(Makor) Special Sit.: BUY Parkson Holdings (PKS MK); Buy



Special Situations: Lion Group

 

BUY Parkson Holdings (PKS MK);

BUY Parkson Retail Group (3368 HK)

PKS MK: MYR 2.96; 3368 HK: HK$2.41

April 9, 2014

We recommend buying Parkson Holdings, a Malaysian holding company with controlling stakes in Parkson Retail – a HK listed retail group with operations in China, and in Parkson Retail Asia, a Singapore listed retail group, with operations in Malaysia, Viet Nam and Indonesia.  While the holding company discount is not significant (10%), we view the stock as one of the better ways to benefit from increased consumption throughout Asia, and particularly so in China.

We also recommend to buy Parkson Retail Group (3368 HK), and would also recommend Parkson Retail Asia if it was not illiquid.  We believe that Parkon Holdings could buy the minorities in both of its listed subsidiaries.

FULL REPORT ATTACHED

>>> The Mosaic Company Provides phosphate market outlook - conf slides


The Mosaic Company Provides phosphate market outlook - conf slides
- Based on our likely demand scenario and capacity estimates, global phosphoric acid operating rates are projected to remain relatively stable at about 85% of effective capacity from 2014 through 2020. This is in line with the average since 2000, but projected rates do not exhibit as much volatility as during the last decade. 
- If current supply and demand projections are on target, global grain and oilseed stocks will increase significantly this year and make up all of the declines during the last three years. 
- Will most likely see balanced supply during the next six months, then a tighter supply situation by September/October.

FT : Global steel demand to slow as Chinese economy cools

Global steel demand will slow this year and in 2015 because of a slackening of growth in China, the world’s biggest consumer of the commodity, hitting the profitability of steelmakers.

The World Steel Association, the industry’s main international body, said on Wednesday it expects global demand to rise 3.1 per cent in 2014 to 1.52bn tonnes – down from growth of 3.6 per cent last year. Global steel growth will accelerate slightly in 2015, rising 3.3 per cent.

However, despite the global slowdown, some steel companies will have an improvement in profits driven by a recovery in developed countries. According to WSA, steel demand over the next two years is likely to depend more on developed economies, such as the US and Europe, rather than emerging countries – a big change from recent history.

The new forecast, revealed as chief executives at some of the biggest steelmakers gathered in London at the twice yearly meeting of the WSA, provides further evidence that China has come to the end of its rapid growth, as the world’s biggest steel producer moves from an investment to a services-driven economy.

The WSA said Chinese demand for the commodity would rise just 3 per cent in 2014 to 721m tonnes, compared with growth of 6.1 per cent last year. In 2015, growth is expected to slow further to 2.7 per cent.

“We’ve all become used to China being the driver of the world economy, particularly in resources, over the past decade or so. We think that’s an era coming to an end,” said Edwin Basson, director-general at WSA.

Weaker steel demand is being felt broadly across all emerging markets, down to ongoing structural problems in many of these economies, the WSA said. Demand in emerging countries is forecast to slow from 5.1 per cent last year to 3.2 per cent in 2014.

According to Mr Basson, a slowdown in China and unstable political situations in other emerging economies will result in just “moderate growth” in the steel industry – a far cry from the early 2000s when global demand for the commodity rose more than 6 per cent a year for six years in a row.

“There’s no candidate waiting in the wings to take over this lead role from China,” said Mr Basson. He said India is the most likely country to have big growth, but this is unlikely to happen in the near future as it is constrained by high inflation and structural problems.

The forecast bodes badly for top steelmakers such as ArcelorMittal, Tata Steel, Chinese groups including Hebei and Baosteel, South Korea’s Posco and Japan’s Nippon Steel.

However, demand for steel in developed economies is forecast to grow 2.5 per cent in 2014, following a contraction of 0.3 per cent last year. The US is forecast to make a strong recovery, with steel demand expected to grow 4 per cent to 99.4m tonnes, on the back of a pick-up in construction activity and manufacturing.

European demand is forecast to rise by 3.1 per cent this year, following a contraction of 0.2 per cent in 2013. The pick-up will provide a boost for companies’ earnings, particularly Europe-based steelmakers such as ArcelorMittal and ThyssenKrupp, which have been hit by weak demand on the continent in the construction and car industries.

(Makor) Special situations/event: Debenhams (DEB LN): pass

Special situations: Debenhams (DEB LN)

Cheap – but for a reason - pass
DEB LN: 79p
April 8, 2014
There has been press reporting that Sports Direct International (SPD) has sold its 4.6% stake in DEB and also sold a put option agreement covering 6.6% voting rights. Further details on the put option were not disclosed. When SPD acquired its 4.6% stake, it said that it intends to be a “supportive shareholder” and “wishes to explore options at an operational level to work together”.  Although, the exact intentions of SPD and its controlling shareholder, Mike Ashley are not known, we note that Mike Ashley has a track record of buying brands at distressed levels. In addition, he had been linked with other retailers (such as Matalan) on JVs/stake acquisition.

On the fundamental side, DEB continues to be a laggard vis-à-vis its peers. DEB is pushing through an aggressive online strategy to counter declining sales at its stores due to structural changes in the sector. Although, this strategy is contributing to the top-line growth, it is coming in at the expense of operating margins.  Among its peers, DEB has the lowest operating margins and consensus expects them to decline going further. On the other hand, the consensus expects margins to expand both for Next and MKS. We believe that DEB has a long way to go before it catches up with its competitors, who have more competitive online product offerings and better cost structures.

On relative value grounds, DEB looks fair value/overvalued vs its peers, despite being cheap in absolute terms. On a DCF basis, we value DEB at ~81p a share (~3% premium to current price).  Overall, we believe that DEB lacks any immediate catalysts that could positively re-rate the share price in the short-term.

The stock would only  become a buy if a case can be made for margin expansion which is the case for now.
FULL REPORT ATTACHED

FT : Lafley takes first big step to reshape P&G with $2.9bn pet brands sale

AG Lafley has made his first big move to restructure Procter & Gamble since returning to be its chief executive for a second time by agreeing to sell three of its pet food businesses to Mars for $2.9bn.

In the all-cash deal announced on Wednesday Mr Lafley is reversing one of his predecessor Bob McDonald’s deals by selling off the Natura pet food business he acquired in 2010.

The move is part of P&G’s effort to focus on core businesses and boost its sales growth and profitability to win back the favour of investors who were unhappy with its performance under Mr McDonald, who stepped down last June.

The other businesses P&G is selling are Iams and Eukanuba, which the consumer goods group acquired in 1999. P&G shares rose 0.8 per cent to $81.98 in early New York trading after it announced the divestiture.

Mars Petcare, part of a privately owned group better known for its chocolate, will add the businesses to its portfolio of pet brands, which include Whiskas and Pedigree.

Mr Lafley said in a statement: “Exiting pet care is an important step in our strategy to focus P&G’s portfolio on the core businesses where we can create the most value for consumers and shareowners.”

The companies expect to complete the transaction in the second half of 2014, subject to regulatory approvals.

Todd Lachman, global president of Mars Petcare, said: “The deal reinforces our leadership in pet nutrition and veterinary science, attracts world class talent and grows our world-leading portfolio.”