Morning Wrap

Today ’s Newsflow Equity Research 30 Jul 2015 Upcoming Events Select headline to navigate to article

Permanent TSB NAV and PT upgrades of 4-5% post Company Events results; PT to €5.00 30-Jul Lufthansa; Q2 2015 Results 31-Jul ; Q2 2015 Results 04-Aug Travis Perkins; H1 2015 Interim Results 06-Aug ; Banks Ulster Bank reports Q2 profit of £80m, helped by impairment releases

US Building Materials 3-month extension for highways as politicians inch towards multi-year deal

Building Materials Solid results from Saint Gobain and reiteration of guidance

Economic View FOMC leaves door open for a September Economic Events rate hike Ireland 30-Jul GDP YoY

Economic View Central Bank upbeat on growth but warns United Kingdom on pro-cyclical fiscal policy United States 30-Jul GDP Annualized QoQ 31-Jul U. of Michigan Sentiment Kennedy Wilson Europe Forecasting NAV of £10.70 for end of June (+5%) Europe 31-Jul CPI Estimate YoY

Hibernia REIT Comforting update from Management ahead of AGM today

Dragon Oil D-DAY for initial acceptances

Lufthansa Holding FY guidance despite further fuel savings

Ryanair Eating their (pasta) lunch 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 Bank of Ireland. 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

Permanent TSB NAV and PT upgrades of 4-5% post results; PT to €5.00

PTSB’s H1 results yesterday were in line with our estimates. However, the NIM trajectory Recommendation: Hold (100bps H1, but 117bps Q2) was stronger than anticipated as deposits re-price quicker Closing Price: €5.07 towards our medium term targets, supporting forecast upgrades. Adjusted FY15 operating Eamonn Hughes profit is raised by €38m to €110m, largely as we lift our NIM estimate from 107bps to +353-1-641 9442 118bps. The uplift reduces each year out, but we still model a NIM upgrade of 6bps in 2018 [email protected] to 1.78% and a FY18 net income increase of c.3% to €161m in the year of ROE normalisation.

Our medium term targets remain unchanged (2018 ROE estimate tweaked from 9.5% to 9.8%), reinforcing the use of our 10% normalised ROE for valuations. But higher earnings estimates in the meantime add a cumulative c.15c to NAV (+3%), whilst other items in the H1 equity number (e.g. gain on Irish CRE sale, higher DTA) add a further c.9c (+2%), driving a combined FY18 NAV uplift of 5%.

The NAV uplift means our fair value is raised from €4.80 to €5.00, but we retain our Hold call. Our base case valuation recognises €500m of provision releases (20% of stock). For those that believe that this could prove conservative, every extra €100m would add c.22c to fair value, whilst every 1% ROE boost adds c.36c. Check our note for full details.

Home…

Banks Ulster Bank reports Q2 profit of £80m, helped by impairment releases

Ulster Bank has reported H1/Q2 results this morning. It reported a H1 operating surplus of Eamonn Hughes +353-1-641 9442 £79m, though £55m of impairment releases drove operating profit of £131m, up from £55m [email protected] in H114. In Q2, Ulster generated a £28m pre-provision profit (£51m in Q1), though a £52m impairment release (Q1 zero) leaves operating profit at £80m, ahead of the £51m in Q115. Colm Foley +353-1-641 6042 [email protected] Total income was down £12m from Q115 to £178m (was also -£14m in Q1), primarily driven Sarah Dunne by lower non-interest income though FX also cost c. £4m. However, the net interest margin +353-1-641 0482 in Q2 was down 2bps to 1.93%, which compares with 1.95% in Q1 and 2.14% in Q414 (full [email protected] year FY14 average was 2.27%), attributed to lower returns on free funds. Costs were up £11m from Q1 to £150m, but included £11m net of restructuring/litigation costs, so flat underlying. The £52m impairment release in Q2 follows a zero charge in Q1 and net write- backs of £104m in Q414, with the key features being a £38m release in the mortgage book (write-backs of £13m in Q1, £39m in Q414) and a £37m release in other corporate lending (£12m charge in Q1 after £64m write-back in in Q414). We would also flag the £33m of impairment releases in RBS Capital Resolution in Q2 (on £4.7bn of gross loans), which compares with the £139m of write-backs in Q115 and £712m write-back in Q414. NPLs at Ulster were down £0.2bn to £4.2bn in Q2. The loan to deposit ratio was 108%.

These results show that the Ulster Bank franchise continues to accrete to capital for its parent, RBS. Lower free funds returns continue to be a headwind for all the Irish banks, but the releases continue to show the potential for capital tied up in the provision stock. We anticipate only modest NIM progression at BOI (H1 2.25% from 2.22% Q414) and lower impairment charges in its H1’s tomorrow. Home…

Page 2 30 Jul. 15 Goodbody Morning Wrap

US Building Materials 3-month extension for highways as politicians inch towards multi-year deal

Yesterday, the House of Representatives easily passed a three-month extension for the Robert Eason +353-1-641 9271 federal highway programme (current authorisation expires in two days). At the same time, [email protected] the Senate is moving towards the passing of a six-year highway programme (looks for growth from $41bn in 2015 to $49bn in 2021, representing growth of 3% p.a.) with a vote David O’Brien +353-1-641 9230 today. However, this is unlikely to get fully approved ahead of the six-week August break. david.a.o’[email protected] Therefore, the 3-month extension is seen as a compromise as the House was originally Sarah Reilly seeking a 5-month extension. +353-1-641 6080 [email protected] There appears to be some optimism that the three month extension is sufficient time for the House and the Senate to reconcile their differences over a multi-year programme.

Any resolution over a multi-year highway programme will be a positive for the heavyside building materials companies. However, in the meantime there is clear evidence that states are sourcing their own funds which is leading to a robust backdrop for aggregate volumes, as highlighted in yesterday’s results from HeidelbergCement.

Home…

Building Materials Solid results from Saint Gobain and reiteration of guidance

After market close yesterday Saint Gobain released H115 results with operating income of Robert Eason +353-1-641 9271 €1.183bn. While behind Bloomberg consensus of €1.39bn, we believe the latter does not [email protected] fully account for the reclassification of the packaging business into discontinued. Lfl sales increased by +2.1% in Q2, representing a return to growth (-1.2% in Q1) and reflects David O’Brien +353-1-641 9230 easing comparatives (6.8% Q114 and 1.6% Q214). In addition, management reiterated david.a.o’[email protected] guidance for lfl organic profit growth in the current financial year. Sarah Reilly +353-1-641 6080 By geographic area the key takeaways are: (i) France remains weak, with lfl sales down 3% [email protected] in Q2 (-5% Q1); (ii) North America remains an area of strength, with lfl sales picking up post a weather impacted Q1 (+5% Q2 / -10% Q1); and (iii) Across Europe, trends improved aided by easing comparatives (+2% Q2 / 1% Q1) but partly offset by Germany being slightly down in Q2 (-6% Q1). It is off note that within the distribution business, the UK has reported further organic growth and “a particularly upbeat trend emerged in the Nordic countries, the Netherlands, Southern Europe and Brazil”.

Overall, this latest set of results from the building materials sector reinforces our view on construction markets; namely strengthening conditions in the US, while Europe continues to show muted progress with some areas of stronger growth, especially in the UK. The comments on the Netherlands and the Nordics are positive for CRH and Wolseley (10% and 15% of group sales), respectively, while the challenging markets for France / Germany are of note for SIG (collectively c.45% of group sales).

Home…

Page 3 30 Jul. 15 Goodbody Morning Wrap

Economic View FOMC leaves door open for a September rate hike

The FOMC once again gave themselves the maximum amount of wriggle room for when the Dermot O’Leary +353-1-641 9167 first rate hike will come in last night’s policy statement. It continues to believe that the [email protected] economy is “expanding moderately”, with a similar adjective used to describe the performance of household spending. It upgraded its view of the labour market somewhat, reflecting the solid data over the past six weeks and stated that the “underutilization of labor resources has diminished since early this year”. However, the committee continues to be sanguine about inflation risks, saying that it “continued to run below” its “longer-run objective”.

In terms of forward-looking statements, the only change was that the committee would see it appropriate to raise the fed funds rate when it has seen “some” further improvement in the labour market.

This suggests that another two positive jobs reports, with solid job gains and a further fall in the unemployment rate, prior to the next meeting on 17 September will be enough for the Fed to sanction its first rate hike in almost a decade at that meeting. The market is currently putting a 40% probability on that outcome. It’s data-watch time again.

Home…

Economic View Central Bank upbeat on growth but warns on pro-cyclical fiscal policy

Juliet Tennent In its Q3 bulletin, released yesterday, the Irish Central Bank upgraded its GDP forecasts for +353-1-641 9469 both 2015 and 2016. It now expects growth of 4.1% this year (was 3.8%) and 4.2% in 2016 [email protected] (was 3.7%). The upgrade is primarily driven by the domestic economy where the Central Bank notes that momentum has “strengthened” and the outlook is now “more favourable” than at the time of its Q2 bulletin. In particular, its outlook for Consumption has improved and it now expects this to grow by 2.3% in both 2015 & 2016, up from 2.2% and 2.1% respectively. On this, it notes increasing employment, rising real disposable incomes and rising consumer confidence as giving support. It also expects Investment spending, including construction, to strengthen further. On the downside, the Bank highlights the high level of indebtedness of households as providing a headwind and points to the still high (albeit improving) level of NPLs and mortgage arrears in the banking system.

However, in a warning to the government, the Central Bank notes the outperformance of the Exchequer but stresses the dangers of pro-cyclical fiscal policy citing Ireland’s past experience. Instead the Bank advises reducing debt levels.

The Bank caveats its forecasts on two things. Firstly; the lack of Q1 GDP data which means it is relying on the more high frequency data releases, and secondly, the, as yet unquantifiable, impact of the inclusion of Irish resident aircraft leasing companies on both the Investment and Import components of GDP (see our note last week on this topic). We will get clarity on these when Q1 GDP numbers are released later this morning. In line with the Central Bank’s forecasts, we expect these to show a strengthening in the domestic economy, notwithstanding the statistical noise associated with the aircraft issues.

Page 4 30 Jul. 15 Goodbody Morning Wrap

Home…

Kennedy Wilson Europe Forecasting NAV of £10.70 for end of June (+5%)

Kennedy Wilson Europe (KWE) is due to release its H115 results on August 6. We expect Recommendation: Buy Rental Income (Including hotel & interest from loans secured from Real estate) of £62m for Closing Price: £11.46 the period, a substantial step-up from £8.6m in H114, following significant investment in the portfolio over the past 12 months. We are forecasting a £50m revaluation gain (was £21.3m Eamonn Hughes +353-1-641 9442 in H114 and £34m in H214), though we note that c.30% of the portfolio was purchased in [email protected] H115. We are forecasting a NAV of £10.70 at the end of June, up from £10.22 in December, as the asset management initiatives are reflected in the valuations. KWE declared an 8p dividend per share for Q1 and we expect this to increase further to 9p in Q2.

We expect to see significant uplift in the NAV given the initiatives taken at the existing assets through re-gearing leases, refurbishing buildings and attracting new tenants to existing assets. KWE has acquired c. £650m of new assets in H1 and a further £211m post the end of June. We believe KWE has c. £300m of additional spending capacity, assuming 50% leverage and capex of c. £120m.

KWE offers a dividend yield of 2.7% which compares to the EPRA index of 4%, which goes some way to explain why KWE is trading at just 1x 2015 P/NAV relative to European EPRA index trading on 1.3x P/B. However we expect to see improving dividends as the portfolio is bedded down which should see the discount narrow over time.

Home…

Page 5 30 Jul. 15 Goodbody Morning Wrap

Hibernia REIT Comforting update from Management ahead of AGM today

Hibernia released an IMS this morning for the period April 1 to July 30, ahead of its AGM at Recommendation: Buy 11.30 today. In the period Hibernia acquired Dundrum View, an 80 unit residential Closing Price: €1.30 development in Dundrum for €28m and also disposed of a number of assets from the Dorville Eamonn Hughes non-core portfolio. Hibernia has sold or contracted to sell 14 units for €7.5m and it has also +353-1-641 9442 agreed terms for the sale of a further 25 units. The remaining 26 units (€8.4m carrying [email protected] value) are expected to be disposed of by year end. To date sales prices achieved have been 20% ahead of carrying value.

Hibernia’s development projects are progressing well. Piling has commenced at Windmill Lane, demolition works will complete at 1-6 Sir John Rogerson’s Quay in September and preliminary planning approval has been granted at Harcourt Sq. It has also completed its fit- out at Wyckham Point in Dundrum ahead of schedule (76% of units either let or booked to let) while work continues at Commerzbank House with a targeted completion of early 2016.

In addition, the internalisation of management was announced in May and a circular is due to be released prior to a vote being put to shareholders at an EGM in due course.

There is limited incremental news-flow in this morning’s statement. We continue to favour office and residential exposure among the REITs and believe Hibernia has assembled an attractive portfolio with strong upside potential from existing and development assets leaving it ideally placed to capture the upswing in rents over the coming years. We are forecasting Prime Grade A Office rents to reach €55 psf by year end and €65 psf by end 2016 driven by strong demand and limited supply. Home…

Dragon Oil D-DAY for initial acceptances

The latest declaration from Elliott Advisors yesterday (5.87% interest) suggests that the Recommendation: Buy minority shareholders that have publicly stated the view that the 750p offer from ENOC Closing Price: £7.18 undervalues Dragon Oil now hold c16.27% of the shares outstanding. Initial acceptances to Gerry Hennigan the 750p cash Offer from ENOC, for the 46% in Dragon Oil not held, are due by 3pm today. +353-1-641 9274 The Offer is conditional upon the receipt of valid acceptances in respect of a majority of the [email protected] Dragon Oil minority shareholders i.e. c.23%.

On the operational front, a Q2 update from Cooper Energy this morning, the operator of the Bargou Permit offshore Tunisia, in which Dragon has a 55% interest, indicates that the process to divest its interests offshore Tunisia “has yet to generate acceptable offers”. Cooper has indicated that it is continuing efforts to divest and reduce its commitments in the Bargou and Hammamet permits. The licence partners drilled the Hammamet West prospect in the Bargou permit in 2013, but a side-track of the well was deemed necessary to fully assess the economic viability. That side-track has yet to be drilled. Tunisia accounts for just 1.3p of our 807p total risked NAV for Dragon Oil, and thus is immaterial to our current valuation.

Events on the corporate front take centre stage for Dragon shareholders today. Failure to secure the required level of acceptances is, in our view, likely to see an extension of the offer.

Home…

Page 6 30 Jul. 15 Goodbody Morning Wrap

Lufthansa Holding FY guidance despite further fuel savings

Lufthansa has reported Q2 Adj. EBIT of €630m, slightly ahead of our €603m forecast and Recommendation: Sell consensus of €530m. The major driver of the outperformance was its cost performance, Closing Price: €12.66 although in part offset by underlying pricing which was weaker than expected. However, it Jack Diskin has left FY15 guidance unchanged for Adj. EBIT of at least €1.5bn. +353-1-641 9193

[email protected] Total revenues grew by 9% to €8.4bn, 2% behind our forecast. Underlying RASK was lower than anticipated, at -5.5%, led by very weak pricing in Middle East/Africa and Asia (-12% and -5% respectively). Positive FX lifted reported RASK to +2%. Its cargo performance was in line with expectations, driven by weaker unit pricing, while 7% revenue growth in services was driven by MRO and catering (both +22% yoy).

The net effect of FX was to inflate costs more than revenues, with total operating costs rising by 7%. As such, underlying ex-fuel CASK was -1.2%. However, allowing for a weaker Euro, this was +5.5%, which is a marginally better performance than we had forecast. Staff costs were slightly lower than our numbers, while its fuel bill of €1.62bn was 2% lower than our estimate.

Despite now guiding for €200m further savings on its FY15 fuel bill, its guidance for Adj. EBIT of ‘at least’ €1.5bn remains. We believe this implies an even weaker pricing outlook, against its existing outlook for ‘clearly negative yields’, given pre- FX RASK was more than 5% lower yoy in H1. With new competitors this year entering its traditionally stronger markets, we expect this weak pricing to be exacerbated this winter. We also remain cautious on its cost guidance of lower ex- fuel CASK yoy. However, it is on the pricing side for its passenger business where we expect it to be challenged to grow returns moving into 2016.

Home…

Page 7 30 Jul. 15 Goodbody Morning Wrap

Ryanair Eating their (pasta) lunch

A number of news items this morning highlight the positive momentum being enjoyed by Recommendation: Buy Ryanair in Italy at the expense of the other airlines. Closing Price: €12.37

Firstly, Alitalia, as part of its commentary around its demand for €80m of compensation from Mark Simpson +353-1-641 0478 Rome’s Fiumicino Airport due to operational losses incurred since the fire in May, also said [email protected] ‘’Fiumicino Airport in its current state is not an appropriate infrastructure to serve as the hub of an airline with our ambitions. …. If Fiumicino will continue to focus on low cost carriers and mediocre services, Alitalia will be forced to shift its growth elsewhere." This sounds similar to one of the reasons given by easyJet for it to close its base at the airport. In that context it seems as if Alitalia is also being squeezed out of Rome by the likes of Ryanair.

Secondly, traffic stats for June from the three Milan airports support our view that the market continues to shift towards the LCCs operating out of Milan Bergamo, with this airport dominated by Ryanair. Overall traffic was up 4.5% yoy, with Malpensa down 1.7%, Linate up 7.4% and Bergamo up 14.5% yoy. In terms of domestic and international flows, domestic traffic was down 3% yoy, with Malpensa seeing a 15% fall, Linate a 5.5% decline and Bergamo growth of 12.9%. For international traffic, overall growth was up circa 8%, with Malpensa up 1.1%, while Linate was notable at +26% and Bergamo up 15.2%. These numbers suggest that Ryanair is gaining significant share in Italy in the current summer season, given that Bergamo is raising its Milan market share by 2.3pp to 26.7% and that Ryanair controls over 82% of Bergamo’s capacity.

Looking at the current calendar year as a whole, Ryanair is expected to increase its share of domestic capacity by 2.8pp to 31.5% (11.8m seats offered) and intra-European traffic by 1.1pp to 26.1% (22.8m seats offered). Overall, Ryanair is expected to grow its traffic by circa 8% this year as against 1% growth for the combined domestic and European market to and from Italy.

We continue to recommend the stock as a Buy given the strong ongoing momentum in traffic growth, impressive unit cost controls and the ability to win market share across Europe. Our price target stands at €15.75.

Home…

Page 8 30 Jul. 15 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 2015f 2016f AIB Group 0.09 44,498 -3.4 1.2 - 7.6 -4.4 2.8 -2.0 -6.5 29.7 52.2 CRH 26.72 21,790 2.0 -0.6 4.7 34.2 1.0 1.0 2.6 16.7 26.0 16.9 Ryanair 12.37 17,118 0.4 -1.1 3.2 26.1 -0.6 0.5 1.1 9.6 13.1 15.8 Wolseley 42.18 10,969 1.1 -1.0 2.5 14.4 0.1 0.6 0.4 -0.5 17.5 16.0 IAG 5.51 10,223 -0.9 -3.3 11.7 13.4 -1.9 -1.8 9.5 -1.5 n/m n/a Bank of Ireland 0.38 12,209 -0.8 -2.3 4.7 20.4 -1.8 -0.8 2.6 4.7 13.4 12.5 Kerry Group 67.38 11,845 -0.3 -2.9 0.7 18.1 -1.3 -1.4 -1.3 2.6 22.5 20.6 Mondi 15.43 7,492 1.8 2.5 11.5 47.0 0.8 4.1 9.3 27.8 16.6 15.9 easyJet 16.83 6,631 0.3 -3.7 9.0 0.7 -0.7 -2.2 6.8 -12.4 12.7 12.3 Travis Perkins 21.95 5,422 0.5 -2.4 3.1 18.2 -0.6 -0.8 1.0 2.8 17.0 14.8

Indices ISEQ performance

% Price 1 Day 1 Week 1 Mth Ytd 7,000 ISEQ 6,427.75 0.75 -1.39 3.52 23.03 6,500 FTSE 100 6,631.00 1.16 -0.55 0.16 0.99 6,000 DAX 30 11,211.85 0.34 -2.68 1.16 14.34 CAC 40 5,017.44 0.81 -1.28 3.03 17.43 5,500

FTSE Eurofirst 300 1,561.48 1.02 -1.57 2.04 14.10 5,000 Nasdaq 5,111.73 0.44 -1.16 3.09 7.93 4,500 S&P 500 2,108.57 0.73 -0.26 2.48 2.41 Dow Jones 17,751.39 0.69 -0.56 0.88 -0.40 4,000 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Nikkei 225 20,302.91 -0.13 -1.41 0.96 16.34

Exchange Rates

Current Px 1 day Px 1 Week Px Dec14 Avg Ytd

Stg/€ 0.705 0.708 0.697 0.776 0.729 STOXX 600 performance US$/€ 1.103 1.104 1.089 1.210 1.114 CHF/€ 1.062 1.066 1.048 1.202 1.057 420

JPY/€ 136.598 136.429 135.104 145.079 134.480 400

Bonds 380

Yield 1 Day Yld 1 Wk Yld 1 Mth Yld 3 Mth 360

US 2 Yr 0.70 0.03 0.70 0.06 0.14 340 US 10 Yr 2.29 0.04 -0.03 -0.04 0.25 320

UK 2 Yr 0.79 0.02 -0.03 0.02 0.08 300 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 UK 10 Yr 2.00 0.04 -0.05 -0.09 0.14

BD 2 Yr -0.25 -0.02 -0.02 -0.25 -0.01

BD 10 Yr 0.67 0.03 -0.02 0.67 0.39

Irish 10 Yr 1.31 0.02 -0.08 -0.33 0.62

Commodities FTSE 250 performance

% Current 1 day 5 day 1 Mth 1 Yr 18,500

Brent (ICE $/bbl) 53.38 0.15 -2.27 -13.92 -50.45 18,000

Gasoline (NYM $/Gal) 1.82 1.06 -0.32 -10.24 -36.52 17,500 Heat Oil (NYM $/Gal) 1.61 -0.39 -1.95 -12.89 -44.88 17,000 Nat.Gas 2.89 2.30 3.96 2.89 -24.21 16,500 16,000 Gold $/oz 1,090.25 -0.54 0.87 -7.29 -16.09 15,500 Silver $/ozt 14.61 0.48 0.83 -7.71 -29.22 15,000

Copper U$/MT 5,302.00 1.19 1.48 -8.06 -25.49 14,500

Wheat $/BU 4.96 -2.84 -3.03 -14.95 -4.57 14,000 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15

Source : FactSet

Page 9 30 Jul. 15 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. 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 is acting as a co-lead manager in an offering of securities in Permanent TSB Group Holdings Plc. Goodbody was the co-lead manager for Hibernia REIT Plc for a public fund raising in the past 12 months. Goodbody is acting as a financial advisor to CRH on the proposed acquisition of certain assets being disposed by Lafarge and Holcim. Please note that Aer Lingus is in an offer period and Goodbody is an advisor to the named Offeror, International Consolidated Airlines Group. Goodbody Stockbrokers acts as corporate broker to AIB Group, Datalex, FBD Holdings, First Derivatives, Grafton Group, Greencore, Hibernia REIT, ICG, Kingspan, , Paddy Power, UDG Healthcare, and UTV Media A complete list of the companies that Goodbody Stockbrokers makes a market in is available at Regulatory Disclosures

Page 10 30 Jul. 15 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 Robert Eason holds shares in Kingspan We would like to inform you that Colm Foley holds shares in Permanent TSB We would like to inform you that Robert Eason holds shares in SIG

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. GSI or it affiliates hold a proprietary position and/or controls on a discretionary basis more than 1% of the total issued share capital of Hibernia REIT

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 11 30 Jul. 15