Special Situations: SODA ($38.35 TGT $50, long term target $75-80)

Special Situations/Value: SODASTREAM INTL. (SODA)

trade action flash - if you missed Green Mountain, buy SODA
GMCR US: US$38.35; initial target: US$50 - potential long-term target $75-$80.

We recommend buying Sodastream. SODA is a manufacturer of home beverage carbonation appliances. Their machines allow customers to do their own carbonated soft drinks out of plain water - almost as good as the alchemists' quests of making gold out of base metals.
The company IPOed in November 2010 at $20.00. It subsequently raised additional capital at $43.50 in April 2011. The shares peaked first at close to $80 in summer 2011 to then collapse to $30 in 2012. The shares then peaked again at about $75 again in the summer 2013, before collapsing again to the current level. In particular the stock was down more than 25% on January 13 when it announced sharply reduced earnings. However it was up yesterday by over 7% when Green Mountain Coffee Roasters (GMCR) announced a JV deal with Coca Cola for developing competing soda machines. In addition, Coca Cola is to take a 10% stake in GMCR for $1.25bn ($75/sh), sending the shares well above $100. We had been successfully recommending GMCR back in October 2012 when the shares traded at about $23 (and issued a sell in May 2013 with the shares trading at 80. They then corrected down to 60 before the recent surge). Sodastream is a mini version of Green Mountain, with a similar business model, and maybe the same growth. Sodastream, which has been targeted by short-sellers (the short interest in mid January exceeded 50% of the float), just as Green Mountain (they must feel sore), is significantly cheaper than Green Mountain, whether now, or when Green Mountain was at the same stage of development. Although it is significantly less profitable than Green Mountain, Sodastream has essentially the same margins as Green Mountain when Green Mountain was of similar size. It is therefore likely that Sodastream will be able to grow its profitability along with scale. However, in the short-term, the Green Mountain-Coke news may entice Pepsi to form a similar venture with Sodastream and/or take a stake or even buy the company outright. We note that last June, there were rumors of a Sodastream buyout by Pepsi or Coke. These speculations died down and the company started to disappoint explaining the stock's collapse. In terms of valuations, the stock appears undervalued in absolute terms. The company is expected to almost triple its ebitda between 2013 and 2016 while sales could increase by more than 50%. This would signify the beginning of significant margin expansion. If the company managed to increase its operating margins to 15% by 2016, an ev/sales multiple of about 2.0 could be justified, translating into a $75-$80 stock price.
FULL REPORT ATTACHED

>>> Aria : Credit Suisse reiterates Neutral rating, price target raised to $8 fr

Ariad Pharmaceuticals Inc Credit Suisse reiterates Neutral rating, price target raised to $8 from $5
- Firms new post-relaunch survey suggests that physicians view Iclusig as an essential drug for CML patients with T315I or other mutations, or for patients that have failed multiple agents. That said, doctors have become more cautious on the adverse event profile for the drug following the marketing suspension.
- While use is certainly going to be more restricted than initial expectations, firms findings make them incrementally more positive relative to their ber bearish view after FDA removed Iclusig from the market.

(RTR) LEG Immobilien eyes capital increase for larger acquisitions

LEG Immobilien eyes capital increase for larger acquisitions

Feb 7 (Reuters) - German property group LEG Immobilien is confident that the stock market would easily absorb any capital increase to fund a large acquisition of residential real estate.
"We can also fund larger acquisitions through a capital increase," Chief Financial Officer Eckhard Schultz told journalists late on Thursday.
He said the benign share price reaction to the placement of a 28.65 percent stake by the private equity arm of Goldman Sachs at the end of last month showed there was "readiness to provide capital to this business model".
The group would also look to buy asset outside its main market of North Rhine-Westphalia, Germany's most populous regional state. (Reporting by Matthias Inverardi; Writing by Ludwig Burger; Editing by Christoph Steitz)

>>> US Gapping down

Gapping down

In reaction to disappointing earnings/guidance: FWM -19.1% (also announces Chief Executive Officer Herbert Ruetsch will retire; William Sanford, President of co, will assume the role of Interim Chief Executive Officer; downgraded by several analysts), MCZ -17.2%, ELON -15.6% (light volume), EGOV -12.4%, EXXI -11.3%, PXLW -11%, ACET -9.7%, OPEN -9.2% (also acquires Ness Computing for $17.2 mln in cash), ECHO -8%, LNKD -7.8%, NCR -7.1%, IMI -5.5% (thinly traded), HITT -5.2%, STKL -4.9%, (light volume), WYN -3.3%, KIRK -2.8% (light volume), IMPV -2.5%, CI -2%, VRSN -0.8% (also downgraded to Sell from Neutral at Citigroup).

Select financial related names showing weakness: CS -1.5% (downgraded to Neutral from Outperform at Macquarie), LYG -1.3%, DB -1.2%, BCS -0.6%.

A few oil/gas related names showing early weakness: BP -1.1%, TOT -0.6%, SNP -0.4%.

Other news: LPHI -9.4% (following late drop in the underlying stock attributed to appeals court ruling ), CLVS -4.8% (still checking), RNDY -2% (prices public offering of 8,844,339 shares of its common stock at $7.00 per share (co is offering 2,948,113 shares, and certain selling stockholders are offering 5,896,226 shares), AU -1.7% (still checking), GMCR -1.4% (modestly pulling back), SUNE-1.1% (late pullback that was attributed to cautious newsletter mention), SHPG -1.1% (announces results from two Phase 3 studies for Vyvanse (lisdexamfetamine dimesylate) Capsules as an adjunctive treatment for adults with Major Depressive Disorder: Vyvanse did not meet the primary efficacy endpoint in either study).

Analyst comments: AOL -2% (downgraded to Neutral from Buy at BofA/Merrill), IRBT -1.8% (downgraded to Underweight from Neutral at JPMorgan), SBAC -0.5% (downgraded to Neutral from Buy at Citigroup)

>>> US Gapping up

Gapping up

In reaction to strong earnings/guidance: SMT +38.7% (also is taking action to exit the optical touch sensor business for desktop displays), UEPS +20.9%, ATHN +17.1%, LCI +14%, EXPE +12.8%, IMN +11.8% (ticking higher), BEBE +11%, CYTK +10.1% (light volume), OUTR +9.9% (announces new RedBox President and leadership transitions for Coinstar and ecoATM; downgraded to Market Perform from Outperform at Northland Capital after announcement of a $350M Dutch Tender), UBNT +8.7%, ATVI +8.3%, LQDT +8%, MXL +6.4%, ADEP +6.2%, LSCC +5.2%, (light volume), MSG +5.2%, ONNN +4%, NWSA +3.9%, GPS +3.8%, MCO +3.8%, STO +3.2%, NTGR +2.5%, ECOM +2.3%, MT +2.1%, MITK +1.9% (light volume), CLCT +1.8% (light volume), SSD +1.3%, APO +1.3%, WWWW +0.7% (light volume), TPX +0.6% (light volume).

A few 3-D print names are modestly rebounding (light volume): DDD +2.7%, SSYS +2.2%, XONE +1.6%

Other news: PDO +28.6% (the co and Yuma Energy announce merger agreement), ARIA +7.5% (Sarissa Capital Management (Carl Icahn's past healthcare lieutenant) wants two Board seats on ARIA Board, according to reports), GTAT +6.9% (related to reports that Apple aquired sapphire tools), MU +1.8% (still checking), AAPL +1.8% (Apple has repurchased $14 bln in shares since earnings report, Tim Cook says, according to reports), PCLN +1.6% (following EXPE results), MYGN +1.4% ( BRCA Patent Owners and Gene by Gene Resolve Patent Suit; Gene by Gene will cease selling or marketing clinical diagnostic tests within N. America that include analysis of the BRCA1 and/or BRCA2 genes as a standalone test or in conjunction with gene panels), GM +1.3% (favorable mention on Mad Money), TWTR +0.9% (modestly rebounding), AMZN +0.8% (announces content licensing agreement with Twentieth Century Fox television distribution that will make Prime Instant Video the exclusive online-only subscription home for streaming all past episodes of The Americans), IIVI +0.8% (announces $20 mln share repurchase program), T +0.8% ( DailyMail discusses that takeover speculation continues in VOD despite AT&T (T) denial, according to reports), QIHU +0.7% (Qihoo 360 Tech. and D Link introduce smart WLAN router, according to reports), GOOG +0.6% (Google plans to own $750 stake in Lenovo (LNVGY) following Motorola deal closure, according to reports), TRIP +0.5% (following EXPE results), SDRL +0.5% (enters into forward agreement for 81,828,500 shares of Sevan Drilling , AAL +0.5% (favorable mention on Mad Money), FB +0.4% (following LNKD results), SODA +0.4% (modestly pulling back), KO +0.4% (Barron's profiles positive view on Coca Cola (KO) following Green Mountain Coffee (GMCR) deal. ), CTRP +0.3% (following EXPE results), HTS +0.2% (American Capital Agency (AGNC) discloses 8.5% passive stake in 13G filing ).

Analyst comments: ANR +1.9% (upgraded to Neutral from Sell at Citigroup), SBUX +1.6% (upgraded to Outperform from Market Perform at Wells Fargo), MYGN +1.4% (upgraded to Neutral from Underperform at Credit Suisse ), SNE +1.1% (upgraded to Buy from Hold at Jefferies), C +1.1% (added to US 1 Focus List at BofA/Merrill ), NFLX +1% (Transferring coverage of Netflix and establishing a Buy rating and a $475 target - Stifel)

(Mediapart) Nuclear: a wear problem threatens nearly half of the reactors

Nuclear: a wear problem threatens nearly half of the reactors (PDF attached french article)

Nearly half of the nuclear reactors are threatened by a fuel cladding wear phenomenon, according to an internal document that EDF has acquired Mediapart. The electrician has launched a real tussle with the Nuclear Safety Agency on the subject.

Nearly half of the nuclear reactors in France is threatened by a wear phenomenon that affects fuel cladding, corrosion victims with repeated use, according to an internal document that EDF has acquired Mediapart. Authority of safety of nuclear power (ASN) envisages measures operating restriction to prevent the risk of rupture of the metal casings. Their behavior is essential for the functioning of nuclear power plants as fuel cladding provide the first safety barrier system. But these provisions are challenged by the group that considers too restrictive. The ASN must render an opinion on this subject in the coming days.

The document which has survived from the anonymous, is a tracking form Technical Alerts nuclear fleet, prepared by the Operations Engineering (UNITE) nuclear generation division (DPN) Electrician unit. It covers the week ending December 13, 2013 (see below).


From page 7, you can read several paragraphs on a corrosion problem on the Zircaloy cladding, metal alloy zirconium present in 25 reactors National Park - which has 58 in all, spread across 19 plants. This material is presented as "more susceptible to corrosion" as newer products, also used in the French plants. It is therefore subject to special monitoring, guided by the established models What the nuclear safety experts. Specifically, 13 slices are involved 1,300 megawatts (MW), among the most powerful, and 12 900 MW, one of the oldest.

Schéma sur le fonctionnement d'un réacteur nucléaire (Wikipedia). Cliquer pour agrandir
Diagram of the operation of a nuclear reactor (Wikipedia).
Click to enlarge
The problem is that the operator has found that the corrosion extended to deeper than expected on some duct thicknesses. So it had to change its reference model. But these new measures are rejected by the ASN considers that they are "not acceptable", as can be read in this document. Consequently, the authority to "consider the establishment of" operating restrictions on fuel "in order to limit radiation, thus reducing the thickness of maximum cladding corrosion."

In other words, it may request a precautionary EDF to use less fuel and its time to replace them more often with new equipment. Exactly the opposite of what is today the electrician, which lengthens the period of use of fuels, increasingly loaded uranium 235 to increase its nuclear production.

"On the razor's edge"

Coupe métallographique d'un crayon de combustible issu d'un réacteur (©IRSN). Metallographic section of a fuel rod from a reactor (© SNRIs).
A showdown begins, and we discover the intensity over the paragraphs. EDF proposes raising the maximum corrosion threshold to 108 microns, or 0.108 millimeter. A trifle? Not really concerned ducts do not measure more than 0.57 millimeter, or even five times the thickness corroded "It's a lot, it is a problem.. This means that between a fifth and a sixth part of the sheath is "Monique Sené analysis physicist, founder of the Group for scientific information on nuclear energy (GSIEN).

But meanwhile, the ASN intends to impose more drastic restriction of 0.1 millimeter. A view rejected by EDF, who openly expresses, "this value is the historical landmark value unrelated to any physical justification." Above all, such a limit would "drastically reduce lengths of campaign", that is to say, periods of use of fuel in the reactors 13 1300 MW. The group may therefore need to review thoroughly the management of uranium fuel at the price of substantial additional costs.

Typically, a fuel rod remains four years in a reactor, which corresponds to the three "rings" of EDF typology. They are then removed during maintenance shutdowns, to be returned to treatment Areva La Hague plant. In the heart of the reactors, new and older assemblages are mixed, according to scientific calculations neutron (see below examples of these "managements"). Longer fuels are used less often they should be changed, and thus stop the reactors. It is a measure of budgetary savings.

Exemple de plan d'assemblage dans un cœur de réacteur, mêlant combustibles neufs et anciens. Example of assembly plan a heart reactor, mixing old and new fuels.
But this is not all. Car Accident, corrosion sheaths could aggravate the situation. Normally, nuclear reactors are controlled by control rods. They determine its power rising or dropping into the machine. If one of them suddenly pops as a result of too much pressure in the system, it is the beginning of a potentially serious accident - he did is never produced such until here in France. The temperature inside the reactor and then greatly increases very quickly. The fuel rods are subjected to a shock treatment and can be deformed. Sheaths corroded might break from 0.08 mm (80 microns) corrosion alert ASN, who beyond, "the safety demonstration of holding the pencil rod ejection is not established."

Photographies de tronçons de zircaloy 4, à différents stades d'oxydation (©IRSN). Cliquer pour agrandir Photographs of sections of Zircaloy 4 at different oxidation stages (© IRSN). Click to enlarge
But then again, EDF is resisting and considers that "the value of 80 microns is reached during the second half of the cycle (between 60 and 80% of the natural length of campaign), this limit can not become a constraint on the length of campaign. " In other words, since it is known that the corrosion thickness reaches this before the end of the planned duration of use, we can not refrain from crossing the threshold. In response, the ASN calls EDF a safety demonstration "acceptable." And could accept a slow operation, "base", that is to say without changing the reactor power during the second round of fuel use. "This is an operation on the razor's edge, Monique analysis senna, accident and ejection of clusters, there is no leeway. It's annoying to work without a net. "We swim in full gray area.

The ASN must give its opinion on this controversial topic in the coming days. But the problem could last five to six more years until 2019 or 2020, when the entire stock of Zircaloy sheaths should be passed. "The heart of the discussion now is to determine how thick corrosion is tolerable, told Mediapart Houdré Thomas, director of nuclear power plants to control the ASN; "is technically examine this subject, which is not entirely trivial. It's complicated. "

More specifically, the "discussions focus on the fact establish compensatory measures compared to a situation where doubts about the acceptability of the corrosion could have. It is not completely obvious. " Several possibilities are considered: change fuel assemblies, reactor power block, and thus the amount of nuclear electricity, remove all ducts Zircaloy park. The latter option would mechanically stop all reactors involved, the time to change uranium rods. It should also find new solutions for the storage and treatment of corroded assemblies. Unable to change or repair the fuel cladding, too radioactive to be approached. We must keep all or change any.

"Challenging the safety demonstration"

Intérieur de la cuve d'un réacteur nucléaire. Inside the vessel of a nuclear reactor.
This problem is the subject of intense discussions between EDF, ASN and its network of experts from IRSN (Institute for Radiological Protection and Nuclear Safety) for fifteen years. The development of the corrosion of Zircaloy has been modeled, and even an experimental program was established to provide a tool for the simulation of damage in the event of ejection ducts cluster. Zirconium is popular with manufacturers of nuclear components because it absorbs very little neutron and thereby facilitates the process of chain reactions. Its default is to corrode faster.

In the past, IRSN estimated that the maximum thickness of corrosion were dumped by EDF. In 2011, as noted in a report (read it here) that the maximum thickness of 115 microns reach calculated oxide or 0.115 millimeter. That is to say, even more than the maximum threshold EDF is now trying to accept. These thicknesses exceed the design criteria previously selected by EDF, and "could jeopardize the safety demonstration" (see this document, p. 2) . When experts analyzed 2,800 fuel assemblies unloaded slices park, 119 were "leaky". In June 2011, two months after the Fukushima accident, these studies are restarted from the feedback from the use of fuels between 2003 and 2009. The novelty today is the recent actions reveal a larger than expected corrosion process.

While EDF puts pressure on the executive for extending the life of nuclear power plants beyond 40 years the revelations on the wear of fuel cladding creep new pebbles in the shoes of the electrician. Over the years, the equipment is used, leaving fuiter radionuclides inside and outside the reactor building. Yet, in theory, the fuel cladding must be as insurmountable as the Great Wall of China. They provide the first safety barrier designed to prevent the spread of radioactive elements outside the reactor. In fact, cases of cladding failure have been observed, including the Cattenom (Lorraine). Over time, a rate of cladding failure between 1 and 2% was allowed.

"Flying a reactor is not simple, it must take into account all the corrosion," says physicist Monique Sené. If a sheath ruptures, radioactive materials spread in the primary circuit of the reactor. "It is pure non-stop but it is not possible to retain the gaseous products," she says. By dint, pipes and even parts of the reactor building may be contaminated. Personal find themselves at risk of radiation, especially during maintenance operations, the most dangerous.

For EDF, "we can not talk about wrestling with the ASN, it is a technical issue which is the subject of exchanges of work." But the group recognizes that "the issue of corrosion of certain ducts is under discussion."

Far from being anecdotal, the problem of wear sleeves fits the heart of the current EDF dilemma, torn between the demands of security and economic imperatives. Given the large number of tranches (25) managing this problem will necessarily have an impact on the operation of the park, and therefore the amount of nuclear electricity produced.