(BArcap) Vivendi : Looking past French telco consolidation

On 5 March, Vivendi confirmed they had received two offers for SFR (Bouygues and
Numericable). Both offers have a similar cash component and a stake in a merged
entity. Valuing Vivendi today is consequently taking a view on the value of the
successful combination but also, lest we forget, taking a view on the value of the
remaining assets. Using €17bn for SFR (based on our €12bn standalone SFR value
plus a 40% consolidation premium), the media assets would trade at 8.3x 2014E and
7.5x 2015E EV/EBITDA. While this seems reasonable (European media sector is on
10.2x and 9.2x, respectively), there is a telecom asset in there. If we put GVT on 6.5x
EV/EBITDA then the media assets would be on 9.2x and 8.4x, respectively. Finally, if
adjusting for the poor cash generation of the media assets (10-15% leakage), the
media assets would trade on 10.4x 2014E and 9.4x 2015E (in line with European
Media). We believe this provides no upside. Reiterate Equal Weight with an
increased €20.00 price target resulting from a higher valuation on SFR (€19.00
before). For investors wanting to participate in French telecom consolidation, we
prefer Iliad and in media our top picks are Lagardère, Publicis and SES.

- Potential impact of selling SFR to Numericable – Our note examines the potential
impact of the mooted Numericable / SFR transaction. We feel that €4bn for a 32%
stake is fair and therefore the €15bn total value is also fair.

- Potential impact of selling SFR to Bouygues – Our note examines the potential impact
of the mooted Bouygues / SFR transaction. We feel that a €19.0bn valuation post
synergies could be a best case scenario for Vivendi.

- Two negative developments on the media front – The French football league is putting
the television rights to tender early (April) and is looking for a 30% increase according
to Le Figaro on 6 March. The US music market is down 14% year-to-date in volume
terms, a significant worsening of recent trends.

(Les Echos) With Zodiac, niches ascend to heaven --> Still like the stock -Buy

Article pusblished in Les Echos this morning, still like ZC, find these levels interesting 23.50 look to be a strong supprot level, 200dMA areound the 22.30 levle is another, Sector as rerated vs the market could see some Op to come on next coming weeks...ZC reporting Q2 salees on the 19th (next week), buy the stock to play rebound on the 25.7 levels (7% higher) first target.

Laurent

With Zodiac, niches ascend to heaven

Slides relief seats through electrical systems, the OEM has stepped acquisitions to offer a full range airlines.

The images have a hard life. Ask anyone around you on Zodiac, and you will inevitably meet boats, fishing, creeks ... Unless, of course, investors whose share increased by 40% per year for five years and who had satisfaction to fly with it. Zodiac is indeed an aerospace company - born in 1896, is the oldest existing even today. When she was already making airships, Boeing was still a lumber merchant and boats.
For those were just a Zodiac boat launched distress at sea when she encountered difficulties in the air. Bled after the war, when she came out of her boxes patent inflatable vessel filed in 1933 which allowed him to recover his health by surfing the civilization of leisure "sixties." The company manufactured its stocks in winter and flowed in August. 31 this month was therefore the only year where Zodiac can present a correct balance its bankers, which is why, incidentally, its exercise is always shifted and ended.
If the French sold its famous craft of investment funds in 2007, it is because in redécollant, aviation had taken such an altitude that it required the attention of the driver. Vessels accounted for only € 400 million on a turnover of 2.4 billion, and sales reported 1.3 billion. What continue to fuel the machine's growth strategy developed by the charismatic Jean-Louis Gerondeau, predecessor of the current CEO , Olivier Zarrouati. Two years after his appointment in 2007, the X-Supaero earned his first stripes repelling the onslaught of Safran, arguing that it would be better alone than in bad company.
Complexity of standards
This is rummaging wedges acquisition who signed his comeback in aviation, the Aerazur in 1978 that Zodiac has found the secret on which he built his fortune. Aerazur was a bit of everything, parachutes, stop barriers in textile, inner tank and small inflatable safety products, belts, slides ... It is against this mess that the strategic idea of ​​niches was born in the spirit of Jean-Louis Gérondeau recruited in 1974. Coexist in a plane almost all technologies invented by man, metallurgy, composite materials, electricity, and they coexist without, necessarily, need to communicate. This gives many "niches" both small and numerous. Once conquered, they are difficult to resume their best guard dogs is the complexity of the standards that govern them. An inflatable system or a "galley" (Zodiac is the global leader of these trucks used to transport food and juices), it seems simple and it does not cost anything at Ikea. But when it comes to sending them to the air, it must meet a number of documents, compilation of all the teachings of all crashes, and which alone can fill an entire room. "The subject is less impenetrable if you're not born into it, "says Olivier Zarrouati. Fort slides recovered Aerazur, the French will be added those of the U.S. Air Cruisers, becoming the world number one. Thus, all Aerazur assets grew and embellished before Zodiac not attack other less visible golf cab. It is in this offensive aided by the very favorable wind conditions of air transport. In a market that grows 4 to 5% per year, Zodiac moves faster, allowing him to target a rate of 7 to 8% of organic growth , which adds an average of 7% external growth by multiplying acquisitions through its cash as well as its inflated slides. In total, he has absorbed more than 35 companies since 1978, all integrated with a recognized expertise in the industry: "As in Rome, the appended populations immediately become citizens of the Empire. "
In 1999, with the resumption of INTERTECHNIQUE, Zodiac brings in his nets not only his current boss, but also doubles its size being enriched with a variety of systems for the distribution of electricity and fuel, to oxygen masks and future entertainment systems onboard. By acquiring the British Outline, specialist chairs first class, he became the world number one in all categories seat and controls a third of the market nearly 3 billion. An investment of 6 to € 700 million for its upscale, Air France devotes 105 to provide more than 2,000 new seats in its passenger business, a bed of 1.96 meters to 50,000 euros each, a Zodiac exclusive originally as the seat eco lightest on the market: 7.5 kilos each.
10% more passengers
Seats, kitchens, toilets, door frames, in total the manufacturer can provide almost the entire cabin, and thus integrate and optimize the use of times more expensive than real estate Paris 50 space. The latest innovations allow him to stay home up to 10% more passengers. What attract airlines, which have almost the comfort of their cabins to differentiate themselves and engage in a battle to attract highly profitable passengers' classes before, "fill up the" rear classes "and travel as light as possible to save fuel. Offering them the opportunity to improve their performance immediately, without waiting for the delivery of new equipment, Zodiac has everything to seduce.
Increasing the share of its business with companies, the supplier reduces its dependence on only manufacturers, increases profitability and speed. The group believes that, if it continues at this rate, $ 10 billion in sales is not out of reach: "Obviously, we do not touch the edges of the aquarium, you can still grow, "says Zarrouati. When the 10 billion will be achieved, it will be time, then, to possibly revise the model, to be inspired by the American example UTC, which, after grown in aeronautics, became a giant conditioning air and lifts, another way to climb. The stability of the family shareholding help to do away with 40% of voting rights are held by descendants of the founders and those who joined them.
The surge in emerging market does not make a Zodiac Ayatollah offshoring, it does not count over 50% production in Tunisia, Thailand and Mexico, and is not in China: "There are no interest to seek China hypothetical half dollar extra hour at the cost of millions of euros per year overhead ", especially as Zodiac is a small business series: he built 10 aircraft per day worldwide. So it preserves its traditional French and American bases, even at the price of accommodation. A Loches (Indre-et-Loire), a 10,000 square meters modernized factory now houses more employees than the institution that preceded and was double its surface. Maintaining these bases is of course permitted by the group's growth, but it's not just patriotism. Many older aircraft still flying, and industrial matters affecting them were much less extensive than today. To maintain or redevelop, memory and know-how that comes is therefore essential. "It floats, it rises, it flies, on plane" already marveled Maupassant, carried by the airship Maurice Mallet, aeronaut, founder of Zodiac. Long as it lasts.

FT : US equity bulls are banking on growth

Sir John Templeton, Anglo-American mutual fund pioneer and founder of the Templeton Growth Fund, famously said: “The four most dangerous words in investing are: ‘This time it’s different.’”
This time, it is definitely different, argue S&P 500 bulls who are banking on a stronger economy in the coming months to justify the market’s current lofty valuations and puncture the growing rumbles about a brewing stock market bubble.

This week on the back of yet another record close just shy of 1,900, the S&P 500 bull market entered its sixth year.
The upward march of US equities in recent years has propelled the broad US benchmark well beyond its prior peaks seen in 2000 and 2007. Those twin peaks just above 1,500 were subsequently followed by brutal bear markets.
Last week, Richard Fisher, president of the Federal Reserve Bank of Dallas issued a blunt appraisal of US equities and how the rally has been driven by the central bank’s easy money policy.
“Stock market metrics such as price to projected forward earnings, price-to-sales ratios and market capitalisation as a percentage of GDP are at eye-popping levels not seen since the dotcom boom of the late 1990s.”
Including the reinvestment of dividends, the S&P 500 has risen 210 per cent since it bottomed during the financial crisis in early March 2009. It is a rally that has been led by cyclical stocks, those that reflect the fortunes of the economy.
Even the most ardent of bulls concede the market is fully valued when they look at various measures, leaving it ripe for a major pullback at the very least.
Against a backdrop of emerging market worries, inconsistent US data and a Federal Reserve prepared to steadily reduce its monthly bond purchases under quantitative easing, the rationale for buying the S&P at current levels is the expectation of a stronger economy in the coming months.
“We would say equities are no longer cheap and that stronger economic growth will be needed to drive earnings and prices higher,” says Russ Koesterich, global chief investment strategist at BlackRock.
After a harsh winter that has overshadowed recent US economic activity, it is hoped that the arrival of spring will spark a renaissance in growth that vindicates such high valuations.
The S&P trades at a forward 12-month P/E ratio of 15.4 times, based on a 12-month forward earnings per share estimate of $122.01 says John Butters, analyst at FactSet. That figure sits well above the five year average of 13.2 times and the 10-year average of 13.8 times.
“With the forward P/E ratio well above the 5-year and 10-year averages, one could argue that the index may now be overvalued,” says Mr Butters.
Nicolas Colas, chief market strategist at ConvergEx Group says such hefty valuations, “require that expectations for revenue and earnings growth are not just hopes and dreams, but promises fulfilled.”
He adds: “On the flip side, if the global economy, led by the US, can begin to accelerate in the back half of 2014, then we are finally well set up to beat expectations going into 2014.”
For some, such as Jim Paulsen, chief investment strategist at Wells Capital Management, 2014 is the year the economy heats up, with the danger that an inflation scare eventually sparks a major pullback once the S&P has reached 2,000.
The key ingredient for the bullish case is a forecast acceleration in quarterly revenue growth for 2014, seen peaking at 4.5 per cent for the third quarter. Up to now, aggressive cost cutting from companies has boosted earnings when revenue or top line growth has only expanded at around 1 per cent over the past year according to FactSet.
The disconnect between earnings and top line growth has been ignored for some time by bullish investors even as the Fed has started trimming its bond buying under QE.
The suppression of interest rates, thanks to several rounds of QE, has pushed both equity and housing prices sharply higher in recent years. That has resulted in the net worth of US households approaching its 2007 peak. As Barclays notes: “US households have never been wealthier, in US dollar terms or adjusted for inflation.”
One pressing issue for bullish investors and policy makers is whether this rise in household net wealth, up $9,800bn at $80,864bn during 2013, will finally propel the economy into a higher gear this year. Or whether companies sitting on record piles of cash, start pumping it into capital investment projects and hire more people.
Should the current soft patch extend into the Spring, equity bulls face coming to terms with Sir John Templeton’s warning about assuming it’s different this time.
“As we see it, even if S&P 500 activity is not to be considered bubble-like behaviour, a continued divergence between stock prices and economic performance means that arguments to the contrary will surely grow more convincing,” says Neil Mellor, strategist at BNY Mellon.
“Given a shift in the balance of opinion it then becomes simply a question of whether stock prices slide imminently or just put in further gains of 20 per cent before doing so.”

FT : Hedge fund managers face up to ‘Truman Show’ markets

In the Truman Show, the late nineties Hollywood film, the eponymous character lives a seemingly charmed world, snuggled comfortably into an American suburbia of white picket fences and crisply cut lawns.
But gradually Truman starts to notice something is not quite right. He is actually trapped inside a film set controlled by hidden directors, and discovers to his horror that he is the unknowing star of the world’s most popular reality TV show.

The question some of the world’s biggest hedge funds are starting to ask is whether overly placid investors will also wake up to discover they are living in a “Truman Show market” – where central bankers’ ultra loose monetary policy has manufactured a fake reality that is bound to end.
For Seth Klarman, the manager of the $27bn hedge fund the Baupost Group who recently coined the analogy in a letter to clients, investors have been lulled into a false sense of security that is creating an ever greater risk of a sharp correction.
“All the Trumans – the economists, fund managers, traders, market pundits – know at some level that the environment in which they operate is not what it seems on the surface,” Mr Klarman wrote in his letter, later adding: “But the zeitgeist is so damn pleasant, the days so resplendent, the mood so euphoric, the returns so irresistible, that no one wants it to end.”
But no matter how sceptical hedge fund managers may be, they find themselves in a bind. While the assumption that central bank bond-buying will continue for the foreseeable future has been a boon to broader markets, indiscriminately surging equities have made life frustrating for most specialised stock pickers.
At the same time other hedge fund strategies, such as making bets on interest rates and currencies according to views on the direction of the global economy, have faltered as markets have refused to obey previously presumed iron rules, such as money printing leading to devaluation. Of late these so-called global macro funds have retreated from such trades as their performance has suffered.
“Many hedge funds continue to predict this ongoing drift upwards in asset prices due to an implicit backstop from central banks, who want to believe they are omnipotent, and that when data is bad they can just turn on the taps again and make it go away,” says Anthony Lawler, portfolio manager at GAM, one of the world’s biggest investors in hedge funds.


As a result, while many managers feel deeply uneasy with the lofty valuations attached to certain parts of the US stock market, and low returns offered by risky assets such as junk bonds, few are willing to step out just yet.
More recently, encouragement has been taken from falling correlations between assets, meaning some portfolio managers are confident they can start to exploit more effectively the pricing anomalies between better and worse quality securities.
“The number of individual stocks mispriced to each other is high, there are some trading on vapour whilst others are still trading on reasonable valuations,” says Luke Ellis, president of Man Group, the world’s largest listed hedge fund. “Are there lots of cheap stocks? No, but on a long short basis there are opportunities.”
“The big question is when this is all going to change. From a purely intellectual point of view, it is interesting how central banks will reverse their policies. From a market point of view, it is uncertain and complicated.”
Sir Michael Hintze, chief executive and founder of CQS, one of Europe’s largest hedge funds, has argued that loose central banks have actually increased the riskiness of markets as a result of their policies forcing too much money into the same assets, meaning any corrections are likely to be sharper than normal.
“Everyone is thinking the same and being driven into the same trade,” he wrote in a note to clients. “Shifts when moving from one state to another can be difficult and abrupt. It is not healthy to have a ‘rigged’ market”.
Yet, for now, as long as markets continue to believe in the willingness and ability of central bankers to maintain current conditions, few hedge fund managers are ready to make any big bets against a reversal.
“Few argue that equities are cheap on any metric, but the majority of hedge fund managers are opting to remain invested,” says Mr Lawler of GAM.
The Truman Show market looks set to continue, even if an increasing number of participants have started to spot the cameras hidden behind the trees

(BFW) Numericable May Explore Other M&A Options If SFR Bid Fails: BI

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Numericable May Explore Other M&A Options If SFR Bid Fails: BI 2014-03-13 08:39:40.472 GMT

By Blanche Gatt March 13 (Bloomberg) -- Numericable likely to examine alternative M&A opportunities if its bid to merge with SFR fails, Bloomberg Industries says in research note. * Bloomberg Industries says potential tie-up with Free, or a new SFR-Bouygues entity make strategic sense * Co.’s mobile operations still just beginning, needs to strengthen convergence investments * May also be potential in cost savings from migration to Numericable’s network, sharing cost of high-speed broadband rollouts * Kepler Cheuvreux said yday co.’s SFR bid isn’t “lost battle,” despite mkt’s apparent view that Bouygues Telecom will finally buy SFR * If Numericable doesn’t get SFR, still has other L/T strategic options: later join new Bouygues-SFR group, merge with Iliad, or be target of any international group * Numericable shares up 0.5% today; gained 5% after earnings yday; down 3.8% YTD: data compiled by Bloomberg * Related stories: * Today: Bouygues Improves SFR Offer to Vivendi by EU1b * Today: Numericable CEO Denoyer Says SFR Bid Valid Until Friday

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

To contact the reporter on this story: Blanche Gatt in London at +44-20-7392-0351 or bgatt@bloomberg.net To contact the editors responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net James Cone

>>> GBL considers strategic holding in Umicore

GBL considers strategic holding in Umicore

GBL, the Belgian investment company that owns more than 5% in the Belgian material technology company Umicore, could consider to expand this holding into a strategic one, Belgian daily de Tijd wrote, citing co-CEO at GBL Gerard Lamarche. He said in an interview with the paper this will be decided later and will depend on market circumstances.

GBL had a war chest of 1.9bn at the end of 2013 and reported net profits of EUR 621m for 2013 up from EUR 256m for 2012. The 2013 GBL results can be found here.
Source De Tijd

(BofA - ML) The Thundering Word - 5 Pain Trades

* Danger Signs
75 out of 88 economists currently forecast a tight 2.5-3.2% range for US GDP in ’14.
21 out of 21 strategists expect the S&P500 to end the year above 1850. Stocks are
at all-time highs; bond and FX volatility at one-year lows. What could go wrong?

1. From 666 (SPX) to 6666 (Nasdaq)
Too much money starts chasing too few goods as excess global liquidity to
medicate European/Asian deflation causes excess valuations in global tech and
health care, small cap, junk bonds and “safe haven” real estate. Watch stock market
breadth.

2. Italy 10-year trades below 1.5% by 2015
Capital ruthlessly gravitates to wherever easy money and tough reform is enacted…
Spanish yields are now just 30bps away from 200-year lows. Until EM or Japan
offer more compelling catalysts, we believe the reflation-reform duet in Europe
threatens an overshoot in periphery bond prices.

3. Japanese land prices rise
A $100,000 house/plot of land in Japan in 1991 is now worth $42,000. We think new
pessimism over Abenomics would be quickly reversed if Japanese land prices
(down 1.8% in 2012) start rising. We believe this would be good for banks. Watch
the Japan land price release on March 18th.

4. Some EM’s outperform
China appears plagued by “bad Goldilocks” and Brazil is yet to enact reform. The
EM “pain trade”? Investors waiting for the classic asset class capitulation miss
select winners. Greece & India are winning the “race to reform”; Indonesia is
winning the “race to surplus”. All are outperforming.

5. Gold outperforms Banks
Banks are the barometer of The Great Rotation. Gold is the barometer of The New
Normal. Investors do not appear positioned for policy mistakes. If “tapering” in the
US and anti-speculation tightening in China retards global growth/increases
deflation, we think both longs in banks and shorts in gold will be disappointed.