Note Goldman Sachs sur Maroc Telecom Février 2013


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Note Goldman Sachs sur Maroc Telecom Février 2013

  1. 1. February 26, 2013COMPANY UPDATEMaroc Telecom (IAM.PA)Sell Equity ResearchStructural challenges in place despite short term ease; SellWhats changed Investment Profile Low HighMaroc Telecom reported full-year 2012 financial results (February 21). Growth GrowthRevenues came in line with our estimate and slightly below Bloomberg Returns * Returns *consensus with 3.2% yoy decline for the full year. EBITDA came above Multiple Multipleexpectations with profitability reaching 57.0% in 4Q2012. The EBITDA Volatility Volatilitysurprise was driven by foreign operations where the margin increased to Percentile 20th 40th 60th 80th 100th Maroc Telecom (IAM.PA)50.3% in 4Q. The company also announced dividend in respect of 2012 at Europe New Markets TMT Peer Group AverageDh7.4, 7% below consensus estimates. For 2013, the company expects the * Returns = Return on Capital For a complete description of theEBITDA margin to stay around 56% and to deliver improvement in investment profile measures please refer to the disclosure section of this document.EBITDA-capex driven by yoy reduction in capex. Key data Current Price (€) 9.57Implications 12 month price target (€) 6.80We incorporate the reported results in to our estimates and raise our 2013- Upside/(downside) (%) (29) Market cap (€ mn) 8,412.915 EBITDA forecast by an average 1.4% on the back competitive pressure Enterprise value (Dh mn) 105,923.3 12/12 12/13E 12/14E 12/15Eease and cost optimization program in international operations. We keep Revenue (Dh mn) New 29,849.0 29,422.0 29,265.5 29,352.5our domestic wireless estimates largely unchanged as we still see ongoing Revenue revision (%) 0.2 (0.3) (0.8) (0.9) EBIT (Dh mn) New 11,757.0 11,262.9 11,081.0 11,041.8price cuts and margin pressure. We believe that risks for incumbent EBIT revision (%) 2.7 1.1 (0.3) (0.9)margin will be building up in Morocco as a result of fixed-line access EPS (Dh) New 7.63 8.40 8.27 8.27 EPS (Dh) Old 7.94 8.40 8.38 8.42unbundling (2013) and LTE auction (expected to come in 2H2013-1H2014) EV/EBITDA (X) 7.1 6.5 6.5 6.5 P/E (X) 15.6 12.7 12.9 12.9may bring incremental competition to mobile market. We hence reiterate Dividend yield (%) 6.2 7.9 7.7 7.7our Sell rating. FCF yield (%) NM NM NM NM CROCI (%) 15.1 14.9 13.9 13.1Valuation Price performance chartOur 12-month price target of €6.8 (down from €6.9) is based on a 9% three- 13.0 380 12.5 370year forward target dividend yield (CEEMEA fixed-line sector average), 12.0 360discounted at a 10% COE. The stock trades on 6.5x 2013E EV/EBITDA, a 11.5 350 11.0 340substantial premium to the CEEMEA telecoms average, supporting our 10.5 330 10.0 320Sell rating. 9.5 310 9.0 300 8.5 290Key risks 8.0 280More aggressive dividend increase and cost reduction; higher share in the Feb-12 Jun-12 Sep-12 Dec-12broadband and mobile market; and higher data center and government Maroc Telecom (L) MSCI EM EMEA (R)revenues, weaker macro dynamics and regulatory changes.INVESTMENT LIST MEMBERSHIP Share price performance (%) 3 month 6 month 12 month Absolute (4.3) 0.7 (23.4)Pan-Europe Sell List Rel. to MSCI EM EMEA (9.1) (4.4) (20.4) Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 2/26/2013 close.Coverage View: NeutralAlexander Balakhnin Goldman Sachs does and seeks to do business with companies+7(495)645-4016 OOO Goldman Sachs BankDaria Fomina covered in its research reports. As a result, investors should be+7(495)645-4017 OOO Goldman Sachs Bank aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to Analysts employed by non- US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc. Global Investment Research
  2. 2. February 26, 2013 Maroc Telecom (IAM.PA) Maroc Telecom: Summary FinancialsProfit model (Dh mn) 12/12 12/13E 12/14E 12/15E Balance sheet (Dh mn) 12/12 12/13E 12/14E 12/15ETotal revenue 29,849.0 29,422.0 29,265.5 29,352.5Operating costs (13,146.0) (13,048.8) (13,097.8) (13,235.8) Cash & equivalents 964.0 2,393.7 3,067.0 4,047.8R&D 0.0 0.0 0.0 0.0 Accounts receivable 10,291.0 10,143.8 10,089.8 10,119.8Lease payments 0.0 0.0 0.0 0.0 Inventory 468.0 461.3 458.9 460.2Other operating profit/(expense) 0.0 0.0 0.0 0.0 Other current assets 106.0 106.0 106.0 106.0EBITDA 16,703.0 16,373.1 16,167.7 16,116.7 Total current assets 11,829.0 13,104.8 13,721.7 14,733.8Depreciation & amortisation (4,946.0) (5,110.2) (5,086.7) (5,074.9) Net PP&E 25,476.0 25,152.3 24,691.6 24,258.7EBIT 11,757.0 11,262.9 11,081.0 11,041.8 Net intangibles 10,322.0 10,390.2 10,446.6 10,501.0Net interest income/(expense) (344.0) (349.0) (342.8) (303.4) Total investments 266.0 266.0 266.0 266.0Associates 0.0 0.0 0.0 0.0 Other long-term assets 56.0 56.0 56.0 56.0Profit/(loss) on disposals 0.0 0.0 0.0 0.0 Total assets 47,949.0 48,969.2 49,181.9 49,815.5Others (recurring) (862.0) 0.0 0.0 0.0Pretax profits 10,551.0 10,914.0 10,738.3 10,738.4 Accounts payable 17,394.0 17,145.2 17,054.0 17,104.7Income tax (3,272.0) (3,219.6) (3,167.8) (3,167.8) Short-term debt 7,259.0 7,259.0 7,259.0 7,259.0Tax rate (%) 31.0 29.5 29.5 29.5 Other current liabilities 649.0 649.0 649.0 649.0Minorities (574.0) (307.8) (302.8) (302.8) Total current liabilities 25,302.0 25,053.2 24,962.0 25,012.7Preferred dividends 0.0 0.0 0.0 0.0 Long-term debt 886.0 966.0 1,086.0 1,366.0Net income (pre-exceptionals) 6,705.0 7,386.6 7,267.7 7,267.8 Other long-term liabilities 1,068.0 1,068.0 1,068.0 1,068.0Other non-recurring items post tax 42.8 0.0 0.0 0.0 Total long-term liabilities 1,954.0 2,034.0 2,154.0 2,434.0Net income 6,747.8 7,386.6 7,267.7 7,267.8 Total liabilities 27,256.0 27,087.2 27,116.0 27,446.7EPS (underlying) (Dh) 7.63 8.40 8.27 8.27EPS (basic, reported) (Dh) 7.68 8.40 8.27 8.27 Preferred shares 0.0 0.0 0.0 0.0Weighted shares outstanding (mn) 879.1 879.1 879.1 879.1 Total common equity 16,294.0 17,175.3 17,056.3 17,056.5 Minority interest 4,399.0 4,706.8 5,009.6 5,312.4Common dividends declared 6,505.3 7,386.6 7,267.7 7,267.8DPS (Dh) 7.40 8.40 8.27 8.27 Total liabilities & equity 47,949.0 48,969.2 49,181.9 49,815.5Dividend payout ratio (%) 97.0 100.0 100.0 100.0 Capitalised leases 0.0 0.0 0.0 0.0Dividend cover (X) 1.0 1.0 1.0 1.0 Capital employed 28,838.0 30,107.0 30,410.9 30,993.9Growth & margins (%) 12/12 12/13E 12/14E 12/15ERevenue growth (3.2) (1.4) (0.5) 0.3 Adj for unfunded pensions & GW (10,322.0) (10,390.2) (10,446.6) (10,501.0)EBITDA growth (1.7) (2.0) (1.3) (0.3) Adj capital employed 18,516.0 19,716.9 19,964.3 20,492.8EBIT growth (5.0) (4.2) (1.6) (0.4) Gross cash invested 87,605.0 92,796.7 97,747.5 102,658.8Net income growth (17.4) 9.5 (1.6) 0.0EPS growth (17.5) 10.2 (1.6) 0.0 Ratios 12/12 12/13E 12/14E 12/15EDPS growth (20.1) 13.5 (1.6) 0.0EBITDA margin 56.0 55.6 55.2 54.9 CROCI (%) 15.1 14.9 13.9 13.1EBIT margin 39.4 38.3 37.9 37.6 CROCI/WACC (X) -- -- -- --Cash flow statement (Dh mn) 12/12 12/13E 12/14E 12/15E ROIC (%) 44.4 42.8 40.5 39.6Net income 6,705.0 7,386.6 7,267.7 7,267.8 ROIC/WACC (X) -- -- -- --D&A add-back (incl. ESO) 4,946.0 5,110.2 5,086.7 5,074.9 ROA (%) 15.6 16.4 15.9 15.7Minority interest add-back 574.0 307.8 302.8 302.8 WACC (%) -- -- -- --Net (inc)/dec working capital 1,145.0 (94.9) (34.8) 19.3 Inventory days 7.2 5.8 5.7 5.7Other operating cash flow 504.0 349.0 342.8 303.4 Asset turnover (X) 1.2 1.2 1.2 1.2Cash flow from operations 13,874.0 13,058.6 12,965.2 12,968.2 Net debt/equity (%) 34.7 26.6 23.9 20.5 EBITDA interest cover (X) 48.6 46.9 47.2 53.1Capital expenditures (5,106.0) (4,854.6) (4,682.5) (4,696.4)Acquisitions 0.0 0.0 0.0 0.0 Valuation 12/12 12/13E 12/14E 12/15EDivestitures 37.0 0.0 0.0 0.0 EV/sales (X) 4.0 3.6 3.6 3.6Others 71.0 0.0 0.0 0.0 EV/EBITDAR (X) 7.1 6.5 6.5 6.5Cash flow from investing (4,998.0) (4,854.6) (4,682.5) (4,696.4) EV/EBITDA (X) 7.1 6.5 6.5 6.5 EV/EBIT (X) 10.1 9.4 9.5 9.5Dividends paid (common & pref) (8,317.0) (6,505.3) (7,386.6) (7,267.7) P/E (X) 15.6 12.7 12.9 12.9Inc/(dec) in debt 916.0 80.0 120.0 280.0 Dividend yield (%) 6.2 7.9 7.7 7.7Other financing cash flows (1,119.0) (349.0) (342.8) (303.4) FCF yield (%) NM NM NM NMCash flow from financing (8,520.0) (6,774.3) (7,609.4) (7,291.1) EV/GCI (X) 1.4 1.1 1.1 1.0Total cash flow 347.0 1,429.7 673.3 980.7 EV/adj. capital employed (X) 6.7 6.1 6.2 6.4 Price/book (X) 6.0 5.5 5.5 5.5Capex/D&A (%) 103.2 95.0 92.1 92.5Reinvestment rate (%) 40.1 36.9 36.0 36.3 Note: Ratios are adjusted for leases where appropriate. Only separately disclosed where significant and ongoing.Cash flow cover of dividends (X) 2.0 1.8 1.8 1.8Free cash flow cover of dividends (X) 1.5 1.2 1.2 1.2 Note: Last actual year may include reported and estimated data.Free cash flow -- -- -- -- Source: Company data, Goldman Sachs Research estimates. Analyst Contributors Alexander Balakhnin Daria Fomina Goldman Sachs Global Investment Research 2
  3. 3. February 26, 2013 Maroc Telecom (IAM.PA)Exhibit 1: Maroc Telecom estimate changes(Dh mn, per share data Dh) Old New Change 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015ERevenues 29,777 29,509 29,510 29,625 29,849 29,422 29,266 29,353 0.2% -0.3% -0.8% -0.9%EBITDA 16,391 16,051 15,935 16,012 16,703 16,373 16,168 16,117 1.9% 2.0% 1.5% 0.7%EBITDA margin 55.0% 54.4% 54.0% 54.0% 56.0% 55.6% 55.2% 54.9% 91 bps 126 bps 125 bps 86 bpsNet income 6,984 7,381 7,370 7,405 6,705 7,387 7,268 7,268 -4.0% 0.1% -1.4% -1.9%EPS (MAD) 7.94 8.40 8.38 8.42 7.63 8.40 8.27 8.27 -4.0% 0.1% -1.4% -1.9%Source: Company data, Goldman Sachs Research estimates. Exhibit 2: Our new 12 month price target is €6.8 DPS (MAD) 2014 2015 8.3 8.27 Valuation Average DPS 8.27 Target dividend yeild 9% Target price (EUR) 6.8 Source: Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 3
  4. 4. February 26, 2013 Maroc Telecom (IAM.PA)Disclosure AppendixReg ACWe, Alexander Balakhnin and Daria Fomina, hereby certify that all of the views expressed in this report accurately reflect our personal views aboutthe subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly orindirectly, related to the specific recommendations or views expressed in this report.Investment ProfileThe Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group andmarket. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on compositesof several methodologies to determine the stocks percentile ranking within the regions coverage universe.The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:Growth is a composite of next years estimate over current years estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospectiveaggregate of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g.P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.QuantumQuantum is Goldman Sachs proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used forin-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.GS SUSTAINGS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus listincludes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage andsuperior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporateperformance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies management of theenvironmental, social and governance issues facing their industry).DisclosuresCoverage group(s) of stocks by primary analyst(s)Alexander Balakhnin: EMEA New Markets-MENA Non Financials, EMEA New Markets-Media, EMEA New Markets-Telecoms.EMEA New Markets-MENA Non Financials: Abdullah Abdul Mohsin Al-Khodari Sons Company (Al Khodari), Abdullah Al Othaim Markets Company,Abu Dhabi National Energy (Taqa), Abu Dhabi National Hotels, Advanced Petrochemical Company, Agility The Public Warehousing Company(Agility), Agthia Group, Air Arabia, Aldar Properties, Aldrees Petroleum and Transport Services, Almarai Company, Arab Potash Company, ArabianCement, Arabtec Holding, Aramex, Bahrain Telecom, Ciments du Maroc, Citadel Capital, Dana Gas, Dar Al Arkan Real Estate DevelopmentCompany (Dar Al-Arkan), Drake and Scull International, Elsewedy Electric Company, Emaar Properties, Emirates Integrated TelecommunicationsCompany (Du), Emirates Telecommunications Corporation (Etisalat), Etihad Etisalat Co, Fawaz Abdulaziz Alhokair and Company, GB Auto, GalfarEngineering & Contracting, Halwani Brothers, Herfy, Holcim Maroc, Industries Qatar, Jarir Marketing Company, Jordan Phosphate Mines Co.,Jordan Telecom, Juhayna Food Industries, Kipco, Kuwait Food Company (Americana), Lafarge Ciments, Maridive and Oil Services, NationalIndustrialization Company (Tasnee), National Petrochemicals Company (Petrochem), Oman Telecom, Omani Qatari Telecommunication Company(Nawras), Orascom Construction Industries, Orascom Development Holding AG, Palm Hills Developments, Qassim Cement Company, QatarElectricity and Water Company (QEWC), Qatar Gas Transport, Qatar National Cement Company, Rabigh Refineries and Petrochemical (PetroRabigh), Ras Al Khaimah Ceramic Company (RAK Ceramics), Red Sea Housing, Renaissance Services, Sahara Petrochemical, Saudi Arabia FertilizerCompany (SAFCO), Saudi Arabian Amiantit Company, Saudi Arabian Mining (Maaden), Saudi Basic Industries Corporation (SABIC), Saudi CementCompany (SCC), Saudi Ceramic Company, Saudi Dairy and Foodstuff Company (SADAFCO), Saudi Electricity Company (SEC), Saudi IndustrialInvestment Group (SIIG), Saudi International Petrochemicals (Sipchem), Saudi Kayan., Saudi Steel Pipe, Saudi Telecom Company, Savola Group,Sixth of October Development and Investment Company (SODIC), Solidere, Sorouh Real Estate, Southern Cement, Suez Cement Company, TalaatMostafa Group Holding Company (TMG Holding), The National Shipping Company of Saudi Arabia (NSCSA), United Electronics Co (Extra),Vodafone Qatar, Yamama Cement, Yanbu Cement Company, Yanbu National Petrochemicals (YANSAB), Zain KSA, Zamil Industrial InvestmentCompany, ezzsteel.EMEA New Markets-Media: CTC Media, Central European Media Enterprises, Group Ltd., Naspers Ltd., TVN S.A., Yandex N.V..Goldman Sachs Global Investment Research 4
  5. 5. February 26, 2013 Maroc Telecom (IAM.PA)EMEA New Markets-Telecoms: Bezeq, Cellcom Israel Ltd., IBS Group, MTN Group, Magyar Telekom, Maroc Telecom, MegaFon, MobileTelesystems, Orascom Telecom, Partner, Qtel, Rostelecom (Ord), Sistema JSFC (GDR), TP Group, Telecom Egypt, Telefonica CR, Telkom SA, TurkTelekom, Turkcell (ADR), VimpelCom Ltd., Vodacom, Zain. Company-specific regulatory disclosuresThe following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companiescovered by the Global Investment Research Division of Goldman Sachs and referred to in this research.Goldman Sachs has received compensation for investment banking services in the past 12 months: Maroc Telecom (€9.57)Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Maroc Telecom (€9.57)Goldman Sachs had an investment banking services client relationship during the past 12 months with: Maroc Telecom (€9.57) Distribution of ratings/investment banking relationshipsGoldman Sachs Investment Research global coverage universe Rating Distribution Investment Banking Relationships Buy Hold Sell Buy Hold Sell Global 31% 55% 14% 48% 41% 36% As of January 1, 2013, Goldman Sachs Global Investment Research had investment ratings on 3,523 equity securities. Goldman Sachs assignsstocks as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Holdand Sell for the purposes of the above disclosure required by NASD/NYSE rules. See Ratings, Coverage groups and views and related definitionsbelow. Price target and rating history chart(s) Maroc Te le com (IAM.PA) Stock Price Currency : Euro Goldman Sachs rating and stock price target history 16.00 450 7.1 10 9 14.00 7.8 7.6 400 6.9 12.00 350 10.00 10.1 300 8.00 9.2 9.7 9.9 6.00 250Stock Price Index Price S F MA M J J A S O N D J F MA M J J A S O N D J F M A M J J A S O N D 2010 2011 2012 Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 12/31/2012. Rating Covered by Alexander Balakhnin, Price target as of Jun 2, 2010 Price target at removal Not covered by current analyst MSCI EM EMEAThe price targets show n should be considered in the context of all prior published Goldman Sachs research, w hich may ormay not have included price targets, as w ell as developments relating to the company, its industry and f inancial markets. Regulatory disclosures Disclosures required by United States laws and regulationsSee company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manageror co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs usually makes amarket in fixed income securities of issuers discussed in this report and usually deals as a principal in these securities.The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,professionals reporting to analysts and members of their households from owning securities of any company in the analysts area ofcoverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment bankingrevenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of theirhouseholds from serving as an officer, director, advisory board member or employee of any company in the analysts area of coverage. Non-U.S.Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and therefore may not be subject to NASD Rule 2711/NYSERules 472 restrictions on communications with subject company, public appearances and trading securities held by the analysts.Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targetsin prior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachswebsite at Additional disclosures required under the laws and regulations of jurisdictions other than the United StatesThe following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States lawsand regulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is definedin the Banking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a banking business, in Australia. This research, and anyaccess to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act, unless otherwise agreed by GoldmanSachs. Brazil: Disclosure information in relation to CVM Instruction 483 is available at applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 16 of CVMInstruction 483, is the first author named at the beginning of this report, unless indicated otherwise at the end of the text. Canada: Goldman, Sachs& Co. has approved of, and agreed to take responsibility for, this research in Canada if and to the extent it relates to equity securities of Canadianissuers. 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  6. 6. February 26, 2013 Maroc Telecom (IAM.PA)visits. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request fromGoldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained fromGoldman Sachs (India) Securities Private Limited; Japan: See below. Korea: Further information on the subject company or companies referred toin this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman Sachs New Zealand Limited and itsaffiliates are neither "registered banks" nor "deposit takers" (as defined in the Reserve Bank of New Zealand Act 1989) in New Zealand. This research,and any access to it, is intended for "wholesale clients" (as defined in the Financial Advisers Act 2008) unless otherwise agreed by GoldmanSachs. 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A copy of these risks warnings, and a glossary of certainfinancial terms used in this report, are available from Goldman Sachs International on request.European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/126/EC isavailable at which states the European Policy for Managing Conflicts of Interest in Connectionwith Investment Research.Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer registered with the Kanto Financial Bureau under registration numberKinsho 69, and a member of Japan Securities Dealers Association, Financial Futures Association of Japan and Type II Financial Instruments FirmsAssociation. Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. 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