WSJ : Car Makers at Consumer Electronics Show Tout Ways to Plug Autos Into the W

Car Makers at Consumer Electronics Show Tout Ways to Plug Autos Into the Web
Moves Raise Worries Among Highway Safety Regulators

WSJ's Jeff Bennett explores the 4G features that Chevrolet will launch with its 2015 models. Photo/Video Courtesy of General Motors Co.
LAS VEGAS—Auto makers aim to make 2014 the year that cars connect to the Web in a big way, and they are stepping up their land rush with Silicon Valley to compete for customers who go online on the road.

General Motors Co. GM -3.37% and Audi AG NSU.XE +1.33% said they plan to use this week's International Consumer Electronics Show here to roll out strategies for equipping cars with built-in 4G high-speed broadband—the mobile technology now common on smartphones and tablets.

The car makers said these data pipelines will let them provide a variety of services, ranging from streaming video to remote troubleshooting of auto systems. GM, for example, plans to offer a Weather Channel app that drivers can see on in-dash screens, GM executives said.

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Consumer Electronics Show 2014

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Ford Motor Co. F +0.45% said last week it will add 3.4 million vehicles to the one million that already use its Ford Sync AppLink product, which lets drivers and passengers control smartphone apps using voice commands through onboard software and systems.

The flurry of activity at CES highlights intensified efforts by auto makers and Silicon Valley companies to overcome long-standing cultural, technical and safety obstacles to mine profit from the hours that consumers spend behind the wheel.

Consumers will pay for services that make their lives easier, said Chevrolet global chief Alan Batey, who will take over as the auto maker's North America chief next week. "Consumers will want it because when they get into the car it's already there."

Many questions remain unanswered. It isn't clear how much customers are willing to pay for in-car Web connections when they already get many services from their current mobile devices.

And safety will be a big issue. Federal highway safety regulators recently published guidelines they want auto makers to follow when designing mobile "infotainment" systems, and have signaled they'll take stronger steps if necessary to minimize the risk that Web connections will distract drivers.

"To take mobile technology and give the driver distractions that don't even relate to driving is just not the right direction," said Dave Teater, senior director at the nonprofit Chicago-based National Safety Council.

"I don't blame the auto makers," said Mr. Teater, "but they are now in an arms race to be more connected and I think that sends a message that it is normal and not dangerous."

That automotive arms race was apparent at the Las Vegas show. GM said it would begin offering 4G LTE high-speed connectivity later this year on 2015 versions of its Chevrolet Corvette, Impala, Malibu and Volt. GM said its 4G connections will also function as mobile Wi-Fi hot spots, allowing consumers to connect seven devices such as phones or tablets.

GM said it plans eventually to offer 4G broadband in the rest of its vehicles. GM is also developing a Chevy app store that would let car owners download applications to the center screen of a vehicle dashboard.

GM said it has 10 applications for download, including a music app called Slacker Radio that provides more than 13 million songs and an app called Glympse that lets a driver share real-time movement with friends.

Separately, GM said it has a team of about 50 programmers developing exclusive apps. One of these, Vehicle Health, will provide more details when a problem crops up in the car.

"We want to try and demystify the check engine light," GM Chief Technology Officer Tim Nixon said.

Audi, Volkswagen AG VOW3.XE -0.80% 's high-volume luxury brand, said it plans to offer 4G connections on its 2015 A3 compact sedan, which goes on sale during the first half of the year. Drivers will have access to Internet radio stations, real-time navigation and the ability to connect eight mobile devices.

Audi officials said they plan to use the Las Vegas show to outline details of a new alliance with Google Inc. GOOG -0.73% to develop new in-car entertainment and information products using Google's Android mobile operating system.

The Google-Audi initiative follows an earlier move by rival Apple Inc. AAPL -2.20% to forge alliances with several auto makers, including BMW AG BMW.XE -0.08% , Daimler AG and Honda Motor Co. 7267.TO -1.27% , to make it easier for consumers with Apple devices to pipe information from their apps into the dashboard.

Detroit and Silicon Valley remain wary of each other when it comes to control of the relationship with the customer. Car makers want a healthy cut of any revenue made possible by offering more-robust connections to services offered by Apple, Google or app makers.

Many consumers can get access to 4G connections in their cars today by carrying their mobile devices with them while they drive. GM and other auto makers pursuing plans to embed broadband connections in vehicles will first have to persuade those customers to pay extra for the onboard portal. GM said it would wrap the new broadband connectivity into the hardware for its OnStar concierge service, but that the 4G connection will be provided by AT&T Inc.

To address safety issues, auto makers and technology companies are working to make in-car displays and controls "glanceable," to reduce distraction and eliminate the need to look at a smartphone.

"Holding a phone and interacting with a phone while driving is just not safe," said Danny Shapiro, senior director for automotive applications at Nvidia Corp. NVDA -1.20% , which makes chips used for automotive displays. "While driving, the last thing you want to do is pull a phone out of your pocket and open an app," he said.

WSJ : High-Speed Traders Form Trade Group to Press Case

High-Speed Traders Form Trade Group to Press Case

High-frequency traders are going on defense.
To counter what they say is the industry's unfair reputation as a disruptive force in the markets, a group of high-frequency trading firms have hired a pair of heavy-hitting political strategists and formed a trade group to press their case with regulators and lawmakers.
The strategists, Kevin Madden and Erik Smith, last week submitted paperwork to found a group called the Modern Markets Initiative, with headquarters in Washington, D.C. Backed by four high-speed firms, it plans to bolster a website Tuesday that will include a video arguing that high-frequency traders have made the financial markets cheaper and faster for investors, a blog to respond to critics and links to academic research.
Mr. Madden helped run Mitt Romney's 2012 presidential campaign, and Mr. Smith was a senior adviser to Barack Obama's 2008 and 2012 campaigns.
The move highlights how the upstart computer-driven trading firms, once a marginal, little-known segment on Wall Street, have grown into a mature industry looking to shift the perception of their activities.
High-frequency traders move rapidly in and out of stocks and commodities to capture fleeting shifts in prices. Their activities first drew broad scrutiny after the May 6, 2010, "flash crash," when many of the firms pulled out of stocks, a move some critics say helped worsen a sharp drop in the market.
High-frequency trading firms are responsible for about 50% of trading in the U.S. equities market, according to Rosenblatt Securities, which advises institutional investors on trading.
That number has been relatively stable over the past several years. However, during the second half of 2008 and first half of 2009, at the peak of the financial crisis, that number was closer to 66%, Rosenblatt said. High-frequency trading increases during times of heightened volatility.
An initial goal for the group is to create a new name for the industry. They prefer "automated professional traders" to high-frequency traders.
"One of the things that has been a problem with the phrase high-frequency trading is that it has become a catch-all for anything people don't like," said Peter Nabicht, spokesman for the new group. Mr. Nabicht is a former executive vice president of Chicago-based high-frequency firm Allston Trading LLC.
The industry is under increased scrutiny. The Financial Industry Regulatory Authority, in a letter last week outlining its enforcement priorities for 2014, said it plans to focus on high-frequency trading, known as called HFT. "Although many HFT strategies are legitimate, some are not and may be used for manipulative purposes," Finra said in the letter.
Several regulators, including some with the Securities and Exchange Commission, recently called for a broad review of computer-driven markets amid concerns that trading has become too complex and plagued by glitches. A 40 to 45 minute trading snafu in 2012 by Knight Capital Group that cost the firm nearly $500 million raised concerns that high-speed markets are vulnerable to mistakes that could spread to regular investors.
Not all high-frequency traders employ the same strategy, but they commonly use proprietary algorithms, state-of-the-art computers and ultrafast connections to exchanges. Critics say they take advantage of large institutions, such as mutual funds, by running up prices at lightning speeds once they detect a big buyer or seller in the market.
"There is no doubt that the computerization of Wall Street has been incredible, but there are a lot of problems that need to be investigated," said David Lauer, a former high-frequency trader who now consults on market structure.
High-frequency firms say they have reduced the cost of trading for all investors and made the markets more efficient. The new group plans to spread that message more widely.
"There are a lot of noisy opponents of high-frequency trading, but there hasn't been an organized rebuttal, and that is going to change," said Ari Rubenstein, managing partner of Global Trading Systems LLC, New York, one of the four founding firms of the new group.
The other founding firms are some of the oldest high-frequency traders in the industry: Tower Research Capital LLC and Hudson River Trading LLC, in New York, and Quantlab Financial LLC, in Houston. The group is seeking additional members. The initiative won't be the first to push high-speed traders' agenda. In 2010, about 30 high-speed firms formed the Principal Traders Group, part of the Futures Industry Association trade group, to help shape policy in Washington.
Modern Markets Initiative has already started reaching out to lawmakers, sending a two-page introduction to the group around the Capitol and an email address for contacting its leadership.
Cameron Smith, founder of Quantlab and a former SEC attorney, kicked off the Modern Markets Initiative in August with a basic website, modernmarketsinitiative.org.

(BN) Delek London Listing Plan Is Warning Sign at UBS: Israel Markets

Delek London Listing Plan Is Warning Sign at UBS: Israel Markets
2014-01-06 07:01:24.256 GMT


     (For more top news about Israel, click {TOP IS <GO>}.)

By Shoshanna Solomon
     Jan. 6 (Bloomberg) -- Delek Group Ltd.’s plan to list
shares abroad should serve as a warning to the Israeli
government that tax and regulatory changes are sapping trading
on the national stock exchange, according to UBS AG.
     The company with stakes in the country’s largest natural
gas fields became on Dec. 31 the third member of the benchmark
index to announce such plans last year. The TA-25 Index gained
half as much as the MSCI World Index in 2013, while buying and
selling on the gauge tumbled 48 percent in the past two years.
     The decisions to trade overseas underline the challenges
faced by the Tel Aviv Stock Exchange as a surge in the shekel
hurts exports and Israel’s economic growth slows. The trend
would leave the bourse “hollowed out of its most-attractive
stocks,” according to the brokerage unit of Excellence Nessuah
Investment House Ltd. in Ramat Gan, Israel.
     “These companies are looking abroad because the local
market is not managing to attract foreign investors,” Ady
Vigodsky, the head of equities at UBS in Herzliya, Israel, said
in a phone interview on Jan. 6. “This will lead to a further
drop in volumes on the exchange. The government must find ways
to lure these investors back.”
     A flurry of legislation aimed at boosting government
royalties and competition has fueled a decline in foreign
investment in the $155 billion stock market. Overseas investors
spent $300 million, or 18 percent, less in the first 11 months
of last year on Israeli shares than in the same period of 2009,
the year before the country’s re-classification to developed
market at index provider MSCI Inc.

                       Mellanox Delisting

     Delek Group’s announcement meant that companies accounting
for more than 10 percent of the weighting on the benchmark
index, said they plan to trade abroad. Israel Chemicals Ltd., a
fertilizer maker that harvests minerals from the Dead Sea, said
in November it will dual list shares to reach global investors
while Israel Corp., the company of billionaire Idan Ofer, said
in June it plans a foreign listing. Mellanox Technologies Ltd.
delisted from Tel Aviv in September citing regulation.
     “Regulation can be unpredictable and short-termist, and
without doubt several of our holdings would benefit from greater
visibility,” London-based William Scholes, an assistant
investment manager at Aberdeen Asset Management Plc, which
oversees $318 billion, said by e-mail Jan. 2. “Because the
Israeli market is small and somewhat isolated, the role of a
regulator in maintaining competition is very relevant in certain
instances.”

                           ‘Big Stick’

     Finance Minister Yair Lapid said at a conference in Tel
Aviv last month that his ministry plans to cut bureaucracy and
regulation as current levels are “pushing people and companies
away.” Avishay Braverman, chairman of the parliamentary
economic affairs committee, said Israel has a surfeit of
regulators that don’t communicate well with each other.
     “Israel has too many regulators,” he said by phone Jan.
2. “I would prefer fewer regulators with a big stick.”
     The TA-25 Index will increase in 2014, Ramat Gan, Israel-
based investment house Halman-Aldubi Group said, amid the lowest
interest rates in four years and after Fitch Ratings raised
Israel’s credit outlook in November, citing greater political
stability.
     Halman-Aldubi, which manages the equivalent of about $4.3
billion in assets, forecast the benchmark index, which closed at
1,323.43 yesterday, may reach 1,500 this year, according to an
e-mailed note Dec. 11.
     The measure gained 12 percent last year, compared with a
jump of 24 percent for the MSCI World Index. The shekel surged
7.5 percent in 2013, the best performer among 31 major
currencies tracked by Bloomberg, as the economy expanded an
estimated 3.5 percent, according to the median of 18 forecasts
on Bloomberg. Growth may slow to 3.4 percent this year, the data
show.

                          MSCI Upgrade

     Emerging market investors exited the local bourse as the
nation joined MSCI’s developed market index, forcing Israeli
companies to compete with those from the U.S., Europe and Japan
for fund managers’ attention.
     Bourse Chief Executive Officer Ester Levanon resigned in
July after a failed attempt to get Israel included in the MSCI
Europe index in an effort to boost volumes. Levanon was replaced
on Jan. 1 by Yossi Beinart, who headed IG Group Holdings Plc’s
Nadex binary options exchange in Chicago.
     The Tel-Aviv Stock Exchange and the Israel Securities
Authority didn’t respond to e-mailed requests for comment.

                     ‘Further Deterioration’

     Israel Chemicals’s pursuit of a dual listing in New York
will increase its proximity to international investors and offer
“greater flexibility for financings, mergers and
acquisitions,” the company said in an e-mailed statement to
Bloomberg Jan. 5. It will also better protect the company
against “the possible further deterioration of Israel’s
business environment and stock market,” it said.
     Stefan Borgas, chief executive officer of the company, said
at a conference in Tel Aviv on Dec. 9 “frequent and unplanned
regulation” is “poison” for the company, making it difficult
to grow within its home market. The shares tumbled 35 percent
last year, the worst performer on the TA-25 Index, as regulatory
intervention dogged its plans and amid upheaval in the global
potash market.
     Houston, Texas-based Noble Energy Inc., which is exploring
for gas offshore Israel with partner Delek Group, complained on
Nov. 21 about Israel’s “incredibly lengthy” policy making
process that has delayed by a year the development of Leviathan,
the country’s biggest gas field.
     “Whimsical behavior of the government and lack of
commitment to its own decisions is creating an unprecedented
hostile business environment,” Gilad Alper, a senior analyst at
the brokerage unit of Excellence Nessuah, which manages the
equivalent of $19 billion, said by phone on Jan. 2. “All this
could be a nail in the coffin of the exchange.”


For Related News and Information:
Bourse’s New CEO to Battle Volumes to Delistings: Israel Markets
NSN MWMEXQ6TTDU0 <GO>
Tel Aviv Bourse Taps Outsider Beinart as CEO After Trading Sinks
FIFW NSN MVK29Q6VDKI1 <GO>
Israel Developed Market Turns Into Be Careful What Is Wished
FIFW NSN MR7WO06TTDS0 <GO>
Tel-Aviv Stock Exchange CEO Levanon Resigns Amid Volume Drop
FIFW NSN MQ39IW6JIJVJ <GO>
Top Stories:TOP<GO>

--With assistance from Samuel Potter in Dubai and Robert Lakin
in Tel Aviv. Editors: Claudia Maedler, Andrea Snyder

To contact the reporter on this story:
Shoshanna Solomon in Tel Aviv at +972-3-542-7108 or
ssolomon22@bloomberg.net

To contact the editor responsible for this story:
Claudia Maedler at +971-4-364-1025 or
cmaedler@bloomberg.net

>>> MS TOP RESEARCH PICKS FOR 2014 - more details & Link to Report

MS TOP RESEARCH PICKS FOR 2014
Airbus (AIR FP), Volkswagen (VOW3 GY), Wolseley (WOS LN), Smith Group (SMIN LN), Akzo (AKZA NA), Lloyds(LLLOY LN), UBS (UBSN VX), London Stock Exch(LSE LN), Aegon (AGN NA), Nestle (NESN VX), JEronimo MArtins (JMRN PL), Smith&Nephew (SN/LN), Boliden (BOL SS), SSAB (SSABA SS), Total (FP FP), TF1 (TFI FP), Ericsson (ERICB SS), SAP (SAP GY), Orange (ORA FP), Veolia (VIE FP), Drax (DRX LN), Go-ahead (GOG LN) Hays (AHS LN), Thomas Cook (TCG LN), Eurotunnel (GET FP)


Based on the year ahead pieces, other recent notes and price action, we think these names are set to deliver strong outperformance this year…
AEROSPACE
Airbus (OW PT €59)
Remains a top pick despite strong outperformance in 2013 (+87%). We see significant upside potential resulting from a pick-up in order flow, improving execution on new programs such as A380 and A350XWB and increasing production. We think the market is overlooking that EADS has proactively managed customers in the backlog to ensure limited cancellations. Key catalysts over the coming months include the Annual Press Conference in Jan 2014 where Management with outline its 2014 strategy including likely book to bill and FY13 results in March where Management will provide updates on 2015 and A350XWB flight testing progress.
AUTOS
VW (OW PT €220)
The worst performing Autos stock in 2013 (along with BMW). We see this set to reverse in 2014, with MQB savings (driving €800m of savings by FY’14) and EU recovery set to drive positive earnings momentum. We think the market undestimates VOW’s gearing to the European car market, with a 25% market share and a ~400bps funding advantage over mass peers providing it with a dominant position in a market that can recover meaningfully. We also see upside surprise from Porsche which we think will contribute >€3bn EBIT in FY’14, incl. €1bn from the new Macan alone.
BUILDING MATERIALS
Wolseley (OW PT 3,575GBp)
Having traded flat since March 2013, Wolseley is our top pick for 2014 within Building Materials. Three factors give us conviction in future outperformance: 1) Improving macro backdrop with 80% of the business based in the US and the UK. 2) Continued improvements in customer service and operational efficiencies driving market share gains and margin improvement. 3) Balance sheet deployment, with earnings enhancing bolt-on acquisitions. Stock trades on 15x PE Jul 15. With the stock at the top end of its recent trading range, we see scope for it to break out over the coming months.
CAPITAL GOODS
Smiths Group (OW, PT 1507.00GBp)
One of our Special Sits team’s top picks as a potential breakup story. We believe Smiths’ prospects are not adequately discounted by the market with a reverse SOTP implying John Crane (the group’s main growth and profit driver) is trading on only 9.5x EBIT; peers trade on 13.4x. This discount appears steep, given its strong track record on earnings growth. In addition, the high quality Smiths Medical business makes the stock more resilient in a downturn and Management has confirmed that it received an approach for its Medical division in 2013 and that it will consider all options around the portfolio in the best interests of shareholders. CEO Philip Bowman has a strong trackrecord in delivering value for shareholders. A key play on an improving M&A environment in 2014.
CHEMICALS
Akzo (OW, PT €59)
Akzo is a clear restructuring story in European chemicals, with new management focusing more on returns and cash flow and we feel the earnings downgrade cycle has moderated. With the second highest operational leverage across European chemicals, Akzo should be a strong beneficiary from any sustainable European recovery. Additionally, the stock offers investors relative defensiveness, some benefit from a lack of raw material inflation, and cost cutting (ongoing >€500m EBITDA improvement programme).
FINANCIALS
Banks- Lloyds (OW PT 100 GBp)
An MS Best Idea, we see Lloyds are the best play on the UK help to Buy theme as it has both a better funding and capital position than other domestic banks. Our base case is that Lloyds’ earnings are ~10% ahead of consensus by 2015, largely from higher loan growth assumptions. With ~27% upside to our base case and scope for significant capital returns as Lloyds resumes its dividend, we see Lloyds as one of the most attractive banks in Europe.
Banks- UBS (OW PT 21.00 CHF)
We see successful restructuring at UBS from greater earnings from asset and wealth management, and believe non-core rundown can drive higher ROTE (>15%), leading to a re-rating and potential for higher capital returns. UBS offers leverage to potentially stronger markets through faster deleveraging, improved capital markets revenues, and higher private banking activity. Further, we believe strong capital leaves it with a sufficient buffer to meet stricter regulation and litigation, and potential for greater capital return. On ~1.6x 2013e TNAV, valuation looks undemanding for >15% ROTE and potential for payout of ~50%.
Div Fins- LSE (OW, PT 1795 GBp)
We see an intriguing self-help story at LSE. We anticipate that 2014 will see an acceleration in moves to improve profitability at the recently acquired LCH business. Our recent meeting with the company reinforced our conviction that LSE has ‘low-balled’ on cost efficiencies at LCH. The ~€25m cost-cutting commitment amounts to just ~8% of LCH’s cost base, compares to 25-35% cost savings from the target cost base in typical exchange M&A. We see significant upside to this number as LSE moves to a centralised service company model, reducing the complexity of multiple outsourced IT contacts. LSE trades on an undemanding 13x 2015 on cautious €25m cost savings. Factoring in more bullish cost savings of €100m with a bit of topline/cyclical recovery could see it trading on just 9x.
Insurance- AEGON (OW, PT €7.70)
With strong FCF growth and substantial deployable capital we see the opportunity for Aegon to significantly de-risk its balance sheet and still increase its dividend by 50% over the next three years. Furthermore, AEGON is a compelling play on rising US rates, with 70% of its business in US and their current guidance on deployable capital based on just 2.5% 10yr yields. Given the trajectory from tapering, risks are clearly to the upside. Stock trades on just 8x 2014 PE vs US peers on 11x.
CONSUMER
Food- Nestle (OW CHF71.00)
Nestle remains our key Overweight pick in EU large-cap Food on the back of accelerating top-line momentum, ‘self-help’ opportunities through more active portfolio management, and potential cash returns, driven by a significant improvement in cash generation. 3 reasons why the stock could re-rate, 1) improving momentum in organic (particularly volume) growth relative to peers. 2) We expect divestments to be a focus of management (as recently reflected by the sale of the Givaudan stake) which could enhance group organic growth and margins by 70-50bps and iii) growth in GCG from 1% in the last 5 years to 13% in the next 3 years.
HPC- SCA OW, (PT 195.00 SEK)
We expect SCA to remain one of the best EPS growth stories in staples in the medium-term, with the coming quarters set to offer continued evidence of the group delivering on the benefits of the strategic changes in the last years. SCA offers sector-leading earnings growth for 2013-15 (18% CAGR), driven by defensive categories, providing stable top-line growth, and a self-help story that should transform profitability in the next few years. At 17.4x 2014 PE (12.5x EV/EBITDA) SCA remains attractive, in our view.
Food Retail- Jeronimo Martins (OW, PT €14.50)
We expect Jeromino Martins to outperform the rest of European food retail over the next 12 months as it remains exposed to the two most powerful trends in food retail globally: the shift away from big box stores to proximity formats, and the shift to discount. Additionally we believe high margins are sustainable given its superior unit economics, its exposure to the proximity and discount channels, its ability to continue to expand the size of its network in the foreseeable future
MEDTECH
Smith & Nephew- (OW, PT 904 GBp)
We believe that negative earnings revisions have troughed and with a new product cycle in Knees, Smith & Nephew is set to outperform in 2014. Valn is relatively attractive on 14.5x 2015 with 7% FCF yield for c9% earnings growth.
METALS & MINING
Mining- Boliden (OW, PT 106 SEK)
We see scope for significant outperformance in 2014 as FCF improves on back of peaking capex. Volume growth is set to accelerate on project rap up driving strong earnings growth. With a strong record of capital discipline, we expect Boliden to increase cash returns, delivering 5% div yield. Stock trades on just 6.5x 2015 PE with a 18% FCF yield.
Steel- SSAB (OW, PT 46 SEK)
SSAB has been a meaningful laggard vs US and European Steel peers after a poor performance in its EMEA division. We see scope for this unit to turn around by pursuing a volume focused strategy and enter a JV with a local player in APAC. Furthermore, SSAB is set to be a key beneficiary of the improving US steel market, with 1/3 of sales coming from its high quality US business. Stock trades on 14x 2015 with a 3.4% div yield and 13.7% FCF yield.
OIL & GAS
Total (OW, PT €50)
Total offers a unique combination of best in class FCF growth and undemanding valuation. After a period of high investment in both upstream and downstream, Total is set to deliver significant growth in operating CF in the coming years. Total trades on a 5.5% div yield vs sector on 5%. Given superior coverage, we believe this should coverage towards the peer group average.
TELCOS, MEDIA & TECHNOLOGY
Media- TF1 (OW, PT €16.15)
We believe that TF1 is set to benefit from improving audience and advertising trends. With high operational gearing and low expectations of ad growth in 2014, we see significant upside risks to forecasts in 2014. TF1 trades on just 7x EV/EBITDA vs peers on 10x with an 8.7% FCF yield (vs peers on 5.9%).
Semis/Telco Equipment- Ericsson (OW, PT 108 SEK)
We believe Ericsson is set to deliver significant margin improvement in 2014 driven by lower “investment” in market share, faster software upgrades to LTE in Europe and higher capacity utilisation in the US. Further capex announcements by carriers in Europe should help drive the stock.
Software- SAP (OW, PT €67.00)
SAP traded sideways in 2013 as lacklustre licence growth, FX downgrades and cloud concerns weighed on the shares. We think momentum is set to accelerate, with cyclical headwinds dissipating and growth in HANA and Cloud subs improving.
We believe that SAP’s transition towards Software as a Service (SaaS) in 2014 will be a positive for the shares as the negative short term impact on EPS is offset by the higher multiple on the back higher recurring revenues. Expect positive 2017 guidance with clear cloud stratey on 21 Jan.
Telcos- Orange (OW, PT €9.60)
We think earnings revisions are toughing and continued headlines around pricing in 4G are already in the price. Scope for upside surprise in 2014 from further cost cutting as well as upside from Fibre roll out and potential IPO/sale of EE. One of the cheapest telcos in Europe, trading on 4.2x EV/EBITDA with a 14.5% FCF yield and trading near all time relative lows vs the sector.
UTILITIES
Veolia (OW, PT €15.50)
Compelling self help and economy recovery. We expect asset sales and cost cutting to make Veolia a smaller, leaner company with leadership positions in structurally attractive Water and Waste businesses. After years of negative FCF, we expect Veolio to be able to self fund growth from 2015. Stock is trading on 12x 2015 with a 5.7% div yield, materially below historic levels and peer Suez Environnement .
Drax (OW PT 880 GBp)
We believe continued execution on biomass conversion is likely to drive significant LT FCF, especially as they convert further plans. The UK government continues to demonstrate good support for Drax. Even on a bear case scenario, we belive that Drax can deliver a 8% unlevered FCF yield.
BUSINESS SERVICES, LEISURE AND TRANSPORT
Bus & Rail- Go Ahead (OW, PT 1,900GBp)
Go Ahead is our top pick in Bus & Rail. We expect GOG to get to £102m of Bus EBITA by F2016. This plus a low capex and the recent pull-back in the shares means GOG is on a highly attractive ex-rail FCF yield of 13% on average for F2015e & 16e. The shares trade close to our fair value for Bus, suggesting Rail is for free.
Business Services- Hays (OW, PT 150.00GBp)
Hays is our top pick in Business Services. Hays has the most attractive geographic exposure, which should drive strong levels of growth and conversion rates of gross profit into EBIT. In addition, a decreasing tax rate will help drive similar levels of EPS growth to Michael Page, we think, but at a far lower multiple. A 2015e EV/Sales multiple of 0.48x and a P/E of 12.8x are commensurate with the Temp staffers and do not reflect its superior margin potential due to mix, in our view.
Leisure- Thomas Cook (OW, PT 200 GBp)
Thomas Cook is one of the most attractive turnaround stocks in the market. New CEO Harriet Green is executing well on her plans to drive £440m of savings by 2015. Importantly cost savings should continue beyond 15 as it implements wave 2 (similar size to wave 1). TCG trades on an attractive 10x 2015 PE and 10% FCF yield, with risks to the upside for both.
Infrastructure- Eurotunnel (OW, PT €8.50)
Our top pick in infrastructure, we believe the market is too pessimistic around the risk of EC enforced cuts to access charged, with both UK and French states providing support. Operational momentum is strong, with regulation likely to impact ferry competitiveness and new routes in 2015 to provide growth. Eurotunnel also offers exposure to an improving European economy, with its high operational and financial (in particular given its strong exposure to the UK).

>>> MS TOP RESEARCH PICKS FOR 2014

MS TOP RESEARCH PICKS FOR 2014
Airbus (AIR FP), Volkswagen (VOW3 GY), Wolseley (WOS LN), Smith Group (SMIN LN), Akzo (AKZA NA), Lloyds(LLLOY LN), UBS (UBSN VX), London Stock Exch(LSE LN), Aegon (AGN NA), Nestle (NESN VX), JEronimo MArtins (JMRN PL), Smith&Nephew (SN/LN), Boliden (BOL SS), SSAB (SSABA SS), Total (FP FP), TF1 (TFI FP), Ericsson (ERICB SS), SAP (SAP GY), Orange (ORA FP), Veolia (VIE FP), Drax (DRX LN), Go-ahead (GOG LN) Hays (AHS LN), Thomas Cook (TCG LN), Eurotunnel (GET FP)

Based on the year ahead pieces, other recent notes and price action, we think these names are set to deliver strong outperformance this year:

>>> AEROSPACE
Airbus (OW PT €59)

>>> AUTOS
VW (OW PT €220)

>>> BUILDING MATERIALS
Wolseley (OW PT 3,575GBp)

>>> CAPITAL GOODS
Smiths Group (OW, PT 1507.00GBp)

>>> CHEMICALS
Akzo (OW, PT €59)

>>> FINANCIALS
Banks- Lloyds (OW PT 100 GBp)
UBS (OW PT 21.00 CHF)
Div Fins- LSE (OW, PT 1795 GBp)
Insurance- AEGON (OW, PT €7.70)

>>> CONSUMER
Food- Nestle (OW CHF71.00)
HPC- SCA OW, (PT 195.00 SEK)
Food Retail- Jeronimo Martins (OW, PT €14.50)

>>> MEDTECH
Smith & Nephew- (OW, PT 904 GBp)

>>> METALS & MINING
Mining- Boliden (OW, PT 106 SEK)
Steel- SSAB (OW, PT 46 SEK)

>>> OIL & GAS
Total (OW, PT €50)

>>>TELCOS, MEDIA & TECHNOLOGY
Media- TF1 (OW, PT €16.15)
Semis/Telco Equipment- Ericsson (OW, PT 108 SEK)
Software- SAP (OW, PT €67.00)
Telcos- Orange (OW, PT €9.60)

>>> UTILITIES
Veolia (OW, PT €15.50)
Drax (OW PT 880 GBp)

>>> BUSINESS SERVICES, LEISURE AND TRANSPORT
Bus & Rail- Go Ahead (OW, PT 1,900GBp)
Business Services- Hays (OW, PT 150.00GBp)
Leisure- Thomas Cook (OW, PT 200 GBp)
Infrastructure- Eurotunnel (OW, PT €8.50)

(BFW) LVMH Board Member Trapani Sells EU33m Worth of Shares

LVMH Board Member Trapani Sells EU33m Worth of Shares
2014-01-06 08:25:12.716 GMT


By Gaurav Panchal
     Jan. 6 (Bloomberg) -- LVMH Watches & Jewelry president
Francesco Trapani sold shares worth EU33m in three separate
transactions (Dec. 30, Dec. 31) according to filings on AMF
website.
  * Filings links: Dec. 30, Dec. 31
  * Dec. 19: Destocking Continues in China


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

--Editor: David Whitehouse

To contact the reporter on this story:
Gaurav Panchal in London at +44-20-7392-0511 or
gpanchal2@bloomberg.net

To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net

(BFW) BNP, SocGen, Intesa Are Key European Bank Stocks, BofAML Says

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BNP, SocGen, Intesa Are Key European Bank Stocks, BofAML Says 2014-01-06 08:13:02.374 GMT

By Chris Malpass Jan. 6 (Bloomberg) -- PE ratios of 7x-9x make BNP Paribas, SocGen and Intesa key buy-rated stocks in European bank sector, BofAML says in note today. * BNP Paribas 2014 revenue seen rising 3%, pretax seen rising 12% as balance sheet revamp now completed * SocGen to return to growth after restructuring, sees positive operating leverage * Intesa earnings seen rising almost 50%, revenue stabilizing as costs, charges drop * Deutsche Bank’s non-IB business to benefit from German growth, rising stock markets * Commerzbank non-core portfolio to improve on tigher credit spreads, peripheral spreads, will also benefit from better growth in Germany, Poland * Erste 2014 pretax seen doubling amid expansion of Romania, Czech Republic economies * Unicredit revenue seen stabilizing, earnings to rise over time * Stocks seen underperforming are mostly in Italy and Spain and include Banco Popolare, Banco Popular, Banco Sabadell, Bankia, Bankinter, BBVA, BCP, Caixabank, Monte Dei Paschi NOTE: SX7P gained 19% last year after rising 23% in 2012 and falling 32% in 2011

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--Editor: James Cone

To contact the reporter on this story: Chris Malpass in Berlin at +49-30-70010-6234 or cmalpass@bloomberg.net

To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net

(HSBC) France - Top picks H1 2014 - Six high conviction ideas fo

France - Top picks H1 2014 - Six high conviction ideas for H1 2014

https://www.research.hsbc.com/R/20/gI7ZHDgh9EVf

* In a context of low interest rates and slow economic growth, we select some high yield stocks with sound earnings prospects such as Eutelsat, Rubis and Suez Environnement

* We prefer value to growth, and we have selected Rallye and Wendel on this thematic

* We also like companies which we think will able to improve margins through cost control and/or pricing power, such as Tarkett


Economic growth is likely to be weak again in H1 2014 in France, given budget deficits, and concerns about the effectiveness of the economic policies adopted to resolve budget problems and debt burdens, especially the fiscal tightening. The political agenda will be back loaded to H1 (municipal election in March, European election in May).

Since the onset of the financial crisis, the investment landscape has been dominated by macro factors. We believe that stock or sector specifics are set to take on an increasing role in driving stock returns in 2014. Stock picking is coming back on the agenda.

We have applied our European equity strategists' sector views to the French Mid cap space. 1/ We believe that value is set to outperform growth given current valuations (eg Rallye or Wendel's whose discount is expected to get lower), 2/ one of the key element of our positive stance on European equities is the potential for earnings growth and margin improvement coming from pricing power, higher utilisation rate of capacity or lower production cost (eg Tarkett), 3/ capital discipline and high dividend yield is another important theme, especially in a low interest rate environment. We have selected Eutelsat, Rubis and Suez Environnement, not only for their dividend yield, but also for their ability to have sustained / increasing earnings.

Finally, we have incorporated in our selection a preference for companies exposed to developing markets. Rallye, Rubis, Suez, Environnement, Tarkett and Wendel, in different ways, are exposed to this thematic.

(BFW) SAP Solid Investment in 2014, Better in 2017: Kepler Cheuvreux

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SAP Solid Investment in 2014, Better in 2017: Kepler Cheuvreux 2014-01-06 07:57:41.968 GMT

By Claudia Rach Jan. 6 (Bloomberg) -- SAP profile more attractive to shareholders by 2016-2017 as co. accelerates transition to cloud, which is likely to reduce S/T growth rate, Kepler Cheuvreux says in note. * SAP could miss 2015 target * Revision of 2015 target is already priced in * Sees software rev. declining modestly in 2014-2015 * Says shr sentiment to progressively change during 2014, co. got capacity to further consolidate cloud market in coming yrs * Rates stock buy; PT raised 10% to EU68 * Next catalyst: SAP scheduled to report 2013 earnings on Jan. 21 * NOTE: SAP up 2.7% in 2013 vs DAX up 25% vs SX8P up 27% * NOTE: 45 analyst ratings 71% buy, 24% hold, 4% sell; avg PT EU65: Bloomberg data

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

To contact the reporter on this story: Claudia Rach in Berlin at +49-30-70010-6219 or crach1@bloomberg.net

To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net

(BFW) Erdogan Says Halkbank CEO Wrong to Keep Cash in Boxes: Hurriyet

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Erdogan Says Halkbank CEO Wrong to Keep Cash in Boxes: Hurriyet 2014-01-06 07:40:51.229 GMT

By Isobel Finkel Jan. 6 (Bloomberg) -- Prime Minister Erdogan told journalists at 4 hr meeting two days ago that Halkbank CEO Suleyman Aslan was wrong to keep cash in his house in that manner, Hurriyet reports. * Hurriyet quotes Milliyet journalist Fikret Bila, who attended meeting for invited members of press, saying that PM referred to corruption probe under which Aslan is arrested as ‘the coup of Dec. 17’ but acknowledged it was wrong for CEO of largest listed state bank to store cash in that way * NOTE: Halkbank Says Role in Iran Gold Trade Legal After CEO Arrested NSN MY96HK6TTDSQ <GO> * NOTE: Halkbank CEO Says $4.5m in Shoeboxes for School Donation: Report NSN MY5MSH6TTDS0 <GO>

Link to Company News:114144Z TI <Equity> CN <GO> Link to Company News:HALKB TI <Equity> CN <GO>

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

To contact the editor responsible for this story: Isobel Finkel at +90-212-317-3911 or ifinkel1@bloomberg.net