>>> Buy Rolls-Royce Sell Safran

{RR/ LN Equity SA FP Equity GRT D<GO>}


* Rolls-Royce (RR/ LN)
- Las news of disposal o Energy to Siemens is a positive step even if it has a slight negative impact on EPS (2/3% dilutive)
- Integration of Tognum on its way
- 2014 could be disappointing due to decline in defence but starting in 2015 we could several years of double digit EPS growth driven by top-line growth in the non-defence divisions and by ongoing significant cost reduction.
- All geo-politics developments should disminish the pressure on defence program cut in the US, next US elcetions are in 2016 and we should see some stability in term of budget before that
There is few risks on the stock, some are already priced but could create volatility on the stock
- Some bad news on few new programmes that could face development delays or slower coule weight on the stock
- SFO investigations for Bribery could also be -ve for the stock
- Large acquisition could be also a potential -ve news
- Chart : stock only rebound 4% from support, see another 5% of potential reboud on short term, still a big gap open since last Feb. ( 1095/1185)

* Safran (SAF FP)
- last set of numbers were a bit disappointing on Aerospace Propulsion & Defence (weakness on helicop. & delays on defence contract), civil market still strong
- Eur$ still an issue, there is a risk above the 1.40 levels
- Still some risk of Delays on LEAP project which is a big part of next years plan
- French state has a 22% stake and as they have moved on Airbus, sector is not key anymore for the state, as we see rumors on EDF of state decreasing its stake, we could see some speculation also on this one
- chart : Stock had a nice rebound from 46.20 support (7%), strong resistance on the 51 levels, don't expect the stock to break these levels

* The Spread
I will play a quick 3.5% perf on this one, with a target above the 7% perf on the ratio

>>> US Weekly Insider Trading Summary

Buyers:
  • Dick's Sporting Goods (DKS) CEO, CFO and Director bought 140,300 shares at $42.46-42.82 worth ~ $6.0 mln
  • GEO Group (GEO) CEO bought 100,000 shares at $33.33-34.06 worth ~ $3.4 mln
  • Banc of California (BANC) CEO bought 35,000 shares at $10.38 worth ~ $400K
  • OFS Capital (OFS) CEO bought 26,266 shares at $12.66-12.69 worth ~ $300K
  • Aegerion Pharmaceuticals (AEGR) CEO bought 10,000 shares at $31.59 worth ~ $300K
  • 8x8 (EGHT) CEO bought 38,000 shares at $7.42 worth ~ $300K
  • Synalloy (SYNL) CEO bought 11,096 shares at $14.76-14.77 worth ~ $200K
Sellers:
  • Plains All American Pipeline (PAA) Pres. of subsidiary-PMC ULC/10% owner sold 208,182 shares at $55.56-56.31 worth ~ $11.6 mln
  • SBA Communications (SBAC) Chairman sold 75,000 shares at $100.50-101.62 worth ~ $7.6 mln
  • Ameriprise Financial (AMP) CEO sold 67,298 shares at $110.11-110.89 worth ~ $7.5 mln
  • Freeport-McMoRan Copper & Gold (FCX) Director sold 186,000 shares at $33.67-33.87 worth ~ $6.3 mln
  • Microchip Technology (MCHP) CEO sold 120,249 shares at $47.09-47.32 worth ~ $5.7 mln
  • Ensco (ESV) CEO sold 50,000 shares at $51.52-51.66 worth ~ $2.6 mln

(BFW) *TOTAL SELLS 10% SHAH DENIZ STAKE SALE WORTH $1.5B

 BN 05/30 13:18 *TOTAL SELLS 10% SHAH DENIZ STAKE TO TPAO
 BN 05/30 13:18 *TOTAL SELLS 10% SHAH DENIZ STAKE SALE WORTH $1.5B
 BN 05/30 13:17 *TOTAL SELLS 10% STAKE IN SHAH DENIZ
*TOTAL SELLS 10% SHAH DENIZ STAKE SALE WORTH $1.5B
2014-05-30 13:18:25.882 GMT

--JURJEN VAN DE POL

-0- May/30/2014 13:18 GMT

>>> US Gapping Up

Gapping up
In reaction to strong earnings/guidance: BIG +10.2%, OVTI +9.3%, NMBL +4.2%, VEEV +3%, ANN +2.5%, AVGO +1.7%.

M&A news: COT +2.6% (announces U.K. Business Unit's Acquisition of Aimia Foods), SNN +1.6% (cont M&A spec).

Other news: RTRX +24.1% (announced entry into a U.S. license agreement for Thola (tiopronin)), NBY +15% (continued strength on reports that co's NeutraPhase product was used to treat necrotizing fasciitis), NLNK +11.7% (dorgenmeltucel-L HyperAcute immunotherapy for melanoma demonstrates clinical efficacy with tumor regression and immune activation), PLX +9.9% (announces ELELYSO (taliglucerase alfa) approved in Canada for the treatment of Gaucher disease in both adult and pediatric patients), OPTT +7.6% (still checking), RESN +7% (IPO opened yesterday; also SCON confirmed stake), DRWI +5.8% (continued strength, +12% on the week), MOBI +4.3% (announces change of fiscal year end and $20 mln share repurchase program), LNG +2.7% (Co and and Iberdrola sign 20-year LNG sale and purchase agreement), CRM +2.6% (announced global strategic partnership with Microsoft), MSG +2.6% (potentially related to sale of Clippers for $2 bln), GTE +2.2% (announced entry into an agreement to sell its Argentina business for ~$69 mln), PGNX +2.2% (PSMA ADC data selected for poster highlight presentation at ASCO), SPEX +1.4% (seeing modest rebound from yesterday's sharp pullback), GTAT +1.3% (positive blog mention; also continued strength, +8% on the week), AVA +1.1% (announced its non-regulated subsidiary, Avista Capital, signed an agreement to sell Ecova, Inc. to Cofely USA Inc. for $335 mln in cash), MDW +1.1% (announced $25 mln bought deal offering of 30.121 mln common shares at $0.83 per share).

Analyst comments: ARRY +4% (initiated with a Buy at Cantor Fitzgerald), KEYW +1.3% (initiated with a Buy at Drexel Hamilton), AAPL +0.4% (target raised to $720 from $635 at Goldman
)

>>> US Gapping down

Gapping down

In reaction to disappointing earnings/guidance: BLOX -32.3%, (Co's CEO Robert Thomas to step down), BNNY -16.8%, EXPR -10.8%, PSUN -10.5%, SPLK -7%, LGF -6.9%, EXA -6.8%, GES -3.3%, FWM -2.9%, VMEM -2.6%, GHM -1.8%, ESL -1.2%.

Select metals/mining stocks trading lower, potentially related to Tier 1 downgrade of Russian steel stocks: CLF -3.4%, RIO -3.1%, BHP -2.2%, VALE -1.8%, MT -1.3%, X -0.8%, FCX -0.6%.

Other news: GLUU -7.4% (announced proposed public offering of common stock), CRDS -5.6% (filed for $25 mln mixed securities shelf offering; also files for ~2.98 mln share common stock offering by selling shareholders), FUEL -2.4% (negative mention on Mad Money), CYTX -1.6% (enters into subscription agreements with certain institutional investors to raise ~ $10 mln), NVS -0.8% (may face lawsuit over kickbacks, according to reports), LINE -0.7% (negative mention on Mad Money).

Analyst comments: EXAS -2.4% (downgraded to Neutral from Outperform at Wedbush on valuation), SDRL -1.9% (downgraded to Sell from Hold at Nordea), HHS -1.3% (downgraded to Perform from Outperform at BMO Capital Mkts ).

WSJ : Boeing Defense Sales to Stay Flat

Boeing Defense Sales to Stay Flat
Company President Cites Headwind of Tight Military Budgets

Boeing Co. expects sales at its defense and space business to remain "roughly flat" for the next five years as it contends with the headwind of tight military budgets, a senior executive said on Thursday.

Dennis Muilenburg, president and chief operating officer, told a Wall Street conference that Boeing still intended to increase profit margins at the unit through aggressive cost cutting and productivity initiatives.

Boeing's defense and space unit generated $33.2 billion in sales last year, a 2% increase over the previous year, while most rivals registered modest declines. Boeing is the world's second-largest military contractor by sales.

Lockheed Martin Corp. LMT +1.48% Chief Executive Marillyn Hewson earlier said at the same event that the global market leader expected a slight decline in sales this year.

Boeing plans to end C-17 cargo aircraft production at its Long Beach, Calif., plant in 2015, while the St. Louis factory that makes F/A-18 and F-15 fighter jets could run out of business within five years unless the company can secure new orders from the Pentagon and international customers.

The budget pressures on the military business contrast with the booming fortunes of its commercial arm, where revenue rose 8% last year to $53 billion.

Two of the best growth prospects on the defense side are derivatives of commercial aircraft. Mr. Muilenburg expects that increasing production of its jetliner-based KC-46A Pegasus aerial refueling tankers and P-8A Poseidon maritime-surveillance aircraft will offset declines elsewhere in the portfolio. Both are built on its commercial-assembly lines in Washington state, offering significant cost savings for the company, he said.

Mr. Muilenburg, viewed as the likely successor to Chief Executive Jim McNerney who reaches the company's mandatory retirement age of 65 in August, is spearheading companywide initiatives for cost savings. Mr. McNerney said he has no plans to retire soon, but Mr. Muilenburg—whose public profile has been growing—was elevated in December to chief operating officer, a newly created position, as the clearest signal of Boeing's succession planning.

Boeing has aggressively renegotiated contracts with its suppliers, seeking as much as 15% to 20% reductions in the price of what it buys to produce its civilian- and defense-aerospace products. Heavily driven by reducing the unit costs of its 787 Dreamliner, Mr. Muilenburg said around 40% of its suppliers, which cover both its commercial and defense products, have agreed to new terms, in many cases receiving higher volume orders in exchange for reduced prices.

Another 30% are being completed, he added, and a final 30% that have resisted Boeing's effort and are farther out.

United Technologies Corp. UTX +0.34% Chief Executive Louis Chênevert, among the most vocal opponents of Boeing's cost-cutting effort, announced last week that it had reached a supplier agreement with Boeing, but didn't provide details.

Mr. Muilenburg said 60% to 70% of the company's costs come from what it purchases from suppliers. Its initiative, dubbed Partnering For Success, has expanded to some 500 companies since beginning the effort about two years ago.

Separately, Boeing announced it added 12 single-aisle 737 and two long-range 777s to its order book, increasing its net orders to 380.

>>> US Early premarket Gappers

Early premarket gappers

Gapping up: RTRX +25%, NBY +20%, OVTI +10.7%, BIG +6.3%, AVA +5%, SPEX +4.8%, NMBL +4%, VEEV +3.5%, AVGO +3.1%, CRM +2.4%, GTE +2.2%, AUY +2%, KGC +1.9%, SNN +1.5%, BBRY +1%, DDD +1%

Gapping down: BLOX -32%, BNNY -15.4%, EXPR -11.6%, PSUN -9.9%, SPLK -8.9%, GLUU -7.6%, LGF -6.7%, CRDS -5.6%, MDW -4.5%, GES -3.3%, RIO -2.9%, FWM -2.9%, VMEM -2.6%, BHP -1.8%, ESL -1.2%

Special Situations: Dual listing arbitrage LONG REN NA / SHORT REL LN

Top Trading Ideas: share class arbitrage strategies

re-setting LONG REED ELSEVIER NA / SHORT PLC

May 30, 2014

We recommend to reset a dual listing arbitrage trade long Reed Elsevier NV / short Reed Elsevier PLC as the Dutch shares are trading at a historical high 10% discount to the UK shares given the 1.538 equalisation factor (see the attached November 18, 2013 report for details). The trade is highly mean reverting and the recent price dislocation provides a trading opportunity. We note that the Unilever NV/PLC trade is on 3.4% discount which we also recommend. FULL REPORT ATTACHED

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