New Flyer Initiating

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Rpt. 27513415 NEW FLYER INDUSTRIES-INITIATING COVERAGE 5 - 1220-Nov-2015 ALTACORP CAPITAL

- MURRAY, CHRIS, ET AL







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- RESEARCH DEPARTMENT

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Rpt. 24316098 NEW FLYER INDUSTRIES-INITIATING COVERAGE 98 - 11407-Aug-2014 ALTACORP CAPITAL


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- POWELL, BERT, ET AL

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- POWELL, BERT, ET AL

Rpt. 21194032 NEW FLYER INDUSTRIES-INITIATING COVERAGE 210 - 22113-Dec-2012 CIBC WORLD MARKETS INC. (CANADA)

- CHIANG, KEVIN

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- CHIANG, KEVIN

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Rpt. 16572088 NEW FLYER INDUSTRIES - INITIATING COVERAGE-INITIATING COVERAGE 270 - 30530-Aug-2010 CIBC WORLD MARKETS INC. (CANADA)

- WILLEMSE, MICHAEL, ET AL

Rpt. 16572110 NEW FLYER INDUSTRIES - INITIATING COVERAGE-INITIATING COVERAGE 306 - 32130-Aug-2010 CIBC WORLD MARKETS INC. (CANADA)

- WILLEMSE, MICHAEL, ET AL

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- STONEMAN, RICHARD, ET AL

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- STONEMAN, RICHARD, ET AL

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- JOHNSON, TREVOR

Rpt. 14260718 NEW FLYER INDUSTRIES - INITIATING COVERAGE 348 - 37117-Dec-2008 CLARUS SECURITIES INC

- ABBOUD, YOUSSEF

Rpt. 13900140 NEW FLYER INDUSTRIES - REINITIATING COVERAGE 372 - 37710-Sep-2008 SCOTIABANK GBM

- TYERMAN, DAVID

Rpt. 13879399 NEW FLYER INDUSTRIES - REINITIATING COVERAGE 378 - 38603-Sep-2008 CIBC WORLD MARKETS INC. (CANADA)

- HOLDEN, PAUL

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- TYERMAN, DAVID

Rpt. 12434923 NEW FLYER INDUSTRIES - REINITIATING COVERAGE 393 - 40416-Jul-2007 CIBC WORLD MARKETS INC. (CANADA)

- HOLDEN, PAUL, ET AL

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Rpt. 11784936 NEW FLYER INDUSTRIES - INITIATING COVERAGE 405 - 41323-Nov-2006 CIBC WORLD MARKETS INC. (CANADA)


Rpt. 11785250 NEW FLYER INDUSTRIES - INITIATING COVERAGE 414 - 44522-Nov-2006 CIBC WORLD MARKETS INC. (CANADA)


Rpt. 11252294 NEW FLYER INDUSTRIES - INITIATING COVERAGE 446 - 45429-May-2006 CIBC WORLD MARKETS INC. (CANADA)

- DUNNING, A.S., ET AL

Rpt. 11251195 NEW FLYER INDUSTRIES - INITIATING COVERAGE 455 - 51226-May-2006 CIBC WORLD MARKETS INC. (CANADA)

- DUNNING, A.S., ET AL

INSTITUTIONAL EQUITY RESEARCH: DIVERSIFIED INDUSTRIES

COMPANY UPDATE

New Flyer Industries Inc.

Notes from Toronto

Solid Meetings Explain Rationale for MCI Transaction: We had the opportunity to host institutional investor meetings with senior management of New Flyer Industries Inc. The company addressed a number of questions related to the recent acquisition of MCI along with commentary on the demand and pricing environment.

We Expect Synergies to Materially Grow: When announcing the transaction to acquire MCI, NFI management indicated an expectation of synergies of $10mm. We believe this number is very low, with management acknowledging during meetings that while they believed the combination stood on its own from a financial perspective, they would run a process similar to how the integration of NABI progressed. For reference, when the company announced the decision to move NABI to the Xcelsior platform, the expectation was for a two to three-year payback implying $7mm to $10mm in savings. Since that point, management has increased estimates of run rate savings indicating that savings were expected to be $16.5mm with Q3/15 reporting and updating that number to $18.0mm with marketing. We believe with a combined ~$1.6bn purchasing spend, the ability to leverage Marcopolos global sourcing network in the private market, weak IT systems at MCI and an acknowledgement that MCI is only in the early stage of lean optimization relative to NFI operations that significant further savings are available.

Underlying Margin Improvement Continues: We continue to expect the trend in underlying margin per equivalent unit to continue to improve in 2016 and 2017. At Q3/15 EBITDA margin per EU on a trailing basis stood at $33.2k/EU, which marks a high point since early 2011. We believe the synergies derived from NABI, estimated at $18mm could add ~$6.5k/EU to 2016 and 2017 run rates, which would bias our estimates higher. Management continues to be conservative in any guidance, also cautioning there can be significant period to period variation, however during meeting did acknowledge the trend toward improved pricing in backlog has begun to materialize as competition normalizes indicating that the average margin in backlog expected to be produced in 2016 and 2017 is better than what was experienced through 2014 and 2015.

Maintain Outperform and $35.00 Target: Based on our discussions with management, we believe the MCI acquisition has significant potential to improve the earnings and cash flow profile of the company. We see a number of opportunities to increase returns with higher synergies, while we continue to see improving fundamentals in core bus manufacturing operations and the aftermarket segment. We maintain our Outperform rating and our 12-month price target of C$35.00. Our target price is based on a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward valuation period as well as an exchange rate of C$1.32/$US.

NFI | TSX

$26.07 Rating: Outperform One Year Target: C$35.00 Total Return: 36.9% Yield: 2.6% November 20, 2015

52-w eek High/ Low : C$26.30 / C$12.05Dividend Yield: 2.6%Shares Outstanding ($mm): 55.5 (basic)

55.5 (fd)Market Capitalization ($mm): C$1446.0Float ($mm) 39.73-Month Avg. Daily Volume ('000): 151.0Por Forma Net Debt (Q4/15) ($mm): $651.9Enterprise Value Incl. OBSD ($mm): $1744.9(Assumes Acquisition of MCI Closes in Q4/15)

(FYE Dec 31) 2014 2015e 2016eRevenue ($mm) $1,451.1 $1,552.1 $2,450.7EBITDA ($mm) $107.4 $144.8 $243.6FD EPS $0.65 $0.99 $1.65

EBITDA ($mm) Q1 Q2 Q3 Q42014 $19.7 $27.0 $25.7 $35.02015 $31.4 $39.2 $36.3 $37.9e2016 $51.9e $52.8e $69.0e $69.8e

Adjusted FD EPS Q1 Q2 Q3 Q42014 $0.10 $0.16 $0.15 $0.242015 $0.20 $0.30 $0.26 $0.23e2016 $0.29e $0.31e $0.52e $0.53e

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Chris Murray, P. Eng., CFA Managing Director 647.776.8246 [email protected] Samarth Modwal, Associate 647.776.8245 [email protected]

Regulatory Disclosures and policy on the dissemination of research: or at www.altacorpcapital.comlast page

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INITIATING COVERAGE: DIVERSIFIED INDUSTRIES

Operating & Financial Highlights

Current ValuationsUnit Price (C$) $26.07

EV/EBITDA 2014 2015 2016 Price/Earnings 2014 2015 2016Peer Average 10.4x 9.0x 7.3x Peer Average 14.7x 13.7x 12.4xNew Flyer Industries Inc. 12.5x 9.3x 7.2x New Flyer Industries Inc. 30.0x 19.9x 11.9x

Income Statement 2014 2015e 2016e 2017e Trend Free Cash Flow (FCF) 2014 2015e 2016e 2017e TrendRevenues Cash provided by operations 45,823 80,172 100,496 177,337Bus Manufacturing 1,132,066 1,231,170 2,016,079 2,075,781 Changes in non-cash working capital 35,255 9,367 62,883 16,023Aftermarket 319,034 320,916 434,615 455,938 OCF less working capital 81,078 89,538 163,379 193,360Revenue 1,451,100 1,552,086 2,450,693 2,531,719 Principal portion of capital lease payments (1,766) (1,908) (2,004) (2,004)Aftermarket % of Total 22.0% 20.7% 17.7% 18.0% Net capital expenditures (10,889) (12,502) (30,278) (36,908)EBITDA - Bus Manufacturing 57,374 82,262 145,663 153,647 Non-operating, non-recurring items affecting FCF 15,398 7,766 - -

Margin - Bus Manufacturing 5.1% 6.7% 7.2% 7.4% Net defined benefit pension funding - - - -EBITDA - Aftermarket Ops. 49,991 62,531 87,897 92,888 FX gain on cash held in foreign currency (154) (961) - -

Margin - Aftermarket Ops. 15.7% 19.5% 20.2% 20.4% Free Cash Flow 83,667 81,933 131,098 154,448Total EBITDA incl. Other/ Synergies 86,457 136,232 243,560 274,816

Margin 6.0% 8.8% 9.9% 10.9% Free cash flow (C$) 92,829 104,615 173,985 198,313Adjusted EBITDA 107,365 144,793 243,560 274,816 per Share $1.67 $1.88 $3.13 $3.57

Margin 7.4% 9.3% 9.9% 10.9% FCF Yield 6.4% 7.2% 12.0% 13.7%Amortization 35,837 42,564 60,691 59,052 FCF per share growth 82.8% 12.6% 66.3% 14.0%Operating Earnings 50,620 93,669 182,869 215,763EBT 37,568 76,452 145,217 190,679 Dividend Per Share (C$) 2014 2015e 2016e 2017e TrendTaxes 10,849 23,890 53,730 70,551 Dividends Declared on Common Shares (C$) 32,457 33,931 38,854 38,854Net Income 26,719 52,562 91,487 120,128 Ratio of Dividends Declared to FCF 35.0% 32.4% 22.3% 19.6%Reported FD EPS $0.48 $0.95 $1.65 $2.16 Dividends on Common Shares $0.585 $0.611 $0.700 $0.700Adjusted FD EPS $0.65 $0.99 $1.65 $2.16 Cash Yield 2.2% 2.3% 2.7% 2.7%

Growth 2014 2015e 2016e 2017e Trend Key Operating Metrics 2014 2015e 2016e 2017e TrendRevenue Bus Deliveries (Equivalent Units (EU)) 2,437 2,503 4,065 4,170Weeks of Production 52 52 53 52 Revenue Per EU (US$000's) 464.5 491.9 496.0 497.8Bus Manufacturing 15.0% 8.8% 63.8% 3.0% EBITDA Per EU (US$000's) 23.5 32.9 35.8 36.8Aftermarket 48.4% 0.6% 35.4% 4.9% Average Weekly Delivery Rate (EU) 49.2 49.1 78.2 81.8

21.0% 7.0% 57.9% 3.3% Average Weekly Line Entry Rate (EU) 48.5 48.0 77.1 80.7Adjusted EBITDA 13.4% 34.9% 68.2% 12.8% Book:Bill Ratio (New Orders+Exercised Options) 0.9x 1.1x 1.0x 1.0xAdjusted FD EPS 2.7% 51.0% 66.8% 31.3% Option Expiry as % of Opening Options 20.7% 5.0% 18.4% 19.9%

FX Assumptions 2014 2015e 2016e 2017e Trend Leverage 2014 2015e 2016e 2017e TrendAverage CAD/USD Rate 0.9057 0.7834 0.7526 0.7783 Net Debt (EOP) 229,034 651,891 610,915 500,725EOP CAD/USD Rate 0.9050 0.7463 0.7634 0.7937 Net Debt to Trailing EBITDA 2.1x 4.5x 2.5x 1.8x

Net Debt to Total Capitalization 33.6% 57.6% 53.0% 44.2%

Firm and Option Order Backlog ($bn) Option Expiry of Backlog of 5410 Equivalent Units (EU)

Note: All amounts in US$ 000's, unless otherwise specified.Source: New Flyer Industries Inc., AltaCorp Capital Inc.

2015, 8%

2016, 16%

2017, 10%

2018, 26%

2019, 28%

2020, 12%

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Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15

Firm Option

ALTACORP CAPITAL INC. INSTITUTIONAL EQUITY RESEARCH: DIVERSIFIED INDUSTRIES

New Flyer Industries 2

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INITIATING COVERAGE: [INDUSTRY]

Marketing Highlights from Toronto We had the opportunity to host institutional investor meetings with senior management of New Flyer Industries Inc. (NFI-T), including the companys President and CEO, Paul Soubry and the companys CFO, Glenn Asham. The company addressed a number of questions related to the recent acquisition of Motor Coach Industries International Inc. (MCI) along with commentary on the demand and pricing environment. Overall, the tone was consistent with the companys conference call and we highlight some additional details below:

When announcing the transaction to acquire MCI, NFI management indicated an expectation of synergies of $10mm coming from certain head office cost savings, the removal of the CEO at MCI as well as minor purchasing synergies. We believe that this number is very low, with management acknowledging during meetings that while they believed the combination stood on its own from a financial perspective, they would run a process similar to how the integration of NABI progressed. For reference, when the company announced the decision to move NABI to the Xcelsior platform, the expectation was for a two to three-year payback implying $7mm to $10mm in savings. Since that point, management has increased estimates of run rate savings indicating that savings were expected to be $16.5mm with Q3/15 reporting and updating that number to $18.0mm with marketing. We believe with a combined ~$1.6bn purchasing spend, the ability to leverage Marcopolos global sourcing network in the private market, weak IT systems at MCI and an acknowledgement that MCI is only in the early stage of lean optimization relative to NFI operations that significant further savings are available. We do expect higher capital spending through 2016 and 2017 to support a number of maintenance capex and cost-saving initiatives, which are already included in our estimates.

Management indicated that lenders were being very supportive with the new credit facility to support the transaction. Management indicated the $482mm term loan represents the MCI cash purchase price of $455mm as well as $27mm of transaction and refinancing costs. The company expects to see proforma leverage at a net debt to EBITDA ex-convertible debentures at 3.0x on transaction close and expects with the strong cash flows to be at ~2.0x levered within two years. The corresponding covenant in the new credit facility limits leverage to 4.0x in the first year, dropping to 3.75x at the first anniversary and 3.5x at the second anniversary. With internally generated cash flows adequate to support the acquisition, there is no intention to issue equity to fund the MCI transaction.

The transaction is expected to close before year-end. There are some accounting adjustments required due to the differences in standards and functional currencies between NFI and MCI, which could impact the opening balance sheet, but that were described as not overly material. Managements early expectation is that a $10mm working capital adjustment payment is likely at close, with recovery in H1/16. Management did note that MCI is less working capital intensive than NFI as for approximately 60% of the business (70% private less two major customers) 100% of the purchase price of coaches is received prior to shipment although seasonality can play a factor into inter-period draws.

New Flyer management had approached KPS, the seller of MCI about the acquisition, which took approximately a 10-month process as opposed to an auction process. Management believe that NFI was the natural buyer of MCI given the proximity of operations, and other strategic synergies to be gained.

The sales and service agreement with Daimler has seen sales of 40 to 50 coaches per year. With the agreement NFI also gets a technology sharing relationship to support the product.



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Most unionised labour contracts at MCI are in place for several years with the exception of a smaller group of service employees in Illinois whose contract expires in January 2016. The manufacturing operation in Winnipeg represented by IAMAW ratified a three-year agreement in July 2015. We believe the companys experience with labour relations as well as intentions to bring plant conditions up to NFI standards with MCI should mitigate any risk of labour issues.

The majority of management at MCI is expected to stay except the current CEO, who will be replaced by Mr. Soubry. The intent is to run MCI as a separate organization in 2016 based on its current business plan supplemented by a senior VP from NFI supporting integration efforts.

MCI carries approximately 325 used buses in inventory. With a process started by KPS/MCI management to manage refurbishment costs, NFI management believes the fair market value relative to carrying value of the inventory is appropriate.

The New Jersey Transit Authority for 772 45-foot coaches plus 375 options contract won in July 2015 is expected to drive incremental growth in sales for MCI. There is an additional contract MCI is expected to bid for 350 additional 40-foot coaches with deliveries likely to occur later this decade. We believe cost synergies are likely to be the primary driver of value creation as opposed to revenue growth.

We continue to expect the trend in underlying margin per equivalent unit to continue to improve in 2016 and 2017. At Q3/15 EBITDA margin per EU on a trailing basis stood at $33.2k/EU, which marks a high point since early 2011. We believe the synergies derived from NABI, estimated at $18mm could add ~$6.5k/EU to 2016 and 2017 run rates, which would bias our estimates higher. Management continues to be conservative in any guidance, also cautioning there can be significant period to period variation, however during meeting did acknowledge the trend toward improved pricing in backlog has begun to materialize as competition normalizes indicating that the average margin in backlog expected to be produced in 2016 and 2017 is better than what was experienced through 2014 and 2015.

Bus Manufacturing EBITDA per EU Quarterly and Trailing Basis

Figure 1 Bus Manufacturing EBITDA per EU Quarterly and Trailing Basis Source: Bloomberg, AltaCorp Capital Inc.

Based on our discussions with management, we believe the MCI acquisition has significant potential to improve the earnings and cash flow profile of the company. We see a number of opportunities to increase returns with higher synergies, while we continue to see improving fundamentals in core bus manufacturing operations and the aftermarket segment. We maintain our Outperform rating and our 12-month price target of C$35.00. Our target price is based on

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a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward valuation period as well as an exchange rate of C$1.32/$US.

Key risks to failing to achieve our price target include, but are not limited to changes in raw material and component costs, foreign exchange risks, competition risk, changes in public sector transportation spending, and failure by management to execute on disclosed strategies.



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Appendix 1: Comparables Valuation

Trading Local Market EVTicker Currency Price Cap ($mm) ($mm) 2014 2015e 2016e 2014 2015e 2016e 2014 2015e 2016e 2014 2015e 2016e

New Flyer Industries Inc. TSX:NFI OP (C$35.00) CAD 26.07 1,447.4 249.8 1,342.6 0.65 0.99 1.65 30.0x 19.9x 11.9x 107.4 144.8 243.6 12.5x 9.3x 7.2x 2.3x 7.0% 10.2%Marcopolo S.A. BOVESPA:POMO4 NR BRL 2.43 2,096.7 1,305.5 3,436.1 0.25 0.16 0.22 7.3x 11.4x 8.2x 268.8 206.1 337.1 12.8x 16.7x 10.2x 1.2x 2.3% 8.2%Wajax Corporation TSX: WJX NR CAD 16.21 323.9 167.5 491.5 2.46 1.62 1.68 6.6x 10.0x 9.6x 82.4 77.5 80.6 6.0x 6.3x 6.1x 1.0x 7.9% 11.7%Ag Growth International Inc. TSX: AFN NR CAD 29.75 427.8 323.6 751.4 0.31 1.97 2.67 NM 15.1x 11.2x 63.4 72.0 91.5 11.8x 10.4x 8.2x 1.7x 4.1% (9.6%)Superior Plus Corp. TSX: SPB NR CAD 9.98 1,402.9 927.2 2,330.1 0.45 0.58 0.89 22.1x 17.3x 11.2x 282.4 279.0 348.1 8.3x 8.4x 6.7x 2.3x 6.0% 7.2%The Greenbrier Companies, Inc. GBX NR USD 34.18 972.9 204.4 1,308.0 4.62 6.66 5.62 7.4x 5.1x 6.1x 257.4 496.1 411.3 5.1x 2.6x 3.2x 1.3x 21.5% 36.9%Oshkosh Corporation OSK NR USD 42.59 3,186.1 896.3 4,082.4 3.49 2.68 3.52 12.2x 15.9x 12.1x 591.2 494.8 589.1 6.9x 8.3x 6.9x 1.7x 8.7% 11.8%Spartan Motors Inc. SPAR NR USD 3.65 125.1 (15.7) 109.3 0.03 (0.05) 0.10 NM NM 38.4x 9.4 8.1 10.9 11.6x 13.5x 10.0x 0.8x 0.8% (4.7%)Wabash National Corp. WNC NR USD 12.88 856.5 135.8 992.3 0.88 1.39 1.38 14.7x 9.2x 9.4x 160.7 214.5 206.8 6.2x 4.6x 4.8x 2.0x 13.7% 22.6%Thor Industries Inc. THO NR USD 55.55 2,915.4 (176.3) 2,739.1 3.55 3.93 4.51 15.7x 14.1x 12.3x 298.8 333.5 390.8 9.2x 8.2x 7.0x 2.7x 17.7% 19.8%Winnebago Industries, Inc. WGO NR USD 21.55 581.5 (70.2) 511.2 1.61 1.54 1.74 13.4x 14.0x 12.4x 65.8 66.1 75.3 7.8x 7.7x 6.8x 2.6x 18.1% 19.9%Navistar International Corporation NAV NR USD 13.30 1,084.2 4,511.0 5,605.2 (5.07) (0.07) 2.30 NM NM 5.8x 331.0 563.5 742.0 16.9x 9.9x 7.6x NM 9.7% NMStudent Transportation Inc. TSX: STB NR CAD 5.60 540.4 274.2 910.0 0.03 0.04 0.04 NM NM NM 69.0 70.3 86.9 13.2x 12.9x 10.5x 2.2x 2.5% 1.8%Blue Bird Corporation BLBD NR USD 10.47 218.6 188.1 456.7 0.00 0.76 1.15 NM 13.7x 9.1x 25.9 75.5 81.7 17.6x 6.1x 5.6x NM 4.5% NMCubic Corporation CUB NR USD 44.60 1,199.0 (43.0) 1,156.2 2.47 2.44 2.79 18.0x 18.3x 16.0x 119.3 120.6 132.3 9.7x 9.6x 8.7x 1.6x 5.8% 4.6%Average 14.7x 13.7x 12.4x 10.4x 9.0x 7.3x 1.8x 8.7% 10.8%

Source: Capital IQ, Company Reports, AltaCorp Capital Inc.NFI 2016e EV/EBITDA is based on pro forma Enterprise Value of $1744.7, assuming close of MCI acquisition in Q4/15As of November 20, 2015. All figures in millions, unless otherwise noted.

EBITDA ROE

EV/EBITDARating &Target

NetDebt

Price to BV ROIC

P/EEPS



10

New Flyer Industries

NFI

Rating:

12 Month Target:

C$26.07

Outperform

C$35.00

Disclosure Requirements1 Is this an issuer related or industry related publication? Issuer2 Does the analyst, a member of the analyst's household, associate or employee who prepared this research

report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name andthe nature of the interest:

N

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equity of the issuer?N

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issuer?N

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N

RankingDistribution

% IBClients

Outperform 59% 26%Sector Perform 25% 12%Underperform 2% 0%Speculative Buy 2% 0%Restricted 3% 25%Not Rated 5% 0%Tender 3% 0%

Total 100% 19%

Rating System

AltaCorp's rating system reflects our outlook for expectedperformance of an issuer's equity securities relative to itspeer group over the next 12 months.An Outperform (Buy) rating represents a securityexpected to provide a return greater than the peer groupaverage.A Sector Perform (Hold) rating represents a securityexpected to provide a return in line with the peer groupaverage.An Underperform (Sell) rating represents a securityexpected to provide a return less than the peer groupaverage.A Speculative Buy rating represents a security where thereturn potential is high, but the risk of a significant loss ismaterial.

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TD Tower66 Wellington Street West, Suite 3530Toronto, Ontario M5K 1A1Tel: 403 539 8600

www.altacorpcapital.com

The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for thesale or purchase of securities. While the accuracy or completeness of the information contained in this document cannot beguaranteed by AltaCorp Capital Inc., it was obtained from sources believed to be reliable. AltaCorp Capital Inc. and/or itsofficers, directors and employees may from time to time acquire, hold or sell positions in the securities mentioned herein asprincipal or agent.The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views aboutthe subject security and issuer.The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to thespecific recommendations or views contained in this research report.AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers underresearch coverage within the next three months.This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and MarketsAct 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of theFinancial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be reliedupon, by any other person.AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and acceptsresponsibility for the content in this research report.U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital(USA) Inc. at 403-539-8600.



11

George FJ Gosbee Chairman & CEO 403 539 8601 [email protected]

Paul Sarachman, CFA, FCSI President Managing Director Capital Markets 647 776 8250 [email protected]

ATB Financial

Dave Mowat President & CEO 780 408 7181 [email protected]

Ian Wild Executive Vice President 403 974 5127 [email protected]

CALGARY 410, 585 8 Avenue SW Calgary AB Canada T2P 1G1 403 539 8600 Main 403 539 8575 Fax TORONTO 66 Wellington Street West, Suite 3530 Toronto, ON Canada M5K 1A1 647 776 8230 Main 647 776 8248 Fax

www.altacorpcapital.com member CIPF IIROC FINRA SIPC

Direct @altacorpcapital.com __________________________________________________________________________________________________________

Institutional Equity Research

E&P- Domestic Patrick J. ORourke, CFA, Analyst 403 539 8615 porourke Yasir Siddiqi, Associate 403 539 8626 ysiddiqi Nicholas Lupick, CFA, Analyst 403 539 8592 nlupick Sunneva Bernhardsdottir, Associate 403 539 8635 sbernhardsdottir Thomas Matthews, P.Eng., CFA, Analyst 403 539 8621 tmatthews Christian Erana, Associate 403 539 8581 cerana

Energy Infrastructure Dirk Lever, CA, Senior Analyst 403 539 8606 dlever Ward Hallett, CA, Associate 403 539 8598 whallett

Oilfield Services Dana Benner, CFA, Senior Analyst 403 539 8620 dbenner Karim Merali, Associate 403 539 8594 kmerali Mark Westby, Analyst 403 539 8591 mwestby

Diversified Industries Chris Murray, P.Eng., CFA, Senior Analyst 647 776 8246 cmurray Samarth Modwal, Associate 647 776 8245 smodwal

Agriculture Peter Prattas, CPA, CA, CFA, Analyst 647 776 8240 pprattas Stuart Pattillo, Associate 647 776 8254 spattillo

All Sectors Victoria Hoa, Research Assistant 403 539 8607 vhoa __________________________________________________________________________________________________________

Institutional Sales

Calgary Kerk Hilton 403 539 8608 khilton

Toronto Paul Sarachman, CFA, FCSI 647 776 8250 psarachman Adam Carlson 647 776 8242 acarlson Jamie Riff 647 776 8233 jriff Tim Miller 647 776 8237 tmiller __________________________________________________________________________________________________________

Institutional Trading

Calgary Tate Pinder 403 539 8613 tpinder Shane Dungey 403 539 8605 sdungey

Toronto Mervin Kopeck 647 776 8040 mkopeck Jon Varley 647 776 8235 jvarley Michael Capobianco 647 776 8231 mcapobianco __________________________________________________________________________________________________________

Investment Banking

George Gosbee 403 539 8601 ggosbee

Debt Capital Markets Jason Caldarelli 647 776 8243 jcaldarelli

Exploration & Production Gurdeep Gill, CFA 403 539 8618 ggill Mark Reynolds, CFA 403 539 8619 mreynolds

Oilfield Services Jesse Hardage 403 539 8628 jhardage

Agriculture & Diversified Industries Jeff Fallows, CFA 647 776 8221 jfallows

All Sectors Patrick Stables 403 539 8604 pstables Edward Otto 647 776 8223 eotto Greg Smiddy 403 539 8595 gsmiddy Alex Athanasopoulos 647 776 8072 aathanasopoulos Yi Huang 403 539 8614 yhuang Blake Eshleman 403 539 8609 beshleman Tyler Press 647 776 8224 tpress __________________________________________________________________________________________________________

Acquisitions & Divestitures

Leslie Kende, P.Eng. 403 539 8622 lkende Bruce Alexander, P.Geol. 403 539 8616 balexander Amy Trynor, P.Eng. 403 539 8623 atrynor Kelly Wylie 403 539 8589 kwylie __________________________________________________________________________________________________________

Private Wealth

David Lush, Head of Private Wealth 403 539 8634 dlush Vojtech Krb, Investment Advisor 403 539 8611 vkrb Tomasz Okuszko, Investment Advisor 403 539 8603 tokuszko Michelle Hennebery, Client & Marketing Coordinator 403 539 8632 mhennebery

12


COMPANY UPDATE


Index Implications of the Recent Move in Share Prices

Index Inclusion Could Provide the Next Catalyst: With the recent move in New Flyer Industries share prices and increase in market capitalization, we believe the company is increasingly eligible for inclusion in the S&P/TSX Composite Index, which we believe could provide a catalyst for share prices. The next rebalance announcement is expected after market close on December 11, with implementation scheduled for December 18 after market close.

Major Criteria for Inclusion: The major criteria to be included in the S&P/TSX Composite include a float adjusted market cap greater than 0.05% of the index float weighted market cap after including the weight of the companys own addition, a volume test that calls for a float turnover of greater than 0.5x of the trailing 12-month period volume and a predominate domicile in Canada.

Early Signs Point to Meeting Thresholds: We estimate NFI shares would have to trade above $21.75 during the measurement period in order to be eligible for inclusion. We also estimate the companys trailing float turnover at 1.09x.

Previous Inclusions Indicate Positive Impact: We believe the discussion around New Flyers possible inclusion in the S&P/TSX Composite Index could create a near-term catalyst for share prices. We have reviewed share price behaviour of other companies added to this index since 2012, looking at performance at various intervals relative to the announcement date of their inclusion. Generally, we have seen strong returns across sectors leading into the announcement date as we believe investors take positions in advance of the announcement in anticipation of inclusion. We believe the inclusion on a company in such a key index increases the breadth of potential institutional investors and enhances trading liquidity. Within the industrial subgroup, our data set showed a return of 9.4% 30 days prior to the announcement date. While individual stock fundamentals are important to consider, we believe this trend is instructive for New Flyer holders.

Maintain Outperform and $35.00 Target: While we remain positively biased on our fundamental outlook for New Flyer shares, we believe investors should consider the impact of the near-term tactical allocation of a positon given the historical performance of shares considered for addition to major indices. We caution however that this can be a double edged sword should NFI fail to be included we would expect a sharp reversal in share prices. We maintain our Outperform rating and our 12-month price target of C$35.00. Our target price is based on a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward valuation period as well as an exchange rate of C$1.32/$US.

NFI | TSX

$24.36 Rating: Outperform One Year Target: C$35.00 Total Return: 46.5% Yield: 2.8% November 16, 2015




EBITDA ($mm) Q1 Q2 Q3 Q42014 $19.7 $27.0 $25.7 $35.02015 $31.4 $39.2 $36.3 $37.9e2016 $51.9e $52.8e $69.0e $69.8e

Adjusted FD EPS Q1 Q2 Q3 Q42014 $0.10 $0.16 $0.15 $0.242015 $0.20 $0.30 $0.26 $0.23e2016 $0.29e $0.31e $0.52e $0.53e


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13





Income Statement 2014 2015e 2016e 2017e Trend Free Cash Flow (FCF) 2014 2015e 2016e 2017e TrendRevenues Cash provided by operations 45,823 80,172 100,496 177,337Bus Manufacturing 1,132,066 1,231,170 2,016,079 2,075,781 Changes in non-cash w orking capital 35,255 9,367 62,883 16,023Aftermarket 319,034 320,916 434,615 455,938 OCF less w orking capital 81,078 89,538 163,379 193,360Revenue 1,451,100 1,552,086 2,450,693 2,531,719 Principal portion of capital lease payments (1,766) (1,908) (2,004) (2,004)Aftermarket % of Total 22.0% 20.7% 17.7% 18.0% Net capital expenditures (10,889) (12,502) (30,278) (36,908)EBITDA - Bus Manufacturing 57,374 82,262 145,663 153,647 Non-operating, non-recurring items affecting FCF 15,398 7,766 - -



Margin 6.0% 8.8% 9.9% 10.9% Free cash f low (C$) 92,829 104,615 173,985 198,313Adjusted EBITDA 107,365 144,793 243,560 274,816 per Share $1.67 $1.88 $3.13 $3.57

Margin 7.4% 9.3% 9.9% 10.9% FCF Yield 6.9% 7.7% 12.9% 14.7%Amortization 35,837 42,564 60,691 59,052 FCF per share grow th 82.8% 12.6% 66.3% 14.0%Operating Earnings 50,620 93,669 182,869 215,763EBT 37,568 76,452 145,217 190,679 Dividend Per Share (C$) 2014 2015e 2016e 2017e TrendTaxes 10,849 23,890 53,730 70,551 Dividends Declared on Common Shares (C$) 32,457 33,931 38,854 38,854Net Income 26,719 52,562 91,487 120,128 Ratio of Dividends Declared to FCF 35.0% 32.4% 22.3% 19.6%

Reported FD EPS $0.48 $0.95 $1.65 $2.16 Dividends on Common Shares $0.585 $0.611 $0.700 $0.700Adjusted FD EPS $0.65 $0.99 $1.65 $2.16 Cash Yield 2.4% 2.5% 2.9% 2.9%






Note: All amounts in US$ 000's, unless otherw ise specif ied.Source: New Flyer Industries Inc., AltaCorp Capital Inc.

2015, 8%

2016, 16%

2017, 10%

2018, 26%

2019, 28%

2020, 12%

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15

Firm Option



14


Looking at Index Implications of the MCI Acquisition With the recent move in New Flyer Industries share prices and increase in market capitalization, we believe the company is increasingly eligible for inclusion in the S&P/TSX Composite Index, which we believe could provide a catalyst for share prices. The next rebalance announcement is expected after market close on December 11, with implementation scheduled for December 18 after market close.

The major criteria to be included in the S&P/TSX Composite include a float adjusted market cap greater than 0.05% of the index float weighted market cap after including the weight of the companys own addition, a volume test that calls for a float turnover of greater than 0.5x of the trailing 12-month period volume and a predominate domicile in Canada.

Threshold Calculations for Index Inclusion Last Price Market Cap S&P/TSX Composite Index 13,075.42 1,629,664,500Estimated Float Weighted Market Cap for 0.05% inclusion 815,240New Flyer Industries $24.36 Float Turnover (>0.50x) 1.09x Share Price >$1 TRUE Units Outstanding (mm) 55.520 Float Adjustment Factor 0.6751 Share Price Needed to make threshold $21.75

Figure 1 Threshold Calculations for Index Inclusion Source: Bloomberg, AltaCorp Capital Inc.

In replicating these criteria based on Fridays closing prices, we estimate NFI shares would have to trade above $21.75 during the measurement period in order to be eligible for inclusion. In our calculations, we have used the float adjustment factor provided by Bloomberg of 0.6751, which reflects the large blocks held by Marcopolo S.A. as well as Coliseum Capital along with insider holdings as reported through SEDI. We also estimate the companys trailing float turnover at 1.09x. With its headquarters in Winnipeg and operations across Canada, reinforced with the addition of MCI we do not see an issue with domicile. We note NFI shares and debentures currently have their primary listing on the TSX, which is an additional criteria for consideration.



15


We believe the discussion around New Flyers possible inclusion in the S&P/TSX Composite Index could create a near-term catalyst for share prices. We have reviewed share price behaviour of other companies added to this index since 2012, looking at performance at various intervals relative to the announcement date of their inclusion. Generally, we have seen strong returns across sectors leading into the announcement date as we believe investors take positions in advance of the announcement in anticipation of inclusion. We believe the inclusion on a company in such a key index increases the breadth of potential institutional investors and enhances trading liquidity. Within the industrial subgroup, our data set showed a return of 9.4% 30 days prior to the announcement date. While individual stock fundamentals are important to consider, we believe this trend is instructive for New Flyer holders.

Impact of Index Additions on Share Prices

Figure 2 Impact of Index Additions on Share Prices Source: Capital IQ, S&P Dow Jones Indices, AltaCorp Capital Inc.

While we remain positively biased on our fundamental outlook for New Flyer shares, we believe investors should consider the impact of the near-term tactical allocation of a positon given the historical performance of shares considered for addition to major indices. We caution however that this can be a double edged sword should NFI fail to be included we would expect a sharp reversal in share prices. We maintain our Outperform rating and our 12-month price target of C$35.00. Our target price is based on a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward valuation period as well as an exchange rate of C$1.32/$US.




16



Trading Local Market EVTicker Currency Price Cap ($mm) ($mm) 2014 2015e 2016e 2014 2015e 2016e

New Flyer Industries Inc. TSX:NFI OP (C$35.00) CAD 24.36 1,352.5 249.8 1,263.5 27.9x 18.5x 11.1x 11.8x 8.7x 6.8x 2.1x 7.0% 10.2%Marcopolo S.A. BOVESPA:POMO4 NR BRL 2.34 2,054.1 1,305.5 3,393.4 7.0x 10.5x 7.8x 12.6x 16.2x 9.9x 1.1x 2.3% 8.2%Wajax Corporation TSX: WJX NR CAD 17.36 346.9 167.5 514.4 7.1x 10.7x 10.3x 6.2x 6.6x 6.4x 1.1x 7.9% 11.7%Ag Grow th International Inc. TSX: AFN NR CAD 30.61 439.7 323.6 768.3 NM 14.3x 9.3x 12.1x 10.2x 7.5x 1.7x 4.1% (9.6%)Superior Plus Corp. TSX: SPB NR CAD 9.98 1,402.9 927.2 2,330.1 22.1x 17.3x 10.7x 8.3x 8.3x 6.8x 2.3x 6.0% 7.2%The Greenbrier Companies, Inc. GBX NR USD 31.95 909.4 204.4 1,244.5 6.9x 4.8x 5.7x 4.8x 2.5x 3.0x 1.3x 21.5% 36.9%Oshkosh Corporation OSK NR USD 40.96 3,251.8 896.3 4,147.4 11.7x 15.3x 11.6x 7.0x 8.4x 7.0x 1.6x 8.7% 11.8%Spartan Motors Inc. SPAR NR USD 3.70 126.8 (15.7) 111.0 NM NM 38.9x 11.8x 13.7x 10.2x 0.8x 0.8% (4.7%)Wabash National Corp. WNC NR USD 12.67 842.5 135.8 978.3 14.4x 9.1x 9.2x 6.1x 4.6x 4.7x 2.0x 13.7% 22.6%Thor Industries Inc. THO NR USD 53.55 2,810.4 (176.3) 2,634.1 15.1x 13.6x 11.9x 8.8x 7.9x 6.7x 2.6x 17.7% 19.8%Winnebago Industries, Inc. WGO NR USD 20.40 550.4 (70.2) 480.2 12.7x 13.3x 11.7x 7.3x 7.3x 6.4x 2.5x 18.1% 19.9%Navistar International Corporation NAV NR USD 12.16 991.3 4,511.0 5,512.3 NM NM 4.8x 16.7x 9.8x 7.3x NM 9.7% NMStudent Transportation Inc. TSX: STB NR CAD 5.46 526.9 274.2 896.5 NM NM NM 13.0x 12.8x 10.3x 2.2x 2.5% 1.8%Blue Bird Corporation BLBD NR USD 10.75 224.4 188.1 462.5 NM 14.1x 9.3x 17.8x 6.1x 5.7x NM 4.5% NMCubic Corporation CUB NR USD 43.42 1,167.3 (43.0) 1,124.5 17.6x 17.8x 15.6x 9.4x 9.3x 8.5x 1.5x 5.8% 4.6%Average 14.3x 13.3x 12.0x 10.2x 8.8x 7.2x 1.8x 8.7% 10.8%

Source: Capital IQ, Company Reports, AltaCorp Capital Inc.NFI 2016e EV/EBITDA is based on pro forma Enterprise Value of $1665.6, assuming close of MCI acquisition in Q4/15As of November 16, 2015. All figures in millions, unless otherwise noted.

Rating &Target

NetDebt

Price to BV

ROICP/E

ROEEV/EBITDA



17


NFI

Rating:

12 Month Target:

C$24.36

Outperform

C$35.00



N




N


N


N


issuer?N


N


N


N


N

RankingDistribution

% IBClients


Total 100% 18%

Rating System





The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for thesale or purchase of securities. While the accuracy or completeness of the information contained in this document cannot beguaranteed by AltaCorp Capital Inc., it was obtained from sources believed to be reliable. AltaCorp Capital Inc. and/or itsofficers, directors and employees may from time to time acquire, hold or sell positions in the securities mentioned herein asprincipal or agent.The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views aboutthe subject security and issuer.The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to thespecific recommendations or views contained in this research report.AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers underresearch coverage within the next three months.This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and MarketsAct 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of theFinancial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be reliedupon, by any other person.AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and acceptsresponsibility for the content in this research report.U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital(USA) Inc. at 403-539-8600.



18

George FJ Gosbee Chairman & CEO 403 539 8601 [email protected]

Paul Sarachman, CFA, FCSI President Managing Director Capital Markets 647 776 8250 [email protected]

ATB Financial

Dave Mowat President & CEO 780 408 7181 [email protected]

Ian Wild Executive Vice President 403 974 5127 [email protected]

CALGARY 410, 585 8 Avenue SW Calgary AB Canada T2P 1G1 403 539 8600 Main 403 539 8575 Fax TORONTO 66 Wellington Street West, Suite 3530 Toronto, ON Canada M5K 1A1 647 776 8230 Main 647 776 8248 Fax

www.altacorpcapital.com member CIPF IIROC FINRA SIPC

Direct @altacorpcapital.com __________________________________________________________________________________________________________

Institutional Equity Research

E&P- Domestic Patrick J. ORourke, CFA, Analyst 403 539 8615 porourke Yasir Siddiqi, Associate 403 539 8626 ysiddiqi Nicholas Lupick, CFA, Analyst 403 539 8592 nlupick Sunneva Bernhardsdottir, Associate 403 539 8635 sbernhardsdottir Thomas Matthews, P.Eng., CFA, Analyst 403 539 8621 tmatthews Christian Erana, Associate 403 539 8581 cerana

Energy Infrastructure Dirk Lever, CA, Senior Analyst 403 539 8606 dlever Ward Hallett, CA, Associate 403 539 8598 whallett

Oilfield Services Dana Benner, CFA, Senior Analyst 403 539 8620 dbenner Karim Merali, Associate 403 539 8594 kmerali Mark Westby, Analyst 403 539 8591 mwestby

Diversified Industries Chris Murray, P.Eng., CFA, Senior Analyst 647 776 8246 cmurray Samarth Modwal, Associate 647 776 8245 smodwal

Agriculture Peter Prattas, CPA, CA, CFA, Analyst 647 776 8240 pprattas Stuart Pattillo, Associate 647 776 8254 spattillo

All Sectors Victoria Hoa, Research Assistant 403 539 8607 vhoa __________________________________________________________________________________________________________

Institutional Sales

Calgary Kerk Hilton 403 539 8608 khilton

Toronto Paul Sarachman, CFA, FCSI 647 776 8250 psarachman Adam Carlson 647 776 8242 acarlson Jamie Riff 647 776 8233 jriff Tim Miller 647 776 8237 tmiller __________________________________________________________________________________________________________

Institutional Trading

Calgary Tate Pinder 403 539 8613 tpinder Shane Dungey 403 539 8605 sdungey

Toronto Mervin Kopeck 647 776 8040 mkopeck Jon Varley 647 776 8235 jvarley Michael Capobianco 647 776 8231 mcapobianco __________________________________________________________________________________________________________

Investment Banking

George Gosbee 403 539 8601 ggosbee

Debt Capital Markets Jason Caldarelli 647 776 8243 jcaldarelli

Exploration & Production Gurdeep Gill, CFA 403 539 8618 ggill Mark Reynolds, CFA 403 539 8619 mreynolds

Oilfield Services Jesse Hardage 403 539 8628 jhardage

Agriculture & Diversified Industries Jeff Fallows, CFA 647 776 8221 jfallows

All Sectors Patrick Stables 403 539 8604 pstables Edward Otto 647 776 8223 eotto Greg Smiddy 403 539 8595 gsmiddy Alex Athanasopoulos 647 776 8072 aathanasopoulos Yi Huang 403 539 8614 yhuang Blake Eshleman 403 539 8609 beshleman Tyler Press 647 776 8224 tpress __________________________________________________________________________________________________________

Acquisitions & Divestitures

Leslie Kende, P.Eng. 403 539 8622 lkende Bruce Alexander, P.Geol. 403 539 8616 balexander Amy Trynor, P.Eng. 403 539 8623 atrynor Kelly Wylie 403 539 8589 kwylie __________________________________________________________________________________________________________

Private Wealth

David Lush, Head of Private Wealth 403 539 8634 dlush Vojtech Krb, Investment Advisor 403 539 8611 vkrb Tomasz Okuszko, Investment Advisor 403 539 8603 tokuszko Michelle Hennebery, Client & Marketing Coordinator 403 539 8632 mhennebery

19


COMPANY UPDATE


Executing on the Promise of the Strategy The Acquisition of MCI Builds a Diversified Transportation Leader

Buying MCI: New Flyer announced that the company has entered into a definitive agreement to acquire Motor Coach Industries International Inc. (MCI) from an affiliate of KPS Capital L.P. and Daimler. The cash purchase price of $455mm represents an implied multiple of 6.0x 2015e EBITDA although we note there are likely a number of other minor working capital and pension adjustments to be reconciled. Management expects the transaction to close by the end of 2015 subject to customary closing conditions including clearing competition regulators.

About MCI: MCI is a leading motor coach manufacturer and parts and service supplier in North America with an installed base of ~28,000 units and a 42% motor coach market share. The company is ~2x the size of its nearest competitor and the leading coach provider both in the public and private sectors. For the nine months ended September 30, 2015, MCI delivered 576 new coaches (EU), representing ~$315mm in revenue with aftermarket parts and service business contributing ~$128mm.

Highly Accretive to Estimates: We update our estimates to reflect the effect of the acquisition and respective additional debt. Our 2016e EBITDA increases to $243.6mm from $157.7mm with no material change in our 2015 estimate. Our 2017e estimate for Adjusted EBITDA increases to $274.8mm from $168.6mm, which includes $22mm in synergies. We also believe it important to mention the considerable increase in free cash flow despite our expectations for additional capital spending at MCI. We forecast a 33.1% and 45.6% increase in free cash flow on an absolute and per share basis with 2016 free cash flow at $174.0mm and 2017 at $198.3mm, up from $104.6mm in 2015.

Maintain Outperform; Increasing Target to C$35.00: The acquisition of MCI fulfills the long-held promise of the benefits of operational excellence as well as building the next phase of the story. We expect the combination should lead to improved margins, cash flows, returns on capital deployed and ultimately on share prices. We also expect the move to a higher market cap as well as the possible inclusion in a number of indices including the S&P/TSX Composite with a threshold on float weight at approximately $22 during the December / January rebalance should be constructive for share prices. Despite a number of positive trading biases however, the companys fundamental outlook greatly improved in our opinion with the announcement of the MCI transaction and we continue to recommend investors evaluate a position at current levels. We maintain our Outperform rating and are increasing our 12-month price target to C$35.00 from C$26.00, previously. Our target price is based on a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward valuation period as well as an exchange rate of C$1.32/$US.

NFI | TSX

$23.90 Rating: Outperform One Year Target: C$35.00 (previously $26.00) Total Return: 49.3% Yield: 2.8% November 11, 2015




EBITDA ($mm) Q1 Q2 Q3 Q42014 $19.7 $27.0 $25.7 $35.02015 $31.4 $39.2 $36.3e $37.9e2016 $51.9e $52.8e $69.0e $69.8e

Adjusted FD EPS Q1 Q2 Q3 Q42014 $0.10 $0.16 $0.15 $0.242015 $0.20 $0.30 $0.26e $0.23e2016 $0.29e $0.31e $0.52e $0.53e


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Income Statement 2014 2015e 2016e 2017e Trend Free Cash Flow (FCF) 2014 2015e 2016e 2017e TrendRevenues Cash provided by operations 45,823 80,172 100,496 177,337Bus Manufacturing 1,132,066 1,231,170 2,016,079 2,075,781 Changes in non-cash w orking capital 35,255 9,367 62,883 16,023Aftermarket 319,034 320,916 434,615 455,938 OCF less w orking capital 81,078 89,538 163,379 193,360Revenue 1,451,100 1,552,086 2,450,693 2,531,719 Principal portion of capital lease payments (1,766) (1,908) (2,004) (2,004)Aftermarket % of Total 22.0% 20.7% 17.7% 18.0% Net capital expenditures (10,889) (12,502) (30,278) (36,908)EBITDA - Bus Manufacturing 57,374 82,262 145,663 153,647 Non-operating, non-recurring items affecting FCF 15,398 7,766 - -



Margin 6.0% 8.8% 9.9% 10.9% Free cash f low (C$) 92,829 104,615 173,985 198,313Adjusted EBITDA 107,365 144,793 243,560 274,816 per Share $1.67 $1.88 $3.13 $3.57

Margin 7.4% 9.3% 9.9% 10.9% FCF Yield 7.0% 7.9% 13.1% 14.9%Amortization 35,837 42,564 60,691 59,052 FCF per share grow th 82.8% 12.6% 66.3% 14.0%Operating Earnings 50,620 93,669 182,869 215,763EBT 37,568 76,452 145,217 190,679 Dividend Per Share (C$) 2014 2015e 2016e 2017e TrendTaxes 10,849 23,890 53,730 70,551 Dividends Declared on Common Shares (C$) 32,457 33,931 38,854 38,854Net Income 26,719 52,562 91,487 120,128 Ratio of Dividends Declared to FCF 35.0% 32.4% 22.3% 19.6%

Reported FD EPS $0.48 $0.95 $1.65 $2.16 Dividends on Common Shares $0.585 $0.611 $0.700 $0.700Adjusted FD EPS $0.65 $0.99 $1.65 $2.16 Cash Yield 2.4% 2.6% 2.9% 2.9%






Note: All amounts in US$ 000's, unless otherw ise specif ied.Source: New Flyer Industries Inc., AltaCorp Capital Inc.

2015, 8%

2016, 16%

2017, 10%

2018, 26%

2019, 28%

2020, 12%

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15

Firm Option



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New Flyer Announces the Acquisition of MCI New Flyer (NFI-T) announced that the company has entered into a definitive agreement to acquire Motor Coach Industries International Inc. (MCI) from an affiliate of KPS Capital L.P. and Daimler. The cash purchase price of $455mm represents an implied multiple of 6.0x 2015e EBITDA although we note there are likely a number of other minor working capital and pension adjustments to be reconciled. Management expects the transaction to close by the end of 2015 subject to customary closing conditions including clearing competition regulators.

The transaction is expected to be funded through a new $825mm senior secured credit facilities comprising of a four year maturity of a $482mm term loan and a US$343mm revolver. Management expects the revolver to be ~$135mm drawn which would represent a pro forma debt to Adjusted EBITDA of ~3.0x at closing assuming the outstanding debentures are treated as equity.

About MCI

MCI is a leading motor coach manufacturer and parts and service supplier in North America with an installed base of ~28,000 units and a 42% motor coach market share. The company is ~2x the size of its nearest competitor and the leading coach provider both in the public and private sectors. For the nine months ended September 30, 2015, MCI delivered 576 new coaches (EU), representing ~$315mm in revenue with aftermarket parts and service business contributing ~$128mm.

MCI Key Market Statistics

Figure 1 MCI Key Market Statistics Source: New Flyer Industries Inc., AltaCorp Capital Inc.

MCIs revenue streams are split into three main segments, New Coach (public and private), Pre-Owned Coach and Aftermarket. Within the New Coach segment, MCI targets the mid-range to luxury segments for private and the mid-range for public clients, including transit authorities, universities, Federal Government and Correctional Facilities. The Pre-Owned segment caters to value customers within the private market as well as small private fleet operations. Coaches are refurbished at MCIs service centres and a trade-in option is also available. The Aftermarket segment provides support to an installed coach fleet of 28,000 buses with a North American footprint which includes six service centres, three distribution facilities and over 3,000 emergency response partners.



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MCIs Revenue Streams and Target Markets

Figure 1 MCIs Revenue Streams and Target Markets Source: New Flyer Industries Inc., AltaCorp Capital Inc.

MCI has long-standing relationships with major transit authorities in North America, some of whom are also long-time New Flyer customers. There is limited concentration in the market with the 10 largest operators in North America accounting for ~44% of new coach volume in 2014. Of particular importance is the recent $395mm award for 722 coaches ($512k/unit) over a five-year period by the New Jersey Transit Authority (NJTA) to replace the majority of the existing fleet. MCIs relationship dates back to 1982 with the company having been awarded the largest public transit award in North American history for 1,400 coaches in 2000. We believe MCI remains ideally positioned for new contract wins from NJTA as well as other transit authorities. In addition, the contract calls for an average of 75 buses per year over the five-year term.

Within the private market, the company has strong relationships with key fleet operators including Coach USA and Greyhound. While private coach orders have limited visibility, NFIs management highlighted the historical consistent growth within the segment.

MCIs Customer Base

Figure 2 MCIs Customer Base Source: New Flyer Industries Inc.



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MCIs revenues have grown consistently over the last four years with robust growth in both pricing and volumes. Revenue per EU has increased to $446K YTD, highlighting the higher margins in the private market segment. We note the NJTA contract is expected to contribute to 2016 volume and beyond.

MCI Historical Financial Performance

Figure 2 MCI Historical Financial Performance Source: New Flyer Industries Inc., AltaCorp Capital Inc.

Acquisition Expands New Flyers Portfolio in a Healthy Demand Environment

The demand environment for the motor coach industry continues to look strong with expected deliveries of ~2,100 coaches in 2015, up ~9% y/y. Management expects population growth and urbanization to continue to support moderate growth rate within the segment. We note demand across transit authorities is expected to stabilize with the private sectors driving majority of the growth in the coming years, including an increasing corporate use of buses.

Canada and US Motor Coach Industry Annual Deliveries of New Coaches

Figure 3 Canada and US Motor Coach Industry Annual Deliveries of New Coaches Source: New Flyer Industries Inc.

The acquisition of MCI diversifies NFIs product offering by not only providing significant exposure to the private coach industry but also materially expanding NFIs aftermarket parts and service business. The transaction is expected to be highly accretive to EPS and free cash flow per share before synergies. The combined entity will employ~4,800 people and support an installed base of over 42,000 transit buses and 28,000 motor coaches across North America.

The acquisition of MCI will allow New Flyer access to the private market while building on a significant aftermarket segment. MCI will introduce new capabilities, including preventative maintenance, spare parts and accident repair. MCI has over 3,000 approved independent service locations to support their fleet. The company is also the North American distributor of Daimlers Setra coaches, considered a premium product positioned above the MCI brands and also provides exclusive sales and service support for the fleet in Canada and the U.S. Management expects the present relationship to continue noting that any anti-trust issues are



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unlikely given that Setra is a differentiated offering, outside of MCIs target mid-range coaches.

There remains a complementary geographic footprint of the two companies noting that MCIs manufacturing locations are closely aligned with NFIs in both US and Canada. With the expected completion of the acquisition, the combined entity will have manufacturing facilities in North Dakota, Alabama, Minnesota and Manitoba.

Combined Manufacturing, Parts & Service Footprint

Figure 3 Combined Manufacturing, Parts & Service Footprint Source: New Flyer Industries Inc.

The company is targeting annual synergies of ~$10mm expected to be realized through operational initiatives and rationalization of corporate costs. NFIs management highlighted that the company will seek to standardize the IT systems in MCI as the first priority. Management declined to comment on expected synergies, especially from the aftermarkets segment, stating that further updates will be announced as the company moves forward in the integration process. We believe that management is remaining decidedly conservative in its estimate for synergies given the geographic proximity of certain manufacturing facilities as well as possible sourcing and operational efficiencies from the synchronization of MCIs aftermarket segment. Management also believe that revenue synergies are limited with both companies sharing a majority of the customers.

Our core belief with regards to synergies and our scepticism in managements target comes from our understanding of the progress the company has made in becoming a world-class manufacturer. At a minimum, bringing the MCI operation up to current standard should afford a multiple of the proposed synergies. We remind investors that the initial $20mm investment planned to integrate NABI called for a two to three-year payback. At Q3/15, management revised expected synergies at $16.5mm and indicated it likely that further gains were possible. We find it difficult to believe that a significantly larger organization, which essentially emerged from bankruptcy in 2010 and that has significant information systems issues does not offer dramatically higher levels of opportunities. One of the hallmarks of our thesis



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surrounding New Flyer remains our previous experience of the financial gains of the implementation of lean principles in a manufacturing operation, reinforced only by the higher level of standard production of the MCI product portfolio. Ultimately, we believe the synergies from this transaction, with the core competencies demonstrated by the management team at NFI to be able to integrate discreet manufacturing operations are likely to be multiples of the initial base. We believe it important to note that this does not imply material head count changes rather this is very much is a Demingesqe shift in the ability of management to radically improve the operating system. We expect a combination of process improvements, internalization of work where accretive, purchasing synergies, efficiencies garnered from information systems and employee engagement offer a host of margin enhancement opportunities; all we expect which drive margin expansion.

Forecast and Outlook

Management noted that there is considerable seasonality in MCIs revenues, particularly on the private side with ~70% of total sales in H2. We estimate 2015e revenue from MCI to be ~$661mm assuming that 65% of the companys bus manufacturing revenues and 75% of aftermarket revenues were realized by Q3/15. Using a 6.0x EBITDA multiple of the purchase price, we estimate 2015e MCI EBITDA of $75.8mm, implying an ~11.5% EBITDA margin. Although no backlog or production rate details were provided for MCI, we assume the company remains on track to deliver ~1,174 EU in 2015. In our 2016 estimates, the most important impact stems from the New Jersey contract, which likely represents the majority of y/y improvement stemming from an average sell price of $512k/unit as well as our forecast for the shipment of 1,356 units which represents the base and options order from the NJT contract. We expect further growth in 2017, with production rates normalising with 1,435 units delivered.

With the closing of the acquisition, New Flyer intends to increase dividends by 12.9% from C$0.62 to C$0.70 per share. The company has also moved from a monthly to a quarterly payment schedule, consistent with other large mid-cap companies.

We update our estimates to reflect the effect of the acquisition and additional debt on the balance sheet. Our 2016e EBITDA increases to $243.6mm from $157.7mm with no material change in our 2015 estimate. Our 2017e estimate for Adjusted EBITDA increases to $274.8mm from $168.6mm, which includes $22mm in synergies. We also believe it important to mention the considerable increase in free cash flow despite our expectations for additional capital spending at MCI. We forecast a 33.1% and 45.6% increase in free cash flow on an absolute and per share basis with 2016 free cash flow at $174.0mm and 2017 at $198.3mm, up from $104.6mm in 2015. A summary of our key changes to estimates is provided in the figure below.



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Change in Estimates ($000s, except per share)

Figure 4 Change in Estimates Source: AltaCorp Capital Inc.

The acquisition of MCI fulfills the long-held promise of the benefits of operational excellence as well as building the next phase of the story. We expect the combination should lead to improved margins, cash flows, returns on capital deployed and ultimately on share prices. We also expect the move to a higher market cap as well as the possible inclusion in a number of indices including the S&P/TSX Composite with a threshold on float weight at approximately $22 during the December / January rebalance should be constructive for share prices. Despite a number of positive trading biases however, the companys fundamental outlook greatly improved in our opinion with the announcement of the MCI transaction and we continue to recommend investors evaluate a position at current levels.

We maintain our Outperform rating and are increasing our 12-month price target to C$35.00 from C$26.00, previously. Our target price is based on a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward valuation period as well as an exchange rate of C$1.32/$US.


2015e 2016e 2017e 2015e 2016e 2017e 2015e 2016e 2017eRevenue

Bus Manufacturing 1,231,170 1,399,122 1,419,613 1,231,170 2,016,079 2,075,781 0.0% 44.1% 46.2%Aftermarket 320,916 298,615 314,498 320,916 434,615 455,938 0.0% 45.5% 45.0%

Revenue 1,552,086 1,697,736 1,734,111 1,552,086 2,450,693 2,531,719 0.0% 44.4% 46.0%Aftermarket % of Total 20.7% 17.6% 18.1% 20.7% 17.7% 18.0% 0 bps 15 bps (13) bps

EBITDAEBITDA - Bus Manufacturing 82,262 93,528 99,373 82,262 145,663 153,647 0.0% 55.7% 54.6%

Margin - Bus Manufacturing 6.7% 6.7% 7.0% 6.7% 7.2% 7.4% 0 bps 54 bps 40 bpsEBITDA - Aftermarket Ops. 62,531 64,199 69,190 62,531 87,897 92,888 0.0% 36.9% 34.3%

Margin - Aftermarket Ops. 19.5% 21.5% 22.0% 19.5% 20.2% 20.4% 0 bps (127) bps (163) bpsTotal EBITDA incl. Other/ Synergies 136,232 157,726 168,562 136,232 243,560 274,816 0.0% 54.4% 63.0%

Margin 8.8% 9.3% 9.7% 8.8% 9.9% 10.9% 0 bps 65 bps 113 bps

Adjusted EBITDA 144,793 157,726 168,562 144,793 243,560 274,816 0.0% 54.4% 63.0%Margin 9.3% 9.3% 9.7% 9.3% 9.9% 10.9% 0 bps 65 bps 113 bps

Operating Earnings 96,873 118,318 130,053 93,669 182,869 215,763 (3.3%) 54.6% 65.9%EBT 80,931 106,633 118,749 76,452 145,217 190,679 (5.5%) 36.2% 60.6%

Net Income 55,383 67,179 74,812 52,562 91,487 120,128 (5.1%) 36.2% 60.6%Reported FD EPS $1.00 $1.21 $1.35 $0.95 $1.65 $2.16 (5.1%) 36.2% 60.6%Adjusted FD EPS $1.04 $1.21 $1.35 $0.99 $1.65 $2.16 (4.9%) 36.2% 60.6%

Free Cash FlowCash provided by operations 80,121 126,851 111,492 80,172 100,496 177,337 0.1% (20.8%) 59.1%OCF less w orking capital 89,487 114,933 122,178 89,538 163,379 193,360 0.1% 42.2% 58.3%Net capital expenditures (12,502) (14,556) (14,070) (12,502) (30,278) (36,908) 0.0% 108.0% 162.3%Free Cash Flow 81,882 98,373 106,104 81,933 131,098 154,448 0.1% 33.3% 45.6%

Free cash f low (C$) 104,547 130,702 136,341 104,615 173,985 198,313 0.1% 33.1% 45.5%per Share $1.88 $2.35 $2.46 $1.88 $3.13 $3.57 0.1% 33.1% 45.5%FCF Yield 9.4% 11.8% 12.3% 8.9% 14.8% 16.8% (54) bps 299 bps 455 bps

Dividends Declared on Common Shares (C$) 33,931 34,413 34,413 33,931 38,854 38,854 0.0% 12.9% 12.9%Ratio of Dividends Declared to FCF 32.5% 26.3% 25.2% 32.4% 22.3% 19.6% (2) bps (400) bps (565) bpsDividends on Common Shares $0.61 $0.62 $0.62 $0.61 $0.70 $0.70 0.0% 12.9% 12.9%

LeverageNet Debt (EOP) 196,942 110,547 39,908 651,891 610,915 500,725 231.0% 452.6% 1154.7%Net Debt to Trailing EBITDA 1.4x 0.7x 0.2x 4.5x 2.5x 1.8x 231.0% 257.9% 669.6%Net Debt to Total Capitalization 29.0% 17.4% 6.5% 57.6% 53.0% 44.2% 98.8% 204.2% 578.1%

Key Operating MetricsBus Deliveries (Equivalent Units (EU)) 2,503 2,709 2,735 2,503 4,065 4,170 0.0% 50.1% 52.5%Revenue Per EU (US$000's) 491.9 516.5 519.1 491.9 496.0 497.8 0.0% (4.0%) (4.1%)EBITDA Per EU (US$000's) 32.9 34.5 36.3 32.9 35.8 36.8 0.0% 3.8% 1.4%Average Weekly Line Entry Rate (EU) 48.0 50.7 51.6 48.0 77.1 80.7 0.0% 52.1% 56.4%Book:Bill Ratio (New Orders+Exercised Options) 1.1x 1.0x 1.0x 1.1x 1.0x 1.0x 0.0% 0.0% 0.0%Option Expiry as % of Opening Options 5.0% 18.4% 19.9% 5.0% 18.4% 19.9% 0 bps 0 bps 0 bps

ACC Old Estimates ACC New Estimates Change



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Trading Local MarketTicker Currency Price Cap ($mm) 2014 2015e 2016e 2014 2015e 2016e

New Flyer Industries Inc. TSX:NFI OP (C$35.00) CAD 23.90 1,326.9 27.5x 18.2x 10.9x 11.7x 8.6x 6.8x 2.1x 7.0% 10.2%Marcopolo S.A. BOVESPA:POMO4 NR BRL 2.32 1,922.6 7.0x 13.2x 7.8x 12.1x 14.7x 9.5x 1.1x 2.3% 8.2%Wajax Corporation TSX: WJX NR CAD 17.72 354.1 7.2x 10.9x 10.5x 6.3x 6.7x 6.5x 1.1x 7.9% 11.7%Ag Grow th International Inc. TSX: AFN NR CAD 30.56 438.9 NM 14.3x 9.3x 12.1x 10.2x 7.5x 1.7x 6.1% (2.5%)Superior Plus Corp. TSX: SPB NR CAD 10.53 1,480.2 23.4x 18.2x 11.3x 8.5x 8.6x 7.1x 2.4x 6.0% 7.2%The Greenbrier Companies, Inc. GBX NR USD 35.30 1,004.8 7.6x 5.3x 6.3x 5.2x 2.7x 3.3x 1.4x 21.5% 36.9%Oshkosh Corporation OSK NR USD 41.98 3,287.8 12.0x 15.7x 11.9x 7.1x 8.5x 7.1x 1.7x 8.7% 11.8%Spartan Motors Inc. SPAR NR USD 3.87 132.7 NM NM 40.7x 12.4x 14.4x 10.7x 0.8x 0.8% (4.7%)Wabash National Corp. WNC NR USD 12.70 844.5 14.5x 9.1x 9.2x 6.1x 4.6x 4.7x 2.0x 13.7% 22.6%Thor Industries Inc. THO NR USD 56.25 2,952.1 15.8x 14.3x 12.5x 9.3x 8.3x 7.1x 2.8x 17.7% 19.8%Winnebago Industries, Inc. WGO NR USD 21.08 568.8 13.1x 13.7x 12.1x 7.6x 7.5x 6.6x 2.6x 18.1% 19.9%Navistar International Corporation NAV NR USD 12.77 1,041.0 NM NM 5.1x 16.8x 9.9x 7.4x NM 9.7% NMStudent Transportation Inc. TSX: STB NR CAD 5.54 528.7 NM NM NM 11.6x 11.4x 9.0x 2.0x 2.6% NABlue Bird Corporation BLBD NR USD 10.68 222.9 NM 14.0x 9.3x 17.8x 6.1x 5.6x NM 4.5% NMCubic Corporation CUB NR USD 44.39 1,193.3 18.0x 18.2x 15.9x 9.6x 9.5x 8.7x 1.5x 5.8% 4.6%Average 14.6x 13.8x 12.3x 10.3x 8.8x 7.2x 1.8x 8.8% 12.1%

Source: Capital IQ, Company Reports, AltaCorp Capital Inc.As of November 11, 2015. All figures in millions, unless otherwise noted.

Rating &Target

Price to BV

ROICP/E

ROEEV/EBITDA



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NFI

Rating:

12 Month Target:

C$23.90

Outperform

C$35.00



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issuer?N


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RankingDistribution

% IBClients


Total 100% 19%

Rating System





The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for thesale or purchase of securities. While the accuracy or completeness of the information contained in this document cannot beguaranteed by AltaCorp Capital Inc., it was obtained from sources believed to be reliable. AltaCorp Capital Inc. and/or itsofficers, directors and employees may from time to time acquire, hold or sell positions in the securities mentioned herein asprincipal or agent.The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views aboutthe subject security and issuer.The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to thespecific recommendations or views contained in this research report.AltaCorp Capital Inc. may receive or intend

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