cpu 24 june 2011

23 June 2011

Computershare (CPU)

The stars to align soon, Initiate with Buy recommendation

Recommendation

Buy Price

$8.84 Target (12 months)

$10.40

AnalystLafitani Sotiriou 613 9235 1668

AuthorisationStuart Roberts 612 8224 2871

Expected Return

Capital growth 17.6%

Dividend yield 2.8%

Total expected return 20.4%

Company Data & Ratios

Enterprise value $5.5b

Market cap $4.9b

Issued capital 555.7m

Free float 87%

12 month price range $8.70 - $11.50

GICS sector Software and Services

SOUTHERN CROSS EQUITIES LIMITED INCORPORATED ACN 071 935 441 AFSL 247027

MEMBER ORGANISATION OF THE AUSTRALIAN STOCK EXCHANGE

DISCLAIMER AND DISCLOSURESTHIS REPORT MUST BE READ WITH THE DISCLAIMER AND DISCLOSURES ON PAGE 18 THAT FORM PART OF IT.

RESTRICTED DISTRIBUTIONTHIS RESEARCH IS DIRECTED TO PROFESSIONAL INVESTORS

Five medium-term growth drivers

We believe CPU is currently facing some significant headwinds as evident with the earnings deterioration. However, we believe many of the detractors appear to have a favourable medium-term outlook, and as such will deliver strong growth over the medium-term. The growth factors are:

• A higher AUD is negatively impacting the translation of foreign revenues to an AUD based valuation. We believe the AUD is likely to depreciate over the medium-term;

• Global interest rates are likely to rise over the medium-term (however not short-term);

• We expect share market momentum to return during 1H12 and to continue through FY13;

• We believe the stock market is in the midst of a lull in corporate action activity as the cycle switches from secondary raisings to IPOs and other capital management initiatives; and

• The resumption of CPU acquisition activity, with the potential BNY Mellon’s US share registry and other acquisitions to drive growth.

We initiate on Computershare (CPU) with a Buyrecommendation and $10.40 price target. We believefive main revenue drivers are at cyclical low pointsbeing: currency, interest rates, share marketmomentum, corporate actions and CPU’s acquisitionactivity. We believe all five areas have a favourablemedium-term outlook, and should deliver CPU robustgrowth following the current slump.

Absolute Price Earnings Forecast

Year end June 30 2010 2011e 2012e 2013e

Sales revenue (US$m) 1,620 1,620 1,719 1,764

Management EBITDA (US$m) 508 490 543 586

Management NPAT (US$m) 321 297 336 369

EPS (adjusted) (US cps) 57.8 53.5 60.5 66.4

EPS (adjusted) (A cps) 65.9 55.5 56.8 64.8

EPS growth $A (%) -4.2% -15.8% 2.4% 14.0%

PER (x) 13.4 15.9 15.6 13.6

Dividend (A¢ps) 28.0 26.0 25.0 30.0

Yield (%) 3.2% 2.9% 2.8% 3.4%

ROE (%) 28.4% 23.4% 23.3% 22.5%

SOURCE: IRESS SOURCE: SOUTHERN CROSS EQUITIES ESTIMATES

Computershare (CPU)

Contents Business overview ........................................................................... 3 Largely stock market related ........................................................ 4 Registry Maintenance / Corporate Actions ............................... 5 Remaining divisions ......................................................................... 6 Competitive environment .............................................................. 7 Link Market Services ....................................................................... 8 Other competitors ............................................................................ 9 Margin income at cyclical low ..................................................... 10 Recent growth ambitions ............................................................. 11 Mixed currency impacts ............................................................... 12 Valuation and relevant drivers ................................................... 13 Over 16% of CPU stock owned by board ................................... 14 Computershare overview ............................................................. 15 Interim Income Statement ........................................................... 16

Computershare (CPU)

Business overview

Company description

Computershare is a global software and services company primarily involved with the share registry market and related services, operating in twenty countries with over 90 offices and 10,000 employees.

More recently, the company has diversified in some countries to include a range of other services including tax voucher solutions and bankruptcy administration. A summary of CPU’s business units, core functions and revenue drivers can be found in Figure 1 below.

Over the years, CPU has sought growth through acquisition by leveraging its technology for interactive registry administration across multiple business groups. CPU aims to utilise the best technology solutions it has across its global network. Further, the company spreads its research and development cost base across a growing global business.

CPU’s more recent acquisition activity includes the outstanding US$550m bid for BNY Mellon’s US Shareowner Services (explored later in more detail) and the smaller acquisition of Servizio Titoli SpA, an Italian issuer services business, announced in April 2011.

Figure 1 - Divisional overview

SOURCE: SOUTHERN CROSS EQUITIES

Figure 2 – 1H11 divisional earnings split Figure 3 – 1H11 currency earnings split

SOURCE: COMPANY DATA SOURCE: COMPANY DATA

Registry maintenance,

41%

Corporate actions, 12%

Business services, 15%

Stakeholder services, 10%

Employee share plans, 9%

Communication services, 10%

Tech and other, 4%

USD, 33.1%

AUD, 22.8%GBP, 14.7%

CAD, 12.1%

HKD, 5.4%

EUR, 3.7%INR, 3.1% Other, 5.1%

Computershare (CPU)

Largely stock market related

Intermediary between listed companies and investors

Over 80% of CPU’s revenue is stock market related, where the company has entrenched itself in the ‘post-transaction’ part of the process (figure 4). CPU largely acts as the intermediary between a listed company (where it has been appointed) and the underlying investors, through the management of:

• The share registry, AGM’s and dividends;

• Corporate actions, including IPOs, M&A and secondary raisings;

• Stakeholder services (corporate proxies and US mutual fund proxies);

• Employee share registry and share saver schemes;

• Hard copy mail-outs, imaging and scanning solutions; and

• Desktop and system support.

Much of the above activity is regular (such as AGMs and dividend payments) which provides a predictable revenue stream. However, there are parts of the process that are less predictable (like corporate actions), which are typically higher margin but result in greater revenue fluctuations.

Figure 4 - Where CPU fits in the share market process, using Australia as the example


Computershare (CPU)

Registry Maintenance / Corporate Actions

Registry Maintenance (41% of revenue)

Registry Maintenance is the largest revenue contributing division of the Group, earning its income through the provision of basic registry services, ordinary dividend payments and the standard AGM.

The division is often the first interaction for a listed company seeking CPU’s services and will typically lead to other revenue opportunities (such as corporate actions). For this reason, the registry maintenance part of the business is highly competitive, and generally a lower margin business.

Despite its lower margins, one advantage is the revenue is largely regular and predictable, providing the company with a reliable revenue base.

The main revenue drivers include the number of shareholders on a register, and interest rate levels (with regards to margin income). We explore margin income in more detail later in the report.

Corporate Actions (12% of revenue)

Corporate Actions represents around 12% of revenue and a higher portion of management EBITDA given it has the most attractive margins in the business. For competitive reasons, CPU does not disclose the exact spread, but the company has confirmed the division has the healthiest margins.

The main activities that make up Corporate Actions revenue includes:

• Initial Public Offerings;

• Secondary Raisings;

• Mergers & Acquisitions (particularly where it is contentious); and

• Special dividends and other capital management initiatives.

There is an element of seasonality with Corporate Actions revenue, as when secondary raisings revenue is high, IPOs and other capital management initiatives tend to be low and vice-versa.

At the moment, it appears as though the global corporate actions activity is largely in between the shift from secondary raisings (during the GFC) to expected growth from IPOs and other capital management initiatives when more favourable markets return.

Computershare (CPU)

Remaining divisions

Business Services (15% of revenue)

Business Services is a combination of various functions that don’t necessarily overlap with each other or extend to more than one country. For example, Voucher Services is specific to the UK market and the relevant regulatory environment allows CPU to play a role in facilitating childcare and other tax relief vouchers. The company utilises similar technologies with Voucher Services as those used in the investor part of the business.

In early 2009 CPU extended its Business Services with the addition of Kurtzman Carson Consultants LLC, a US based company which provides administrative support services and technology solutions to companies undergoing corporate restructuring or chapter 11 bankruptcy proceedings.

The remaining functions include handheld devices (one use includes for voting at AGMs or EGMs) and other small services.

Stakeholder Services (10% of revenue)

The division includes the management of corporate proxies in addition to US mutual fund proxies. The US market structure is different to other markets, in that mutual fund proxies play a relatively greater role with contested issues. The process can involve mass marketing, phone calls, vote projections and more.

Employee Share Plans (9% of revenue)

CPU manages employee share plans in countries where they exist (and where CPU has a presence), and within the parameters of the regulatory environment. The revenue is largely driven by the number of employees, dollars per plan, and in the case of the UK, margin income.

Communication Services (10% of revenue)

Communication Services includes the entire mail-out process, including hard-copy, imaging, scanning, and electronic delivery. The services are not restricted to investor services, with other organisations utilising the services, such as speeding fines in Victoria (CPU’s home state) that are processed through CPU’s Communication Services. The revenue is dependent on the number of communications.

Tech and Other (3.5% of revenue)

Tech and Other covers the miscellaneous functions of the business including the provision of desktop systems for clients that don’t have sufficient software to utilise CPU’s wide range of solutions. Much of the revenue is based on an annual license fee charge.

Computershare (CPU)

Competitive environment

Share registry services the battleground

We believe the future success of CPU is largely dependent on its ability to grow and maintain the share registry services part of the business given many of the other divisions benefit from this core function. Therefore our competitive environment analysis is largely focused on this area, taking into account the global consolidators and main incumbents in each market.

Global consolidation rife in sector

We believe the share registry function and related services will continue to consolidate around the globe, in line with stock market exchanges, as players seek the benefits of scale and providing a global solution. In our view there are three global consolidators (two large, one small), with three other major players keen to grow their influence including:

• Computershare (listed on ASX);

• Link Market Services (private equity firm Pacific Equity Partners);

• BoardRoom (listed on SGX);

• Equiniti (number one player in UK);

• Capita (middle-sized player in the UK, with large outsourcing business); and

• Tricor I.S. (in Hong Kong and China, backed by the Bank of East Asia).

CPU share registry footprint continues to grow

CPU is currently the largest global player, with a market leading, or a top three position in the relevant markets where it has a presence (Figure 5). Encouragingly, CPU has been positioning in the high-growth developing economies. Further, its proposed BNY Mellon acquisition will catapult CPU to the number one external provider of registry services in the US.

Figure 5 - CPU share registry footprint


Computershare (CPU)

Link Market Services

Private equity funded

Link Market Services (Link) is emerging as a major player on the global share registry scene. Starting from the same homeland as Computershare, Link grew from the Australian market to include Canada, US, South Africa and India as the major locations with a share registry offering (Figure 6). Link’s growth has been largely supported by its majority shareholder, private equity group Pacific Equity Partners (PEP), and has occurred primarily over the last six years.

Much like CPU, Link provides share market related services in a variety of markets, including the UK, France and Hong Kong. Link also has:

• A mail and print house operations;

• Superannuation administration company;

• Share ownership analysis and investor relations; and

• Financial planning organisation.

International Strategic Alliance

In early June 2011, UK based Equiniti, Asia based Tricor Investor Services and Link signed a strategic alliance to deliver a market leading technology and financial services offering to globally listed companies.

The alliance is less than a month old, so it is difficult to gage the level of synergies between the businesses, the level of investment for each organisation and how much intellectual property each is willing to share.

In our view the alliance is the strongest move yet to combat the dominance of CPU and provides the greatest competitive threat. We already understand CPU is facing stiff competition from Link in Canada and Australia, and we expect the pressure to continue.

Figure 6 - Link Market Services - Share registry overview


Computershare (CPU)

Other competitors

BoardRoom Limited

More of an unknown quantity, BoardRoom has spawned from the Singaporean stock market, providing share registry and related services (Figure 7). The company was listed in 2000 and has a market capitalisation around S$100m. It is dwarfed by CPU and Link, but nevertheless is on the global expansion front with a share registry presence in Malaysia and having recently acquired the third largest player in Australia: Registries (following ACCC’s rejection of Link’s approach). The company provides shareholder related services in Hong Kong and China.

More on Equiniti and other UK player, Capita

In addition to Equiniti’s strategic partnership with Link and Tricor, the company is the dominant share registry provider in the UK, claiming 54% of the top 100 clients. The company provides the full range of share market related services, in addition to business process outsourcing capabilities. The company has 1,800 employees across 12 offices and has enough scale to build on its leading position in the UK.

Another major player in the UK is Capita, which is a FTSE100 company involved in a range of business outsourcing solutions. Capita’s business would be highly complementary to CPU given its reliance on technological platforms and providing outsourcing solutions.

Tricor Investor Services

Tricor appears to be a distant second in the Hong Kong market (with CPU around 90%), but does have a diversified business and appears to be specialising in business inflows into China. Backed by the Bank of East Asia, the company cannot be simply written off, particularly given its alliance with Equiniti and Link.

Figure 7 - BoardRoom Limited


Computershare (CPU)

Margin income at cyclical low

Margin income derived from a few divisions

CPU earns its margin income by holding large cash balances as part of its general operations, and it represents around 10% of the group’s total income. The margin income is primarily derived from the following divisions:

• Registry Maintenance: Through holding large dividend balances prior to distribution, CPU derives a margin income;

• Corporate Actions: Special dividends and the collection of IPO contributions;

• Employee share plan: Accumulation of employee share plans.

Leverage to interest rates and market levels

The margin income is leveraged to the interest rate levels in the respective markets where it holds cash balances on behalf of clients. In the main markets where CPU has operations i.e. the UK, US and Canada have interest rates close to zero percent (Figure 8), the only exception is the Australian market.

We don’t expect interest rates to improve over the short-term, but do believe there is upside risk over the medium-term as interest rate levels are expected to rise along with margin income.

Further, there are typically higher dividend payments and a greater level of IPO activity when markets are on the rise, and as such an improvement in market conditions will also benefit the margin income.

Hedging activity provides some support, but running out

CPU utilises natural and synthetic hedges when managing interest rate exposure. The natural hedge relates to the debt offsetting the margin income (i.e. when interest rates are low, margin income is weak but so too is the interest expense). In addition, CPU locked in some favourable synthetic hedges when interest rates were higher, and now some of those hedges are rolling off. Overall the short-term outlook for hedging is negative, however the downside to margin income is limited given the already weak state.

Figure 8 - Margin income overview

SOURCE: COMPANY DATA AND SOUTHERN CROSS EQUITIES

Computershare (CPU)

Recent growth ambitions Computershare owes a lot of its success to its ability to grow through acquisition, by maximising existing technologies and infrastructure by transferring best solutions across the business. The acquisition activity has been relatively subdued over the last couple of years, until the announcement of the proposed acquisition of BNY Mellon’s US share registry operations. Below we explore the two announcements this calendar year.

Small bolt-on in Italy

In early April this year, CPU announced the acquisition of Servizio Titoli SpA from the London Stock Exchange. Servizio Titoli is the leading provider of issuer services in Italy and is involved in meetings and dividend register management. The company has approximately 9.3m Euros in revenue (around 1-2% of CPU’s total revenue).

Although only small, such deals help to solidify CPU’s market leading position and add incremental EPS growth.

Elephant hunting in the US: BNY Mellon Share business

CPU announced in late April this year its plan to acquire BNY Mellon’s shareowner services business, which is a major player in the US. BNY Mellon’s operations are of a similar size to CPU’s existing US share market related services.

The proposed purchase price of US$550m is expected to be management EPS accretive in the first year and is to be cash and debt funded.

Our initial conservative estimate suggest it could add up to 8% EPS growth by year three (Figures 9 & 10), given the high level of synergies on offer. Our starting point of 10% EBITDA margins (compared to CPU Group of 30%) is based on the identified costs CPU believes it can extract (i.e. if CPU hits target, the EBITDA margins will be over 35%, therefore 10% as a starting point appears prudent).

The deal requires approval from the Federal Trade Commission and the Department of Justice Antitrust Division and possibly the Federal Reserve. We expect a decision on the outcome sometime over the next six months, and have placed a 50% probability on it occurring, adding around 5% to our valuation.

Figure 9 – Indicative BNY transaction Figure 10 – Key assumptions for BNY

SOURCE: SOUTHERN CROSS EQUITIES ESTIMATES SOURCE: SOUTHERN CROSS EQUITIES ESTIMATES

Computershare (CPU)

Mixed currency impacts

On the one hand stronger USD reported earnings....

CPU reports in USD, and has provided guidance for FY11 management EPS to be 5% - 10% lower than FY10 given the overall weak state of markets and corporate activity. Since the original guidance was provided, the USD has weakened against most major currencies (Figure 13), and as such, provides a buffer for the company. We estimate the currency movements against the USD since January 2011 will add approximately 5% to USD earnings.

... On the other hand, crimping AUD valuation

On average, the AUD has strengthened against most major currencies over the last six months (Figure 12). As such, the translation to an AUD valuation has also been impacted. The current year impact is only minor, but the major variable is where the AUD will be over the coming years. We believe there is greater upside risk to our AUD valuation, as our forecasts assume a weakening over the medium-term against most major currencies, particularly the USD.

Figure 11 – 1H11 revenue contribution by currency

SOURCE: COMPANY DATA AND SOUTHERN CROSS EQUITIES

Figure 12 – AUD versus major currencies Figure 13 – USD versus major currencies

SOURCE: IRESS AND SOUTHERN CROSS EQUITIES SOURCE: IRESS AND SOUTHERN CROSS EQUITIES

Computershare (CPU)

Valuation and relevant drivers

The stars align... almost

We initiate on CPU with a Buy recommendation and $10.40 price target, based on our risked valuation detailed in Figure 14 below. Our positive view is largely based on timing, as we believe the five primary value drivers are at cyclical low points, being currency, interest rates, share market conditions, corporate activity and CPU’s acquisition activity (Figure 15). We anticipate all five value drivers to move to cyclical high points over the medium-term, and recommend Buying CPU now to position for the expected improvement across the business.

Figure 14 - Valuation

SOURCE: SOUTHERN CROSS EQUITIES ESTIMATES

Figure 15 - Valuation drivers


Computershare (CPU)

Over 16% of CPU stock owned by board

Board and CEO

CPU has a nine person board, with four of the members having worked (or are still working) for Computershare, including:

• Christopher John Morris (chairman): a founding member and driving force of CPU’s globalisation. Former CEO and now contributes as a non-executive director. C. Morris owns 47.3m shares, equivalent to 8.51% of shares on issue;

• W. Stuart Crosby (CEO and director): was appointed CEO on November 2006, prior to which he was Group COO. S. Crosby owns 124k direct shares, with fewer than 2m performance rights;

• Anthony Norman Wales (non-executive director): has been with CPU since 1981 and at one stage was an executive director, although now participates as a non-executive director. A. Wales has 28.1m shares, or 5.06% of CPU;

• Penelope Jane Maclagan (non-executive director): recently became a non-executive director in September 2010, after being heavily involved (and leading) CPU Technology Services. P Maclagan owns 14.9m shares, equivalent to 2.69% of CPU.

The remaining five directors are from a variety of backgrounds, of particular note includes former AXA Asia Pacific CEO Arthur Les Owens (joined February 2007) and Jerry Lieberman who joined in August 2010 and has extensive background in financial services having been COO at AllianceBernstein L.P.

Figure 16 – Directors with more than 100,000 CPU shares

SOURCE: COMPANY DATA

Computershare (CPU)

Computershare overview

Company description

Computershare is a global software and services company primarily involved with the share registry market and related services, operating in twenty countries with over 90 offices and 10,000 employees.

More recently, the company has diversified in some countries to include a range of other services including tax voucher solutions and bankruptcy administration. A key focus appears to be leveraging its technology for interactive registry administration across multiple business groups.

Investment strategy

We believe the five main value drivers for CPU are at a cyclical low point being: AUD currency impact, interest rates, share market growth, corporate activity and CPU’s own growth through acquisition. We expect all five areas to improve over the medium-term, and as such, generate significant shareholder value for CPU investors.

Risks

Key risks for the stock include:

• Currency risk – CPU has over a dozen currencies that contribute to the overall earnings of the group, with the primary contributors being USD, CAD, GBP, HKD and AUD based. Given the share price is in AUD, any major movements against the share price currency can significantly impact the AUD earnings and subsequently, the valuation of the group;

• Interest rate risk – As part of the CPU activity, the company is required to hold large cash balances on behalf of clients, where CPU is entitle to earn interest income. Further, the company often has large amounts of borrowings in place. As such, fluctuations in the relevant interest rates will have a direct impact on the Group’s earnings; and

• Technology risk – There is a risk that the existing technologies behind the software CPU provides would be superseded or made redundant by new technologies or players in the market.

Computershare (CPU)

Interim Income Statement

Figure 17 - Interim Income Statement


Computershare (CPU)

Table 1 - Financial summary


Computershare (CPU) Price Target (A$): 10.40 Share Price (A$) 8.84Recommendation: Buy Market Cap (A$m) 4,912

INCOME STATEMENT VALUATION DATAY/e June 30 (US$m) 2009 2010 2011e 2012e 2013e Y/e June 30 (US$m) 2009 2010 2011e 2012e 2013eSales revenue 1,512 1,620 1,620 1,719 1,764 Net profit adj (US$m) 290 321 297 336 369Operating Expenses 1,036 1,111 1,130 1,176 1,178 Adjusted EPS (US cents) 52 58 53 60 66Management EBITDA 476 508 490 543 586 USD EPS growth (%) 1% 11% -7% 13% 10%Depreciation & Amortisation 40 47 42 41 39 Net profit adj (A$m) 382 366 308 316 360Management EBIT 436 461 448 502 548 Adjusted EPS (A cents) 69 66 56 57 65Net Interest 36 23 34 35 35 AUD EPS growth (%) 19% -4% -16% 2% 14%Pre-tax profit 400 438 414 467 513 P/E ratio (x) 12.9 13.4 15.9 15.6 13.6Tax 110 117 117 131 144 CFPS (c) 61.5 74.6 59.4 68.3 73.7Management NPAT 290 321 297 336 369 Price/CF (x) 14.4 11.9 14.9 12.9 12.0One-off items -37 -26 -53 -33 -25 DPS (c) 22 28 26 25 30Reported net profit 253 295 244 303 344 Yield (%) 2.5% 3.2% 2.9% 2.8% 3.4%

Franking (%) 45% 55% 60% 60% 60%CASHFLOW EV/EBITDA (x) 11.8 11.0 11.4 10.3 9.5Y/e June 30 (US$m) 2009 2010 2011e 2012e 2013e Price/book (x) 5.5 4.6 4.1 3.6 3.2EBITDA 476 508 490 543 586 NTA ($) -1.45 -1.27 -1.06 -0.70 -0.30Change in provisions -5 -8 -5 1 1Working capital change 40 -3 -3 2 1 PROFITABILITY RATIOSNet interest -27 -26 -31 -35 -35 Y/e June 30 (US$m) 2009 2010 2011e 2012e 2013eTax paid -90 -82 -101 -131 -144 EBIT/sales (%) 29% 28% 28% 29% 31%Other -51 25 -20 0 0 Return on assets (%) 17% 17% 15% 16% 17%Operating cashflow 341 414 330 379 409 Return on equity (%) 29% 28% 23% 23% 23%SIB capex -23 -57 -24 -32 -32 Dividend cover (x) 3.1 2.4 2.1 2.3 2.2Investments -252 -113 -20 0 0 Effective tax rate (%) 28% 27% 28% 28% 28%Asset sales 17 0 3 0 0Other -12 15 0 0 0 LIQUIDITY AND LEVERAGE RATIOSInvesting cashflow -270 -155 -41 -32 -32 Y/e June 30 (US$m) 2009 2010 2011e 2012e 2013eShare issues / Equity raised -8 -7 -28 0 0 Net debt/(cash) ($m) 794 715 596 397 174Dividends paid -93 -122 -150 -148 -153 Net debt/equity (%) 88% 67% 50% 30% 11%Other 98 -25 5 0 0 Net debt/EBITDA (x) 1.7 1.4 1.2 0.7 0.3Financing cashflow -2 -154 -174 -148 -153Net change in cash 70 105 115 199 224 INTERIMSCash at end of period 180 279 408 607 830 Half end December 31 (US$m) 1H10 1H11 1H12e 1H13e 1H14e

Sales revenue 808 781 845 874 883BALANCE SHEET EBIT 252 225 256 281 293Y/e June 30 (US$m) 2009 2010 2011e 2012e 2013e Pre tax profit 241 209 239 264 276Cash 180 279 408 607 830 Adjusted profit 174 150 172 190 199Receivables 267 298 319 332 338 One-off items -5 -33 -17 -13 -10PPE 91 145 147 147 147 Reported profit 170 117 154 176 188Intangibles 1,705 1,776 1,778 1,737 1,706 Interim DPS (A cents) 14.0 14.0 13.0 15.0 17.0Other 254 192 181 182 182 Interim adjusted EPS (US cents) 31.4 27.0 30.9 34.2 35.7Total assets 2,498 2,690 2,834 3,005 3,204 Interim adjusted EPS (A cents) 36.4 29.1 29.5 32.5 37.6Payables 325 354 373 388 395Debt 974 994 1,004 1,004 1,004 ASSUMPTIONSProvisions 90 82 77 78 78 Y/e June 30 2009 2010 2011e 2012e 2013eOther 207 188 190 190 190 AUD/USD 0.76 0.88 0.98 1.07 1.03Total liabilities 1,596 1,618 1,643 1,659 1,667 USD/AUD 1.32 1.14 1.02 0.94 0.98Shareholders’ equity 894 1,061 1,175 1,331 1,521 USD/CAD 1.14 1.07 0.96 0.97 0.98Total shareholders funds 901 1,073 1,191 1,346 1,537 USD/EUR 0.72 0.72 0.70 0.71 0.71

USD/GBP 0.61 0.63 0.61 0.62 0.62W/A F/D shares on issue 559 560 559 559 559 USD/INR 47.0 46.7 45.2 47.9 49.9

USD/HKD 7.77 7.76 7.77 7.75 7.73

Computershare as at 23 June 2011

Recommendation BuyPrice $8.84Target (12 months) $10.40

Computershare (CPU)

Recommendation structure

Spec Buy: Expect >30% total return on a 12 month view but carries significantly higher risk than its sector

Buy: Expect >15% total return on a 12 month view

Accumulate: Expect total return between 5% and 15% on a 12 month view

Hold: Expect total return between -5% and 5% on a 12 month view

Reduce: Expect total return between -15% and -5% on a 12 month view

Sell: Expect <-15% total return on a 12 month view

Research Team Steve Goldberg Head of Research T 612 8224 2809 E [email protected]

Daniel Blair Industrial Analyst Telco/Media T 612 8224 2886 E [email protected]

Peter Chapman Resources Analyst Gold/Uranium T 612 8224 2847 E [email protected]

David George Resources Analyst Diversifieds T 613 9235 1972 E [email protected]

Fleur Grose Resources Analyst Iron Ore/Coal/Diversifieds T 613 9235 1678 E [email protected]

Johan Hedstrom Resources Analyst Energy T 612 8224 2859 E [email protected]

Justin Hilford Industrial Analyst Emerging Growth T 613 9235 1966 E [email protected]

Judith Kan Associate Analyst Energy T 612 8224 2844 E [email protected]

TS Lim Financials Analyst Banks/Regionals T 612 8224 2810 E [email protected]

Toby Molineaux Associate Analyst Industrial T 612 8224 2813 E [email protected]

Paresh Patel Industrial Analyst Retail/Beverages T 612 8224 2894 E [email protected]

Stuart Roberts Industrial Analyst Healthcare/Biotech T 612 8224 2871 E [email protected]

Emma Sellen Executive Assistant T 612 8224 2853 E [email protected]

Jonathan Snape Industrial Analyst Emerging Growth T 613 9235 1601 E [email protected]

Mathan Somasundaram Quantitative Analyst Head of Quant & Data Services T 612 8224 2825 E [email protected]

Lafitani Sotiriou Analyst Financials/Industrials T 613 9235 1668 E [email protected]

Janice Tai Quantitative & System Analyst T 612 8224 2833 E [email protected]

Joel Weiss Associate Analyst Industrial T 612 8224 2895 E [email protected]

Chris Whitehead Associate Analyst Resources T 612 8224 2838 E [email protected]

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This document is intended solely for the information of the particular person to whom it was provided by Southern Cross Equities Limited and should not be relied upon by any other person. Although we believe that the advice and information which this document contains is accurate and reliable, Southern Cross Equities Limited has not independently verified information contained in this document which is derived from publicly available sources, directors and proposed directors and management. Southern Cross Equities assumes no responsibility for updating any advice, views, opinions, or recommendations contained in this document or for correcting any error or omission which may become apparent after the document has been issued. Southern Cross Equities Limited does not give any warranty as to the accuracy, reliability or completeness of advice or information which is contained in this document. Except insofar as liability under any statute cannot be excluded, Southern Cross Equities Limited and its directors, employees and consultants do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this document or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this document or any other person.

This document has not been written for the specific needs of any particular person and it is not possible to take into account each investors individual circumstances and that investors should make their adviser aware of their particular needs before acting on any information or recommendation. Southern Cross Equities Limited, its employees, consultants and its associates within the meaning of Chapter 7 of the Corporations Law may receive commissions, underwriting and management fees, calculated at normal client rates, from transactions involving securities referred to in this document and may hold interests in the securities referred to in this document from time to time.

Southern Cross Equities Ltd and its associates hold 4,200 shares in CPU as at the date of this report. This position is subject to change without notice.

cpu 24 june 2011

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