July 2014 This Research has been prepared and issued by BBY Ltd and remains the property of BBY Ltd. No material contained in this Research may be reproduced or distributed without prior written approval of BBY, except as allowed by the Copyright Act. This Research is current at the date of publishing. For updates or further information regarding this research, please contact your advisor. BBY does or seeks to undertake business with companies covered in its research and therefore, Investors should consider this report as only a single factor in making their investment decisions. For explanations regarding ratings and other important disclosures, please refer to the disclosure section at the end of this document. In our July edition of STOCKscan, we inform clients about our upcoming Managed Discretionary Accounts (MDA) service, which launched in New Zealand and will soon be launching in Australia. Also covered in this edition is an excerpt about the continuing success of BBY’s Disruptive Technology Lunch Series, which showcases some of the best and brightest of emerging technology companies. Further included in this month’s STOCKscan are insights on why we have confidence in gold, a research update on Health Care front-runner Regeneus Limited (ASX:RGS), as well as key highlights from our Emerging Companies Conference. Also included in this report: ♦ Performance snapshot of our High Conviction Model Portfolio ♦ BBY’s top calls for June 2014 ♦ Stock profiles of companies mentioned are attached at the end of this document. Launch of BBY Managed portfolio is to outperform the capital return of the ASX 200 Accumulation Index. Discretionary Accounts Service Quantitative Momentum portfolio: provides exposure to A Managed Discretionary Account (MDA) is a managed 5-10 of the current strongest performing stocks listed on investment solution that is tailored to your investment the Australian Stock Exchange (ASX). Based on the BBY needs. Investment decisions are made at the MDA HomeTrader Quantitative Momentum product, this actively manager’s discretion using the client’s contributions without managed portfolio is focused on providing capital growth. prior reference to the client for each transaction. The objective of this model portfolio is to outperform the BBY’s MDA service takes the weight off the shoulders of capital return of the ASX 200 Accumulation Index. time-poor clients. Instead of being burdened with the day- to-day management of your investment portfolio, BBY can BBY Disruptive Technology Lunch exercise professional management at your discretion. An Series MDA account allows clients to invest in fast-growing In early June, BBY launched its “Disruptive Technology” markets without having to commit the personal time and lunch series at its head office in Sydney. The Disruptive attention required to trade these markets themselves. Technology lunch series showcases the best and brightest Deciding on your MDA investment strategy is entirely of Australia’s emerging technology companies and the dependent on your personal situation. In consultation, series is a demonstration of BBY’s commitment to high BBY’s MDA Operators will assess your risk profile, as well growth companies. as your investment objectives. This will enable us to On Thursday 3 July, BBY held the third lunch of the series provide you with an MDA strategy solution that serves your and yet again, it was a great success attracting a full-house best interests. of Australian fund managers, high net worth advisers and exciting technology entrepreneurs. BBY has already launched an MDA service for New Zealand clients and we are soon to launch another three New technology is constantly being introduced to the MDA services; our MDA Quantitative Momentum portfolio market on a daily basis and there is no better way to service, as well as income and growth portfolio solutions: support tech start-ups than by helping them access financial markets. Income model portfolio: provides exposure to 10-25 blue chip high yield stocks listed on the Australian Stock BBY Executive Chairman, Glenn Rosewall comments, “BBY is working hard to facilitate new investment Exchange (ASX). This portfolio’s strategy is focused on opportunities by showcasing these emerging technology providing a steady source of income with an emphasis on companies. The spectacular turnout at all three lunches franking credits. The objective of this model portfolio is to demonstrates that our efforts are paying off and investors outperform the income return of the ASX 200 Accumulation are moving out of their comfort zones to become a part of Index. the future. This turnout has also in fact prompted us to Growth model portfolio: provides exposure to 10-25 blue expand the lunch series to our Melbourne office.” chip high growth stocks listed on the Australian Stock BBY’s next Disruptive Technology Lunch will be held in Exchange (ASX). This portfolio’s strategy is focused on Sydney on Thursday 17th July 2014 with Digivizer, providing capital growth. The objective of this model Expert360 and Local Fixer. bby.com.au July 2014 Trade Idea: Buy Gold might ultimately find themselves ‘behind the curve’ in fighting an inflation outbreak. Graham Parlane, Associate Director - Markets, BBY (NZ) Limited recommended buying gold on 11 June 2014; Tim Sholl, Senior Client Advisor at BBY confirmed ♦ I get the impression that right now Gold is widely Graham’s trade idea by issuing a trade alert on 26 June to unloved. We have large numbers of clients with well Buy XAU/USD. Tim’s recommendation and targets are as documented expectations that Gold can be worth follows; US$3,000-5,000 in time due to the experimental monetary policies of the world’s major central banks (in ♦ The price of Gold has moved from lows at the turn of response to the GFC) ultimately causing inflation. Over the century of around USD$250 to reach record highs the last 6 months we have seen almost no interest to of USD$1920 in 2011 as market experienced the Tech assume long Gold (or Silver) positions despite this Wreck, September 11 attacks, the second invasion of overall sentiment bias. Iraq , the GFC and finally the near breakup of Europe. ♦ Now we can only speculate as to what might drive the ♦ Since 2011, the Gold price has fallen to the USD$1180 precious metals higher. Perhaps the fact that the level twice as hopes for a recovery in the world European Central Bank doesn’t pay interest anymore economy and the US Dollar have increased as central means there is no lost opportunity in owning Gold. banks continue to flood the world with cash in Despite recent selling of Gold, based on the notion continued Quantitative Easing programs. that the U.S. will raise rates in the future making gold ♦ Expected inflation from these huge QE programs has less attractive is wrong? Instead perhaps Gold may not yet emerged which has helped to keep Gold in a rise under rising U.S. interest rate yields because range from US$1180 to US$1430. those yields are responding to new inflation pressures which could be the seeds of an era of rampant ♦ I am expecting the USD to remain weak and for inflation. We cannot know (yet), but various technical inflation to begin to rise as economic growth returns to factors abound to suggest buying interest down at Europe , Japan and the US. these levels is emerging”. ♦ Conflict in the Middle East, Ukraine and the South ♦ As long as I have been studying Gold the contention China Sea could also boost Gold as investors turn to from long standing analysts has always been that safe haven assets. mining stocks rise before the price of spot gold does. ♦ I am looking for Gold to break the 2 year downtrend The suggestion being that the industry insiders line at USD$1320 and move up to USD$1500 , the understand what market forces are apparent and thus 200 week moving average and ultimately for it to test they buy the asset they have most knowledge over; USD$1600 , the long term downtrend line over the their companies. Add to that the fact that Gold miners’ next 12 months. margins increase at an exponential rate compared to the rise in gold itself and you have a tasty recipe. ♦ This trade will be placed in the BBY Online Trading Platform through a ‘Forex Trade’ ticket. Graham provided an update on this view on 20 June following a jump in the metals market on 19 June; For more information, speak to your BBY advisor, or ♦ There are numerous theories as to why the metals call Client Sales & Solutions on 1800 551 212 jumped so strongly overnight. We now know the Silver market had assumed record ‘short’ positioning last month as per official U.S data http://goldnews.bullionvault.com/silver-gold- 060920141 so perhaps it was simply a short covering rally on the Fed inspired weaker USD. ♦ U.S. President Obama last night confirmed that the U.S. won’t be going back in on the ground to Iraq so perhaps the market fears a worsening in conditions over that way. ♦ Neither view can be discounted, but my favoured view is to do with U.S. inflation. Yesterday the market went into the Fed decision expecting the Fed to at least give a nod to the recent higher U.S. inflation readings. They didn’t, instead telling the market rates will stay low for a longer than usual time. I suspect that what we are seeing is now the first expression of fears that the Fed STOCKSCAN July 2014 2 bby.com.au July 2014 Healthcare Front-Runner Regeneus banks, securities and operators. NNW’s operations extend to value-added applications, data acquisition, data mining, Ltd (ASX:RGS) precision marketing and other areas of expertise.