GD Express Carrier Berhad

Transcription

1 13 December 2016 Initiate Coverage GD Express Carrier Berhad Going the last mile with GDEX Initiate Coverage with BUY Target Price (TP): RM2.06 INVESTMENT HIGHLIGHTS GDEX is a market leader in domestic express delivery Profits are forecasted to increase at a 3-yr CAGR of 16% The company is a beneficiary of e-commerce growth We initiate coverage with a BUY call and TP of RM2.06 Market leader in express delivery. According to our analysis, GDEX is ranked second in terms of domestic express delivery market share holding an 18% share. GDEX has outpaced the overall industry which expanded at a CAGR of 10% between 2012 and 2015, increasing its market share by 0.4ppt per year. Growing in tandem with the e-commerce industry. We are forecasting a 3-year FY17-FY19 profit CAGR of 16% contributed by: i) Fast growing e-commerce industry which is entering the growth phase of the industry life cycle, with CAGR estimated at 20.8% between 2015 and As an express delivery partner appointed by key e-commerce platforms, GDEX is poised to benefit from increasing parcel volumes. ii) Expansion in sorting capacity. We estimate that GDEX will expand its sorting capacity by 28%/30%/ in FY17/FY18/FY19. The company is undergoing several initiatives to increase its sorting capacity at reasonable capital outlay, including reorganising the layout of its 67k sq. ft. HQ/sorting hub and investing in new semiautomated sorting lines. iii) M&A opportunities. GDEX has RM282m in dry powder and is prepared to deploy its net cash into value enhancing and synergistic assets. GDEX has already invested RM5.5m for a 30% stake in Web Bytes Sdn Bhd (Web Bytes) to enhance its technological offering to fend off new tech-based delivery start-ups. Initiate coverage with BUY and TP of RM2.06. We value the company using the discounted cash flow method (DCF). GDEX has consistently achieved PBT margins of 15-16% which are on average 10ppts higher compared to its peers. While our TP implies a forward price-to-earnings (PER) of 70x FY17 core earnings, we believe it is justified as GDEX is a beneficiary of the high growth e-commerce sector. RETURN STATS Price (9 Dec 2016) Target Price Expected Share Price Return RM1.73 RM % Expected Dividend Yield +0.3% Expected Total Return STOCK INFO +19.4% KLCI 1, Bursa / Bloomberg Board / Sector Syariah Compliant 0078/ GDX MK Main/ Trading Services Yes Issued shares (mil) 1, Par Value (RM) 0.05 Market cap. (RM m) Price over NA 52-wk price Range Beta (against KLCI) 3-mth Avg Daily Vol 3-mth Avg Daily Value Major Shareholders Mr. Teong Teck Lean Yamato Singpost 2, RM RM m RM0.42m 37.98% 22.85% 11.23% MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK Kindly refer to the last page of this publication for important disclosures

2 INVESTMENT STATISTICS FYE Dec FY15A FY16A FY17F FY18F FY19F Revenue (RM m) EBIT (RM m) Pre-tax Profit (RM m) Core PAT (RM m) FD EPS (sen) EPS growth (%) PER(x) Net Dividend (sen) Net Dividend Yield (%) Source: Company, MIDF Research DAILY PRICE CHART Source: Bloomberg Tay Yow Ken, CFA

3 A. KEY INVESTMENT MERITS Growing its slice of the pie. We estimate that GDEX has steadily increased its market share among domestic express delivery players, growing its market share by 1.2ppt annually between 2012 and The expansion of market share is commendable, considering the overall industry grew by a compounded annual growth rate (CAGR) of 10% from RM727m to RM1.05b. This indicates that the company was able to propel itself ahead of competitors while keeping pace with overall market growth. In addition, profitability margins have not been sacrificed in favour of market share gains as pricing remained stable and costs contained. Figure 1: Market share growth ( ) 100% RM727m RM824m RM933m RM1.05b 75% 50% 25% 0% 45.3% 41.7% 38.8% 36.1% 16.8% 17.0% 17.5% 18.0% 37.9% 41.3% 43.7% 46.0% Others GDEX Pos Laju (Sources: Companies, MIDF Research) Figure 2: Domestic express delivery companies market share (2015) and revenue & PBT margin trends GDEX 18% 250, ,000 16% * 17% 16% 16% Pos Laju 46% City-Link 150, ,000 50,000 14% 14% 14% ABX 4% 0 FY2013 FY2014 FY2015 FY % Skynet 8% Nationwide 9% Revenue (RM'000) PBT margin (%) Note 1: International express delivery players such as DHL, FedEX and UPS are not included as a substantial portion of their revenue is derived from international freight. Meanwhile, it is common for these players to outsource last mile delivery services to domestic players. Note 2: Excludes interest income. (Sources: Companies, MIDF Research) 3

4 E-commerce (B2C) the growth engine. GDEX is well positioned to grow in tandem with the e-commerce industry in Malaysia having derived 25% of its FY16 revenue from the segment. According to MITI and MDEC, e-commerce is entering the growth phase of the industry life cycle. This suggests that the industry possesses ample mileage in terms of growth potential, with a forecasted 5-year CAGR of 20.8% between 2015 and As an express delivery partner appointed by key e-commerce platforms, GDEX is presented with the opportunity to benefit from the need to fulfil a higher number of parcel deliveries. Figure 3: Malaysia e-commerce industry life cycle Malaysia Singapore, China US, Korea E-commerce in Malaysia is at an inflection point, undergoing a transformation from the introduction phase of the industry life cycle into the growth phase, characterised by accelerating sales and the entry of new platforms. Introduction Growth Mature Declining (Sources: MITI, MDEC, MIDF Research) Figure 4: Growth of GDEX s key clientele for its e-commerce segment Astro Go Shop 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 1HFY17 Revenue 25,000,000 37,000,000 38,000,000 52,000,000 62,000,000 63,900,000 74,100,000 Growth qoq (%) 48% 3% 37% 19% 3% 16% Compounded quarterly rate 17% Products sold 120, , , , , , ,000 Growth qoq (%) 46% 26% 17% 29% 6% 26% Compounded quarterly rate 20% Lazada (USD$'m) FY13 FY14 FY15 GMV* ,025 Growth yoy (%) N/A 305% 167% Revenue Growth yoy (%) N/A 104% 78% Zalora (EUR'm) FY13 FY14 FY15 GMV Growth yoy (%) N/A 80% 81% Revenue Growth yoy (%) N/A 70% 77% E-commerce platform clients include Astro Go Shop, Lazada, Zalora, 11Street, Gemfive and CJ Wow Shop which recorded RM18.6m revenue in its maiden reporting quarter. *Gross Merchandise Revenue (GMV) Note: Figures for Lazada and Zalora include other Asian markets but is reflective of the Malaysian operations as one of the largest contributors. (Sources: Astro, Rocket Internet, MIDF Research) 4

5 Figure 5-7: Courier services traffic in Malaysia, parcel per capita & Malaysia demographics m 13% 10% 24% 30% 25% 20% Underpinned by the proliferation of e- commerce, parcel delivery volumes have risen at a 5-year CAGR of 12% % % 5% 0% -5% -10% Parcel volume growth in 2015 spiked to 24% due to a sharp rise in e-commerce merchants and transactions. The growth in parcel volumes bodes well for GDEX who fulfils last-mile parcel deliveries. Documents Parcels Parcel Growth (yoy) m USA China Malaysia Parcel delivered per capita in Malaysia (year 2015) was marginal in comparison with the US and China. This reflects low penetration rate and maturity level of e-commerce in Malaysia. The wide difference in parcel per capita denotes that Malaysia is lagging behind its more developed peers. This represents opportunities for growth as Malaysia catches up to developed countries. Aged 35 and below 63% Time spent on social media Smartphone penetration rate 32% 47% E-commerce growth is expected to be driven by a young demographic, high IT literacy and high internet/mobile penetration rates. 0% 20% 40% 60% 80% (Sources: MCMC, China State Post Bureau, Bloomberg, MITI, MDEC, MIDF Research) 5

6 Express delivery partner model. GDEX differs from its peers by deriving the bulk of its parcel delivery revenue from contracts with e-commerce platforms as opposed to retail customers (e.g. walk-in customers and individual e- commerce merchants). The appointment as an express delivery partner allows GDEX to secure a higher quantity of parcel volumes, which enables GDEX it to reduce unit costs through achieving better economies of scale. Premium pricing through enhanced service offering. The company is constantly improving its reliability, timeliness, customer service, range of services and technology. This has led to GDEX offering better service quality and hence the ability to charge a premium in pricing. For example, GDEX offers cash on delivery (COD), same day delivery and warehousing services which are not widely offered by competitors. As a result, GDEX is able to enjoy higher PBT margins of 15-16% compared to its peer average of %. Shaking off competition from start-ups. While there has been an influx of start-up express delivery firms entering the market such as Ninjavan, Neonrunner and Zyllem which run app-based services, incumbents possess several competitive advantages. Years of investments into sorting equipment, trucks and IT infrastructure have allowed incumbents to handle significantly higher parcel volumes. This leads to lower unit cost, network reach (especially in rural areas) and the ability to ramp-up capacity to meet peak season demand. Hence, we opine that incumbents would be able to withstand the threat of new competition. Figure 8-9: Contract vs. walk-in customer mix Retail 20% Retail 60% GDEX Peers Contract 80% Contract 40% 20% 16% 16% 16% 10% 5% 6.2% 5.7% 4.5% 6.5% 0% FY2013 FY2014 FY2015 FY2016 GDEX Express Delivery PBT margin (%) PBT margin peers (%) (Sources: Company, MIDF Research) 6

7 Bottlenecks will be a thing of the past. Having witnessed a surge in demand in FY16 from the e-commerce segment, the company s average utilisation rate for its sorting facility rose to 90%. At times, the company faced difficulty in coping with the large volume of orders, with sorting capacity stretched 10% above its designed capacity. This occurred during promotional periods such as the #MYCYBERSALE campaign which saw a GMV of RM211m (79%yoy increase) transacted over a period of only 5 days. To better prepare itself in handling such surges in volume, GDEX has taken measures to increase its sorting capacity by 28%/30%/ in FY17/FY18/FY19. Scaling up at a reasonable cost. GDEX is undergoing several initiatives to increase its sorting capacity at reasonable capital outlay. This includes reorganising the layout of its 67k sq. ft. HQ/sorting hub in PJ to maximise the use of space, converting an empty parking lot into a loading bay, investing in semi-automated sorting lines, improving the sorting process and conducting sorting at a number its 66 branches before delivery to its PJ hub. These improvements are cost effective, expeditious and at minimal disruption to operations compared to developing an entirely new facility. Meanwhile, management is looking to acquire a new parcel of land in the Klang Valley to build a new international sorting hub in FY18-FY19. Figure 10-11: Parcel sorting capacity & vehicle fleet 160, , , ,000 80,000 60,000 40,000 20, % 20% 28% 0% 0% 8% FY13 FY14 FY15 FY16 FY17 FY18 FY19 50% 40% 30% 20% 10% 0% RM30m CAPEX budget for FY17 (73% of FY16 CFO). Parcel sorting capacity is set to rise by a CAGR of 17% between FY16 and FY19 with capex allocation of 40%. 1,200 1, Parcel sorting capacity (daily) Growth yoy (%) 50% 40% 28% 30% 19% 19% 14% 20% 14% 13% 12% 10% 0% FY13 FY14 FY15 FY16 FY17 FY18 FY19 Number of vehicles Growth yoy (%) Management aims to increase its vehicle fleet size by more than 10% p.a. by allocating 40% of its yearly capex budget to increase its delivery capacity. The remaining 20% is allocated for GDEX s warehousing business. It currently operates 130k sq. ft. of warehouse space which is close to being fully utilised (Sources: Company, MIDF Research) 7

8 Resilient earnings from the conventional B2B business. With 25% of FY16 revenue derived from the rapidly expanding e-commerce segment, the bulk or 75% of revenue still comprises of its bread and butter B2B business which entails the express delivery of documents. GDEX has garnered a portfolio of clients consisting of major banks, manufacturers, hospitals, telecommunication players as well as over 50,000 SMEs. While the segment is not expected to grow as rapidly as the e-commerce segment due to migrations to cloud storage, the segment will still grow in line with increased outsourcing activity for the transportation of documents. On the hunt for more acquisitions. GDEX has a war chest of RM282m and is prepared to deploy this net cash into value enhancing and synergistic assets. GDEX has already invested RM5.5m for a 30% stake in Web Bytes Sdn Bhd (Web Bytes) which provides cloud based Retail Management Solutions (e.g. point of sales and inventory management systems) through its Xilnex Brand. We believe more acquisitions could be on the cards for express delivery players, integrated logistics businesses or warehouse/industrial land. Adding value through tech. While the Web Bytes deal is not expected to immediately provide visible returns, we understand that GDEX and Web Bytes will be co-developing software/mobile applications to enhance GDEX s product features such as offering real-time tracking, seamless creation of delivery orders and providing notifications direct to mobile. These new features would increase GDEX s competitiveness in facing technology-based competitors as well as increasing its presence in the retail segment where it currently only derives 20% of its express delivery revenue. Reputable strategic shareholders. Having displayed growth and efficiency, GDEX has attracted the likes of Yamato Holdings Co Ltd (Yamato, 22.8% stake) and Singapore Post Ltd (Singpost, 11.2% stake) to as its strategic shareholders. The former, Yamato, which purchased GDEX shares at RM1.74, is Japan s largest and fifth globally in terms of express delivery revenue. Thus far, Yamato s involvement in GDEX has been confined to providing technical and strategic advice. Moving forward, we believe it is likely that business collaborations, such as channelling parcel volumes, cross border trucking and fresh produce deliveries could be established. The Alibaba connection. It is worth noting that the world s largest e-commerce player Alibaba holds an indirect stake in GDEX via Singpost thus giving GDEX an advantage over its competitors when bidding for business. Moreover, Alibaba has bought over Lazada, one of GDEX s largest customers. Figure 12-13: Web Bytes acquisition & GDEX strategic shareholders RM5.5m to purchase 30% in Web Bytes to enhance GDEX s tech offerings. 30% 10.17% 22.84% 11.23% (Sources: Company, MIDF Research) 8

9 B. VALUATION Initiate coverage with a BUY recommendation based on fully diluted TP of RM2.06. We initiate coverage on GDEX with a BUY call and TP of RM2.06. Our valuation is derived from our discounted-cash flow (DCF) model which assumes WACC of 8.5% and terminal growth rate of 3%. Our TP indicates potential capital upside of +24%. GDEX has consistently achieved PBT margins of 15-16% which are on average 10ppts higher compared to its peers due to its efficient cost structure and premium pricing arising from value enhanced service offering. While our TP implies a forward Price-to-Earnings (PER) of 70x FY17 core earnings, we believe it is justified as GDEX is a beneficiary of the high growth e-commerce sector. In addition, the current share price of RM1.73 remains below Yamato s entry price of RM1.74. Figure 14: DCF valuation for GDEX FYE June FY2017 FY2018 FY2019 FY2020 FY2021 FY2027 EBIT multiplied (1-tax rate) 56,843 64,998 75,077 79,582 84, ,661 Less: Capex -30,000-25,000-20,000-15,000-15,000-15,000 Add: Depreciation 10,285 11,879 13,839 13,529 15,184 21,539 FCF 37,127 51,877 68,916 78,111 84, ,200 Sum of PV FCF 565,767 PV of terminal value 2,363,391 Enterprise value 2,929,157 Add: Net cash 295,223 Add: Cash from conversion of warrants 274,105 Total equity value 3,224,380 # of shares outstanding 1,383,240 # of warrant outstanding 179,154 Target price 2.06 Current price 1.73 Upside (%) 19.4% WACC 8.5% Terminal growth rate 3% (Source: MIDF Research) 9

10 C. FINANCIAL HIGHLIGHTS PAT forecasted to expand at a 3-year CAGR of 16%. Growth will be driven by the e-commerce segment which is expected to grow at a similar CAGR. In addition, GDEX has shown that it is able to win market share from competitors. The on-going expansion of its sorting capacity, vehicle fleet and warehouses would enable this growth. In addition, we expect PAT margins to remain steady at over despite the threat of new competitors as GDEX is itself improving its service offering. Figure 15: GDEX revenue and PAT 350, , , , , , , , ,000 21% 22% 150,000 18% 14% 100,000 28,296 34,444 40,670 46,480 53,662 50,000 0 FY15 FY16 FY17F FY18F FY19F Revenue PAT PAT Growth (yoy) 40% 35% 30% 25% 20% 10% 5% 0% (Sources: Company, MIDF Research) Consistent free cash flows despite capex drive. We forecast GDEX to continue generating free cash flow (FCF) in FY17-FY19 despite capex drive to ramp up sorting capacity, warehousing space and vehicle fleet. GDEX has shown good FCF generation, with RM43m made available to equity owners in FY16 translating into an FCF yield of 1.9%. We do not rule our higher dividend payments in the future after it embarks on its capex drive putting its net cash pile of RM282m into use. Figure 16: Annual capex and net gearing 60,000 43,447 40,000 32,867 13,645 17,033 21,347 20,000 9,994 1, ,000-5,100-4,207-7,010-3,797-40,000-30,000-25,000-20,000 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FCF Capex (Sources: Company, MIDF Research) 10

11 Income Statement FY15A FY16A FY17F FY18F Revenue Cash Flow Statement Operating activities FY15A FY16A FY17F FY18F Cost of sales PAT Operating expenses Depreciation & amortization EBITDA Changes in working capital Depreciation & amortisation Interest paid EBIT Tax paid Finance cost Other items PBT CF from Operations Tax expense Investing activities PAT Capex Balance Sheet FY15A FY16A FY17F FY18F Assets Property, plant and equipment Prepaid lease payments Total non-current assets Receivables & other receivables Interest received Other items CF from Investments Financing activities Net proceeds from borrowings Interest paid Other items Inventories Cash and cash equivalents Total current assets CF from Financing Net changes in cash Beginning cash Ending cash Total Assets Liabilities Ratios FY15A FY16A FY17F FY18F Loans and borrowings Revenue growth 24.0% 11.7% 17.0% 15.5% Other LT liabilities PBT growth 29.0% 28.4% 17.7% 14.3% Total non-current liabilities PAT growth 21.0% 21.7% 18.1% 14.3% Payable and accruals PBT margin 15.9% 18.3% 18.4% 18.2% Loans and borrowings Total current liabilities PAT margin 14.4% 15.7% 15.8% 15.7% ROE 20.0% 8.9% 9.6% 10.1% Total Liabilities ROA 15.0% 7.9% 8.6% 9.0% Equity Net gearing (x) -25.4% -72.9% -68.2% -66.3% Share Capital FD Book value/share (sen) Reserves PBV (x) Total Equity FD Core PAT/share (sen) PER (x)

12 D. INVESTMENT RISKS Severe recession. GDEX is involved in the delivery of documents and parcels between businesses (B2B) and between businesses and end-users (B2C). GDEX is relatively insulated from business cycles due to the majority of revenue being derived from B2B document transportation. However, a severe and prolonged downturn caused by changes in economic and geopolitical conditions may hamper the company s business. Protracted economic uncertainty may cause businesses to downsize, hence reducing the requirement of document transportation. Shortage of workers. GDEX is dependent a skilled force of drivers to operate its fleet of 654 trucks. At present, GDEX has a workforce of 3,000 employees. Drivers perform daily deliveries following routes mapped out by GDEX s proprietary software to ensure efficiency and timeliness. A shortage of skilled drivers would adversely impact the company s operations in fulfilling pick-ups and deliveries. In addition, increases in minimum wage or delays in obtaining driver permits could increase GDEX s operating expenses or hinder operations. E-commerce falling out of favour with consumers. The proliferation of e-commerce has allowed consumers to make purchases at the convenience of their personal computers or mobile devices. With this convenience, the sector has grown by leaps and bounds, benefitting parcel delivery players such as GDEX. A change in preference of consumers or a large shift back to brick and mortar shopping would reduce the volume of parcels required to be delivered. This would negatively impact GDEX which relies on the e-commerce sector for growth. Intense competition from existing and new competitors. The entry of multiple competitors with large financial backing could be a threat to GDEX. Competitors who are able to reduce prices in favour of market share would result in reduced yields and intense bidding for contracts by e-commerce platforms. This would be unfavourable for GDEX and could reduce its profitability margins. Start-ups with more advanced technology could also pose a threat, giving e- commerce platforms or retail clients more options with differentiated services. Cognisant of this, GDEX has invested in a software company to assist it in developing and enhancing its technology capabilities. 12

13 E. APPENDIX GD Express Carrier Berhad (GDEX) is principally provides last mile express delivery and logistics services. The company is currently one of company is currently one of the largest express delivery companies in Malaysia operating from its 67k sq. ft. all-weather central clearing hub in Petaling Jaya. GDEX adopts a Hub & Spoke distribution system through a comprehensive domestic network comprising of 211 stations. These include 1 sorting HQ, 66 branches, 1 affiliate station, 54 agents, 23 lodge-in centres and 67 reseller agencies. Figure 17: Group structure GD Express Carrier Bhd 100% GD Express Sdn Bhd GD Logistics (M) Sdn Bhd 100% 100% GD Venture (M) Sdn Bhd GD Express (Singapore) Pte Ltd 100% 100% GD Technosystem Sdn Bhd GDEX Regional Alliance Pte Ltd 100% 100% 100% GD Facilities and Assets Management GD Valueguard Sdn Bhd Sdn Bhd Figure 18: Corporate History Established in 1996, but ran into difficulties triggered by 1997 financial crisis 2000 Entry of Teong Teck Lean as controlling shareholder of GDEX 2003 First local express delivery company to obtain ISO 9001: 2000 (Quality Management System) 2005 Successfully listed GDEX on ACE MARKET of Bursa Malaysia 2008 First local express carrier to deploy conveyor systems for both parcel and document sorting 2011 Entry of Singapore Post as substantial shareholder 2013 Successfully transferred listing to MAIN MARKET of Bursa Malaysia 13

14 Figure 19: Express delivery and logistics operational flow Customer calls GDEX Customer Service for a pickup service The shipments are sorted and distributed at the GDEX HQ hub GDEX assigns dispatch to pick-up shipments and bring them back to the GDEX station The sorted shipments are sent to the designated GDEX stations Shipments from station are directed to the GDEX HQ Hub Shipments delivered to recipient Customer delivers bulk materials to GDEX warehouse The boxes are sent to the GDEX HQ Hub for sorting and distribution These materials are sorted systematically and repacked into customised GDEX boxes The sorted boxes are sent to designated GDEX stations The boxes are sealed and addressed to the recipients The boxes are then sent to the recipients Figure 20: Sorting hub & spoke distribution model Shipper A Receiver A Shipper B Receiver B Shipper C Receiver C Suppliers Intermediaries Customers Customer Driven 14

15 MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad ( X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY TRADING BUY NEUTRAL SELL TRADING SELL Total return is expected to be > over the next 12 months. Stock price is expected to rise by > within 3-months after a Trading Buy rating has been assigned due to positive newsflow. Total return is expected to be between - and + over the next 12 months. Total return is expected to be <- over the next 12 months. Stock price is expected to fall by > within 3-months after a Trading Sell rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE NEUTRAL NEGATIVE The sector is expected to outperform the overall market over the next 12 months. The sector is to perform in line with the overall market over the next 12 months. The sector is expected to underperform the overall market over the next 12 months. 15