email protected]

The data from MIBI highlights another avenue of pressure on insurers, likely to see further rates rises in the coming 6 months and into 2017. Our models have rates up 5.5% in H2 (though hi-single digit in motor) for FBD, with a further 3.3% growth in FY17. This will facilitate the company returning to breakeven in Q416 and profitability in 2017.

Home…

Page 4 30 Aug. 16 Goodbody Morning Wrap

Economic View Mortgage approval data for July show 24% growth

The positive trend in mortgage approvals continued in July, with the latest lending data from Dermot O’Leary +353-1-641 9167 the Banking and Payments Federation showing an increase in both value and volume across [email protected] the board.

The total value of mortgages approved grew by 24% yoy in July. While this is slower than the growth achieved in June (+37% yoy), it represents a healthy rate of increase. In the three months to July, the total value of mortgage approvals was up 29% yoy. This was driven by growth in volume approved (+18% yoy) as well as growth in average loan size (+9% yoy).

The strongest growth continued to come from Re-mortgaging, which grew in value by 93% yoy in the 3 months to July. Re-mortgaging has grown 388% over the last 2 years thanks to increasing awareness of lower mortgage-rate products available in the marketplace, albeit from a low base. The strongest growth in transactional mortgage values over the 3-month period came from first-time buyers (27% yoy) and mover purchasers (23% yoy) versus 16% yoy growth in investor mortgages.

The July data is building on the rebound seen in Q2 as the impact of the macro- prudential rules introduced by the Central Bank in February 2015 dissipates. The strong approvals growth in Q2 and into early Q3 augurs well for a pick-up in lending activity in H2 and possibly the first few months of 2017. Though still early, it probably lends credence to the view that the risk bias to our €5.2bn gross new lending figure +(9% yoy) for the full year is positive. Home…

Banks BOI extends mortgage cashback offer from 2% to 3%

Bank of Ireland announced yesterday that it is to extend its 2% cashback offer for new Eamonn Hughes +353-1-641 9442 mortgages to 3%. The existing 2% cashback offer was due to expire in September, but BOI [email protected] has replaced it with a new “Cashback Plus” offer which gives the same 2% cashback at drawdown, but an extra 1% after 5 years if you are a current account holder with the bank.

The revised offer runs to March 31 2017.

The announcement from BOI maintains competitive pressures in the mortgage market. With the market simplistically breaking down into banks with the lowest headline rates and those with cashback offers. As such, BOI is likely to be more intensively going head-to-head with PTSB and EBS in the cashback offer section of the market.

The treatment of cashback offers is that they are amortised over the life of the mortgage. An extension of the offer by a further 100bps from 2% to 3% is likely to reduce annual income on each new mortgage by c.4.5bps. On an anticipated €1.46bn of new mortgages this year, and assuming every loan qualified (and remained with BOI for 5 years), then the incremental hit above the current 2% cashback offer is a c.€0.7m hit to net income. Small, but they all add up, whilst also compounding up each year as more new business gets written.

Home…

Page 5 30 Aug. 16 Goodbody Morning Wrap

Market Data Top 10 Covered Companies

Company Price Mkt Cap Absolute Relative to European Sector P/E (LC) (LCM) 1 Day 1 Week 1 Mth Ytd 1 Day 1 Week 1 Mth Ytd 2016f 2017f CRH 30.55 24,914 2.3 5.1 11.2 14.4 2.5 4.2 10.7 21.9 18.8 15.4 AIB Group 6.10 16,659 -2.4 1.7 -6.2 -8.4 -2.3 0.8 -6.5 -2.4 11.7 21.3 HeidelbergCement 82.35 16,340 -0.8 2.3 8.7 8.9 -0.7 1.5 8.3 16.1 15.9 14.4 12.11 15,615 0.9 0.5 1.5 -19.3 1.1 -0.4 1.1 -14.0 14.2 11.4 77.83 13,683 1.0 1.7 1.7 2.0 1.2 0.8 1.3 8.7 24.0 21.3 Wolseley 43.30 11,260 - 1.6 2.9 17.3 0.2 1.7 1.1 7.9 17.2 15.1 Paddy Power Betfair 96.35 8,065 - -2.0 9.5 6.1 0.2 -1.9 7.6 -2.4 31.3 25.6 IAG 3.92 7,969 - 0.5 -3.4 -35.8 0.2 -0.3 -3.8 -31.6 5.5 4.6 Mondi 15.97 7,754 - 0.6 4.4 19.7 0.2 -0.2 4.0 27.6 12.6 12.1 DCC 70.05 6,180 - -0.5 3.9 23.8 0.2 -0.4 2.0 13.8 21.0 25.0

Indices ISEQ performance

% Price 1 Day 1 Week 1 Mth Ytd ISEQ 6,214.36 0.72 2.48 5.91 -8.50 6,800 FTSE 100 6,838.05 - 0.14 1.69 9.54 6,600 6,400 DAX 30 10,544.44 -0.41 0.48 2.00 -1.85 6,200 CAC 40 4,424.25 -0.40 0.78 -0.35 -4.59 6,000

FTSE Eurofirst 300 1,350.40 -0.17 0.82 0.22 -6.06 5,800

Nasdaq 5,232.33 0.26 -0.23 1.36 4.49 5,600 S&P 500 2,180.38 0.52 -0.10 0.31 6.68 5,400 Dow Jones 18,502.99 0.58 -0.14 0.38 6.19 5,200 Aug-15 Nov-15 Feb-16 May-16 Nikkei 225 16,737.49 2.30 0.84 1.02 -12.06

Exchange Rates

Current Px 1 day Px 1 Week Px Dec15 Avg Ytd

Stg/€ 0.854 0.854 0.862 0.737 0.796 STOXX 600 performance US$/€ 1.117 1.128 1.133 1.086 1.115 CHF/€ 1.094 1.092 1.089 1.087 1.094 390 JPY/€ 114.065 113.375 113.629 130.676 121.945 380 370 Bonds 360 350

Yield 1 Day Yld 1 Wk Yld 1 Mth Yld 3 Mth 340 US 2 Yr 0.80 -0.04 0.80 0.15 -0.11 330 US 10 Yr 1.56 -0.07 0.02 0.11 -0.29 320 310

UK 2 Yr 0.16 - 0.05 0.05 -0.30 300 Aug-15 Nov-15 Feb-16 May-16 UK 10 Yr 0.57 - 0.01 -0.12 -0.87

BD 2 Yr -0.63 -0.00 0.01 -0.63 -0.11

BD 10 Yr -0.05 0.03 0.04 -0.05 -0.19

Irish 10 Yr 0.40 0.01 -0.03 -0.01 -0.37

Commodities FTSE 250 performance

% Current 1 day 5 day 1 Mth 1 Yr 18,500 Brent (ICE $/bbl) 49.92 - 1.77 17.57 -0.26 18,000 Gasoline (NYM $/Gal) 1.47 -3.03 -2.83 11.18 -3.61 17,500

Heat Oil (NYM $/Gal) 1.50 -0.75 -0.70 14.71 -5.74 17,000

Nat.Gas 2.87 - 2.68 -0.17 5.75 16,500

Gold $/oz 1,318.75 - -0.64 -1.73 16.19 16,000

Silver $/ozt 18.67 - -0.90 -6.84 29.29 15,500

Copper U$/MT 4,622.00 - -0.78 -4.76 -9.28 15,000

Wheat $/BU 4.08 - -4.40 -0.06 -15.76 14,500 Aug-15 Nov-15 Feb-16 May-16

Source : FactSet

Page 6 30 Aug. 16 Goodbody Morning Wrap

Issuer & Analyst Disclosures

Analyst Certification The named Research Analyst certifies that: (1) All of the views expressed in this research report accurately reflect my personal views about any and all of the subject securities and issuers. (2) No part of my remuneration was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this report.

Regulatory Information Goodbody Stockbrokers, trading as Goodbody, is regulated by the Central Bank of Ireland. In the UK, Goodbody is authorised and subject to limited regulation by the Financial Conduct Authority. Goodbody is a member of the Irish Stock Exchange and the London Stock Exchange. Goodbody is a member of the FEXCO group of companies. This publication has been approved by Goodbody Stockbrokers. The information has been taken from sources we believe to be reliable, we do not guarantee their accuracy or completeness and any such information may be incomplete or condensed. All opinions and estimates constitute best judgement at the time of publication and are subject to change without notice. The information, tools and material presented in this document are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities.

Conflicts of Interest Goodbody Stockbrokers has procedures and policies in place to identify and manage any potential conflicts of interest that arise in connection with its research business. Goodbody Stockbrokers’ analysts and other staff who are involved in the preparation and dissemination of research operate and have a management reporting line that is independent to its Corporate Finance business. Information barriers are in place between the Corporate Finance arm and the Research arm to ensure that any confidential and or price sensitive information is handled in an appropriate manner.

Our Investment Research Conflicts of Interest Policy is available at Conflicts of Interest

Investors should be aware, that, where appropriate, research may be disclosed to the issuer(s) in advance of publication in order to correct factual inaccuracies only and not to materially amend the research in any way. Goodbody Stockbrokers is satisfied that it has operational procedures in place, which ensure that such disclosures will not compromise the report’s objectivity.

Goodbody has provided investment banking services to , Cairn Homes, CRH, Hibernia REIT, IAG, Paddy Power Betfair, Permanent TSB and Wireless Group in the past 12 months.

Goodbody Stockbrokers acts as corporate broker to AIB Group, Applegreen, , Cairn Homes, Datalex, Draper Esprit, FBD Holdings, First Derivatives, Grafton Group, Greencore, Hibernia REIT, ICG, Kingspan, , Paddy Power Betfair, UDG Healthcare, and Wireless Group The list of companies for which Goodbody acts as market maker and on which it provides research, is available at Regulatory Disclosures

Page 7 30 Aug. 16 Goodbody Morning Wrap

Other disclosures

We would like to inform you that Eamonn Hughes holds shares in AIB Group We would like to inform you that holds shares in Permanent TSB

A description of this company is available at Company Descriptions

All prices used in this report are as at close of business of the previous working day unless otherwise indicated.

A summary of our standard valuation methods are available at Valuation Methodologies

A summary of share price recommendations and whether material investment banking services have been provided to these companies is available at Regulatory Disclosures

Other important disclosures are available at Regulatory Disclosures

Goodbody Stockbrokers updates its recommendations on a regular basis. A breakdown of all recommendations provided by Goodbody Stockbrokers is available at Regulatory Disclosures Where Goodbody Stockbrokers has provided investment banking services to an issuer, details of the proportion of buys, holds and sells attributed to that issuer will also be included. This is updated on a quarterly basis.

The date on which stock recommendations were first released for all stocks mentioned in this report are available at http://www.goodbody.ie/research_disclosures/regulatorydisclosures/index.html. If a different recommendation has been made in the previous twelve months, this will also be disclosed here.

Recommendation Definitions Goodbody Stockbrokers uses the terms “Buy”, “Sell” and “Hold. The term “Buy” means that the analyst expects the security to appreciate in excess of 10% over a twelve month period. The term “Sell” means that the security is expected to decline in excess of 10% over the next twelve months. The term “Hold” means that the analyst expects the security to neither appreciate more than 10%, or depreciate more than 10% over the next twelve months.

On 26th November, 2012, the terms “Add” and “Reduce” were removed from the Recommendation Definitions and both were replaced with the “Hold” recommendation. Any Previous Recommendation that refers to either an “Add” means that the analyst expected the security to appreciate by up to 15% over a twelve month period. Any Previous Recommendation to “Reduce” means that the analyst expected the security to decline by up to 15% over the next twelve months.

In the event that a stock is delisted the firm will automatically cease coverage. If however the firm ceases to cover a stock for any other reason the firm will disclose this fact.

Distribution of research to clients of Goodbody Securities Inc (GSI) in the US

GSI distributes third-party research produced by its affiliate, Goodbody Stockbrokers GSI is a member of FINRA and SIPC GSI does not act as a market-maker. Goodbody Stockbrokers or GSI holds a proprietary position and/or controls, on a discretionary basis, more than 0.5% of the total issued share capital of Cairn Homes, and Datalex

This information was current as of the last business day of the month preceding the date of the report. An affiliate of GSI may have acted, in the past 12 months, as lead manager/co-lead manager of a publicly disclosed offer of the securities in this company. Investors should be aware that an affiliate of GSI may have provided investment banking or non-investment-banking services to, and received compensation from this company in the past 12 months or may provide such services in the next three months. The term investment banking services includes acting as broker as well as the provision of corporate finance services, such as underwriting and managing or advising on a public offer. All transactions by US persons involving securities of companies discussed in this report are to be effected through GSI.

Disclaimer While all reasonable care has been taken in the production and dissemination of this report it is not to be relied upon in substitution for the exercise of independent judgement. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you.

Private customers having access, should not act upon it in anyway but should consult with their independent professional advisors. The price, value and income of certain investments may rise or may be subject to sudden and large falls in value. You may not recover the total amount originally invested. Past performance should not be taken as an indication or guarantee of future performance; neither should simulated performance. The value of securities may be subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities.

All material presented in this report, unless specifically indicated otherwise is copyright to Goodbody Stockbrokers. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Goodbody Stockbrokers.

Goodbody, Ballsbridge Park, Ballsbridge, 4, Ireland T (+353 1) 6670400 W www.goodbody.ie E [email protected] Page 8 30 Aug. 16