>>> Tesco plc Fitch cuts rating to BBB from BBB+

Tesco plc Fitch cuts rating to BBB from BBB+The downgrade reflects an increase of competitive pressures in the UK grocery market, in light of the continuing growth of hard discounters and increasing price competition among established players. The rating action also reflects economic and political headwinds in its international business as well as execution risk associated with the group's strategicrepositioning.

(GS) Alstom- Off Conv. Buy List - full note attached

* What happened
Alstom’s board has approved the revised GE offer. The French State has
confirmed that, subject to execution of definitive agreements for the
various alliances between GE, Alstom and the State, including the Global
Nuclear & French Steam Alliance, it will grant the required foreign
investment authorization. Bouygues has also agreed to sell a 20% stake in
Alstom to the French State. We downgrade Alstom to Neutral (was
Conviction List Buy) and change our 3-month target price of €36 to a 12-
month target price of €28.5. Since being added to the Conviction Buy List on
May 2, 2014, the shares are down 5.9% vs the FTSE World Europe up 3.1%.

* Current view
We assume that the current Energy deal with GE as accepted by the board
goes ahead (subject to outstanding contingencies) and value Alstom at
€28.5/share. We value Alstom (Transport assets inc. GE Signaling) post
deal on 9x CY15/16E EV/EBIT. We believe Alstom’s competitive positioning
slightly improves post-deal, albeit the company still ranks in the bottom
quartile of our global multi-industry framework; see our report Preparing
for the next industrial revolution, April 28, 2014. The main reason for this
higher ranking is Rail’s higher long-term growth prospects than Power
Generation (we expect 0.8% long-term growth for Alstom post-deal vs. -0.5%
for Alstom pre-deal). We assume Alstom’s returns post-deal will still be
bottom quartile in the context of the capital goods sector.

Our new EV/EBIT-based (9x CY15/16E) 12-month target price of €28.5 implies
only 2% upside for Alstom shares; hence our downgrade to Neutral. Key
upside risks to our Neutral rating are: a material improvement of the
global rail outlook, higher-than-expected synergies between Alstom
Transport and GE Signaling, better-than-expected GE Signaling
profitability (assumed high single digit), and better-than-expected FCF
generation of the standalone entity. Downside risks include failure of the
completion of the deal as subject to outstanding contingencies, further
litigation charges and weaker earnings.

(Makor) Special Situations: Lululemon (LULU): BUY $40.23


Event Driven Strategies Special Situation: LULULEMON

BUY  & re-iterating short UA

 

LULU US: US$ 40.23 ; UA US: US$ 58.88

 

June 23, 2014

Another US/Canadian apparel company, Lululemon, is under the event driven spotlight.  Lululemon is a $6bn fast growing designer and retailer of athletic products, mainly for Yoga. The company was IPOed in 2007 at $9.00 and has been extremely successful ever since.  Revenues have grown from $270m in 2008 to expected $1.8bn next year while net income has grown from $30m to $250m over the same period.  However, as is often the case with high growth companies, LULU had a string of  disappointing earnings reports and the stock recently corrected from a high of just over $80 in 2013 to the current $40. As a result, the Lululemon’s founder, Dennis “Chip” Wilson, in “in talk” with Goldman Sachs to look at opportunities aimed at maximizing LULU’s shareholder value.  Dennis Wilson owns about 26% but has no managerial role in the company anymore and he has been a controversial if not wildly successful entrepreneur (http://fullcomment.nationalpost.com/2013/12/10/brian-hutchinson-lululemon-founder-isnt-dead-yet-hes-just-resting/).  He recently tried unsuccessfully to remove two board members including the Chairman who had just replaced him.

Lululemon is a clear undervaluation outlier within its peer group.  It achieves the highest profitability (20% operating margins, 32% operating return on assets).  Moreover, in terms of growth, Lululemon is also undervalued, particularly vs. Under Armour.

FULL REPORT ATTACHED

(BFW) Alstom Cut to Neutral at Goldman as Revised GE Offer Accepted

Alstom Cut to Neutral at Goldman as Revised GE Offer Accepted
2014-06-23 13:22:05.407 GMT


By Nadine Skoczylas
     June 23 (Bloomberg) -- Alstom cut to neutral from
conviction list buy at Goldman Sachs, PT to EU28.5 from EU36.
  * Since being added to list on May 2, Alstom down 5.9% vs FTSE
    World Europe up 3.1%: GS
  * Shares down 2.5% after falling as much as 3.4% earlier today
  * Has 4 buys, 12 holds, 5 sells; avg. PT EU30.50 implies
    upside of ~12%: Bloomberg data
  * NOTE: Alstom may be worth EU32/shr post-GE deal, UBS says
  * NOTE: GE prevailed over Siemens counterproposal, initial
    French opposition to win Alstom deal


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

--With assistance from Joshua Fineman in New York. 

To contact the reporter on this story:
Nadine Skoczylas in Jerusalem at +972-2-640-1103 or
nelsibai@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net