Equity Research
25 August 2015
U.S. Equity Strategy
MACRO STRATEGY
Time to reconsider high yielding stocks
U.S. Equity Strategy
Stocks with high dividend yields have underperformed in 2015. We believe this is
largely due to expectations that interest rates will rise. But interest rates have not
gone up and macro developments such as the CNY devaluation suggest they may stay
low for longer. The decoupling of high dividend yielding stocks and interest rates
presents a buying opportunity, in our opinion.
The environment for dividend strategies is suitable. The 10y Treasury yield ended
yesterday at 2.17%, exactly where it was on December 31, 2014. Despite this, the
highest dividend paying stocks in the S&P 500 have underperformed, indicating the link
between dividend strategies and interest rates has broken down.
Taking a fresh look at utilities, REITs, and MLPs. Investors seeking dividends often
focus on industries such as utilities, REITs, and MLPs. These groups of stocks have all
underperformed in 2015. The utilities sector has trailed the S&P 500 by 5%. REITs have
advanced less than 2%. Far worse has been the performance of MLPs, which have
declined 17% since the beginning of the year.
We look at interest rate risk, fundamentals, and valuation. Conventional wisdom
asserts that utilities, REITs, and MLPs do not do well when interest rates rise. But our
historical review shows that performance is resilient. On fundamentals, MLPs face
challenges, but REITs are strong and utilities are stable. Valuation is not an impediment
to a rebound for these groups of dividend paying stocks, in our opinion.
This is an extract from U.S. Equity Strategy: Time to reconsider high yielding stocks
(August 18, 2015). Clients can view the full report on Barclays Live.
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 11.
Jonathan Glionna
+1 212 526 5313
[email protected]
BCI, US
Eric Slover, CFA
1.212.526.6426
[email protected]
BCI, US
Mario Lu
+1 212 526 4885
[email protected]
BCI, US
Barclays | U.S. Equity Strategy
Dividend paying stocks have underperformed
In Paying for revenue growth we argued that companies with high growth expectations
have become expensive and it may be time to rotate out of some of these stocks. But, what
should investors rotate into? Well, one area to consider is dividend stocks. Portfolio
strategies that emphasized dividend paying stocks had been doing well over the last five
years, but that changed in 2015. The highest dividend paying stocks in the S&P 500 have
underperformed the broader index by approximately 5% this year. This is surprising to us
considering that the environment for dividend strategies is suitable. Economic growth is
subdued, the U.S. dollar is strong, and commodity prices are falling. These conditions
should keep inflation expectations and intermediate-term interest rates low. In addition, the
recent devaluation of the CNY is disinflationary, adding another argument for low interest
rates (see Global Rates Weekly: One step forward...).
Considering this, dividend strategies deserve a fresh look. Figure 1 displays the cumulative
spread return of a high dividend factor against the 10y Treasury yield, which is inverted. As
shown, the link between dividend strategies and interest rates has broken down. We believe
this is presenting a buying opportunity. A lesser breakdown occurred in February 2014 and
it was followed by strong returns for dividend strategies. For example, the utilities sector
produced a 21% total return from February 2014 until year end.
FIGURE 1
High dividend paying stocks have broken down in relation to interest rates
120
0.0%
0.5%
115
1.0%
110
1.5%
105
2.0%
100
2.5%
The utilities sector
returned 21% from here
to year-end 2014
95
3.0%
3.5%
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
4.0%
Jan-11
90
High dividend factor: cumulative spread return (lhs)
10y Treasury yield (rhs, inverted)
Source: Factset, Haver Analytics, Barclays Research
Taking a fresh look at utilities, REITs, and MLPs
Investors seeking dividends often focus on industries such as utilities, REITs, and MLPs.
These groups of stocks have all underperformed in 2015. The utilities sector is the fourth
worst performing sector, trailing only energy, materials, and industrials. REITs were among
the best performing industries in 2014, but are up less than 2% in 2015. The performance
of MLPs has been far worse, down 17% since the start of the year (Figure 2). An
expectation that intermediate-term interest rates will rise is a primary reason for the
underperformance of these high yielding stocks, in our opinion. In addition, the MLP group
has been hurt by lower commodity prices.
Considering the poor performance of utilities, REITs, and MLPs we believe it is a good time
to reassess these high yielding stocks. While utilities remain the quintessential yield sector,
the alternatives have expanded. REITs and MLPs have experienced explosive growth and the
combined market capitalization of the S&P 500 REIT industry group and the Alerian MLP
25 August 2015
2
Barclays | U.S. Equity Strategy
index is now well in excess of the S&P 500 utilities sector (Figure 3). At present, the utilities
sector and REIT industry yield more than 3% while MLPs yield more than 7% (Figure 4).
In January we published our preferred dividend strategy for 2015, which recommended
seeking a combination of yield and growth (see U.S. Equity Strategy: Look for yield plus
growth in 2015). But what about examining yield strategies from the perspective of these
three industry groups instead? Should we be worried about higher interest rates? What
about fundamental risk? Could valuation impede a rebound? We address these questions in
the sections that follow.
FIGURE 2
Cumulative total return since 2001
800
Utilities
700
REITs
MLPs
600
500
400
300
200
100
Mar-15
Jan-14
Aug-14
Jun-13
Apr-12
Nov-12
Feb-11
Sep-11
Jul-10
Dec-09
Oct-08
May-09
Mar-08
Jan-07
Aug-07
Jun-06
Nov-05
Apr-05
Feb-04
Sep-04
Jul-03
Dec-02
Oct-01
May-02
0
Source: S&P, Haver, Alerian, Barclays Research
FIGURE 3
REITs and MLPs have grown in relation to utilities (market
capitalization)
$bn
600
500
Utilities Sector
FIGURE 4
Dividend yield
Dividend yield
8%
REIT Industry
7%
MLPs (Alerian MLP index)
6%
5%
400
4%
300
3%
200
2%
100
1%
0%
0
2007
2015
Source: S&P, Haver Analytics, Alerian, Barclays Research
Utilities
REITs
MLPs
Source: S&P, Haver Analytics, Alerian, Barclays Research
We believe interest rate risk is manageable
Utilities, REITs, and MLPs are all considered to be interest rate sensitive. The consensus view
is these stocks perform poorly when interest rates go up because fixed income assets
become more competitive. Funds flow out of high yield stocks and into bonds as interest
rates rise. This has been cited as one of the reasons these industry groups have not done
25 August 2015
3
Barclays | U.S. Equity Strategy
well so far in 2015. But, keep in mind that interest rates have not gone up this year. There
has been volatility, but the 10y Treasury yield ended August 17 at 2.17%, exactly where it
was on December 31, 2014. So, it appears these groups of stocks have gone down in
anticipation of interest rates rising, alongside fundamental concerns for MLPs.
As mentioned, the conventional wisdom asserts that utilities, REITs, and MLPs do not do
well when interest rates rise. But how strong is this link to interest rates? In Figure 5 we plot
the price of each of these three groups against the 10y Treasury. The markers show data for
the end of each month during the last five years. It is hard to discern a linear relationship
between the price of these groups of stocks and the 10y Treasury yield. In fact, the
relationship does not look strong.
FIGURE 5
A strong relationship between high yielding stocks and interest rates is not apparent
(monthly data covering the last five years)
Price
600
S&P 500 utilities index
S&P 500 REIT index
Alerian MLP index
500
400
300
200
100
0
1.5%
2.0%
2.5%
3.0%
3.5%
10y Treasury Yield
Source: S&P, Haver, Alerian, Barclays Research
But, we are not as interested in the linear relationship between high yield stocks and interest
rates as we are in the performance when interest rates rise. That is the risk. So, to isolate
this, we identified four periods when the 10y Treasury yield increased by approximately
100bp or more during a six month period. The performance of utilities, REITs, and MLPs is
shown in Figures 6-9. In 2003, both REITs and MLPs performed well, each increasing by
more than 10% in the six month period. Utilities did not keep pace. In 2009, MLPs had
exceptional performance, increasing by more than 40% in just six months. Meanwhile REITs
and utilities declined modestly. Utilities were stable in 2010/11 while REITS and MLPs
increased sharply. This period looked similar to 2003. Lastly, during the so-called taper
tantrum of 2013, REITs declined, utilities were unchanged, and MLPs were up modestly,
although there was a lot of volatility. Overall, these periods show that utilities have been
stable during recent periods of rising interest rates, while MLPs performed well and REITs
were inconsistent.
25 August 2015
4
Barclays | U.S. Equity Strategy
Source: S&P, Haver, Alerian, Barclays Research
Source: S&P, Haver, Alerian, Barclays Research
FIGURE 8
…REITs did best in 2010/11…
FIGURE 9
…but not in 2013
10y Treasury Yield
Utilities
REITs
MLPs
4.0%
3.5%
130
115
3.0%
Jun 5 2009
May 8 2009
May 22 2009
10y Treasury Yield
Utilities
REITs
MLPs
3.0%
125
120
Apr 24 2009
Dec 5 2008
2.0%
Dec 12 2003
Nov 28 2003
Nov 14 2003
Oct 31 2003
Oct 3 2003
Oct 17 2003
Sep 5 2003
Sep 19 2003
Aug 22 2003
Jul 25 2003
Aug 8 2003
Jul 11 2003
Jun 27 2003
90
Jun 13 2003
3.0%
2.5%
Apr 10 2009
95
Mar 27 2009
100
3.5%
3.0%
Feb 27 2009
105
150
140
130
120
110
100
90
80
70
60
Mar 13 2009
4.0%
3.5%
Feb 13 2009
110
Jan 16 2009
115
10y Treasury Yield
Utilities
REITs
MLPs
4.0%
Jan 30 2009
4.5%
120
Jan 2 2009
10y Treasury Yield
Utilities
REITs
MLPs
5.0%
FIGURE 7
…MLPs outperformed materially in 2009
Dec 19 2008
FIGURE 6
Utilities underperformed when rates went up in 2003…
120
115
2.5%
110
105
110
105
2.5%
100
2.0%
100
95
95
Source: S&P, Haver, Alerian, Barclays Research
Sep 6 2013
Aug 9 2013
Aug 23 2013
Jul 26 2013
Jul 12 2013
Jun 28 2013
Jun 14 2013
May 31 2013
May 17 2013
May 3 2013
Apr 19 2013
Apr 5 2013
90
Mar 8 2013
1.5%
Mar 22 2013
Feb 18 2011
Feb 4 2011
Jan 21 2011
Jan 7 2011
Dec 24 2010
Dec 10 2010
Nov 26 2010
Oct 29 2010
Nov 12 2010
Oct 15 2010
Oct 1 2010
Sep 17 2010
Sep 3 2010
90
Aug 20 2010
2.0%
Source: S&P, Haver, Alerian, Barclays Research
But, this is just four periods that we selected based arbitrarily on an approximately 100bp
increase in the 10y Treasury yield. What if we use a larger sample? In Figure 10 we
summarize the results of a similar analysis using a larger set. For this we used a 50bp
increase in the 10y yield as a hurdle, capturing 12 time periods (each six months long).
Once again, the performance does not support an argument that these groups of stocks
perform poorly when interest rates rise. In fact, the average return is positive in all three
cases and REITs and MLPs display periods of remarkably strong results. Now, it is fair to
highlight that these returns, while positive, have not been better than the broader S&P 500.
But, if we are talking about bond substitutes then preservation of capital is relevant, and the
absolute returns are satisfactory.
25 August 2015
5
Barclays | U.S. Equity Strategy
FIGURE 10
Total return during 12 periods of rising rates since 2001
50%
High
Low
Average
40%
30%
20%
10%
0%
-10%
-20%
Utilities
REITs
MLPs
S&P 500
Source: S&P, Haver Analytics, Alerian, Barclays Research
Overall, we find the performance of utilities, REITs, and MLPs to be resilient when interest rates
increase. In fact, the correlation of the total return of these groups and the change in Treasury
yields is weak. In Figure 11, we display these correlations for monthly periods going back to
2002. While the correlation is negative during periods of rising rates, it is not high.
FIGURE 11
The correlation of monthly total returns to changes in 10y Treasury yields
Utilities
REITS
MLPs
All months (2002-2015)
-2%
-8%
16%
10y Treasury Yields up (2002-2015)
-13%
-14%
-16%
10y Treasury Yields down (2002-2015)
11%
-1%
28%
Source: S&P, Haver Analytics, Alerian, Barclays Research
So, why do utilities, REITs, and MLPs not display worse performance when interest rates
rise? And why are the correlations not higher? We attribute it to two reasons. The first is
that these sectors, while considered bond substitutes, do not really act like government
bonds. Instead, they act like high yield corporate bonds. When interest rates go up, spreads
narrow, causing the duration to be lower than estimated. 2013 is a good example. Yields on
treasuries increased but the move was buffered by a contraction in spreads for utilities,
REITs, and MLPs (Figure 12). In other words, the yields on these equities did not go up by as
much as the yields on government bonds. This allowed for more price stability than
expected. But, it also works in reverse. A good example of this occurred in 2015. Yields on
government bonds declined but yields on REITs and utilities were stable, resulting in wider
spreads. Yields have risen on MLPs but we attribute that to fundamental concerns.
25 August 2015
6
Barclays | U.S. Equity Strategy
FIGURE 12
Spreads narrow when yields rise
8%
10y Treasury Yield
REITs Yield
Utilities Yield
MLPs Yield
7%
6%
5%
4%
3%
2%
1%
Aug 5 2011
Sep 23 2011
Nov 11 2011
Dec 30 2011
Feb 17 2012
Apr 6 2012
May 25 2012
Jul 13 2012
Aug 31 2012
Oct 19 2012
Dec 7 2012
Jan 25 2013
Mar 15 2013
May 3 2013
Jun 21 2013
Aug 9 2013
Sep 27 2013
Nov 15 2013
Jan 3 2014
Feb 21 2014
Apr 11 2014
May 30 2014
Jul 18 2014
Sep 5 2014
Oct 24 2014
Dec 12 2014
Jan 30 2015
Mar 20 2015
May 8 2015
Jun 26 2015
0%
Source: S&P, Haver Analytics, Alerian, Barclays Research
The other reason why utilities, REITs, and MLPs show less sensitivity to interest rates than
expected is the growth rate of dividends. As we have written previously, growth is crucial to
reduce risk in a dividend strategy during periods of potentially rising interest rates. Figure 13
displays the standard deviation of returns for various dividend strategies in different macro
environments. In every case, adding growth to a high yield strategy reduces the standard
deviation.
FIGURE 13
Standard deviation of dividend factors in various macro regimes
Regime
10 yr yield increases
10 yr yield decreases
Oil increases
Oil decreases
USD increases
USD decreases
All 3 macros above increases
All 3 macros above decreases
2s10s increases
2s10s decreases
SPX increases
SPX decreases
Full Sample
Div Growth Factor
3.8
3.0
3.3
3.4
3.1
3.6
3.5
2.9
3.7
2.7
3.4
3.2
3.4
Div Yield Factor
4.0
5.2
5.0
4.6
5.4
4.2
4.7
4.4
5.5
4.2
4.2
5.2
4.9
Div Yield > median &
Div Growth > 10%
1.6
1.7
1.6
1.7
1.7
1.7
1.8
1.9
1.8
1.6
1.7
1.6
1.7
Source: Barclays Research
Utilities, REITs, and MLPs continue to grow dividends. In fact, in 2Q15 dividends per share
for the S&P 500 REIT industry jumped 18% compared to 2Q14. Growth in dividends from
the utilities sector has not been as robust, but it is steady at around 5%. Even MLPs
continue to grow distributions, despite the decline in commodity prices (Figure 14). Overall,
we believe dividend growth is important because it subdues sensitivity to interest rates.
25 August 2015
7
Barclays | U.S. Equity Strategy
FIGURE 14
Growth rate of dividends (distributions for MLPs)
Utilities
20%
REITs
MLPs
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
3Q14
4Q14
1Q15
2Q15
Source: S&P, Haver Analytics, Barclays Research
The fundamental outlook for MLPs suggests caution, but
REITs and utilities are stable
But what about fundamentals? Could that be the reason why dividend stocks have decoupled from interest rates? That may be true for MLPs, but not REITs and utilities. While
utilities, MLPs, and REITs are often classified together as dividend stocks, their
fundamentals are not the same. Utilities are highly regulated and generally low risk. REITs
are sensitive to economic growth and the patterns of overbuilding that have afflicted the
industry for decades. MLP fundamentals are aligned with the commodity cycle. At present,
MLPs face fundamental challenges, while REITs have positive fundamentals and utilities are
stable.
Recall, MLPs are publicly-traded partnerships that do not have common stock and do not
pay dividends. Investors are limited partners who receive distributions. To achieve the
partnership status crucial to an MLP structure, at least 90% of income must come from
sources including crude oil, natural gas, and other petroleum products. In addition, activities
are limited to the extraction, distribution, transportation, and storage of these products.
Because of the strict limits on MLPs, the industry is not diversified. Rather, it is concentrated
in commodities-related activities. Still, not all MLPs are the same and it is important to
distinguish between those with direct commodity exposure and those that have long-term
contracts that blunt the implications of lower prices. With the price of oil having declined by
almost 60%, the industry faces a challenging outlook, although balance sheets are generally
healthy. We recommend our team led by Richard Gross for more analysis (see MLPs: This
time, it IS different).
Meanwhile, fundamentals in the REIT industry are solid. As our REIT analyst Ross Smotrich
discussed in REIT Earnings Preview: 2Q15, employment is growing and new supply is
limited. These are good conditions for rental rates. For office properties, vacancies are at
16.6% and the improvement that began in urban areas is spreading to the suburbs. In fact,
office properties are experiencing the strongest net absorption since the financial crisis. In
apartments, occupancy is at 96% and rents are growing at 3.5% per year. Even the
industrial real estate market continues to expand, with vacancy rates at 9.8%, the lowest
level since 2007. We expect economic growth in the U.S. to increase in the second half of
2015 and that should allow for stable fundamentals in the REIT industry.
25 August 2015
8
Barclays | U.S. Equity Strategy
The same can be said for utilities. Fundamentals are stable. Regulated utilities do face
growth challenges, but the industry’s 10% return on equity remains attractive in relation to
current interest rates. The rate base of regulated utilities has been growing at 4-6%
following a heavy cycle of capital expenditures, but this is unlikely to be sustained. Rather,
growth should moderate as capex spending normalizes. Still, the positive offset is that cash
flow will likely improve, spurring additional dividend growth. In power, the supply and
demand balance is getting better. Supply remains constrained by environmental rules that
are leading to shutdowns. Demand has been dampened by energy efficiency initiatives, but
economic growth remains strong enough to provide an offset (see the latest update from
Dan Ford and his team here).
Valuation is not a hindrance to a rebound
Utilities, REITs, and MLPs have underperformed the S&P 500 in 2015. This has made
valuation more attractive, although outside of MLPs, it is not out of line with recent history.
One way to measure valuation for these groups of dividend stocks is to compare their
dividend yield to the benchmark 10y Treasury. We do this in Figure 15. As shown, MLPs
have experienced a dramatic increase in their yield relative to the risk-free rate. Utilities and
REITs have not. MLPs yield 520bp more than the 10y Treasury, which is high in relation to
history. In fact, since the financial crisis, MLPs have rarely yielded more than 500bp above
Treasuries. We attribute this to the previously mentioned fundamental concerns facing the
group. In contrast, utilities and REITs, which have stable fundamentals, have experienced
only a modest increase in yield spread in 2015. Utilities yield 140bp more than Treasuries
while REITs yield 100bp more.
FIGURE 15
Dividend yield spread – MLPs are close to the recent wide but utilities and REITs are not
14%
Utilities spread
REITs spread
MLPs spread
12%
10%
8%
6%
4%
2%
0%
Apr 6 2007
-2%
Mar 21 2008
Mar 6 2009
Feb 19 2010
Feb 4 2011
Jan 20 2012
Jan 4 2013
Dec 20 2013
Dec 5 2014
-4%
Source: S&P, Haver Analytics, Alerian, Barclays Research
Another way to measure valuation for these stocks is by comparing the cash flow yield of
the companies to the triple-B corporate bond index. This allows for an assessment of value
against a fixed income asset class with similar risk. The cash flow measure we use in Figure
16 is EBITDA-to-enterprise value. While this measure is not equivalent between utilities,
REITs, and MLPs, it does provide valuable information in a time series. Currently, the cash
flow yield spreads of MLPs and REITs are above the long-term average. Utilities are in line
with the long-term average. These measures indicate to us that valuation is not a constraint
on dividend paying stocks staging a rebound in the final part of the year.
25 August 2015
9
Barclays | U.S. Equity Strategy
FIGURE 16
Cash flow yield in relation to BBB corporate bond yield
MLPs: EBITDA/EV - BBB corp yield
12%
Utilities: EBITDA/EV - BBB corp yield
10%
REITs: EBITDA/EV - BBB corp yield
8%
6%
4%
2%
Jun-15
Jun-14
Dec-14
Jun-13
Dec-13
Jun-12
Dec-12
Jun-11
Dec-11
Jun-10
Dec-10
Jun-09
Dec-09
Jun-08
Dec-08
Jun-07
Dec-07
Jun-06
Dec-06
Jun-05
Dec-05
Jun-04
Dec-04
Jun-03
Dec-03
-4%
Jun-02
-2%
Dec-02
0%
Source: S&P, Haver Analytics, Alerian, SNL, Barclays Research
25 August 2015
10
Barclays | U.S. Equity Strategy
ANALYST(S) CERTIFICATION(S):
ANALYST(S) CERTIFICATION(S):
I, Jonathan Glionna, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or all of the
subject securities or issuers referred to in this research report and (2) no part of my compensation was, is or will be directly or indirectly related to
the specific recommendations or views expressed in this research report.
IMPORTANT DISCLOSURES CONTINUED
Barclays Research is a part of the Investment Bank of Barclays Bank PLC and its affiliates (collectively and each individually, "Barclays"). For
current important disclosures regarding companies that are the subject of this research report, please send a written request to: Barclays
Research Compliance, 745 Seventh Avenue, 14th Floor, New York, NY 10019 or refer to http://publicresearch.barclays.com or call 212-526-1072.
The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's total
revenues, a portion of which is generated by investment banking activities.
Analysts regularly conduct site visits to view the material operations of covered companies, but Barclays policy prohibits them from accepting
payment or reimbursement by any covered company of their travel expenses for such visits.
In order to access Barclays Statement regarding Research Dissemination Policies and Procedures, please refer to
https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html. In order to access Barclays Research
Conflict Management Policy Statement, please refer to: https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-conflictmanagement.html.
The Investment Bank’s Research Department produces various types of research including, but not limited to, fundamental analysis, equity-linked
analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations
contained in other types of research, whether as a result of differing time horizons, methodologies, or otherwise.
Risk Disclosure(s)
Master limited partnerships (MLPs) are pass-through entities structured as publicly listed partnerships. For tax purposes, distributions to MLP
unit holders may be treated as a return of principal. Investors should consult their own tax advisors before investing in MLP units.
Barclays legal entities involved in publishing research:
Barclays Bank PLC (Barclays, UK)
Barclays Capital Inc. (BCI, US)
Barclays Securities Japan Limited (BSJL, Japan)
Barclays Bank PLC, Tokyo branch (Barclays Bank, Japan)
Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong)
Barclays Capital Canada Inc. (BCCI, Canada)
Absa Bank Limited (Absa, South Africa)
Barclays Bank Mexico, S.A. (BBMX, Mexico)
Barclays Capital Securities Taiwan Limited (BCSTW, Taiwan)
Barclays Capital Securities Limited (BCSL, South Korea)
Barclays Securities (India) Private Limited (BSIPL, India)
Barclays Bank PLC, India branch (Barclays Bank, India)
Barclays Bank PLC, Singapore branch (Barclays Bank, Singapore)
Barclays Bank PLC, Australia branch (Barclays Bank, Australia)
25 August 2015
11
DISCLAIMER:
This publication has been produced by the Investment Bank of Barclays Bank PLC and/or one or more of its affiliates (collectively and each individually,
"Barclays"). It has been distributed by one or more Barclays legal entities that are a part of the Investment Bank as provided below. It is provided to our clients
for information purposes only, and Barclays makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to any data included in this publication. Barclays will not treat unauthorized recipients of this report as its clients. Prices
shown are indicative and Barclays is not offering to buy or sell or soliciting offers to buy or sell any financial instrument.
Without limiting any of the foregoing and to the extent permitted by law, in no event shall Barclays, nor any affiliate, nor any of their respective officers,
directors, partners, or employees have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of
anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or
its contents.
Other than disclosures relating to Barclays, the information contained in this publication has been obtained from sources that Barclays Research believes to
be reliable, but Barclays does not represent or warrant that it is accurate or complete. Barclays is not responsible for, and makes no warranties whatsoever as
to, the content of any third-party web site accessed via a hyperlink in this publication and such information is not incorporated by reference.
The views in this publication are those of the author(s) and are subject to change, and Barclays has no obligation to update its opinions or the information in
this publication. The analyst recommendations in this publication reflect solely and exclusively those of the author(s), and such opinions were prepared
independently of any other interests, including those of Barclays and/or its affiliates. This publication does not constitute personal investment advice or take
into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all
investors. Barclays recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent
advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic
markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those
reflected. Past performance is not necessarily indicative of future results.
This material has been issued and approved for distribution in the UK and European Economic Area by Barclays Bank PLC. It is being made available
primarily to persons who are investment professionals as that term is defined in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005. It is directed at, and therefore should only be relied upon by, persons who have professional experience in matters relating to
investments. The investments to which it relates are available only to such persons and will be entered into only with such persons. Barclays Bank PLC is
authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a
member of the London Stock Exchange.
The Investment Bank of Barclays Bank PLC undertakes U.S. securities business in the name of its wholly owned subsidiary Barclays Capital Inc., a FINRA and
SIPC member. Barclays Capital Inc., a U.S. registered broker/dealer, is distributing this material in the United States and, in connection therewith accepts
responsibility for its contents. Any U.S. person wishing to effect a transaction in any security discussed herein should do so only by contacting a
representative of Barclays Capital Inc. in the U.S. at 745 Seventh Avenue, New York, New York 10019.
Non-U.S. persons should contact and execute transactions through a Barclays Bank PLC branch or affiliate in their home jurisdiction unless local regulations
permit otherwise.
Barclays Bank PLC, Paris Branch (registered in France under Paris RCS number 381 066 281) is regulated by the Autorité des marchés financiers and the
Autorité de contrôle prudentiel. Registered office 34/36 Avenue de Friedland 75008 Paris.
This material is distributed in Canada by Barclays Capital Canada Inc., a registered investment dealer, a Dealer Member of IIROC (www.iiroc.ca), and a
Member of the Canadian Investor Protection Fund (CIPF).
Subject to the conditions of this publication as set out above, the Corporate & Investment Banking Division of Absa Bank Limited, an authorised financial
services provider (Registration No.: 1986/004794/06. Registered Credit Provider Reg No NCRCP7), is distributing this material in South Africa. Absa Bank
Limited is regulated by the South African Reserve Bank. This publication is not, nor is it intended to be, advice as defined and/or contemplated in the (South
African) Financial Advisory and Intermediary Services Act, 37 of 2002, or any other financial, investment, trading, tax, legal, accounting, retirement, actuarial
or other professional advice or service whatsoever. Any South African person or entity wishing to effect a transaction in any security discussed herein should
do so only by contacting a representative of the Corporate & Investment Banking Division of Absa Bank Limited in South Africa, 15 Alice Lane, Sandton,
Johannesburg, Gauteng 2196. Absa Bank Limited is a member of the Barclays group.
In Japan, foreign exchange research reports are prepared and distributed by Barclays Bank PLC Tokyo Branch. Other research reports are distributed to
institutional investors in Japan by Barclays Securities Japan Limited. Barclays Securities Japan Limited is a joint-stock company incorporated in Japan with
registered office of 6-10-1 Roppongi, Minato-ku, Tokyo 106-6131, Japan. It is a subsidiary of Barclays Bank PLC and a registered financial instruments firm
regulated by the Financial Services Agency of Japan. Registered Number: Kanto Zaimukyokucho (kinsho) No. 143.
Barclays Bank PLC, Hong Kong Branch is distributing this material in Hong Kong as an authorised institution regulated by the Hong Kong Monetary
Authority. Registered Office: 41/F, Cheung Kong Center, 2 Queen's Road Central, Hong Kong.
Information on securities/instruments that trade in Taiwan or written by a Taiwan-based research analyst is distributed by Barclays Capital Securities
Taiwan Limited to its clients. The material on securities/instruments not traded in Taiwan is not to be construed as 'recommendation' in Taiwan. Barclays
Capital Securities Taiwan Limited does not accept orders from clients to trade in such securities. This material may not be distributed to the public media or
used by the public media without prior written consent of Barclays.
This material is distributed in South Korea by Barclays Capital Securities Limited, Seoul Branch.
All Indian securities-related research and other equity research produced by the Investment Bank are distributed in India by Barclays Securities (India) Private
Limited (BSIPL). BSIPL is a company incorporated under the Companies Act, 1956 having CIN U67120MH2006PTC161063. BSIPL is registered and
regulated by the Securities and Exchange Board of India (SEBI) as a Portfolio Manager INP000002585; Stock Broker/Trading and Clearing Member: National
Stock Exchange of India Limited (NSE) Capital Market INB231292732, NSE Futures & Options INF231292732, NSE Currency derivatives INE231450334,
Bombay Stock Exchange Limited (BSE) Capital Market INB011292738, BSE Futures & Options INF011292738; Merchant Banker: INM000011195;
Depository Participant (DP) with the National Securities & Depositories Limited (NSDL): DP ID: IN-DP-NSDL-299-2008; Investment Adviser: INA000000391.
The registered office of BSIPL is at 208, Ceejay House, Shivsagar Estate, Dr. A. Besant Road, Worli, Mumbai – 400 018, India. Telephone No: +91 22
67196000. Fax number: +91 22 67196100. Any other reports produced by the Investment Bank are distributed in India by Barclays Bank PLC, India Branch,
an associate of BSIPL in India that is registered with Reserve Bank of India (RBI) as a Banking Company under the provisions of The Banking Regulation Act,
1949 (Regn No BOM43) and registered with SEBI as Merchant Banker (Regn No INM000002129) and also as Banker to the Issue (Regn No INBI00000950).
Barclays Investments and Loans (India) Limited, registered with RBI as Non Banking Financial Company (Regn No RBI CoR-07-00258), and Barclays Wealth
Trustees (India) Private Limited, registered with Registrar of Companies (CIN U93000MH2008PTC188438), are associates of BSIPL in India that are not
authorised to distribute any reports produced by the Investment Bank.
Barclays Bank PLC Frankfurt Branch distributes this material in Germany under the supervision of Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).
This material is distributed in Malaysia by Barclays Capital Markets Malaysia Sdn Bhd.
This material is distributed in Brazil by Banco Barclays S.A.
This material is distributed in Mexico by Barclays Bank Mexico, S.A.
Barclays Bank PLC in the Dubai International Financial Centre (Registered No. 0060) is regulated by the Dubai Financial Services Authority (DFSA). Principal
place of business in the Dubai International Financial Centre: The Gate Village, Building 4, Level 4, PO Box 506504, Dubai, United Arab Emirates. Barclays
Bank PLC-DIFC Branch, may only undertake the financial services activities that fall within the scope of its existing DFSA licence. Related financial products or
services are only available to Professional Clients, as defined by the Dubai Financial Services Authority.
Barclays Bank PLC in the UAE is regulated by the Central Bank of the UAE and is licensed to conduct business activities as a branch of a commercial bank
incorporated outside the UAE in Dubai (Licence No.: 13/1844/2008, Registered Office: Building No. 6, Burj Dubai Business Hub, Sheikh Zayed Road, Dubai
City) and Abu Dhabi (Licence No.: 13/952/2008, Registered Office: Al Jazira Towers, Hamdan Street, PO Box 2734, Abu Dhabi).
Barclays Bank PLC in the Qatar Financial Centre (Registered No. 00018) is authorised by the Qatar Financial Centre Regulatory Authority (QFCRA). Barclays
Bank PLC-QFC Branch may only undertake the regulated activities that fall within the scope of its existing QFCRA licence. Principal place of business in Qatar:
Qatar Financial Centre, Office 1002, 10th Floor, QFC Tower, Diplomatic Area, West Bay, PO Box 15891, Doha, Qatar. Related financial products or services
are only available to Business Customers as defined by the Qatar Financial Centre Regulatory Authority.
This material is distributed in the UAE (including the Dubai International Financial Centre) and Qatar by Barclays Bank PLC.
This material is distributed in Russia by OOO Barclays Capital, affiliated company of Barclays Bank PLC, registered and regulated in Russia by the FSFM.
Broker License #177-11850-100000; Dealer License #177-11855-010000. Registered address in Russia: 125047 Moscow, 1st Tverskaya-Yamskaya str. 21.
This material is distributed in Singapore by the Singapore branch of Barclays Bank PLC, a bank licensed in Singapore by the Monetary Authority of Singapore.
For matters in connection with this report, recipients in Singapore may contact the Singapore branch of Barclays Bank PLC, whose registered address is 10
Marina Boulevard, #23-01 Marina Bay Financial Centre Tower 2, Singapore 018983.
Barclays Bank PLC, Australia Branch (ARBN 062 449 585, AFSL 246617) is distributing this material in Australia. It is directed at 'wholesale clients' as defined
by Australian Corporations Act 2001.
IRS Circular 230 Prepared Materials Disclaimer: Barclays does not provide tax advice and nothing contained herein should be construed to be tax advice.
Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be used, and cannot
be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the transactions or other
matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor.
© Copyright Barclays Bank PLC (2015). All rights reserved. No part of this publication may be reproduced or redistributed in any manner without the prior
written permission of Barclays. Barclays Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP. Additional
information regarding this publication will be furnished upon request.
US14-0056