National Budget 2015

Impact Analysis

27-Mar-15 2

Macro Perspectives

NB: Actuals & Forecasts are both as per present & previous issues of “Medium Term Projections” issued by the Ministry of Finance; Growth rates taken from the Budget Supplement

Diversified nature of the local economy

6%

3%

5%

6%

6% 3%

13%

10% 23%

9%

11%

10% 10%

5%

4%

7%

4%

15%

COND

CONS

IND FIN

T&L

PROP

COMM

GOV

HLTH UT

OTH

TRADE

MANU.

AGRI

LOGISTICS

CONSTRUCTN

BANKING INSU

MANU.

▲ +3.4%

▲ +5.5% ▲ +5.0%

▲ +6.6%

▲ +4.8%

▲ +2.1%

4.2 3.6 3.4 3.2 3.5

5.3 5.7

4.1 4.2 4.0 4.0 3.8

5.3 5.7

Actual Forecast

-3.2 -3.2

-1.8

-3.7 -3.2

-4.5 -3.8

-2.5

-2.2

-3.2 -3.5

-3.0

Actual

Forecast

-8.2

-13.2

-10.3 -9.9 -10.3

-8.6 -8.8

-11.1 -11.6

-9.1 -9.6

-8.1

Actual

Forecast

GDP

Gro

wth

[%

] Bu

dget

Def

icit

[%]

C/A

Defic

it [%

]

27-Mar-15 3

Overarching Measures What we got

Fast-tracking + Efficient licensing

Address skill v/s labour mismatch

Attract diaspora through tax breaks

Promise of higher & cheaper bandwidth

Effective public sector & judiciary

Elimination of Alt. Minimum Tax

Public sector promise to recruit massively

A study on wages

BoM to have freedom on Repo and Exchange rates

What we think

Theoretical positive but reek of déjà-vu

Reskilling requires time whose benefits will not be felt soon

A minimum wage is likely to affect company margins

A larger public sector wage-bill could result in higher taxes at the next budget

A return to the 80s & 90s policy of inflating away costs through a devaluation of the MUR

4.2 3.6 3.4 3.2

3.5

5.3 5.7

GDP Growth [%]

27-Mar-15 4

Capital Markets What was needed

Incentives for quality listings

A push for market sophistication

Strengthened enforcement

What we got

No update on SICOM’s listing

Non-residents are now exempted of withholding tax on bonds

Undisclosed ‘incentives’ for asset managers to move Front-Office to Mauritius

Unclear ForEx & Interest rate policies

A new Gold fund in spite of the metal being readily available on the SEM

ALEX-20

ALCAPEX-12

SEMDEX

27-Mar-15 5

Financial Sector What was needed

High level diversification strategy to reduce dependence on a handful of DTAs

Strengthened enforcement without overburdening the industry with contentious reporting

What we got

Indirect drivers of growth through planned infrastructure works

Complete discussions with India to stifle DTA abuses

Yet another Government-run bank

A cap on some lending rates

Sector LCP Δ YTD Comments

MCB Bank 198.50 +0.3% BoM prudential guidelines might stymie lending for “smart-cities” & “technopoles”. SME bank may nibble away some biz + levy extension neutral YoY Market maker for Sov. bonds will enhance flexibility

SBM Bank 0.99 -2.9%

BBCL Bank 4.20 -41.7%

CIM NBFI 9.00 +0.0% SME bank may siphon biz + Cap on HP interest will dent revenue Indian commitment to DTA will provides breathing space FINC NBFI 22.00 -8.3%

MEI Insurance 107.50 -0.6% Creation of "smart-cities" and "technopoles“ should drive growth of property insurance in medium/long term MUA Insurance 76.00 +7.8%

SWAN Insurance 322.00 -3.9%

ANGLO Insurance 830.00 -4.0%

27-Mar-15 6

Travel & Leisure What was needed

Concrete steps to improve connectivity to rest of the world

Next generation marketing backed by appropriate funding

Lower airport/airfare taxes/fees

What we got

Streamlined omnibus licensing

Promise of an improved MTPA with stronger funding for marketing

Tourist site re-habilitation

New flights from Europe in Q4

Sector LCP Δ YTD Comments

NMHL Hotel 64.00 -19.7%

Revamped MTPA + increased funding should enhance Mauritius' visibility Increased flight connectivity (Austria & Germany) will boost arrivals and thus likely trigger improvement in both occupancy and room rates.

LUX Hotel 59.00 -1.7%

SUN Hotel 36.50 -18.9%

CHSL Hotel 36.00 -7.7%

HTLS Hotel 37.00 -2.6%

SCT Hotel 6.94 ±0%

MOLI Hotel 41.80 ±0%

TPL Hotel 6.20 -11.4%

MK Airline 14.25 -19.0%

LOTO Lottery 7.42 -28.7% Ban on scratch cards, advertisement as well as higher fees and/or taxes will have a detrimental effect on PAT. ASL Betting 53.00 -41.1%

Stock Sector LCP Δ YTD Comments

ALTEO Sugar 32.55 -4.3% Unknown impact of new IRS policies on sugar conglomerates who will participate in the “Smart” Real-Estate dev. Sugar IPPs might not benefit from solar incentives and could dent off-take in te long run

TERRA Sugar 32.60 -1.2%

OMNI Sugar 76.00 -10.3%

MEDL Sugar 62.00 -0.8%

IBL Multi 116.00 +2.7% Marine, Logistics and seafood segments will benefit from the development of the port coupled with measures for financial & hospitality sectors ROGE Multi 29.15 +12.1%

HML Multi 107.00 -2.3%

EUDC Multi 16.00 +5.3% Comm. and Hospitality segmt poised to gain from infrastructure proj & enhanced connectivity UTIN Multi 12.00 +4.3%

27-Mar-15 7

Multi-Sector Conglomerates What was needed

What we got

The recently launched Sovereign equity fund under review

“Smart/Techie” property development

New policy on IRS/RES to be announced soon

Tax breaks for Solar-powered micro-IPPs

Transformation of Port-Louis into a proper regional hub

Facilitation of expansion onto mainland Africa

Revised system to sugar on an unprotected world market

27-Mar-15 8

Consumer Staples What was needed

Transition to a sustainable model for the primary sector

A means to make local producers competitive on the regional export market

What we got

Incentives to shift to old-school chemical-cide free farming

No tax increases

Unclear ForEx policy

Stock Sector LCP Δ YTD Comments

CMPL Retail 16.00 -13.5%

Beverages companies were spared from sugar, water or alcohol tax raises. A record low MUR against the USD, is likely to hurt both margins and consumer demand.

PBL Bevs 280.00 +21.2% PHIN Bevs 190.00 +15.2% QBL Bevs 6.04 +0.7% VITAL Bevs 57.00 -6.6% MOR Edible Oils 27.50 -1.8% MIL Margarine 923.00 ±0% CSE Sugar 132.00 -2.9%

Unclear if large farmers would also benefit from Bio-farming tax breaks A record low MUR against the USD, is likely to hurt margins Although feeds producers might be buffeted by a higher government subsidy on feeds at Rs4/kg

UNSE Sugar 50.00 ±0% INNO Foods 55.00 -1.8% SODIA Poultry 0.35 +34.6% LFL Feed 25.20 -3.1% LMLC Flour 155.00 +3.2% MCOS Toileteries 60.00 +1% A record low MUR against the USD, is likely to hurt both margins and consumer

demand. SAIL Toileteries 21.00 -0.2%

27-Mar-15 9

Consumer Discretionary What was needed

What we got

Extension of freight subsidies and creation of new shipping lines

Exploration for minerals in EEZ

Death of the plastics bags industry

Measures to facilitate expansion as well as exports into the region

Stock Sector LCP Δ YTD Comments

CTL Textiles 36.25 -6.8% May benefit from freight rebate scheme and creation of regional shipping lines Regularisation of 2nd hand car dealers would alleviate unfair competition although Asian cars are poised to cost substantially higher due to USD strength

ENLC Auto + EoE 22.25 -14.4%

ABC Automobile 95.50 ±0%

ACC Tyre 153.75 -7.9%

MSIL Tyre 35.50 ±0%

RHT Transport 28.00 ±0%

UBS Transport 38.00 -0%

VEM Oil & Gas 139.75 +0.5% Gain new business from development of bunkering

27-Mar-15 10

Materials & Industrial What was needed

Massive boost to rekindle construction

What we got

New and repackaged infrastructure projects spanning from new townships, to bridges and water/sewage pipes

Renewed commitment to transform port into a hub and augment shipping lines

Stock Sector LCP Δ YTD Comments

UBP Construction 86.00 +9.2% Demand for construction materials poised to rocket should all the infrastructural endeavours be kick-started swiftly GAMMA Construction 36.00 -12.2%

MCFI Fertilizer 22.60 -9.6%

Exports might benefit from freight rebate and enhanced shipping connectivity

BYCH Dyes 10.65 -11.3%

CHEM Chemicals 22.00 -4.3%

GAZ Gases 111.00 ±0%

PIM Plastics 76.75 -4.1%

PCCL Kleenex 50.00 +1.2%

MFD Freeport 11.50 -3.8% Development of Seaport will boost demand for logistics

FORT Heavy Eng 173.00 +3.6%

Stock Sector LCP Δ YTD Comments

ENLL Prop Dev 51.00 +4.1% Unknown effect of IRS policy + ENLL, unlike others, was not explicitly cited as part of “smart-city”. Cogir should gain from doped construction.

BLFE Prop Dev 4.94 -13.3% Azuri was cited as a "Smart-City" + New flights should boost its hotels

ASCE Shopping Cntr 12.00 -0%

CAUD Shopping Cntr 1.31 +1.6%

CIMO Shopping Cntr 423.00 ±0%

NOVUS Biz Park 8.24 ±0%

COVI Hotel 7.30 +2.2% Rental linked to Club Med’s perf. which should benefit from new flights

UTDL Misc 62.00 -0% Development of the port to GRNW would boost value of its lands

27-Mar-15 11

Property What was needed

Measures to prevent oversupply in order to protect prices/value as well as rental yields for commercial, residential as well as business parks.

What we got

Extensions of Land Transfer breaks for middle-income residential projects and higher threshold (+50%) for 1st time acquirer

Undisclosed policy change on IRS/RES developments

27-Mar-15 12

Key & Disclaimer

An overall positive impact expected from budget measures

An overall negative impact expected from budget measures

Neither positive nor negative impact expected from budget measures

NB: Last Closing Price (LCP) and YTD return figures are all as at Mar 25th 2013

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