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Equity Research

Investment Research

Post-results note 6 November 2015 A. P. Moller – Buy

(Unchanged)

Industrial Transportation & Motorways,

Most risks are discounted

We maintain our view that most risks are discounted in the share price; Key data however, we need a sentiment change to trigger a revaluation, which we Price (DKK) * 10,510 Target price, 12 mth (DKK) † 12,500 believe would be a return of growth in the container market. The valuation is appealing and we reiterate our Buy recommendation. Market cap (USDm) 32,621 Market cap (EURm) 30,028

 Impact on the investment case. The report does not change our view. We still Reuters MAERSKb.CO expect container lines to adjust capacity to match demand short term to bring Bloomberg MAERSKB DC

rates above breakeven levels or further ahead of contract negotiations around No. of shares (m) 21.3 year-end. We expect rates to start to deteriorate from tomorrow after last week’s Net debt (current Y/E) (m) 11,099 Free float 47.0% successful GRI before a new push in mid-December and ahead of the Chinese Avg. daily vol, 12M (000) 28.8

New Year (8 February 2016) demand rush. However, we need to see evidence Price performance that demand has resumed a normal relation to GDP growth (about 1.5x) before 17,000 16,000 we find sustainable support for the share price – we would not expect to see this 15,000 14,000 evidence before Q2 16. 13,000 12,000

11,000 10,000  Estimate changes. We have only made minor changes to our estimates following Error!AutoText notdefined. entry 9,000 Nov 14 Feb 15 May 15 Aug 15 Nov 15

the report, leading to 4% lower EPS in 2015 and 3% higher EPS in 2016. MAERSKb.CO FTSE EU 300/Ind. Trans. rebased

. We expect Maersk Line NOPAT to increase to USD1.98bn in 2016 1M 3M 12M 5Y

based on growth resuming to 3-5%, a 2.5% structural reduction in rates and a unit Absolute -3% -14% -30% -19% cost reduction of -4.8%, with bunker costs falling by 21% due to lower bunker Rel. local market -6% -9% -44% -60% Rel. EU Sector -5% -9% -35% -44% prices and other unit costs falling by 2%. Source: FactSet  Valuation. We base our 12-month price target of DKK12,500 on a blend of our Estimate changes 15E 16E 17E P/CE multiple peer group valuation model and absolute valuation of P/BV 0.7x in Sales 0.3% 0.9% 0.9% 2016, which is the lowest since 2008, when it was 0.8x. EBITDA 0.9% 5.2% 4.9% EBIT (adj.) -3.7% 6.3% 7.0% EPS (adj.) -4.3% 3.1% 3.1% Key financials Source: Markets estimates Year-end Dec (USD) 2013 2014 2015E 2016E 2017E Revenues (m) 47,654 47,770 41,655 42,986 44,484 Next event Q4 25-Feb Revenues growth -19.9% 0.2% -12.8% 3.2% 3.5% EBITDA (m) 11,598 14,169 9,919 10,476 10,959 * Price as at close on 6 November 2015 EBIT, adj. (m) 6,912 9,054 4,791 5,498 5,772 † Includes dividends EBIT growth -9.6% 31.0% -47.1% 14.7% 5.0% Pre-tax profit (m) 6,623 5,311 5,027 5,399 5,753 EPS (adj.) 140 263 152 180 200

DPS 9.97 53.4 53.7 59.7 62.7 Dividend yield 0.5% 2.6% 3.5% 3.9% 4.1% FCF yield 5.6% 0.0% -0.5% 3.7% 3.6% EBIT margin (adj.) 14.5% 19.0% 11.5% 12.8% 13.0% Net debt/EBITDA (x) 1.1 0.6 1.1 1.2 1.2 ROIC 9.1% 14.7% 10.1% 10.7% 10.6% EV/sales (x) 1.2 1.1 1.0 1.0 1.0 EV/EBITDA (x) 4.9 3.9 4.6 4.1 3.9 EV/EBIT (adj.) (x) 8.2 5.8 9.0 7.8 7.5 Analyst(s) P/E (adj.) (x) 15.6 7.7 10.1 8.5 7.7 P/BV (x) 1.2 1.1 0.7 0.7 0.7 Finn Bjarke Petersen +45 45 12 80 36 Source: Company data, Danske Bank Markets estimates [email protected]

1Important | A. P. Moller disclosures – Maersk and certificationsBuy are contained from page 17 of this report. www.danskemarketsequities.com

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Investment case

Maersk is a conglomerate, with Maersk Line the swing factor for earnings. We expect Maersk Line to continue outperforming peers through cost leadership – the balance in the container market should improve significantly in 2016 through falling supply growth and continued strong performance by European and US consumers. The group has a neutral/positive correlation with falling oil prices due to a short oil position in US dollar terms. production has reached a trough and looks set to improve in the next five years. However, the risk of losing the oil contract is a real concern but, in our view, would not be a blow to the group's performance. Maersk Drilling has strong contract coverage that shelters it from falling rates for rigs. Disciplined capex and focus on ROIC will leave room for a significant share buyback in the coming years. In addition, in our view valuation is attractive in absolute and historical terms. Change of estimates

Our estimates for Maersk Group are relatively unchanged following the Q3 15 report. For details of the changes to our divisional estimates, see the relevant text below.

Table 1. Changes to estimates

USDm New Change Change (%) 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E Maersk Line 24,361 24,688 25,418 326 213 219 1% 1% 1% Maersk Oil 5,554 5,669 6,004 -173 196 208 -3% 4% 4%

APM Terminals 4,168 4,413 4,717 -47 -50 -53 -1% -1% -1% Error!AutoText notdefined. entry Maersk Drilling 2,497 2,423 2,319 -50 -17 -16 -2% -1% -1% Maersk Supply Services 700 729 761 0 0 0 0% 0% 0% Maersk Tankers 1,114 1,216 1,139 51 52 52 5% 5% 5% Damco 3,409 3,716 3,902 0 0 0 0% 0% 0% Svitzer 650 933 1,023 0 0 0 0% 0% 0% Other -800 -800 -800 0 0 0 0% 0% 0% Revenue 41,655 42,986 44,484 106 395 411 0% 1% 1%

Maersk Line 1,578 1,980 2,110 -8 62 63 -1% 3% 3% Maersk Oil 388 320 320 -127 -9 11 -25% -3% 4% APM Terminals 730 899 1,057 65 56 68 10% 7% 7% Maersk Drilling 699 527 458 -52 -16 -15 -7% -3% -3% Maersk Supply Services 178 158 174 0 0 0 0% 0% 0% Maersk Tankers 212 239 229 37 30 30 21% 14% 15% Damco 54 71 91 14 18 3 36% 33% 3% Svitzer 119 202 213 0 2 2 0% 1% 1% Other -194 -487 -466 -71 -22 -24 -58% -5% -6% Result for year 3,765 3,909 4,187 -142 121 138 -4% 3% 3% Discontinued businesses 0 0 0 0 0% 0% 0%

Impairment losses 100 0 0 0 0 0 0% 0% Gain/loss on sale, net 465 0 0 0 0 0 0% 0% 0% Other one-offs Result for year adj. 3,400 3,909 4,187 -142 121 138 -4% 3% 3% Minorities 180 180 180 0 0 0 0% 0% 0% Net result adjusted 3,220 3,729 4,007 -142 121 138 -4% 3% 4%

Source: Danske Bank Markets estimates

Realised vs estimates

Group guidance for underlying profit is around USD3.4bn as in the 23 October profit warning. However, the company reduced its capex guidance from USD8bn to USD7bn.

Group net profit for continued businesses excluding gains and impairments for Q3 15 came in at USD660m versus the USD662m guided on 23 October.

2 | A. P. Moller – Maersk Buy www.danskemarketsequities.com

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Maersk Line reported NOPAT of USD264m versus our estimate of USD353m (no

consensus after 23 October).

Maersk Oil reported NOPAT of USD32m versus company-collected consensus of USD49m (our estimate USD93m), the result included USD82m in exploration costs versus consensus of USD180m (our estimate USD200m). We estimate full-year production of 300,000boepd (previously 285,000boepd).

APM Terminals’ reported NOPAT was USD175m versus consensus of USD171m (our estimate USD143m), while like-for-like volumes were down -4.4% versus -3.5% in Q2 15.

Maersk Drilling reported NOPAT of USD184m versus consensus of USD175m (our estimate USD215m).

T able 2. Realised vs expected

USDm Danske Cons. Q3 14 2014 Q3 15 Q3 15A Q3 15E Dev.% Q3 15E Dev.% Maersk Line 7,074 27,351 6,018 6,018 5,933 1.4% 6,165 -2.4% Maersk Oil 2,174 8,737 1,321 1,321 1,484 -11.0% 1,388 -4.8% APM Terminals 1,109 4,455 1,046 1,046 1,038 0.8% 1,054 -0.8% Maersk Drilling 525 2,102 646 646 674 -4.2% 617 4.7% Maersk Supply Services 232 778 145 145 186 -21.9% 196 -26.0% Maersk Tankers 267 1,174 282 282 275 2.5% 267 5.8% Damco 848 3,164 719 719 655 9.8% 767 -6.2% Svitzer 189 821 161 161 144 12.2% 170 -5.3% Other -249 -812 -210 -228 -210 -234 Revenue 12,169 47,770 10,128 10,110 10,178 -0.7% 10,407 -2.9%

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Gain on sales of non current assets 454 600 115 118 115 8 Share of profit/loss in joint ventures -14 -6 39 45 39 15.4% 36 26.8% Associated companies, share of profit 1) 157 412 24 34 24 41.7% 28 21.4%

Maersk Line 685 2,341 264 264 353 -25.2% 443 -40.4% Maersk Oil 222 -861 32 32 93 -65.5% 49 -34.0% APM Terminals 345 900 175 175 143 22.4% 171 2.6% Maersk Drilling 192 478 184 184 215 -14.3% 175 5.4% Maersk Supply Services 79 201 45 45 46 -2.6% 49 -7.2% Maersk Tankers 84 132 59 59 41 45.2% 40 49.4% Damco -68 -293 20 20 8 150.0% 9 135.3% Svitzer 23 -270 30 30 26 13.3% 26 15.4%

Other -307 -289 -197 -31 -147 -79 60.8% Continued businesses 1,255 2,339 612 778 778 0.0% 880 -11.6% Discontinued 2,856 0 0 0 0 Result for period 1,255 5,195 612 778 778 0.0% 880 -11.6%

Sales gains 454 600 115 118 115 8 Impairment test and other one offs 58 2,627 0 0 0 Result excl. sales gains and impairment 859 4,366 497 660 663 -0.4% 825 -20.0%

CFFO 2,722 8,761 1,503 2,194 1,500 46.2% 2,018 8.7% Capex 1,352 6,263 1,501 1,290 1,501 -14.1% 1,559 -17.2% Free cash flow 1,370 2,498 2 904 -1 460 96.7%

Transported volumes (FFE 000) 2,401 9,442 2,427 2,427 2,427 0.0% 2,495 -2.7% Average container rate (USD per FFE) 2,679 2,630 2,163 2,163 2,163 0.0% 2,212 -2.2% Unit cost (USD per FFE incl. VSA income) 2,456 2,451 2,165 2,310 2,089 2,250 2.7% Entitlement oil production (000bpd) 238 251 300 300 283 6.0% 280 7.1% Oil price (USD/bl) 100 99 50 50 57 -12.3% 51 -2.0% Exploration costs (USDm) 215 765 82 82 200 -59.0% 180 -54.4% APMT equity throughput (TEUmn) 9.7 38.3 8.9 8.9 9.3 -4.4% 9.3 -4.3%

Source: Company data, company-collected consensus, Danske Bank Markets estimates

3 | A. P. Moller – Maersk Buy www.danskemarketsequities.com

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Maersk Line

We have made minor changes to our Maersk Line estimates. We have kept our volume estimate but lifted our rate estimate slightly upward based on the latest GRI success. We except this to deteriorate in coming weeks before a new push brings the rate up again in mid-December. We the estimate average rate for Q4 15 will be 2.5% lower than it was in Q3 15. Currently, in Q4 15 the CCFI is down 1.3% q/q.

We have adjusted unit costs in line with the better-than-expected performance in Q3 15, resulting in a 0.6% lower unit cost in 2016 and 2017.

Table 3. Maersk Line – change of estimates

USDm New Change Change % 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E Revenue 24,361 24,688 25,418 326 213 219 1% 1% 1% Cost 20,784 20,582 21,122 353 134 139 2% 1% 1% EBITDA 3,577 4,105 4,297 -28 79 80 -1% 2% 2% EBITDA margin 14.7% 16.6% 16.9% EBIT 1,681 2,092 2,237 -7 63 65 0% 3% 3% Tax 103 112 127 1 1 1 1% 1% 1% NOPAT 1,578 1,980 2,110 -8 62 63 -1% 3% 3%

CFFO 3,577 4,105 4,297 -28 79 80 -1% 2% 2% Capex 2,500 2,278 3,025 0 0 0 0% 0% 0% Free cash flow 1,077 1,827 1,272 -28 79 80 -3% 5% 7%

Gain/loss on sale, net 33 0 0 21 0 0 175% 0% 0% Share of joint venture 0 0 0 0 0 0 0% 0% 0%

Share of associated companies -1 0 0 0 0 0 0% 0% Error!AutoText notdefined. entry Impairment losses 0 0 0 0 0 0 0% 0% 0% EBIT adj. 1,649 2,092 2,237 -28 63 65 -2% 3% 3% Margin 6.8% 8.5% 8.8% NOPAT adj. 1,546 1,980 2,110 -29 62 63 -2% 3% 3%

Volume FFE (m) 9.5 9.9 10.3 0.0 0.0 0.0 0.0% 0.0% 0.0% Rate (USD per FFE) 2,268 2,217 2,195 33 32 32 1.5% 1.5% 1.5% Unit cost (USD per FFE) 2,178 2,074 2,047 36 12 12 1.7% 0.6% 0.6% Bunker cost (USD per tonne) 330 258 258 40 13 13 13.8% 5.1% 5.1%

Source: Danske Bank Markets estimates

4 | A. P. Moller – Maersk Buy www.danskemarketsequities.com

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Table 4. Maersk Line

USDm 2011 2012 Q3 14 Q4 14 2014 Q1 15 Q2 15 Q3 15 Q4 15E 2015E 2016E 2017E Container 22,907 24,191 6,432 6,183 24,832 5,502 5,616 5,414 5,111 21,643 22,002 22,653 Other 2,201 2,927 642 729 2,519 752 647 604 715 2,718 2,685 2,765 Revenue 25,108 27,118 7,074 6,912 27,351 6,254 6,263 6,018 5,826 24,361 24,688 25,418 Bunker cost 6,800 6,700 1,289 1,094 4,883 767 750 740 669 2,926 2,382 2,477 Other cost 17,299 18,239 4,607 4,670 18,256 4,285 4,515 4,513 4,545 17,858 18,200 18,644 EBITDA 1,009 2,179 1,178 1,148 4,212 1,202 998 765 612 3,577 4,105 4,297 EBITDA margin 4.0% 8.0% 16.7% 16.6% 15.4% 19.2% 15.9% 12.7% 10.5% 14.7% 16.6% 16.9% EBIT -483 525 740 694 2,504 736 531 303 111 1,681 2,092 2,237 EBIT adj. -551 518 714 650 2,342 733 523 282 111 1,649 2,092 2,237 EBIT margin adj. -2.2% 1.9% 10.1% 9.4% 8.6% 11.7% 8.4% 4.7% 1.9% 6.8% 8.5% 8.8% NOPAT -553 461 685 655 2,341 714 508 264 92 1,578 1,980 2,110 NOPAT adj. -621 454 659 611 2,179 711 500 243 92 1,546 1,980 2,110

CFFO 993 1,799 1,029 1,507 4,119 971 873 694 612 3,577 4,105 4,297 Capex, net 3,292 3,550 483 635 1,974 202 861 353 1,084 2,500 2,278 3,025 Free cash flow -2,299 -1,751 546 872 2,145 769 12 341 -472 1,077 1,827 1,272

Invested capital 20,211 20,649 20,260 20,084 20,084 19,839 20,340 20,383 20,966 20,966 21,231 22,196 ROIC -3% 2% 13% 12% 11% 14% 10% 5% 2% 7% 9% 10%

Transported volumes – FFE (000) 8,111 8,493 2,401 2,398 9,442 2,207 2,484 2,427 2,423 9,541 9,923 10,320 Change y/y 11.5% 4.7% 3.7% 11.9% 6.8% -1.8% 3.7% 1.1% 1.1% 1.1% 4.0% 4.0% Average freight rate – USD per FFE 2,828 2,846 2,679 2,579 2,630 2,493 2,261 2,163 2,109 2,268 2,217 2,195 Change y/y -7.7% 0.6% 0.9% -3.1% -1.6% -5.1% -14.2% -19.3% -18.2% -13.8% -2.3% -1.0% Other revenue USD per FFE 272 344 267 304 267 341 260 249 295 285 271 268 Change y/y 19.9% 26.7% -3.0% -12.9% -11.9% 37.6% 5.6% -6.9% -3.0% 6.8% -5.0% -1.0%

Bunker cost per FFE 838 789 537 456 517 348 302 305 276 307 240 240 Change y/y 44.5% -5.9% -6.6% -23.6% -13.2% -34.9% -44.4% -43.2% -39.5% -40.7% -21.7% 0.0% Error!AutoText notdefined. entry Other cost per FFE 2,133 2,148 1,919 1,948 1,934 1,942 1,818 1,860 1,875 1,872 1,834 1,807 Change y/y 1.5% 0.7% -0.2% -5.3% -3.0% -0.8% -4.9% -3.1% -3.7% -3.2% -2.0% -1.5% Total cost per FFE 2,971 2,936 2,456 2,404 2,451 2,289 2,120 2,165 2,151 2,178 2,074 2,047 Change y/y 10.8% -1.2% -1.7% -9.4% -5.3% -8.1% -13.6% -11.8% -10.5% -11.1% -4.8% -1.3%

Bunker price USD/tonne 620 661 575 512 562 358 335 324 304 330 258 258 Change in bunker price y/y 44% 7% -1% -13% -6% -38% -42% -44% -41% -41% -22% 0% Bunker volume per TEU 0.68 0.60 0.46 0.45 0.46 0.49 0.45 0.47 0.45 0.46 0.46 0.46 Bunker volume per TEU change y/y 1% -12% -4% -6% -8% 6% -4% 3% 0% 1% 0% 0%

EBITDA – USD per TEU 62 128 245 239 223 272 201 158 126 187 207 208 EBIT adj. – USD per TEU -34 30 149 136 124 166 105 58 23 86 105 108

Source: Company data, Danske Bank Markets estimates

Chart 1. Maersk Line volume growth vs market Chart 2. Larger ports – volumes by month y/y quarterly y/y

20.0% 18.0% 14% 12% 11% 15.0% 11.9% 10% 9% 9% 9% 11.0% 10.2% 8% 10.0% 7.3% 6% 6.6% 6% 4.4% 4% 4% 4% 4% 5.0% 3.3% 3.7% 4% 3% 3% 1.1% 0.0% 2% 1% Change y/y Change 0% 0.0%

Volume growth y/ygrowthVolume 0% -1.8% -2% -5.0% -3.5% -2% -2% -4% -2% -6.7% -4% -4% -3% -10.0% -6% -5% -4% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 2 3 4 5 6 7 8 9 10 11 12 12 12 12 12 13 13 13 13 14 14 14 14 15 15 15 15E 2014 2015 2013 Maersk line volumes y/y CTS globale volume Maersk Line weighted

Source: Company data, Container Trade Statistics, Danske Bank Markets Source: Ports; Singapore, Shanghai, Long Beach, LA, CTS; European imports, Danske Bank Markets

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Chart 3. Maersk Line ROIC Chart 4. Maersk Line EBIT gap to peers

25% 20.0% 20% 15.0% 20% 17% 11.1% 16% 9.3% 15% 10.0% 8.0%7.7% 8.2%7.8% 8.4%7.6% 14% 6.7% 6.5% 6.9% 7.0% 6.2% 6.7% 15% 5.0% 5.4% 5.8%5.3% 3.8% 3.7% 11%11% 11% 5.0% 3.2% 3.0%2.5%3.2% 10% 9% 10% 1.4% 10% 0.5% 7% 7% 7% 0.0% 5% 3% 3% 5% 2% 2% 1% 1% -5.0% -3.6% ROIC 0% 1% 0% margin EBIT -10.0% -1% -15.0% -5% -3% -20.0% -10%

-11% -25.0%

Q3 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q2 15 Q3 15

-15% Q1 09

1993 1994 1995 1997 1998 2000 2001 2002 2004 2005 2007 2008 2009 2011 2012 2014 1992 1996 1999 2003 2006 2010 2013

2015E 2016E 2017E ROIC adj. 5 years average ROIC target low ROIC target high Maersk Line gap to peers Maersk Line Peers

Source: Danske Bank Markets Source: Danske Bank Markets

Chart 5. Change in rates and bunker cost per TEU y/y Chart 6. Bunker cost (USD per TEU)

50% 800 40% 700 30% 600 20% 10% 3% 500 0% 1% 1% 0% 400 -10% -3% -3% -2% -1% -7% 300

-20% -15% Error!AutoText notdefined. entry lagging 1 months 1 lagging

Change in unit cost y/y costunit in Change -30% 200 -40% 100

-50% spot vs. USD/t cost bunker Line Maersk 0 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 12 12 12 12 13 13 13 13 14 14 14 14 15 15 15 15E16E 16E 16E Unit cost excl. bunker Bunker cost Maersk Line Market lagging 1 month

Source: Company data, Danske Bank Markets estimates Source: Company data, Danske Bank Markets estimates

Chart 7. Unit cost per FFE (USD) Chart 8. Bunker consumption per TEU

1,800 1.40 1.28

1,600 1.20 1.05 478 1.01 1,400 1.00 419 394 0.87 1,200 291 290 298 0.80 259 0.67 0.68 153 0.64 0.63 1,000 120 120 0.60 0.59 0.60 0.53 0.53 0.50 0.51 0.48 0.49 0.46 0.48 0.46 0.47 0.46 0.45 0.47 800 0.45 0.45 0.40 600 1,225 TEU per cost Bunker 1,047 1,051 1,066 1,074 997 Unit cost USD per TEU per USD costUnit 967 936 917 903 0.20 400 -

200

2006 2007 2008 2009 2010 2011 2012 2013 2014

Q1 12 Q1 12 Q2 12 Q3 12 Q4 13 Q1 13 Q2 13 Q3 13 Q4 14 Q1 14 Q2 14 Q3 14 Q4 15 Q1 15 Q3 0 15 Q2 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 15E Q4 Maersk Line CMA CGM Other cost per TEU Bunker cost per TEU

Source: Company data, Danske Bank Markets estimates Source: Company data, Danske Bank Markets

Maersk Oil

We have changed our estimates for 2015, resulting in 25% lower NOPAT. The major reason behind our lower estimate is higher depreciation than expected in 2015. In addition, we have reduced our exploration cost estimates by USD200m to the guided USD500m in 2015 and by USD100m to USD500m in 2016-17.

6 | A. P. Moller – Maersk Buy www.danskemarketsequities.com

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We have adjusted our tax rate assumption to 54% adjusted for exploration costs and

75% including exploration costs in 2016 and 2017. The change brings our tax estimate in line with 2015 adjusted for exploration and impairment (52.5%).

Table 5. Maersk Oil – change of estimates

USDm New Change Change % 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E Revenue 5,554 5,669 6,004 -173 196 208 -3% 4% 4% Exploration costs 500 500 500 -200 -100 -100 -29% -17% -17% Operational costs, etc. 2,383 2,230 2,423 -48 -44 -48 -2% -2% -2% EBITDA 2,883 2,730 2,923 -248 -144 -148 -8% -5% -5% EBITDA margin 51.9% 48.2% 48.7% EBIT 1,090 1,279 1,280 -190 184 251 -15% 17% 24% Tax 702 959 960 -62 193 240 -8% 25% 33% NOPAT 388 320 320 -127 -9 11 -25% -3% 4%

CFFO 1,970 1,980 2,120 137 148 116 7% 8% 6% Capex 2,600 3,200 3,188 0 0 0 0% 0% 0% Free cash flow -630 -1,220 -1,068 137 148 116 18% 11% 10%

Gain/loss on sale, net 3 0 0 0 0 0 0% 0% Share of joint venture 0 0 0 0 0 0 0% 0% 0% Share of associated companies 0 0 0 0 0 0 0% 0% 0% Impairment losses 80 0 0 0 0 0 0% 0% EBIT adj. 1,167 1,279 1,280 -190 184 251 -14% 17% 24% Margin 21.0% 22.6% 21.3% NOPAT adj. 295 320 320 -127 -9 11 -30% -3% 4%

Source: Danske Bank Markets estimates

Error!AutoText notdefined. entry Table 6. Maersk Oil

USDm 2012 2013 Q3 14 Q4 14 2014 Q1 15 Q2 15 Q3 15 Q4 15E 2015E 2016E 2017E Revenue 10,154 9,142 2,174 1,843 8,737 1,433 1,583 1,321 1,217 5,554 5,669 6,004 Exploration costs 1,088 1,149 215 205 765 162 109 82 147 500 500 500 OPEX 1,898 2,233 721 740 2,856 681 625 598 479 2,383 2,230 2,423 EBITDA 7,168 5,760 1,238 898 5,116 590 849 641 591 2,671 2,939 3,080 EBITDA margin 70.6% 63.0% 56.9% 48.7% 58.6% 41.2% 53.6% 48.5% 48.6% 48.1% 51.8% 51.3% Depreciation 1,895 1,668 323 906 3,649 311 440 422 412 1,585 1,661 1,800 Gain/loss on sale, net 109 0 0 4 4 3 0 0 0 3 0 0 Share of joint venture 0 0 0 0 0 0 0 0 0 0 0 0 Share of associated companies -42 -42 0 0 -5 0 0 0 0 0 0 0 EBIT 5,340 4,050 915 -4 1,466 282 409 219 180 1,090 1,279 1,280

Tax 2,884 3,004 693 28 2,327 74 272 187 169 702 959 960 NOPAT 2,456 1,046 222 -32 -861 208 137 32 11 388 320 320 NOPAT adj. 2,418 1,186 228 431 1,348 35 217 32 11 295 320 320 CFFO 3,857 3,246 726 416 2,594 105 611 548 706 1,970 1,980 2,120 Capex, net 1,959 1,800 591 582 2,198 494 502 515 1,089 2,600 3,200 3,188 Free cash flow 1,898 1,446 135 -166 396 -389 109 33 -383 -630 -1,220 -1,068 Invested capital 6,920 6,478 5,155 5,282 5,282 5,955 5,962 5,965 6,642 6,642 8,182 9,570 ROIC adj. 36.2% 17.7% 16.2% 29.3% 22.9% 2.2% 15.8% 2.3% 0.7% 4.9% 4.3% 3.6% Entitlement oil production (boepd) 257.9 235.4 238.0 275.0 251.4 304.0 306.0 300.0 272.2 295.5 309.8 329.0 Oil price (USD/bl) 112.0 109.0 100.0 72.4 99.0 54.0 62.0 50.0 48.6 51.5 50.0 50.0 Opex (USD/bl) 20.1 26.0 32.9 29.1 31.1 24.9 22.4 21.7 19.1 22.1 19.7 20.2 Exploration costs (USD/bl) 11.5 13.4 9.8 8.1 8.3 5.9 3.9 3.0 5.9 4.6 4.4 4.2 Gain/loss on sale, net 109 0 0 4 4 3 0 0 0 3 0 0 Share of joint venture 0 0 0 0 0 0 0 0 0 0 0 0 Share of associated companies -42 -42 0 0 -5 0 0 0 0 0 0 0 Impairment losses 29 98 6 467 2,208 0 80 0 0 80 0 0 EBIT adj. 5,302 4,190 921 459 3,675 279 489 219 180 1,167 1,279 1,280 Margin 52.2% 45.8% 42.4% 24.9% 42.1% 19.5% 30.9% 16.6% 14.8% 21.0% 22.6% 21.3%

Source: Company data, Danske Bank Markets estimates

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Chart 9. Production (000boepd) Chart 10. Cost per barrel (USD)

500.0 70.0 450.0 400.0 60.0 350.0 boepd (000) boepd 50.0 - 300.0 18.3 15.7 250.0 40.0 19.8 200.0 8.3 14.0 13.4 14.6 15.0 150.0 30.0 17.5 11.5 4.6 100.0 boepd per USD 16.5 4.4 4.2 20.0 12.0 50.0 13.8 15.0 8.1 31.1 9.2 26.0 - 5.2 4.3 22.1

Entitelment production Entitelmentproduction 10.0 4.2 20.1 19.7 20.2 1.9 2.7 13.2

9.0 8.1 9.7

1992 1993 1995 1996 1998 2000 2001 2003 2004 2006 2007 2009 2011 2012 2014 1997 1999 2002 2005 2008 2010 2013

1994 6.4 6.4

2015E 2017E 2016E - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Denmark Oil Denmark Gas Qatar UK Kasahstan USA OPEX per boepd Exploration per boepd Depreciations per boepd

Source: Company data, Danske Bank Markets estimates Source: Company data, Danske Bank Markets, estimates

APM Terminals

We have lifted our APM Terminals earnings estimates in line with the better-than- expected performance in Q3 15, lifting NOPAT 2015 by 10% and 2016-17 by 7%.

Table 7. APM Terminals – change of estimates

USDm New Change Change % 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E

Revenue 4,168 4,413 4,717 -47 -50 -53 -1% -1% -1% EBITDA 946 1,097 1,285 56 56 56 6% 5% 5% Error!AutoText notdefined. entry EBITDA margin 22.7% 24.8% 27.2% EBIT 891 1,086 1,289 80 67 83 10% 7% 7% Tax 160 187 232 14 12 15 10% 7% 7% NOPAT 730 899 1,057 65 56 68 10% 7% 7%

CFFO 786 910 1,053 41 44 41 6% 5% 4% Capex 881 1,231 994 0 0 0 0% 0% 0% Free cash flow -95 -322 60 41 44 41 30% 12% 230%

Gain/loss on sale, net 11 0 0 1 0 0 10% 0% 0% Share of joint venture 150 174 204 20 22 24 15% 14% 14% Share of associated companies 90 140 164 10 0 14 13% 0% 9%

Impairment losses 0 0 0 0 0 0 0% 0% 0% EBIT adj. 640 772 921 49 45 44 8% 6% 5% Margin 15.3% 17.5% 19.5% NOPAT adj. 479 585 689 34 34 29 8% 6% 4%

Volume TEU (m) 36.0 39.0 41.3 -1.1 -1.2 -1.3 -3% -3% -3%

Source: Danske Bank Markets estimates

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Table 8. APM Terminals

USDm 2012 2013 Q3 14 Q4 14 2014 Q1 15 Q2 15 Q3 15 Q4 15E 2015E 2016E 2017E Maersk Line 1,958 1,630 420 405 1,715 408 430 380 426 1,644 1,783 1,952 External 2,822 2,701 689 719 2,740 728 603 666 527 2,524 2,630 2,765 Revenue 4,780 4,331 1,109 1,124 4,455 1,136 1,033 1,046 953 4,168 4,413 4,717 OPEX 3,687 3,439 853 895 3,445 916 827 826 653 3,222 3,317 3,432 EBITDA 1,093 892 256 229 1,010 220 206 220 300 946 1,097 1,285 EBITDA margin 22.9% 20.6% 23.1% 20.4% 22.7% 19.4% 19.9% 21.0% 31.5% 22.7% 24.8% 27.2% Depreciations 283 297 97 87 329 70 77 80 80 307 324 364 Gain/loss on sale, net 117 70 357 1 374 8 2 1 0 11 0 0 Share of joint venture 100 93 -31 -30 -14 39 32 40 39 150 174 204 Share of associated companies 59 68 25 23 93 20 22 24 24 90 140 164 EBIT 864 826 510 136 1,134 217 185 205 284 891 1,086 1,289 EBIT adj. 588 595 137 137 654 150 129 140 221 640 772 921 EBIT margin adj. 12.3% 13.7% 12.4% 12.2% 14.7% 13.2% 12.5% 13.4% 23.1% 15.3% 17.5% 19.5% Tax 163 56 165 19 234 27 24 30 79 160 187 232 NOPAT 701 770 345 117 900 190 161 175 204 730 899 1,057 NOPAT adj. 584 700 -12 116 526 182 159 174 204 719 899 1,057

CFFO 910 923 318 110 925 271 176 224 115 786 910 1,053 Capex, net 1,297 841 -570 233 -2 222 169 172 318 881 1,231 994 Free cash flow -387 82 888 -123 927 49 7 52 -203 -95 -322 60

Invested capital 5,495 6,177 5,874 5,933 5,933 5,821 5,995 6,033 6,272 6,272 7,179 7,809 ROIC 15.2% 13.5% 22.5% 7.9% 14.7% 13.1% 10.7% 11.6% 13.0% 11.6% 12.5% 13.5%

Volume TEU (m) 35.4 36.3 9.7 9.4 38.3 9.1 9.2 8.9 8.8 36.0 39.0 41.3 Volume growth 5.7% 2.5% 4.3% 1.1% 5.5% -3.2% -6.1% -8.2% -6.4% -6.0% 8.2% 6.0% External share 46.0% 46.0% 50.0% 50.0% 50.0% 50.0% 51.0% 51.0% 48.0% 51.0% 52.0% 53.0% Revenue (USD per TEU) 135 119 114 120 116 125 112 118 108 116 113 114 Growth % -3.4% -11.6% -5.2% 1.0% -2.5% 7.5% -2.6% 2.8% -9.4% -0.5% -2.2% 0.8% Error!AutoText notdefined. entry Opex (USD per TEU) 104 95 88 95 90 101 90 93 74 89 85 83 Growth -3.7% -9.0% -7.1% 1.8% -5.1% 14.4% 1.3% 5.5% -22.1% -0.5% -4.9% -2.4% Tax rate 18.9% 6.8% 32.4% 14.0% 20.6% 12.4% 13.0% 14.6% 28.0% 18.0% 17.2% 18.0%

Source: Company data, Danske Bank Markets estimates

Maersk Drilling

We reduce our time-charter rate per day and opex per day estimates, resulting in a reduction in NOPAT of 7% in 2015, with limited effect on our 2016 and 2017 estimates.

Table 9. Maersk Drilling – change of estimates

USDm New Change Change % 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E Revenue 2,497 2,423 2,319 -50 -17 -16 -2% -1% -1% EBITDA 1,310 1,170 1,065 -77 -17 -16 -6% -1% -1% EBITDA margin 52.5% 48.3% 45.9% EBIT 863 646 562 -65 -20 -19 -7% -3% -3% Tax 164 119 103 -12 -4 -3 -7% -3% -3% NOPAT 699 527 458 -52 -16 -15 -7% -3% -3%

CFFO 1,146 1,052 961 -64 -13 -13 -5% -1% -1% Capex 850 188 200 101 0 0 13% 0% 0% Free cash flow 296 864 761 -165 -13 -13 -36% -1% -2%

Gain/loss on sale, net 41 0 0 12 0 0 0% 0% Share of joint venture 0 0 0 0 0 0 0% 0% 0% Share of associated companies 8 0 0 0 0 0 0% 0% 0% Impairment losses 27 0 0 0 0 0 0% 0% 0% EBIT adj. 787 646 562 -77 -20 -19 -9% -3% -3% Margin 32% 27% 24% NOPAT adj. 623 527 458 -64 -16 -15 -9% -3% -3%

Contracted days 6,935 6,922 7,136 154 0 0 2% 0% 0% TC per contracted day 360,104 349,960 325,016 -15,590 -2,409 -2,237 -4% -1% -1%

Source: Danske Bank Markets estimates

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Table 10. Maersk Drilling

USDm 2012 2013 Q3 14 Q4 14 2014 Q1 15 Q2 15 Q3 15 Q4 15E 2015E 2016E 2017E Revenue 1,683 1,972 525 635 2,102 630 624 646 597 2,497 2,423 2,319 OPEX 1,045 1,109 298 349 1,199 287 263 277 360 1,187 1,252 1,255 EBITDA 638 863 227 286 903 343 361 369 237 1,310 1,170 1,065 EBITDA margin 37.9% 43.8% 43.2% 45.0% 43.0% 54.4% 57.9% 57.1% 39.7% 52.5% 48.3% 45.9% Depreciations 197 239 78 149 348 141 118 143 93 495 525 503 Gain/loss on sale, net 0 4 74 -1 82 0 29 12 0 41 0 0 Share of joint venture 0 19 8 -45 -36 0 0 0 0 0 0 0 Share of associated companies 0 0 0 0 0 13 -5 0 0 8 0 0 EBIT 441 647 231 91 601 215 267 238 143 863 646 562 EBIT adj. 465 624 149 102 520 175 243 226 143 787 646 562 EBIT margin adj. 27.6% 31.6% 28.4% 16.1% 24.7% 27.8% 38.9% 35.0% 24.0% 31.5% 26.7% 24.2% Tax 94 119 39 38 123 47 49 54 14 164 119 103 NOPAT 347 528 192 53 478 168 218 184 129 699 527 458 CFFO 597 775 127 322 701 280 248 382 236 1,146 1,052 961 Capex, net 555 1,517 673 157 2,160 686 45 44 75 850 188 200 Free cash flow 42 -742 -546 165 -1,459 -406 203 338 161 296 864 761 Invested capital 4,283 5,320 7,710 7,623 7,623 8,220 8,246 8,092 8,074 8,074 7,737 7,434 ROIC adj. 8.8% 10.5% 6.7% 4.0% 6.1% 7.1% 10.4% 8.7% 6.6% 7.9% 6.7% 6.0%

Source: Company data, Danske Bank Markets estimates

Valuation

We base our 12-month target price of DKK12,500 on a blend of our P/CE multiple, peer group valuation model and the outperformance by Maersk Line relative to peers.

The company announced a share buyback for the next 12 months to USD1bn – we had estimated USD1.5bn. We have reduced our buyback estimate for 2017-18 to Error!AutoText notdefined. entry USD1.25bn (previously USD1.50bn).

Our revised share buyback forecast still leads to a total yield of 6.6%, of which 3.5pp is dividend in 2015E and 7.0% in 2016E.

Chart 11. A. P. Moller – Maersk vs Danske Bank P/CE Chart 12. A. P. Moller – Maersk premium/discount to multiple sum of the parts peer group (DKK per share) Danske Bank P/CE multiple sum of the parts peer group valuation

18,000 60% 48% 16,000 40%

40% 14,000 30%

12,000 18% 20% 17%16% 16% 10,000 8,411 8,000 0%

DKK pershare DKK 6,000 -4% -3% -5% -11% Premium /discountPremium -20% -14% -14% 4,000 -18% -18% -18% -20% -21% -24% -27% 2,000 -29% -40% -38%-36%-38% -

-45%

1992 1997 1998 1999 2000 2004 2005 2006 2007 2011 2012 2013 2014 1994 1995 1996 2001 2002 2003 2008 2009 2010

1993 -60% 2015E Maersk Line Maersk Oil APM Terminals Maersk Drilling Maersk Supply Service Maersk Tankers Damco Svitzer Other Share price (blend A/B shares)

Source: Company data, FactSet peer estimates, Danske Bank Markets A. P. Moller Source: FactSet, Danske Bank Markets estimates – Maersk estimates

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Chart 13. EV/EBITDA (x) and ROIC Chart 14. P/BV (x) and ROE

2.5 25.0% 10.0 20% 2.3 9.1 9.0 2.1 2.1 8.3 2.0 20.0% 7.9 2.0 8.0 15% 1.8 1.7 1.7 7.0 6.5 6.5 6.5 15.0% 5.8 5.8 1.5 1.4 6.0 5.6 10% 1.3 1.3 5.1 5.1 1.2 1.2 1.2 1.2 5.0 5.0 1.2 10.0% 4.7 4.74.7 1.1

4.6 ROE 5.0 P/BV 4.3 4.4 1.0 1.0 0.9 4.0 ROIC 3.8 1.0 0.90.9 4.0 3.6 3.6 5% 0.8 0.8

EV/EBITDA 3.2 0.7 5.0% 3.1 0.70.6 3.0 2.4 0.5 2.0 0% 0.0%

1.0

0.0 -5.0%

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

0.0 1992 -5%

2016E

2007 2008 2009 2010 2011 2012 2013 2014 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

2015E 2016E 2017E P/BV ROE EV/EBITDA ROIC

Source: Company data, Danske Bank Markets estimates Source: Company data, Danske Bank Markets estimates

Chart 15. Peer group P/CE multiples 1992-2017E (x) Chart 16. A .P. Møller – Maersk cash earnings 1992-2017E

12.0 12,000 y = 407.67x - 88.618

10.0 10,000

8.0 8,000

USDm -

6.0 6,000 Error!AutoText notdefined. entry

4.0

4,000 Cash earnings Cash P/CE multiples peer group peer multiples P/CE 2.0 CAGR 92-2013: 10.6% 2,000 CAGR 2003-13: 4.6% CAGR 2014-17: 3.7% -

0

1993 1994 1996 1997 1999 2000 2002 2003 2005 2006 2008 2009 2011 2012 2014 1992 1995 1998 2001 2004 2007 2010 2013

2015E 2017E 2016E

1992 1994 1995 1996 1998 1999 2000 2002 2003 2004 2006 2007 2010 2011 2014 1993 1997 2001 2005 2008 2009 2012 2013

2015E 2017E Maersk Line Maersk Oil Linear (Maersk Line) Linear (Maersk Oil) 2016E

Source: Company data, Danske Bank Markets estimates Source: Company data, Danske Bank Markets estimates

Chart 17. Dividend and share buybacks Chart 18. Total yield

6,000 9.0% Extraordinary dividend from distribution of 8.2% 5,000 Danske Bank share approx USD 5.3bn not included 8.0% in 2015 7.0% 4,000 7.0% 6.6%

3,000 6.0% 4.1% 3.2% 2,000 500 5.0% 3.1% 1,015 1,250

485 500 3.7% Yield

USDm 1,000 4.0% 930 945 1,068 1,279 1,156 1,129 1,217 0 374 3.0% 1.3% 2010 2011 2012 2013 2014 2015E 2016E 2017E -1,000 2.0% 4.1% 3.5% 3.9% 2.6% 2.8% 2.5% -2,000 1.0% 2.0% 2.4%

-3,000 0.0% 2010 2011 2012 2013 2014 2015E 2016E 2017E Dividend Share-buy-backs announced Dividend yield Buy-back yield Share-buy-back DB est. FCF

Source: Company data, Danske Bank Markets estimates Source: Company data, Danske Bank Markets estimates

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Chart 19. NIBD/EBITDA adjusted (x) Chart 20. Excess capital relative to BBB+ investment

grade

2.5 15 13

2.0 10 10 1.9 1.7 1.7 1.7 1.7 1.7 6 1.5 5 1.4 5 1.3 1.3 4 4 4 3 4 1.1 1.1 1 1.0 1.1 0 0.9 1.0 1.0 NIBD/EBITDA adj. NIBD/EBITDA -3 -2 -2 -2 0.7 USDbn capacity Excess 0.5 -5 -3 -6

- -10 2010 2011 2012 2013 2014 2015E 2016E 2017E 2010 2011 2012 2013 2014 2015E 2016E 2017E

NIBD/EBITDA NIBD/EBITDA adj. Excess cap. Invest. grade min. Excess cap. Invest. grade max BBB+/Baa1 grade min. BBB+/Baa1 grade max.

Source: Company data, Danske Bank Markets estimates Source: Company data, Danske Bank Markets estimates

Danske Bank peer group valuation model

We base our peer group valuation model on 2016E P/CE multiples, indicating a value of DKK14,258m (DKK14,941 per share) for 2016E.

Our model is simple, multiplying cash earnings per business area in the Maersk Group by FactSet estimated P/CE for its peers. The model does not include any subjective discount/premiums but shows only the sum of the current valuation of the

Error!AutoText notdefined. entry peer group (P/CE) weighted by the cash earnings by business segment in the Maersk Group. We estimate the break-up value at USD39,173m (previously USD38,243m) in 2015 based on cash earnings of USD8,528m (previously USD8,399m) and a weighted P/CE multiple of 4.6x (previously 4.6x).

Cash earnings is calculated as pre-tax profit plus depreciation and impairment minus payable tax.

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Table 11. Our peer group sum-of-the-parts valuation model

Per share (DKK) 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Maersk Line 2,048 0 5,086 1,804 3,777 5,853 6,709 4,765 5,187 5,112 Maersk Oil 3,439 5,736 7,183 4,886 5,296 3,715 2,706 3,395 3,443 3,119 APM Terminals 583 887 1,458 1,807 1,695 1,774 2,034 2,564 2,748 3,021 Maersk Drilling 215 673 1,064 948 922 1,244 527 786 2,156 1,631 Maersk Supply Service 222 466 600 462 476 657 222 237 274 384 Maersk Tankers 284 199 368 163 359 50 488 503 764 874 Damco 0 41 113 113 129 -125 -131 113 122 139 Svitzer 118 214 437 332 345 401 148 148 252 356 Other 150 278 -72 1,290 790 58 82 -210 -687 -662 Break-up value 7,060 8,495 16,236 11,804 13,790 13,627 12,785 12,300 14,258 13,975 Share price (blend A/B shares) 5,620 7,320 10,102 7,584 8,521 11,771 12,160 10,098 10,409 10,768 USD/DKK 5.09 5.36 5.62 5.35 5.79 5.62 5.62 6.70 6.70 6.70

USDm 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Maersk Line 8,842 0 19,888 7,409 14,331 22,903 25,862 15,176 16,024 15,267 Maersk Oil 14,847 23,517 28,088 20,067 20,094 14,535 10,429 10,812 10,636 9,315 APM Terminals 2,518 3,638 5,699 7,423 6,432 6,941 7,842 8,165 8,491 9,022 Maersk Drilling 930 2,759 4,159 3,893 3,497 4,868 2,031 2,504 6,662 4,872 Maersk Supply Service 959 1,913 2,348 1,897 1,805 2,571 856 756 846 1,148 Maersk Tankers 1,224 816 1,439 669 1,361 197 1,881 1,601 2,360 2,611 Damco 0 168 441 464 491 -487 -505 359 376 416 Svitzer 511 877 1,708 1,364 1,308 1,568 569 470 778 1,064 Other 646 -2,591 -283 5,300 2,997 228 315 -670 -2,123 -1,977 Group 30,478 31,097 63,486 48,486 52,317 53,323 49,281 39,173 44,050 41,737 Market value 24,263 30,011 39,500 31,151 32,328 46,060 46,873 32,160 32,160 32,160 Premium/discount -20% -3% -38% -36% -38% -14% -5% -18% -27% -23% Peer group P/CE multiples 2008 2009 2010 2011 2012 2013 2,014 2015E 2016E 2017E

Error!AutoText notdefined. entry Maersk Line 5.0 0.0 4.6 7.3 6.7 7.0 6.2 4.3 4.0 3.7 Maersk Oil 3.1 6.7 6.9 4.7 4.6 5.4 4.3 5.5 5.4 4.4 APM Terminals 5.0 5.0 4.6 7.3 6.7 7.0 8.8 7.9 6.9 6.3 Maersk Drilling 2.7 5.1 6.9 5.3 5.9 6.3 2.9 2.1 6.3 5.1 Maersk Supply Service 2.7 5.1 6.9 5.3 5.9 6.3 2.7 2.3 2.7 3.5 Maersk Tankers 2.7 5.1 6.9 5.3 5.9 6.3 7.1 4.6 6.2 6.9 Damco 2.7 5.1 6.9 5.3 5.9 6.3 6.2 4.3 4.0 3.7 Svitzer 2.7 5.1 6.9 5.3 5.9 6.3 2.7 2.3 2.7 3.5 Other 3.3 4.6 6.3 5.7 6.0 6.4 5.1 4.2 4.8 4.6 Group 3.6 6.7 5.8 5.5 5.6 6.3 5.3 4.6 5.0 4.5

Cash earnings (USDm) 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Maersk Line 1,784 -335 4,306 1,015 2,139 3,290 4,139 3,506 3,993 4,169

Maersk Oil 4,714 3,510 4,077 4,232 4,351 2,714 2,788 1,973 1,980 2,120 APM Terminals 508 734 1,234 1,017 960 997 1,229 1,037 1,224 1,421 Maersk Drilling 351 541 604 739 591 767 826 1,195 1,052 961 Maersk Supply Service 362 375 341 360 305 405 343 327 313 326 Maersk Tankers 462 160 209 127 230 31 268 349 382 376 Damco 0 33 64 88 83 -77 -191 83 94 114 Svitzer 193 172 248 259 221 247 178 203 288 302 Other 197 -558 -45 928 504 36 -422 -161 -444 -426 Group 8,571 4,632 11,038 8,765 9,384 8,410 9,347 8,528 8,888 9,374

Source: Company data, Danske Bank Markets estimates

Risks

Risks that could impede achievement of our DKK12,500 12-month price target include lower than-expected GDP and world trade growth, a lower-than-expected oil price and freight rates in container shipping being lower for longer than expected.

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Company summary

Sales breakdown, geographical areas Sales breakdown, divisions

APMMaersk Maersk Supply Terminals,Drilling,Services, 5% 2% 10%

Maersk Oil, 20% Maersk Line, 63%

Global, 100%

Company description Main shareholders

The A.P. Moller - Maersk Group is a worldwide conglomerate. The company Name Votes (%) Capital (%) operates in 130 countries and has a workforce of more 100,000 employees. In Møllers Fond til almene Formaal 51.1% 41.5% addition to owning one of the world’s largest shipping companies, APMM is involved in a wide range of activities within energy, logistics, retail and Møllers Familiefond 12.8% 8.4% manufacturing. Maersk is broken up in a number of divisions: Maersk Line, which Møllerske Støttefond 5.9% 2.9% is the world’s largest container shipping company, Maersk Oil & Gas, APM Terminals, Maersk Drilling and APM Shipping services which consist of Maersk

Supply Services, Maersk Tankers, Damco and Svitzer. Maersk Container Industry, a minority share in Höegh Autoliners and 1.6% of Danske Bank.

Company information Management

A. P. Moller - Maersk CEO: Nils Smedegaard Andersen

Esplanaden 50, DK-1098 K CFO: Trond Ø Westlie Denmark IR: Henrik Lund Error!AutoText notdefined. entry

www.maersk.com

Net sales and EBITDA margin (USDm) EBIT and EBIT margin (USDm)

80,000 40% 15,000 20%

60,000 30% 15% 10,000 40,000 20% 10%

5,000 20,000 10% 5%

0 0% 0 0% 10 11 12 13 14 15E 16E 17E 10 11 12 13 14 15E 16E 17E

Net sales EBITDA margin EBIT EBIT margin

P/E – 12 months forward (x) P/BV – 12 months forward (x)

40 2.0 35 1.8 30 1.6 1.4 25 1.2 20 1.0 15 0.8 10 0.6 5 0.4 05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14

Source: Company data, FactSet, Danske Bank Markets estimates [all charts and tables]

14 | A. P. Moller – Maersk Buy www.danskemarketsequities.com

di Mostare risks

scounted

Summary tables

INCOME STATEMENT Year end Dec, USDm 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Net sales 61,960 48,793 56,198 60,574 59,524 47,654 47,770 41,655 42,986 44,484 Cost of sales & operating costs -44,575 -39,510 -39,694 -45,038 -46,301 -36,056 -33,601 -31,736 -32,510 -33,526 EBITDA 17,385 9,283 16,504 15,536 13,223 11,598 14,169 9,919 10,476 10,959 Depreciation -3,982 -4,848 -5,265 -5,059 -4,903 -4,423 -6,387 -4,553 -4,880 -5,092 EBITA 13,403 4,435 11,239 10,476 8,320 7,175 7,782 5,366 5,597 5,866 Amortisation -741 -598 -579 -289 -336 -284 -199 -136 -99 -95 Impairment charges -381 -141 -128 -26 -110 0 -2,072 0 0 0 EBIT 11,911 3,763 10,614 10,283 8,096 7,339 5,917 5,489 5,824 6,156 - of which non-recurring items 444 -384 -5 601 229 -21 -3,543 438 0 0 EBIT before non-recurring items 11,837 4,080 10,537 9,561 7,645 6,912 9,054 4,791 5,498 5,772 Financial items, net -1,121 -1,007 -998 -1,124 -480 -401 -827 -462 -425 -402 Associated companies 0 0 0 0 0 0 0 0 0 0 Pre-tax profit 10,377 2,781 9,677 9,430 7,341 6,623 5,311 5,027 5,399 5,753 Taxes -6,933 -3,805 -4,657 -6,065 -3,304 -3,238 -2,972 -1,262 -1,490 -1,567 Minorities -133 -287 -313 -541 -297 -328 -180 -180 -180 -180 Discontinued operations 21 0 1 15 3 395 2,856 0 0 0 Net profit 3,332 -1,311 4,707 2,839 3,742 3,451 5,015 3,585 3,729 4,007 Net profit (adj.) 2,867 -927 4,712 2,224 3,510 3,078 5,702 3,247 3,729 4,007

CASH FLOW USDm 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E EBITDA 17,385 9,283 16,504 15,536 13,223 11,598 14,169 9,919 10,476 10,959 Change in working capital 1,303 -248 -439 -94 -1,247 252 260 -886 -2 -3 Net interest paid -1,121 -1,007 -998 -1,124 -480 -401 -827 -462 -425 -402 Taxes paid -7,569 -3,980 -4,872 -5,807 -2,975 -3,161 -3,289 -1,262 -1,490 -1,567 Other operating cash items -1,406 6,714 -439 -1,056 -1,973 702 -1,552 0 0 0

Cash flow from operations 8,592 10,762 9,757 7,456 6,548 8,990 8,761 7,308 8,559 8,987 Capex -12,488 -7,773 -5,169 -11,448 -9,696 -6,309 -8,749 -7,468 -7,413 -7,917 Error!AutoText notdefined. entry Disposals/(acquisitions) 3,408 435 620 1,656 3,370 1,400 2,486 0 0 0 Free cash flow -3,896 2,989 4,588 -3,993 -3,148 2,681 12 -159 1,146 1,070 Incr./(decr.) in equity 0 0 0 0 0 0 -485 -1,015 -1,000 -1,250 Incr./(decr.) in debt -621 836 -2,558 1,317 -143 -1,586 -2,888 2,280 2,000 750 Dividend paid -603 -575 -374 -930 -945 -1,068 -1,279 -1,156 -1,130 -1,219 Minorities and other financing CF -1,717 -5,175 274 -11 897 -550 2,479 0 0 0 Cash flow from financing -2,941 -4,914 -2,659 375 -191 -3,203 -2,173 109 -130 -1,719 Disc. ops and other 0 0 0 0 0 0 0 0 0 0 Incr./(decr.) in cash -3,429 -1,490 2,549 -1,962 31 878 325 -51 1,016 -648

BALANCE SHEET USDm 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Cash and cash equivalents 3,554 2,064 4,614 2,652 2,683 3,561 3,886 3,835 4,851 4,203

Other current assets 8,302 7,752 8,694 9,189 10,735 7,812 7,050 6,405 6,610 6,840 Fixed tangible assets 42,670 47,205 44,386 46,118 46,757 48,081 49,960 52,875 55,408 58,233 Intangible assets (incl. goodwill) 2,672 2,494 2,608 5,015 6,044 4,774 2,818 2,682 2,583 2,488 Other non-current assets 7,223 6,997 6,494 7,415 8,170 10,072 5,130 5,390 5,717 6,101 Total assets 64,422 66,512 66,796 70,390 74,389 74,299 68,844 71,187 75,169 77,865 Trade payables 5,639 5,954 6,008 6,475 6,294 5,366 5,277 4,398 4,538 4,697 Short-term debt 2,247 2,326 2,253 2,246 2,290 3,033 1,412 1,412 1,412 1,412 Other current liabilities 4,592 2,970 3,642 3,171 3,506 2,961 2,901 2,249 2,311 2,381 Long-term debt 17,694 18,913 15,761 16,849 17,349 12,666 10,913 13,193 15,193 15,943 Other long-term liabilities 4,510 5,739 4,734 5,486 5,598 7,881 6,116 6,116 6,116 6,116 Total liabilities 34,682 35,902 32,399 34,227 35,037 31,906 26,619 27,368 29,571 30,548 Shareholders' equity (incl. min.) 29,740 30,610 34,396 36,163 39,351 42,393 42,225 43,819 45,599 47,317 Total liabilities and equity 64,422 66,512 66,796 70,390 74,389 74,299 68,844 71,187 75,169 77,865 Net debt 16,833 19,553 13,782 16,887 17,404 12,464 8,768 11,099 12,083 13,481 Working capital -1,929 -1,172 -956 -457 935 -515 -1,128 -242 -240 -237 Source: Company data, Danske Bank Markets estimates

15 | A. P. Moller – Maersk Buy www.danskemarketsequities.com

discounted Mostare risks

Summary tables

PER SHARE DATA 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E No. of shares, fully diluted (y.e.) (m) 22.0 22.0 22.0 22.0 22.0 22.0 21.7 21.0 20.4 19.7 No. of shares, fully diluted (avg.) (m) 22.0 22.0 22.0 22.0 22.0 22.0 21.7 21.3 20.7 20.0 EPS (reported) (USD) 152 -59.65 214 129 170 157 231 168 180 200 EPS (adj.) (USD) 130 -42.16 214 101 160 140 263 152 180 200 DPS (USD) 5.11 2.43 7.12 7.48 8.29 9.97 53.4 53.7 59.7 62.7 CFFO/share (USD) 349.3 482.4 413.2 298.9 269.0 402.5 376.7 325.3 413.1 448.4 Book value/share (USD) 1,278 1,304 1,473 1,536 1,680 1,807 1,918 2,043 2,183 2,343

MARGINS AND GROWTH 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E EBITDA margin 28.1% 19.0% 29.4% 25.6% 22.2% 24.3% 29.7% 23.8% 24.4% 24.6% EBITA margin 21.6% 9.1% 20.0% 17.3% 14.0% 15.1% 16.3% 12.9% 13.0% 13.2% EBIT margin 19.2% 7.7% 18.9% 17.0% 13.6% 15.4% 12.4% 13.2% 13.5% 13.8% EBIT margin (adj) 19.1% 8.4% 18.7% 15.8% 12.8% 14.5% 19.0% 11.5% 12.8% 13.0% Sales growth 20.4% -21.3% 15.2% 7.8% -1.7% -19.9% 0.2% -12.8% 3.2% 3.5% EBITDA growth 31.7% -46.6% 77.8% -5.9% -14.9% -12.3% 22.2% -30.0% 5.6% 4.6% EBITA growth 49.8% -66.9% n.m. -6.8% -20.6% -13.8% 8.5% -31.0% 4.3% 4.8% EPS (adj.) growth 17.2% n.m. n.m. -52.8% 57.8% -12.3% 87.9% -42.2% 18.3% 11.1%

PROFITABILITY 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E ROIC (after tax, incl. GW, adj.) 17.6% 6.0% 15.0% 13.3% 10.0% 9.1% 14.7% 10.1% 10.7% 10.6% ROIC (after tax, excl. GW, adj.) 18.8% 6.3% 15.8% 14.3% 11.0% 10.0% 15.9% 10.9% 11.4% 11.2% ROE (adj.) 9.8% -3.1% 14.5% 6.3% 9.3% 7.5% 13.5% 7.5% 8.3% 8.6% ROIC (adj.) - WACC 11.3% -0.3% 8.7% 7.0% 3.7% 2.8% 8.3% 3.8% 4.4% 4.3%

MARKET VALUE 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Share price (DKK) 5,711 7,296 9,998 7,584 8,544 11,801 12,437 10,510 10,510 10,510 Outstanding number of shares (m) 22.0 22.0 22.0 22.0 22.0 22.0 21.7 21.0 20.4 19.7

Market capitalisation (m) 23,442 30,917 39,556 29,112 33,182 47,902 43,784 32,175 31,241 30,108

Net debt, year-end (m) 16,833 19,553 13,782 16,887 17,404 12,464 8,768 11,099 12,083 13,481 Error!AutoText notdefined. entry MV of min. and ass. comp. (m) -2,659 -2,625 -2,724 -3,250 -3,854 -3,740 -156 -236 -383 -587 Enterprise value (m) 37,616 47,845 50,614 42,749 46,732 56,626 52,396 43,038 42,941 43,003

VALUATION 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E EV/sales (x) 0.6 1.0 0.9 0.7 0.8 1.2 1.1 1.0 1.0 1.0 EV/EBITDA (x) 2.3 5.2 3.2 2.9 3.7 4.9 3.9 4.6 4.1 3.9 EV/EBITA (x) 3.0 10.2 4.6 4.3 5.9 7.9 5.7 8.7 7.7 7.3 EV/EBIT (x) 3.2 11.7 4.8 4.5 6.1 8.2 5.8 9.0 7.8 7.5 P/E (reported) (x) 7.0 n.m. 8.4 10.3 8.9 13.9 8.7 9.1 8.5 7.7 P/E (adj.) (x) 8.2 n.m. 8.4 13.1 9.5 15.6 7.7 10.1 8.5 7.7 P/BV (x) 0.83 1.08 1.22 0.86 0.90 1.21 1.05 0.75 0.70 0.65 EV/invested capital (x) 0.8 0.9 1.0 0.8 0.8 1.0 1.6 1.1 1.1 1.0 Dividend yield 0.48% 0.17% 0.40% 0.56% 0.55% 0.46% 2.64% 3.51% 3.90% 4.10%

Total yield (incl. buybacks) 0.48% 0.17% 0.40% 0.56% 0.55% 0.46% 3.75% 6.62% 7.05% 8.17% Free cash flow yield -16.62% 9.67% 11.60% -13.71% -9.49% 5.60% 0.03% -0.50% 3.67% 3.55%

FINANCIAL RATIOS 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E Net debt/EBITDA (x) 1.0 2.1 0.8 1.1 1.3 1.1 0.6 1.1 1.2 1.2 Net debt/equity (x), year-end 0.6 0.6 0.4 0.5 0.4 0.3 0.2 0.3 0.3 0.3 Dividend payout ratio 3.4% n.m. 3.3% 5.8% 4.9% 6.3% 23.1% 32.0% 33.2% 31.4% Interest coverage (x) 10.0 3.3 10.2 10.7 8.3 11.6 14.2 8.6 9.9 9.8 Cash conversion (FCF/net profit) -116.9% n.m. 97.5% -140.6% -84.1% 77.7% 0.2% -4.4% 30.7% 26.7% Capex/sales 20.2% 15.9% 9.2% 18.9% 16.3% 13.2% 18.3% 17.9% 17.2% 17.8% NWC/sales -3.1% -2.4% -1.7% -0.8% 1.6% -1.1% -2.4% -0.6% -0.6% -0.5%

QUARTERLY P&L Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15E Sales (m) 11,736 11,949 12,169 11,916 10,547 10,526 10,128 10,454 EBITDA (m) 2,964 5,486 3,222 2,498 2,937 2,791 2,456 1,735 EBIT before non-recurring items (m) 2,080 279 2,091 5,010 1,823 1,539 1,174 516 Net profit (adj.) (m) 994 1,994 842 4,729 1,516 1,030 555 146 EPS (adj.) (USD) 209 -178.65 192 1,116 371 252 136 38.9 EBITDA margin 25.3% 45.9% 26.5% 21.0% 27.8% 26.5% 24.2% 16.6% EBIT margin (adj.) 17.7% 2.3% 17.2% 42.0% 17.3% 14.6% 11.6% 4.9% Source: Company data, Danske Bank Markets estimates

16 | A. P. Moller – Maersk Buy www.danskemarketsequities.com

discounted Mostare risks

Disclosures

This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’). The author of the research report is Finn Bjarke Petersen. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst’s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’ rules of ethics and the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and independence. These procedures are documented in of Danske Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank’s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Danske Bank, its affiliates, subsidiaries and staff may perform services for or solicit business from A. P. Moller – Maersk and may hold long or short positions in, or otherwise be interested in, the financial instruments mentioned in this research report. The Equity and Corporate Bonds analysts of Danske Bank and undertakings with which the Equity and Corporate Bonds analysts have close links are, however, not permitted to invest in financial instruments that are covered by the relevant Equity or Corporate Bonds analyst or the research sector to which the analyst is linked. Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing, trading, brokerage, investment management, investment banking, custody and other financial services activities, may be a lender to A. P. Moller – Maersk and have whatever rights as are available to a creditor under applicable law and the applicable loan and credit agreements. At any time, Danske Bank, its affiliates and subsidiaries may have credit or other information regarding A. P. Moller - Maersk that is not available to or may not be used by the personnel responsible for the preparation of this report, which might affect the analysis and opinions expressed in this research report.

Danske Bank is a market maker and may hold positions in the financial instruments mentioned in this research report. Error!AutoText notdefined. entry Within the previous 12 months, Danske Bank has acted as exclusive financial adviser to A. P. Moller - Maersk in connection with the divestment of Esvagt. As an investment bank, Danske Bank, its affiliates and subsidiaries provide a variety of financial services, including investment banking services. It is possible that Danske Bank and/or its affiliates and/or its subsidiaries might seek to become engaged to provide such services to A. P. Moller - Maersk in the next three months. Danske Bank has made no agreement with A. P. Moller - Maersk to write this research report. No parts of this research report have been disclosed to A. P. Moller - Maersk. No recommendations or opinions have been disclosed to A. P. Moller - Maersk and no amendments have accordingly been made to the same before dissemination of the research report.

Financial models and/or methodology used in this research report Recommendations and opinions in this research report are formed on the basis of a combination of discounted cash flow analysis, industry knowledge, peer group analysis and company-specific and market technical elements (events affecting both the financial and operational profile of the company). Forecasting of company sales and earnings is based on segmented bottom-up models using subjective views of relevant future market developments. In addition, the expected macroeconomic environment is taken into account. The output is aggregated into models for group profit and loss, balance sheets and cash flow estimates – all taking into account the recent development in historical research reports. Risk warning

Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis of relevant assumptions, are stated throughout the text. Expected updates We expect to update this research product on a regular basis (at least twice per year). See the front page of this research report for the date of first publication. Recommendation structure The Danske Bank Markets recommendation system is absolute. It means that each stock is rated on the basis of a total return, measured by the upside potential (including dividends and capital reimbursement) over a 12-month time horizon. The Danske Bank Markets spectrum of recommendations (or ratings) for each stock comprises three categories: Buy, Hold, Sell (in short B, H, S). In specific cases and for a limited period of time, analysts may have to rate stocks as Rating Suspended (RS) or Not Rated (NR), as explained below. Meaning of each rating or recommendation: • Buy: we expect the stock to generate a total return of more than 10% over the next 12 months. • Hold: we expect the stock to generate a total return of 0% to 10% over the next 12 months. • Sell: we expect the stock to generate a total return below 0% over the next 12 months. • Rating Suspended: the rating is suspended due to a capital operation (e.g. takeover bid, share issue) where the issuer or a related party of the issuer is or could be involved or to a change of analyst covering the stock. • Not Rated: Danske Bank Markets produces investment research on Danske Bank but does not have an investment recommendation to buy, hold or sell or any target price on the stock.

17 | A. P. Moller – Maersk Buy www.danskemarketsequities.com

discounted Mostare risks

As at 6 November 2015, Danske Bank Markets had investment recommendations on 255 The proportion of issuers corresponding to each of the recommendation categories securities. The distribution of recommendations is represented in the Securities ratings above to which Danske Bank provided investment banking services in the past

breakdown diagram below. 12 months is shown below.

Sell Rating Investment banking relationships 13% Buy 67% Hold 28%

Sell 2% Hold Buy 32% 55%

Changes to recommendation in the past 12 months:

Date Old rec. New rec.

General disclaimer This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) (‘Relevant Financial Instruments’). The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in this research report. This research report is not intended for retail customers in the or the United States.

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18 | A. P. Moller – Maersk Buy www.danskemarketsequities.com