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1 May 2018 Australia

EQUITIES Clean TeQ Holdings


CLQ AU Outperform Offtake remains a key catalyst
Price (at 04:45, 30 Apr 2018 GMT) A$0.94

Valuation A$ 1.82 Key points


- DCF (WACC 10.0%, beta 2.0, ERP 5.0%, RFR 3.8%)
 We resume coverage on CLQ and initiate coverage on the TSX listing with
12-month target A$ 1.80 Outperform ratings and set A$1.80/C$1.80 price targets.
12-month TSR
GICS sector
% +91.5
 CLQ is set to release the DFS in the next few months, which we expect will
underpin higher cobalt and nickel production rates than PFS estimates.
Commercial & Professional Services
Market cap A$m 696  The A$155m capital raising leaves CLQ well positioned to accelerate project
development with offtake agreements presenting major positive catalysts.
30-day avg turnover A$m 2.4
Number shares on issue m 740.6

Investment fundamentals Event


Year end 30 Jun 2017A 2018E 2019E 2020E  We are resuming coverage on CLQ and initiating coverage on the TSX listing.
Revenue m 1.2 1.6 0.0 0.0
EBIT m -12.5 -15.3 -16.9 -17.3 Impact
Reported profit m -12.2 -14.3 -14.8 -22.2
Adjusted profit m -12.2 -14.3 -14.8 -22.2  Capital raising enables project acceleration: CLQ has completed a $155m
Gross cashflow m -11.4 -13.6 -14.2 -21.6 equity capital raising, which enables the company to accelerate development
CFPS ¢ -2.3 -2.1 -1.5 -1.7
CFPS growth % -77.6 9.8 28.0 -11.6
of its Sunrise project. The release of the definitive feasibility study was recently
EPS adj ¢ -2.5 -2.2 -1.6 -1.7 delayed until June but we expect this will enable CLQ to outline higher
EPS adj growth % -68.4 11.2 29.0 -10.1 production rates of cobalt and nickel sulphates in the first ten years.
Total DPS ¢ 0.0 0.0 0.0 0.0
Total div yield % 0.0 0.0 0.0 0.0  Unlocking funding and offtake are key catalysts: Further funding is
ROA % -16.9 -8.0 -3.3 -1.5 required to bring the project into production by 2021. Our valuation for CLQ
ROE % -17.9 -7.8 -3.0 -3.1
assumes an additional $500m in equity is required assuming 100% ownership
EV/EBITDA x -36.2 -45.0 -71.5 -70.3
Net debt/equity % -75.9 -53.9 -61.7 104.7 of the Sunrise project. However a partial sell-down as part of an offtake
P/BV x 4.1 2.8 1.7 1.7 agreement could significantly reduce CLQ’s requirement for additional equity.
CLQ AU vs Small Ordinaries, & rec history Earnings and target price revision
 We have made changes to our earnings forecasts after incorporating the
capital raising and our updated capital expenditure profile for the Clean TeQ
Sunrise project. We widen our forecast losses for FY18 by 12%, FY19 by 1%,
FY20 by 64% and FY21 by 34%. However the higher production rate in the
early years drives a 15% lift in our FY22 EPS forecast. We set our price
targets at A$1.80/C$1.80.

Price catalyst
Note: Recommendation timeline - if not a continuous line, then there was no
Macquarie coverage at the time or there was an embargo period.
Source: FactSet, Macquarie Research, April 2018
 12-month price target: A$1.80 based on a Sum-of-the-parts NPV methodology.
(all figures in AUD unless noted)
 Catalyst: The release of the definitive feasibility in the next few months
presents a material near-term catalyst for CLQ. Securing offtake agreements
and additional funding are also material catalysts for CLQ in 2018.

Action and recommendation


 Resuming/initiating coverage at Outperform: The capital raising has
enabled CLQ to accelerate the development of the Clean TeQ Sunrise project
with the ordering of the remaining long-lead time items and completing an infill
drill out of the deposit. The release of the DFS in the next few months should
confirm capital costs for the project and include an updated reserve estimate
and updated production profile. Securing additional offtake agreements, which
we believe could reduce CLQ’s remaining equity funding requirement, remains
a key potential positive catalyst in 2018.

Please refer to page 7 for important disclosures and analyst certification, or on our website
www.macquarie.com/research/disclosures.
Macquarie Wealth Management Clean TeQ Holdings

Placement enables project acceleration and grade focus


 CLQ announced plans to raise $150m via an underwritten placement on 8 March 2018. The placement,
which was completed in two tranches, was completed on 24 April 2018 after the second tranche
received shareholder approval. CLQ also launched a Share Purchase Plan (SPP) in conjunction with
the institutional placement, raising a further $5.5m, increasing the total amount raised to $155.5m.

Fig 1 CLQ has raised $155.5m through placement and SPP


Placement Price Shares (m) Value (A$m)

Tranche 1 1.15 86.9 99.9


Tranche 2 1.15 43.6 50.1
SPP 1.15 4.8 5.5
Total 135.3 155.5
Source: CLQ, Macquarie Research, May 2018

 CLQ noted that the capital raising is expected to bring forward development of the Clean TeQ Sunrise
project by a year through enabling the funding of early works and ordering long lead time items. CLQ
had previously purchased two autoclaves, with the remaining long lead time items relating to the acid
plant, generators and other specialised fabricated equipment.

 In addition, CLQ plans to complete an infill drill out program that will target higher grade cobalt zones,
which should enable higher levels of cobalt and nickel production in the early years of the project.
Previously, CLQ has suggested that production rates as high as 5ktpa of cobalt in sulphate could be
possible by targeting cobalt rich zones.

Increasing metal production in the early years


 As part of the definitive feasibility study (DFS), CLQ has already released an updated resource
estimate, with a reserve expected to be released following the completion of the aforementioned drill out
program. The updated resource includes a measured resource of 40mt @ 0.75% Ni and 0.15% Co. We
expect the first ten years of the Sunrise project to focus on this higher grade resource, with a targeted
mine plan expected to deliver higher grades than the resource averages.

 We have made some modest adjustments to our cobalt production profile, lifting annual output from
4.7ktpa to 4.8ktpa to reflect an expected focus on higher grade zones, which was already partially
factored into our forecasts. We have also lifted our nickel production forecasts by ~18% to 20.8ktpa
over the first ten years, translating to a combined metal (contained in sulphate) of 25-26ktpa. The DFS
is expected to contain more specific grade profiles, which we expect will contain some annualised
volatility.

Fig 2 Clean TeQ Sunrise cobalt production outlook Fig 3 Clean TeQ Sunrise nickel production outlook

Cobalt (kt) - old Cobalt (kt) - new Nickel (kt) - old Nickel (kt) - new
6.0 25.0

5.0
20.0

4.0
15.0
3.0

10.0
2.0

5.0
1.0

0.0 0.0

Source: CLQ, Macquarie Research, May 2018 Source: CLQ, Macquarie Research, May 2018

1 May 2018 2
Macquarie Wealth Management Clean TeQ Holdings

Additional funding requirements remain


 We have increased our pre-production capital cost for the Clean TeQ Sunrise project from US$1.0bn to
US$1.2bn. The increase in our capital costs assumption reflects a combination of increased plant
capacity requirements due to the increased metal production rates and also the likelihood that CLQ will
accept a fixed price lump-sum Engineering-Procurement-Construct (EPC) contract. While an EPC
contract is expected to cost more, it is likely to significantly reduce pre-production project capital and
delivery risk.

 CLQ had $116m in cash at the end of the 3QFY18 and post the completion of the placement and SPP
we expect net cash to have increased to $170m. Allowing for forecast spend on completing the DFS we
assume a ~$140m net cash balance by the time the DFS is released in the next few months. CLQ has
appointed Mandated Lead Arrangers (MLA) to provide a US$500m debt facility. We expect the debt
target will remain around 60% of the project capital cost, equivalent to US$720m.

Fig 4 Sunrise capex expected to be US$1.2bn


Funding requirements US$m A$m Funding sources US$m A$m

Sunrise project capex 1,200 1,600 Bank debt 720 960


Corporate costs 45 60 Offtake financing 150 200
Working capital 90 120 Equity 375 500
Financing/other 15 20 Cash at bank 105 140
Total funding 1,350 1,800 Total funding sources 1,350 1,800
Source: CLQ, Macquarie Research, May 2018

 In addition to the US$1.2bn in project capital we assume a further US$150m in other costs relating to
working capital, corporate and financing costs, lifting the total funding requirement to US$1.35bn. Our
60% project capex financing assumption covers just over 50% of the total funding requirements. We
expect CLQ to secure an additional US$150m in offtake or working capital finance, which translates to
US$375m (A$500m) in additional equity required to fund the full development.

 Our development scenario and valuation for CLQ assumes a further A$500m equity raising @
A$0.95/share with CLQ retaining a 100% interest in the Sunrise project. However a partial sell-down of
the project could materially reduce the remaining equity funding requirement for CLQ. Assuming a sell-
down based on either Macquarie forecasts or at spot prices could raise A$170-550m, potentially
covering CLQ’s remaining equity funding requirements.

Fig 5 Project sell-down could cover CLQ’s remaining equity requirement


Sell-down – Macq NPV US$m A$m Sell-down – Spot NPV US$m A$m

10% 130 170 10% 140 180


20% 250 340 20% 270 360
30% 380 510 30% 410 550
Source: Macquarie Research, May 2018

Modest changes to near-term earnings


 We have made modest changes to our earnings forecasts after incorporating the capital raising and our
updated capital expenditure profile for the Clean TeQ Sunrise project. We widen our forecast losses for
FY18 by 12%, FY19 by 1%, FY20 by 64% and FY21 by 34%. However the higher production rate in the
early years drives a 15% lift in our FY22 EPS forecast. We set our price targets at A$1.80/C$1.80.

Fig 6 Modest changes to earnings post equity raising


Earnings changes FY18e FY19e FY20e FY21e FY22e

EPS (A¢) - old (2.0) (1.6) (1.1) (2.5) 15.1


EPS (A¢) - new (2.2) (1.6) (1.7) (3.4) 17.3
Change (12%) (1%) (64%) (37%) 15%
Source: CLQ, Macquarie Research, May 2018

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Macquarie Wealth Management Clean TeQ Holdings

Fig 7 Clean TeQ Sunrise Ni/Co production/costs Fig 8 Clean TeQ Sunrise Scandium production/costs

Nickel (kt) Cobalt (kt) AISC (US$/lb) 60.0 Scandium oxide (t) AISC (US$/kg) 700
25.0 3.00

50.0 600
2.00
20.0
1.00 500
40.0
15.0 400
0.00
30.0
(1.00) 300
10.0
20.0
(2.00) 200
5.0
(3.00) 10.0 100

0.0 (4.00) 0.0 0

Source: CLQ, Macquarie Research, May 2018 Source: CLQ, Macquarie Research, May 2018

Fig 9 NiEq grade comparison at various cobalt Fig 10 NPV sensitivity to 10% move in price
1.60%
Ni Eq (Macq) Ni Eq (spot)
1.40% 12%

1.20%
10%
1.00%
8%
0.80%

0.60% 6%

0.40%
4%
0.20%
2%
0.00%
Clean TeQ Wingellina Murrin Murrin Ravensthorpe
Sunrise 0%
Nickel Cobalt Scandium
CLQ AU MLX AU GLEN LN FN TSX

Source: CLQ, Macquarie Research, May 2018 Source: CLQ, Macquarie Research, May 2018

Fig 11 CLQ Net cash build Fig 12 CLQ NPV by project

Net cash / (debt) (A$m) Market cap (A$m)


5,000

4,000

3,000
Cash /
2,000 corporate /
other
1,000 24%
Clean TeQ
0 Sunrise
Scandium Clean TeQ
(1,000) 4% Sunrise Nickel
& Cobalt
(2,000) 72%

(3,000)
Feb 25
Sep 18

Aug 21

Sep 25

Aug 28
Jun 20
Jan 21

Jun 27
Jan 28
Oct 22
May 23

Oct 29
May 30
Mar 22

Mar 29
Nov 19

Dec 23
Jul 24

Nov 26

Dec 30
Jul 31
Apr 19

Apr 26

Source: CLQ, Macquarie Research, May 2018 Source: CLQ, Macquarie Research, May 2018

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Macquarie Wealth Management Clean TeQ Holdings

Fig 13 CLQ summary valuation

Clean TeQ Holdings


ASX : CLQ Price: (A$ps) 0.94 Year end: Jun Rating: Outperform Up/dn TSR
Mkt cap: (A$m) 696 Diluted shares (m) 740.6 ASX Target: A$1.80 91% 91%
TSX : CLQ Price: (C$ps) 0.94 TSX Target: C$1.80 91% 91%

ASSUMPTIONS FY17 FY18e FY19e FY20e FY21e FY22e FY23e ATTRIBUTABLE MINE OUTPUT FY18e FY19e FY20e FY21e FY22e FY23e
Exchange Rate A$/US$ 0.75 0.78 0.78 0.75 0.75 0.75 0.75 Clean TeQ Sunrise Nickel & Cobalt
Nickel Price (US$/lb) 4.60 5.55 6.24 6.97 7.26 7.62 8.69 Nickel (t) 0 0 0 2,397 14,382 20,774
Cobalt Price (US$/lb) 18.89 33.90 24.25 16.50 21.50 28.75 35.41 Cobalt (t) 0 0 0 558 3,348 4,836
RATIO ANALYSIS FY17 FY18e FY19e FY20e FY21e FY22e FY23e Scandium Oxide (t) 0 0 0 0 0 0
Diluted share capital m 490.1 760.3 1,286.6 1,286.6 1,286.6 1,286.6 1,286.6 C1 Cash costs
EPS (diluted and pre sig. items) A¢ -2.5 -2.2 -1.6 -1.7 -3.4 17.3 37.5 Clean TeQ Sunrise Nickel & Cobalt (US$/lb) nm nm nm 1.03 (2.96) (4.85)
P/E x -37.8x -42.6x -59.9x -54.4x -28.0x 5.4x 2.5x Clean TeQ Sunrise Scandium (US$/kg) nm nm nm nm nm nm
CFPS A¢ (0.3) (2.0) (1.1) (1.7) (3.9) 24.8 47.0 AISC
P/CF x -288.1x -48x -87.6x -56.9x -23.8x 3.8x 2.0x Clean TeQ Sunrise Nickel & Cobalt (US$/lb) nm nm nm 2.17 (1.68) (3.41)
DPS A¢ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Clean TeQ Sunrise Scandium (US$/kg) nm nm nm nm nm nm
Dividend yield % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Franking Level % 0% 0% 0% 0% 0% 0% 0% CLEAN TEQ SUNRISE NICKEL/COBALT OUTPUT
Book value per share x 0.23 0.33 0.57 0.55 0.52 0.69 1.07 25.0 Nickel (kt) Cobalt (kt) AISC (US$/lb) AISC + sulphate premium (US$/lb) 3.00
P/Book value x 4.1x 2.8x 1.7x 1.7x 1.8x 1.4x 0.9x 2.00
20.0
R.O.E. (pre sig items) % -11% -6% -2% -3% -6% 25% 35% 1.00
R.O.A. (pre sig items) % -10% -6% -2% -1% 1% 20% 37% 15.0 0.00
Interest Cover x 44.1x 15.0x 8.2x -3.5x 0.3x 6.0x 19.7x (1.00)
EBITDA per share A$ps -0.02 -0.02 -0.01 -0.01 0.02 0.34 0.63 10.0 (2.00)
EV/EBITDA x -52.4x -38.4x -15.1x -86.5x 63.8x 3.5x 1.2x (3.00)
5.0
Free cash flow yield % (4%) (14%) (15%) (99%) (29%) 24% 46% (4.00)
0.0 (5.00)
FY17 FY18e FY19e FY20e FY21e FY22e FY23e FY24e FY25e FY26e FY27e FY28e FY29e FY30e
EARNINGS FY17 FY18e FY19e FY20e FY21e FY22e FY23e
Sales Revenue A$m 1 2 0 0 96 663 1,103 REVENUE MIX - MACQ REVENUE MIX - SPOT
Other Revenue A$m 0 0 0 0 0 0 0
Total Revenue A$m 1 2 0 0 96 663 1103
Operating Costs A$m 0 0 0 0 (51) (210) (279)
Operational EBITDA A$m 1 2 0 0 45 453 824
Exploration Expense/Write-offs A$m 0 0 0 0 0 0 0 Cobalt
41% Nickel
Corporate & Other Costs A$m (13) (16) (16) (17) (17) (18) (18) 44%
Nickel Cobalt
EBITDA A$m (12) (15) (16) (17) 28 436 806 59% 56%
D&A A$m (1) (1) (1) (1) (10) (55) (79)
EBIT A$m (12) (15) (17) (17) 19 381 727
Net Interest A$m 0 1 2 (5) (60) (63) (37)
Profit Before Tax A$m (12) (14) (15) (22) (41) 317 690
Tax Expense A$m 0 0 0 0 (2) (95) (207) NICKEL/COBALT RESERVES AND RESOURCES
Minorities A$m 0 0 0 0 0 0 0 Reserves
Adjusted NPAT A$m (12) (14) (15) (22) (43) 222 483 Clean TeQ Sunrise Mt Ni (%) Ni (kt) Co (%) Co (kt)
Significant Items (post tax) A$m 0 0 0 0 0 0 0 Proved 54.9 0.71% 390.0 0.10% 55.0
Reported NPAT A$m (12) (14) (15) (22) (43) 222 483 Probable 41.3 0.58% 240.0 0.10% 41.0
Total Reserves 96.2 0.65% 630.0 0.10% 96.0
CASHFLOW FY17 FY18e FY19e FY20e FY21e FY22e FY23e Resources
Net Profit A$m (12) (14) (15) (22) (43) 222 483 Clean TeQ Sunrise Mt Ni (%) Ni (kt) Co (%) Co (kt)
Interest/Tax/D&A A$m 1 1 1 1 12 150 129 Measured 40.0 0.75% 299.0 0.15% 58.0
Working Capital/other A$m 10 (1) 0 0 (19) (52) (7) Indicated 47.0 0.55% 259.0 0.12% 58.0
Net Operating Cashflow A$m (2) (15) (14) (21) (51) 320 605 Inferred 14.0 0.25% 35.0 0.11% 16.0
Capex A$m (14) (87) (164) (1,176) (305) (29) (48) Total Resources 101.0 0.59% 593.0 0.13% 132.0
Investments A$m (1) 0 0 0 0 0 0
Sale of PPE and Other A$m 0 0 0 0 0 0 0 SCANDIUM RESERVES AND RESOURCES
Free cash flow A$m (16) (102) (178) (1,198) (355) 291 557 Clean TeQ Sunrise Mt Sc (ppm) Sc (%) (Sc t) (Sc2O3)
Dividends Paid A$m 0 0 0 0 0 0 0 Reserves 1.2 582 0.06% 699 1,069
Debt A$m 0 (3) 0 800 360 (293) (560) Resources - High Grade 28.1 421 0.04% 11,819 18,083
Equity Issuance A$m 98 152 493 2 0 0 0 Resources - Low Grade 28.1 421 0.04% 11,819 18,083
Other A$m 0 0 0 0 0 0 0
Net Financing Cashflow A$m 98 149 493 802 360 (293) (560) SUM-OF-THE-PARTS NPV Spot prices Macquarie forecasts
Net change in cash A$m 82 47 315 (396) 5 (3) (3) Projects A$m A$ps A$m A$ps
Clean TeQ Sunrise Nickel & Cobalt 1,820 1.41 1,692 1.31
BALANCE SHEET FY17 FY18e FY19e FY20e FY21e FY22e FY23e Clean TeQ Sunrise Scandium 80 0.06 82 0.06
Cash A$m 89 136 451 55 60 57 54 Unpaid capital & Equity Raising 500 0.39 500 0.39
PP&E & Mine Development A$m 3 64 227 1,403 1,698 1,673 1,642 Resources 37 0.03 37 0.03
Exploration A$m 14 41 41 41 41 41 41 Corporate (110) (0.09) (110) (0.09)
Total Assets A$m 120 264 752 1,563 1,892 1,947 1,951 Cash 136 0.11 136 0.11
Debt A$m 3 0 0 800 1,160 867 307 Debt 0 0.00 0 0.00
Total Liabilities A$m 7 12 22 852 1,225 1,058 579 Net Equity Value (@ 10% real WACC, 12.6% Nominal))
2,463 1.91 2,336 1.82
Total Net Assets / Equity A$m 113 252 730 710 667 889 1,372
Net Debt / (Cash) A$m (86) (136) (451) 745 1,100 810 253 PRICE TARGET TSX LISTING ASX LISTING
Gearing (net debt/(nd + equity)) % (314%) (117%) (161%) 51% 62% 48% 16% Clean TeQ Holdings C$ps A$ps
Gearing (net debt/equity) % (76%) (54%) (62%) 105% 165% 91% 18% PRICE TARGET (1.0x NPV) 1.80 1.80

Source: CLQ, Macquarie Research, May 2018

1 May 2018 5
Macquarie Wealth Management Clean TeQ Holdings

Macquarie Quant View


The quant model currently holds a strong negative view on Clean TeQ Attractive
Displays where the
Holdings. The strongest style exposure is Price Momentum, indicating this
company’s ranked based on
stock has had strong medium to long term returns which often persist into

Fundamentals
the fundamental consensus
the future. The weakest style exposure is Profitability, indicating this stock is
Price Target and
not efficiently converting investments to earnings; proxied by ratios like ROE
Macquarie’s Quantitative
or ROA.
Alpha model.
345/364 Two rankings: Local market
(Australia & NZ) and Global
Global rank in sector (Comm. & Prof.
Comm. & Prof. Services Quant Services)
Local market rank Global sector rank
% of BUY recommendations 100% (3/3)
Number of Price Target downgrades 0
Number of Price Target upgrades 0

Macquarie Alpha Model ranking Factors driving the Alpha Model


A list of comparable companies and their Macquarie Alpha model score For the comparable firms this chart shows the key underlying styles and their
(higher is better). contribution to the current overall Alpha score.

SG Fleet Group 0.3 SG Fleet Group

Bingo Industries -0.5 Bingo Industries

IPH -0.9 IPH

Cabcharge Australia -1.3 Cabcharge Australia

Clean TeQ Holdings -1.6 Clean TeQ Holdings

-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Valuations Growth Profitability Earnings Price Quality
Momentum Momentum

Macquarie Earnings Sentiment Indicator Drivers of Stock Return


The Macquarie Sentiment Indicator is an enhanced earnings revisions Breakdown of 1 year total return (local currency) into returns from dividends, changes
signal that favours analysts who have more timely and higher conviction in forward earnings estimates and the resulting change in earnings multiple.
revisions. Current score shown below.

SG Fleet Group
SG Fleet Group 0.1

Bingo Industries
Bingo Industries -0.2

IPH
IPH -0.4

Cabcharge Australia -0.4


Cabcharge Australia

Clean TeQ Holdings -1.8 Clean TeQ Holdings

-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 -100% -50% 0% 50% 100%
Dividend Return Multiple Return Earnings Outlook 1Yr Total Return

What drove this Company in the last 5 years How it looks on the Alpha model
Which factor score has had the greatest correlation with the company’s A more granular view of the underlying style scores that drive the alpha (higher is
returns over the last 5 years. better) and the percentile rank relative to the sector and market.
⇐ Negatives Positives ⇒
Normalized Percentile relative Percentile relative
Working Capital Inc. 11% Score to sector(/364) to market(/359)

Change in Cash FY0 10%


Alpha Model Score -1.56
Valuation -1.23
Change in PPE FY0 9% Growth -0.02
Cash to Total Assets FY0 9%
Profitability -1.38
Earnings Momentum -0.23
Return on Assets FY0 -20% Price Momentum 0.01
250d Volatility -24% Quality -0.49
Capital & Funding -2.28
Volatility 250 Day -24% Liquidity -1.16
Operating Leverage Inc. -24% Risk -0.55
Technicals & Trading 1.97
-30% -20% -10% 0% 10% 20% 30%
0 50 100 0 50 100
0 0 1 1

Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and
screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com)

1 May 2018 6
Macquarie Wealth Management Clean TeQ Holdings

Important disclosures:
Recommendation definitions Volatility index definition* Financial definitions
Macquarie - Australia/New Zealand This is calculated from the volatility of historical All "Adjusted" data items have had the following
Outperform – return >3% in excess of benchmark return price movements. adjustments made:
Neutral – return within 3% of benchmark return Added back: goodwill amortisation, provision for
Underperform – return >3% below benchmark return Very high–highest risk – Stock should be catastrophe reserves, IFRS derivatives & hedging,
expected to move up or down 60–100% in a year IFRS impairments & IFRS interest expense
Benchmark return is determined by long term nominal – investors should be aware this stock is highly Excluded: non recurring items, asset revals, property
GDP growth plus 12 month forward market dividend speculative. revals, appraisal value uplift, preference dividends &
yield minority interests
Macquarie – Asia/Europe High – stock should be expected to move up or
Outperform – expected return >+10% down at least 40–60% in a year – investors should EPS = adjusted net profit / efpowa*
Neutral – expected return from -10% to +10% be aware this stock could be speculative. ROA = adjusted ebit / average total assets
Underperform – expected return <-10% ROA Banks/Insurance = adjusted net profit /average
Medium – stock should be expected to move up total assets
Macquarie – South Africa or down at least 30–40% in a year. ROE = adjusted net profit / average shareholders funds
Outperform – expected return >+10% Gross cashflow = adjusted net profit + depreciation
Neutral – expected return from -10% to +10% Low–medium – stock should be expected to *equivalent fully paid ordinary weighted average
Underperform – expected return <-10% move up or down at least 25–30% in a year. number of shares
Macquarie - Canada
Outperform – return >5% in excess of benchmark return Low – stock should be expected to move up or All Reported numbers for Australian/NZ listed stocks
Neutral – return within 5% of benchmark return down at least 15–25% in a year. are modelled under IFRS (International Financial
Underperform – return >5% below benchmark return * Applicable to Asia/Australian/NZ/Canada stocks Reporting Standards).
only
Macquarie - USA
Outperform (Buy) – return >5% in excess of Russell Recommendations – 12 months
3000 index return Note: Quant recommendations may differ from
Neutral (Hold) – return within 5% of Russell 3000 index Fundamental Analyst recommendations
return
Underperform (Sell)– return >5% below Russell 3000
index return

Recommendation proportions – For quarter ending 31 March 2018


AU/NZ Asia RSA USA CA EUR
Outperform 54.38% 58.90% 48.35% 43.91% 69.03% 45.26% (for global coverage by Macquarie, 3.69% of stocks followed are investment banking clients)
Neutral 32.48% 27.88% 34.07% 48.73% 21.29% 38.95% (for global coverage by Macquarie, 3.07% of stocks followed are investment banking clients )
Underperform 13.14% 13.21% 17.58% 7.37% 9.68% 15.79% (for global coverage by Macquarie, 0.39% of stocks followed are investment banking clients )

CLQ AU vs Small Ordinaries, & rec history CLQ CN vs TSX, & rec history

(all figures in AUD currency unless noted) (all figures in CAD currency unless noted)

Note: Recommendation timeline – if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period.
Source: FactSet, Macquarie Research, May 2018

12-month target price methodology


CLQ AU: A$1.80 based on a Sum-of-the-parts NPV methodology
CLQ CN: C$1.80 based on a Sum-of-the-parts NPV methodology

Company-specific disclosures:
CLQ CN: MACQUARIE CAPITAL (AUSTRALIA) LIMITED or one of its affiliates managed or co-managed a public offering of securities of Clean TeQ
Holdings Ltd in the past 12 months, for which it received compensation.
Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures.
Date Stock Code (BBG code) Recommendation Target Price
30-Apr-2018 CLQ AU Outperform A$1.80
23-Feb-2018 CLQ AU Outperform A$2.00
08-Jan-2018 CLQ AU Outperform A$2.30
08-Nov-2017 CLQ AU Outperform A$2.20
10-Oct-2017 CLQ AU Outperform A$2.10
20-Jun-2017 CLQ AU Outperform A$1.10
16-May-2017 CLQ AU Outperform A$1.00
20-Apr-2017 CLQ AU Outperform A$1.30
07-Mar-2017 CLQ AU Outperform A$1.50
Target price risk disclosures:
CLQ AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include
geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global
economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates,
foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to
manage certain of these exposures.
CLQ CN: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include
geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global
economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates,
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Macquarie Wealth Management Clean TeQ Holdings

foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to
manage certain of these exposures.
Analyst certification:
We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or
their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views
expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors
including Macquarie Group Limited (MGL) total revenues, a portion of which are generated by Macquarie Group’s Investment Banking activities.

General disclosure: This research has been issued by Macquarie Securities (Australia) Limited ABN 58 002 832 126, AFSL 238947, a Participant of
the ASX and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Wealth Management, a division of Macquarie Equities
Limited ABN 41 002 574 923 AFSL 237504 ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited
(“MENZ”) an NZX Firm. Macquarie Private Wealth’s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN 46 008 583 542,
AFSL No. 237502) (“MBL”) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business
in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New
Zealand Act 1989.
Apart from Macquarie Bank Limited ABN 46 008 583 542 (MBL), any MGL subsidiary noted in this research, , is not an authorised deposit-taking
institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary’s obligations do not represent deposits or other liabilities of MBL. MBL
does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise.
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