Remove: Booker, Sainsbury from Most / Morrison (Wm.) from Least Preferred Following on from the cessation of coverage of the European Food Retail sector, we are removing Booker, Sainsbury from Most Preferred and Morrison (Wm.) from Least Preferred.
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Orange May Need to Cut Dividend Further, Kepler Cheuvreux Says 2014-01-28 08:24:59.365 GMT
By Sam Chambers Jan. 28 (Bloomberg) -- Pricing pressure in French wireless will lower avg revenue per user and force Orange to raise 4G subsidies with little return in the S/T, Kepler Cheuvreux says, cutting stock to reduce. * Kepler Cheuvreux says capex unlikely to fall as management has planned due to 4G, fiber network rollouts in France, Spain * As a result mgmt. will probably be forced to cut its guidance and div. payout * Increases PT by 20% to EU9 after rolling forward model to 2014 ests, which includes higher ests due to scope for better regulation/market repair * NOTE: Orange cut its 2012 dividend to 80c/shr in Oct 2012; BDVD forecasts div. to remain at 80c/shr for next 2 yrs * NOTE: Orange scheduled to report 2013 results on March 6
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To contact the reporter on this story: Sam Chambers in London at +44-20-7673-2021 or schambers7@bloomberg.net
To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net
Clients sell stocks—but surprisingly, mostly defensives
*1st week of net sales this year amid market sell-off
Last week, during which the S&P 500 was down 2.6% (its biggest weekly decline since May 2012), BofAML clients were net sellers of $302mn of US equities following four weeks of net buying. Net sales were entirely due to institutional clients, who sold stocks following five weeks of net buying. Hedge funds were net buyers for the second consecutive week, while private clients continued their long-term net buying streak, with inflows into US stocks by this group in all but three of the last 35 weeks since late May. By size segment, outflows were entirely in the large cap space last week.
* Defensive-led outflows; big Tech inflows continue
Interestingly, despite concerns over China and EMs, net sales last week were actually concentrated in the defensive sectors of Health Care and Staples, along with ETFs. Tech saw the largest net buying following the previous week’s record inflows into the sector, and has the longest net buying trend of the ten sectors with five consecutive weeks of inflows. We note that most sectors which saw inflows last week were globally-oriented cyclical sectors. We have been expecting clients to rotate out of defensives and into these sectors as global growth picks up this year, particularly
given very attractive valuations that appear to be discounting the worst, and so far this year we have seen evidence of what could be the start of this rotation (see Chart of the Week below).
* Other notable flows: Broad-based small cap buying, Utilities sales
- All three client groups were net sellers of Utilities. No sector saw net buying by all three groups, though both hedge funds and private clients bought Discretionary, Staples, Energy, Financials, Health Care, Industrials, and Tech.
- Small caps saw net buying by all three client groups last week; no size segment saw net sales by all three groups.
- BofAML pension fund clients were net buyers of US stocks across all three size segments last week following a week of net selling, and are currently small net buyers YTD. Net buying last week was chiefly in Industrials and Materials, while Energy and Tech saw the largest net sales. See pg 9 for details.
Spain Fin Min De Guindos: Reiterates 2014 GDP forecast of 1%
- Transparency more important than capital requirements
- Spain becoming a competitive country.
- Spain becoming a competitive country.
Eurozone governments facing the threat of bankruptcy should impose a one-off wealth tax on their citizens before seeking help from others, Germany’s Bundesbank proposed on Monday.
The German central bank raised the idea of an emergency capital levy in its monthly report, arguing that it corresponded with the principle of “national responsibility, according to which taxpayers are responsible for their government’s obligations, before the solidarity of other states is called upon”.
The Bundesbank said that the levy would have to be a one-off “imposed in conditions of extraordinary national crisis”, in order to limit negative consequences for investment, and potential capital outflows.
It acknowledged that a nation in crisis would have difficulty making a convincing case to depositors and investors that any such levy would be a one-time measure.
Although the report did not specify a eurozone country that should consider such a tax, its policy makers may have had Italy in mind. At the height of the eurozone crisis in 2011, Rome actively considered such an extraordinary wealth tax – known in Italy as a “patrimoniale” – as a way to pay down its sovereign debt load, the biggest in the single currency after Greece. It was never enacted.
Such an approach could suit Italy because – despite its high sovereign debt levels – its citizens have relatively little private debt and large amounts of wealth. That means a one-off tax could make a major dent in its national borrowing. According to Eurostat, the EU’s statistical agency, Italian households boast higher net financial wealth, as a percentage of gross domestic product, than almost all other eurozone countries, including Germany and France.
The International Monetary Fund discussed the option of a wealth tax in a report in October.
The IMF said: “The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behaviour (and may be seen by some as fair).”
The IMF said the tax rates needed to bring down public debt in eurozone countries to pre-crisis levels would be hefty; it reckoned a rate of about 10 per cent on households with positive net wealth.
Last year, Cypriot deposit holders were forced to take losses on their bank accounts to help pay for the country’s €10bn international bailout. But those deposits were used to limit the price tag for its rescue as opposed to paying down the country’s sovereign debt load.
In 1992, when the Italian lira was at risk of being forced out of the European Rate Mechanism, then-prime minister Giuliano Amato imposed an emergency wealth tax that sucked 0.6 per cent out of all Italian bank accounts overnight to fight ballooning sovereign debt levels.
The Bundesbank report comes amid widespread indignation in Germany, stoked by the popular press, over bailouts of heavily indebted eurozone countries.
A study of household wealth published by the European Central Bank last year gave fresh impetus to Germans’ resentment. The ECB data showed median net wealth in Cyprus stood at €267,000 euros per household compared with €51,000 per household for Germany. Different levels of home ownership played a significant role in the disparity.
In its report, the Bundesbank also noted signs of gradual improvement in the countries most affected by the crisis.
The report said: “Comparing the current situation and trends in the countries concerned with the initial situation at the outbreak of the crisis, it appears that a great deal has already been achieved.” The current challenge for crisis-affected countries is to reduce public and private debt, the central bank said.
“It is of central importance to rapidly reduce public deficits to European target values,” the Bundesbank said.
Free Mobile is moving from the first stage of the business cycle (when it achieved its easier goals) into the second stage, where growth is harder to achieve, subscriber momentum falters and investors no longer extrapolate the current run-rate, but gradually adjust their long-term expectations to more sustainable levels.
A credible mobile strategy requires much higher capex
Free Mobile’s 4G initiative has obvious flaws (in terms of coverage and frequency), but it has sparked a negative price reaction. We don’t see value creation in subsidies as subscriber gains aren’t sufficient to offset the lower EBITDA per subscriber. Free Mobile subscriber net adds could slow significantly (0.7m in 2014E vs 2.6m in 2013E), as competitors react, price differentials narrow and churn increases, given its large customer base. To cope with the expected traffic growth and stay competitive, Illiad will have to raise network investment (to EUR350-400m per year) and spectrum costs (EUR0.7-1.2bn) beyond current consensus expectations.
Bouygues unleashed hostilities
Iliad is the most at risk from Bouygues’ new offers, with its high exposure to fixed broadband (80% of EBITDA, 120% of FCF) and lower prices. We see signs of price deflation in fixed too, albeit with less intensity than in mobile, narrowing Iliad’s price discount. The cross-selling opportunity and Freebox halo effect are waning, and we expect a sharp slowdown in subscribers. FTTH levels the playing field, returns are uncertain and subscriber take-up is minimal. Iliad will need to raise capex to remain competitive long-term.
No free lunch
Iliad is probably the last partner for network sharing, takeover or consolidation. It could become marginalised, forcing it to overspend vs peers.
Reduce, TP raised from EUR135 to EUR145
We roll over our model and use lower WACC for mobile (9%) and fixed (8%) based on the recent sector rerating, but our estimates are largely unchanged. We lift our TP from EUR135 to EUR145 and reiterate our Reduce rating given the implied 17% downside. Iliad trades at 8.6x EV/EBITDA 2014E, but the ratio is distorted by its mobile unit. We estimate the implied market value of the fixed broadband unit at 7.8x EV/EBITDA 2014E. We think cable assets ex M&A trade at 8.0x and that cable merits a premium. Orange trades at 4.8x and the telecom sector at 6.0x. We estimate zero FCF generation in 2013E and –EUR60m in 2014E. Even in 2020E, the FCF yield at 7.8% would still be well below the industry average.
Rating ChangesCompany Name Ticker Rating (New) Rating (Old)
Akcansa Cimento Sanayi ve Ticaret AKCNS.IS Buy Neutral
Akenerji Elektrik Uretim AKENR.IS Neutral Buy
Anadolu Cam Sanayii ANACM.IS Neutral Buy
Anadolu Efes AEFES.IS Neutral Sell
Coca Cola Icecek CCOLA.IS Buy Neutral
Emlak Konut Gayrimenkul Yatirim Ortakligi EKGYO.IS Buy Neutral
Ford Otosan FROTO.IS Neutral Sell
Gubre Fabrikalari (Gubretas) GUBRF.IS Neutral Buy
Kordsa KORDS.IS Buy Neutral
Soda Sanayii SODA.IS Buy Neutral
Turk Traktor ve Ziraat Makineleri TTRAK.IS Buy Neutral
VESTEL White goods VESBE.IS Sell Neutral
Brisa Bridgestone Sabanci Lastik Sanayi ve Ticaret (Brisa) BRISA.IS Neutral Sell
Goldman Sachs Global Investment Research
Turkey: Multi-Industry
Published January 27, 2014
Rebalancing underway, yet already discounted: TAV, Enka, Celebi, Halk, Emlak top picks
Turkish equities are down c.40% since May...
The Turkish equity market has declined by 28% since its May 2013 peak, while the Turkish lira has depreciated by a further 18% vs. the US dollar, leading to a fall of 41% fall in US dollar terms. Over the last three years, the index is down c. 30% in US dollar terms, despite cumulative real GDP growth of 15% over the same period.
...discounting the expected macro slowdown
We believe that the market has already largely discounted the expected slowdown and rebalancing of the Turkish economy: the equity market is now trading below 9x 2014E P/E, a 14% discount to other EMs. Our economists also believe that the TRY reached fair value in early January for the first time since 2006, though they expect some further weakness by year end to support the rebalancing of the economy.
We expect a differentiated impact on stocks
In this context, we prefer companies with positive FX exposure to a weakening TRY, or domestic businesses offering deep value.
We highlight three groups of companies that we believe are attractive: (1) high quality stocks that are positively exposed to FX and offer significant valuation upside; (2) stocks with valuation upside and that benefit from TRY weakness and which the market has sold off; and, (3) stocks that suffer from TRY weakness, but which we believe are oversold and thus offer deep value. Our top picks (all on the CEEMEA Focus List) reflect these themes: TAV, Celebi, Enka, Halkbank and Emlak Konut (from Neutral).
We highlight TAV, Celebi, Enka, Halkbank and add Emlak to the CEEMEA Focus List
We revise our estimates for 41 non-financial Turkish stocks and make 13 rating changes:
AKCNS, CCOLA, EKGYO, KORDS, SODA and TTRAK to Buy from Neutral; VESBE to Sell from Neutral; AKENR, ANACM and GUBRF to Neutral from Buy; and AEFES, BRISA and FROTO to Neural from Sell.
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Afren 2013 Output 47,112boe/d Beats High End Forecast 47kboe/d 2014-01-28 07:05:38.432 GMT
By Benjamin Dow Jan. 28 (Bloomberg) -- 2013 total revenue $1.65b beats est. $1.62b. * 2013 capex $685m, targets 2014 capex at $845m * Plans 6 Africa wells in 2014; 2 each in 2Q, 3Q, 4Q
Link to statement:{NSN N03NGK3HBS3M <go>} Link to Company News:{AFR LN <Equity> CN <GO>}
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To contact the editor responsible for this story: Benjamin Dow at +7-495-771-7735 or bdow2@bloomberg.net
US Market closed lower, US Index were highly correlated with JPY during the all session...AAPL outperformed during the session before reporting numbers, stock was down 7,5% in after hours, volume were slightly abpve average @ 724mil shres...VIX @ 17,42 -3,97%...SKEW @ 131,61 -3,02%... Japan focus shifts on whether a corporate tax cut will be needed to mitigate the rising sales tax in April. Ruling LDP officials said to debate the merits of lower taxes, while the more conservative Fin Min Aso calls for lawmakers to keep Japan's fiscal state in mind...Nikkei -0.17%...- China shadow banking sector seems to have averted a high-profile default for ICBC's China Credit Trust product after "unnamed" investor stepped in with a deal to protect the principal of the product buyers, just as analysts warned
about the "moral hazard" created by perpetuating the selling of high-yield/"low- risk" products. Shanghai Composite initially strengthened before the late- morning selloff after a slowdown reported in China industrial profits growth.
PBoC was in the market for the 3rd straight session, with another outsized CNY150B OMO in 14-day reverse repos, but could not keep the overnight money market rates from rising for the 6th consecutive day....Shanghai +0.21%
Eur$1.3680 S&P Fut +0.27% European future-0.15%
Keep an eye on :
- ANA SM : Acciona Sets Convertible-Bond Issue Size at EU342m
- CAV1V FH : Caverion 4Q EPS Matches, Sales Miss Ests.; Proposes to Pay Div
- DEC FP : JCDecaux 2013 Rev. EU2.68b, Matching Est.
- EN FP : SFR, Bouygues to Share Mobile-Phone Networks, Le Figaro Says (Not New already reported in les Echos yest)
- IPN FP : Ipsen Fourth-Quarter Sales Rise 2% to EU293 Million
- ITP FP : Interparfums Says 2013 Operating Profit May Exceed EU50M
- LHA GY : Lufthansa Considers Rene Obermann for CEO Post, Rheinische Says
- PHIA NA : Philips 4Q Adj. Ebita Beats Estimates, 2014 to Be ‘Modest Step’
- 1913 HK : Prada Falls Most Since October 2011; PE Drops to 20-Month Low -10% at the open and only -1.2% now
- RDSA NA : Shell Said to Seek Buyers for $1b Stake in Ho-Ho Pipeline
- POP SM : Popular Won’t Meet Earnings Objective For 2013, Expansion Says
- RR/ LN : Awarded $182.7M USAF contract
- SIE GY : Siemens Profit Beats Estimates Helped by Infrastructure Demand, Sees Continuing Charges at Power Transmission Business
- SOW GY : Software AG 2013 Ebit Falls 10%; Misses Estimates
- SRT3 GY : Sartorius Says Reaches 2013 Target, Sees Significant 2014 Growth
- STAN LN : could be takeover target for ANZ, ICBC, CCB, MUFJ and SMFG
- STM FP : STMicroelectronics 4Q Rev. In Line; Adj. Loss/Shr Worse Than Est
- TKA GY : Cevian Lifts ThyssenKrupp Stake to Almost 15%, Handelsblatt Says
- VIV FP : SFR, Bouygues to Share Mobile-Phone Networks, Le Figaro Says (Not New already reported in les Echos yest)
>>> Up
*AKCANSA RAISED TO BUY VS NEUTRAL AT GOLDMAN
*ANADOLU EFES RAISED TO NEUTRAL VS SELL AT GOLDMAN
*ARCELORMITTAL RAISED TO OUTPERFORM AT RBC CAPITAL
*BANCO POPULAR RAISED TO OUTPERFORM AT CREDIT SUISSE
*BANCO SABADELL RAISED TO NEUTRAL AT CREDIT SUISSE
*BRENNTAG RAISED TO BUY VS HOLD AT BERENBERG
*BRISA RAISED TO NEUTRAL VS SELL AT GOLDMAN
*BEIERSDORF RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
*BG GROUP RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
*CAIXABANK RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*CIB RAISED TO BUY VS NEUTRAL AT GOLDMAN
*COCA COLA ICECEK RAISED TO BUY VS NEUTRAL AT GOLDMAN
*EMLAK RAISED TO BUY VS NEUTRAL AT GOLDMAN
*FORD OTOSAN RAISED TO NEUTRAL VS SELL AT GOLDMAN
*INTESA SANPAOLO RAISED TO OUTPERFORM AT RBC CAPITAL
*KORDSA RAISED TO BUY VS NEUTRAL AT GOLDMAN
*SODA SANAYII RAISED TO BUY VS NEUTRAL AT GOLDMAN
*TUPRAS RAISED TO NEUTRAL VS SELL AT UBS
*TURK TRAKTOR RAISED TO BUY VS NEUTRAL AT GOLDMAN
*VERBUND RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT MORGAN STANLEY
>>> Down
*AKENERJI CUT TO NEUTRAL VS BUY AT GOLDMAN
*ANADOLU CAM CUT TO NEUTRAL VS BUY AT GOLDMAN
*BG DOWNGRADED FROM OVERWEIGHT TO NEUTRAL AT JP MORGAN
*CBQ CUT TO NEUTRAL VS BUY AT GOLDMAN
*EURONAV CUT TO HOLD FROM BUY AT ING
*GUBRETAS CUT TO NEUTRAL VS BUY AT GOLDMAN
*JOHNSON ELECTRIC CUT TO SELL VS NEUTRAL AT UBS
*NETIA CUT TO HOLD VS BUY AT ING
*OUTOKUMPU CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
*VESTEL BEYAZ CUT TO SELL VS NEUTRAL AT GOLDMAN
*ZIGGO CUT TO NEUTRAL AT HSBC
>>> PT Change
*BG Group PT Cut to 1,350p from 1,460p at Raymond James
*MONTE PASCHI PT CUT TO EU0.15 VS EU0.19 AT CITI; KEPT AT SELL
>>> Initiation
*EFG-HERMES REINSTATED BUY AT GOLDMAN; ONTO CEEMEA FOCUS LIST
*G4S RATED NEW UNDERWEIGHT AT MORGAN STANLEY; PT 235P
*NUMERICABLE RATED NEW BUY AT NOMURA; PT EU31
*SECURITAS RATED NEW EQUALWEIGHT AT MORGAN STANLEY; PT SEK70
*URALKALI RATED NEW BUY AT SOCGEN; PT $31
>>> Call
>> Stock
***UBS
*METRO AG REMOVED FROM UBS’S EUROPEAN KEY CALLS
*Delhaize, Sainsbury Removed From UBS’s M&A Watch List
*TUPRAS REMOVED FROM UBS’S LEAST PREFERRED LIST
***ML
*HOLCIM, TAYLOR WIMPEY ADDED TO BOFAML BUILDINGS MOST PREFERRED
*PERSIMMON, LAFARGE EXIT BOFAML BUILDINGS MOST PREFERRED LIST
***MS
*GN STORE NORD ADDED TO MORGAN STANLEY’S BEST IDEAS LIST
*UNITED UTILITIES ADDED TO MORGAN STANLEY’S BEST IDEAS LIST