Australian Equities in an Asian Century

1. Perpetual Investments Australian Equities in an Asian Century Presented by Sam Stobart Senior Investment Specialist March 2013

2. Global growth – subdued and still Asia-dependantGlobal economic growth in the next four years 12% 2004-2007 2012-2015 9% 6% 3% 0% World USA Europe Japan UK Asia China India Australia Source: IMF, Macquarie Equities and Perpetual Investments as at 31 January 2013.

3. Regional growth models are changing

4. Growth of China….from fishing village Source: Rio Tinto

5. Toworld’s fastest growing city Source: Rio Tinto

6. Room with a view Source: UBS Australia Limited as at 31 January 2013.

7. RIO cost out programs and production growth

8. Seaborne Coal Trade Volumes Source: Perpetual and Factset

9. thechina steel story has a long way left to run with india and other to follow Note: Stylistic representation Source: Correlates of War, Maddison, Global Insight, Rio Tinto, 28 November 2011

10. Grade decline constrains the supply response % copper in process feed Average grade of Chinese domestic iron ore 50% 45% 40% 35% 30% 25% 20% 15% 10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Brook Hunt – a Wood Mackenzie Company. Source: J.P. Morgan estimates

11. Australian retailShort of ideas? Source: TBA

12. Which categories are under threat? SHARE OF ONLINE SALES Source: NAB

13. Which categories are under threat? ESTIMATED PRICE GAPS SHARE OF OFFSHORE SPEND Source: JP Morgan Source: Commonwealth Bank of Australia

14. Failure to penetrate the online segment Average 1.4% Source: Ferrier Hodgson, Nielsen

15. Some companies get it right • Oroton has shown strong understanding of the challenges and opportunities facing retailers in Australia • FY12 60% growth in online sales (now ≈10% of total sales) • Asian expansion plans coming to fruition • 7 stores in Malaysia & Singapore; 4 more per annum • Direct ownership of Chinese stores from 2013 • Strong growth already recorded Source: Oroton

16. Understanding the market Australian home page Chinese home page Source: Oroton

17. Oroton’s transformation to success Sales and store growth Earnings and share price Source: Oroton, Factset

18. What city is synonymous with gambling?

19. Las Vegas is a distant memory Macau gaming revenue • Revenue growth has averaged ≈30% pa for the past decade • Mainland gambling is illegal • Significant Infrastructure upgrades $US million Source: JP Morgan, Platinum Broking

20. Mass market and VIP growth Mass market and VIP growth Macau Source: Goldman Sachs

21. It’s a margin game VIP Profitability Estimate $ in millions Mass Market Profitability Estimates $ in millions Gaming tax at ~40% (US $40) Gaming tax at ~40% (US $40) Commission at 45% (US $45) Marketing expenses at 5% of revenue (US $5) Total VIP revenue of US $100 Total mass revenue of US $100 Operating expenses at 6% of revenue (US $6) Operating expenses at 15% of revenue (US $15) EBITDA US $10 or 10% Margin EBITDA US $40 or 40% Margin Source: JP Morgan

22. Melco strong revenue growth Revenue Melco Crown share price Source: Factset

23. Domestic opportunities for growth Rolling annual tourists • Tapping in to growth of Chinese VIP market in Australia • Refurbishments • Potential construction of new 6 star hotels in both Sydney and Perth • Domestically VIP margins are as strong as domestic mass market Source: ABS, Commsec

24. The big banks in Asia • BUT WHAT ABOUT THE INSURERS?

25. Asian growth potential • By 2020 Asia will have more middle class consumers than the rest of the world combined • A tried and tested formula;Increased wealth = increased assets = increased insurance • IAG has strong market positions in Malaysia, Thailand, China, India and Vietnam IAG owns 49% of Malaysia’s largest general insurer Source: Goldman Sachs, IAG

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