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BFW 03/17 07:33 *BRIT TO SELL SHARES IN IPO AT 230P-275P, TERMS SHOW

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Brit to Sell Shares in IPO at 230p-275p, Terms Show 2014-03-17 07:39:48.93 GMT

By Francesca Cinelli March 17 (Bloomberg) -- Offer size ~GBP230m–GBP275m pre- greenshoe, according to terms obtained by Bloomberg News. * Market cap seen at GBP920m-GBP1.1b * Minimum 25% free float * JPMorgan, UBS joint coordinators and bookrunners * Co-managers: Canaccord, Numis * Books due to close March 27, pricing on March 28 * Lock-ups: Apollo and CVC 180 days; management 365 days * NOTE March 4: Apollo, CVC Seek Initial Public Offering of Insurer Brit Group {NSN N1WOGI6JTSEZ <go>}

Link to Company News:{0959481D LN <Equity> CN <GO>} Link to Company News:{2270Z LN <Equity> CN <GO>} Link to Company News:{APO US <Equity> CN <GO>} Link to Company News:{BRE LN <Equity> CN <GO>}

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

To contact the reporter on this story: Francesca Cinelli in Milan at +39-02-80644-252 or fcinelli@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at +44-20-7073-3722 or arummer@bloomberg.net

Europe
Strategy Matters: How EM risks are priced in European equities

We look at the EM-exposed areas of the European market to assess how the slowdown and risks to emerging markets have been priced. We find that our EM-exposure basket (GSSTBRIC) has de-rated and is back to an average rating versus the market – but is still not at a discount. Some slowdown in growth is clearly priced for EM exposed areas, but in our view there is still further to go, with Basic Resources, Industrial Goods & Services and Chemicals most vulnerable on the industrial side, and Food & Beverages still vulnerable on the consumer side.


What are European equities pricing in for EM growth?
Our basket of EM-exposed stocks (GSSTBRIC) has underperformed sharply – down 14% versus the market over the past year. This recent weakness stands in contrast to the substantial outperformance and re-rating in the 2007-10 period. We find that the de-rating of our basket already implies some slowdown to EM growth; but the risks are still to the downside, and the stocks are not yet offering value, in our view.


EM-exposed industrials & EM-consumer stocks both vulnerable
Splitting our EM basket into Industrial (GSSTBRCI) and Consumer exposure (GSSTBRCC), both appear vulnerable. The industrial names were the ones to benefit from the booms in fixed asset investment and commodity-related demand from the early 2000s. Their underperformance recently has been small compared with the performance in the previous decade and they remain very sensitive to EM growth. The consumer names should ultimately benefit as China’s growth becomes more consumption-driven. But near term, we find they are negatively correlated to EM rates, which our economists expect to increase further over the coming year.


Remain Underweight most sectors with high EM exposure
We also look at the European sectors most sensitive to EM. We find that while Food & Beverages has de-rated versus the market – it was on a 60% P/E premium that has now fallen to c.30% – it is still expensive versus history. We stay Underweight. We find more value in Personal & Household goods, but even here relative multiples have returned to average rather than being clearly cheap; stay Neutral. The performance and relative valuation of Industrial Goods & Services and Chemicals are both linked to EM growth and we continue to see these as vulnerable; remain Underweight. Basic Resources does not look expensive and the 4Q earnings season was relatively good, but the sector remains exposed to downward moves in metals prices; we remain Underweight.

Why gaining from value investing is hard

Values in common parlance elude definition. Equally decent people can hold contrasting values with deep fervour. In the financial context, the word "value" sets off emotions that are almost as deep. "Value" is a style of investing that offers the chance of beating the market. It is widely understood in the US, where it is common for mutual funds and other products to be marketed as being "value". The case for value springs from two sources. The first is the work of Benjamin Graham, an investor and academic who published his magnum opus, Security Analysis, during the Great Depression. He argued that investors should treat any stock as a share of a bigger company, and work out the exact intrinsic value of the assets they were buying with that company. The important concept was "margin of safety". If a company could be bought for less than its intrinsic value, then the downside risk was minimal. Mr Graham taught his theory for many decades at Columbia Business School. His many successful alumni include Warren Buffett, who describes Graham as the second most influential man in his life, coming only after his father. The second case for value also stems from academia. Eugene Fama (made a Nobel economics laureate last year) and Kenneth French studied equity returns over the years to find out if there were any predictable inefficiencies. This revealed a "value effect". Put simply, stocks that are cheap when bought, as measured by their price-to-book ratio, tend to beat other stocks over the long run. Mr Fama also spawned a dynasty of successful investors. Using quantitative screens, investors buy stocks that are cheaper than average, and can expect to reap outperformance in the longer term. Dimensional Fund Advisors is the most famous exponent. Its founder, David Booth, honoured his intellectual debt to Mr Fama with a donation to his alma mater, which was renamed the Chicago Booth School of Business in his honour. This approach has also spawned "factor" investing. Fund managers use quantitative methods to screen many stocks, and chase particular factors. For example, there was a period recently when dividend yield was in demand. In a downturn "quality" stocks – with consistent earnings and strong balance sheets – tend to outperform. The two approaches have something in common. They involve comparing the current market price to some kind of intrinsic measure of a company’s value. But there are big differences. The Graham approach involves minute examination of balance sheets to find a true margin of safety. Only a few stocks will make the cut. A Fama/French approach involves buying stocks that are cheaper than others and relying on the anomaly to shine through. It is about looking for relative rather than absolute value. Tren Griffin of Microsoft, an expert in Graham-style value investing, suggests a basketball analogy. He says: "The Fama/ French approach would be to recruit 100 of tallest males in town. This team would do better than average since there is a correlation between height and ability." Graham would "hold tryouts and evaluate everyone’s basketball skills. Someone using this style would pick the top 15 players". He suggests that the Graham team would win "by a large margin". There is a further issue. Both value approaches have evolved over time. Far fewer stocks meet Graham’s original criteria now, with the market in a bull run, than when he wrote. That has led to new takes on Graham’s ideas. Mr Buffett looks for stocks with a strong franchise, or a reason to believe that they will maintain or increase earnings into the future. Further, value is often offered as an alternative to "growth" investing. Growth lacks a Ben Graham figure, and no academic research has yet demonstrated a "growth" anomaly. In general a "growth" stock needs to show that its earnings are growing. There are periods when such stocks will outperform "value" stocks. Fund groups will offer separate "value" and "growth" funds, and maintain style discipline between them. This gives investment advisers the chance to show their worth by switching between them. The main index-providers now offer separate "growth" and "value" indices. The danger here is that all the concepts become so stretched as to be meaningless. Beating the market is difficult. The Graham and Fama approaches both yield strategies that have a decent chance to do so. But the former requires exhaustive research. When markets are particularly strong, as now, few stocks will offer the margin of safety that Graham required. The latter requires some great algorithms. Both require iron discipline. It is hard to believe that most of the funds now marketed under the "value" label truly follow a value approach, or that they are giving their investors much chance to outperform in the long term. john.authers@ft.com

Asian Market Update: Crimea votes to be annexed by Russia; PBoC widens Yuan trading band to 2%

***Economic Data*** - (AU) AUSTRALIA FEB NEW MOTOR VEHICLE SALES M/M: +0.1% V -4.0% PRIOR; Y/Y: -3.5% V -3.0% PRIOR - (NZ) NEW ZEALAND FEB PERFORMANCE SERVICES INDEX: 53.1 V 57.8 PRIOR (6-month low) - (NZ) NEW ZEALAND Q1 WESTPAC CONSUMER CONFIDENCE: 121.7 V 120.1 PRIOR (9-year high) - (SG) SINGAPORE FEB ELECTRONIC EXPORTS Y/Y: -3.7% V -17.0% PRIOR; NON-OIL DOMESTIC EXPORTS M/M: 7.2% V 1.1%E; Y/Y: 9.1% V 7.6%E - (UK) UK MAR RIGHTMOVE HOUSE PRICES M/M: 1.6% V 3.3% PRIOR; Y/Y: 6.8% V 6.9% PRIOR

Market Snapshot (as of 03:30 GMT): - Nikkei225 -0.4%, S&P/ASX -0.3%, Kospi +0.2%, Shanghai Composite +0.5%, Hang Seng -0.4%, Jun S&P500 flat at 1,833, Apr gold +0.3% at $1,383, Apr crude oil +0.2% at $99.12/brl

***Highlights/Observations/Insights*** - Sentiment in Asia is mixed with tinges of cautious optimism, as worries over continued Kremlin vs West standoff in the wake of an overwhelming local support for Russian annexation in Crimea were infused with some relief that Russia pulled its troops back from territorial Ukraine and agreed to allow OSCE inspectors to enter all parts of the country. China markets are particularly volatile, with Shanghai Composite switching between gains and losses in the wake of PBoC widening its daily Yuan trading band from 1% to 2% over the weekend.

- Tensions between Russia and Ukraine were heightened early in the weekend amid reports that an armored-vehicle supported force of 80 Russian troops took over the settlement of Strelkovoye of Kherson Region outside of Crimea. Russian border guard justified the presence for protection of energy/water pipelines leading into the Crimean peninsula. The referendum vote yielded a near-unanimous over-95% support for Crimea to be annexed by Russia, and the local leader announced he would lodge a formal application to complete the "return home" on Monday. EU Foreign Ministers are meeting in Brussels on Monday as well, with the initial draft resolution refusing to recognize the referendum and threatening more sanctions against Moscow. Obama and Putin held a phone conference late on Sunday which seemingly produced a thaw from the weekend tensions: the White House reiterated the Crimea vote would never be recognized but noted the crisis can still be resolved diplomatically. Kremlin statement indicated that while Russia holds to its opinion the referendum was legitimate, it also supports deploying international OSCE inspectors in all parts of Ukraine. Earlier, Russian Foreign Ministry also issued a statement condemning ultranationalist - pro-Russia clashes in eastern Ukraine resulting in 2 deaths in Kharkiv, and that it would consider "many appeals to defend civilians".

- PBoC widened the yuan trading band nearly 2 years after the last move, going from 1% to 2%. PBoC said it would allow Yuan to continue to be more market-driven in the future and plans "further develop the role of the market in the RMB exchange rate formulation." Analysts differ in implications of this widely-telegraphed move - HSBC economist noting the PBoC feels the economy is strong enough to handle adjustment, BoA/ML stating the move is to communicate the end of one-way bet on CNY gain, and ANZ noting PBoC wanted to punish speculators, forecasting a move to CNY6.20-6.25 this week. USD/CNY was set slightly lower than on Friday, while onshore trade slightly favored CNY sellers.

- Saber-rattling was also more audibly heard on the Korean peninsula, where the North test-fired 25 short-range missiles that landed into the East Sea. Missile fire follows Friday's statement from North Korea's National Defence Commission on Friday threatening "to bolster up its nuclear deterrence for self-defence". US State Dept said it was aware of rocket launch by North Korea, Calls on Pyongyang to refrain from increased provocations.

- In Europe, Moody's raised the outlook on European Union to Stable from Negative late on Friday, citing improved multi-layer debt-service protection and conservative budget management. Over the weekend, Greece opposition Syriza party leader Tsipras announced international creditors committed a "crime" against southern Europe through imposed austerity and should pay reparations. Also of note, Italy PM Renzi and France Pres Hollande held talks on Saturday, agreeing on the need to approve measures to reduce labor costs and increase competitiveness.

***Fixed Income/Commodities/Currencies*** - (JP) BOJ offers to buy ¥250B in 1-3yr JGB, ¥250B in 3-5yr JGB and ¥400B in 5-10yr JGB - (VN) Vietnam Central Bank to cut dong deposit ceiling rate to 6.0% from 7.0% prior - GLD: SPDR Gold Trust ETF daily holdings rise 3.3 tonnes to 816.6 tonnes (highest since 816.8 on Dec 17th) - GLD: Spot gold extending early gains above $1,390; Fresh 6-month highs - (CN) PBoC sets yuan mid point at 6.1321 v 6.1346 prior setting

- Risk started on the back foot in early part of the session, sending AUD/USD and USD/JPY to their lows of $0.9000 and ¥101.25, but has since recovered. Despite the referendum and threat of sanctions, the market is showing some tentative hints of relief that Russian tanks are not rolling across the east Ukraine borders. AUD/USD is tesing $0.9050, USD/JPY is approaching 101.60, and NZD/USD was bid as high as $0.8545, up over 20pips from the lows, with NZIER raising New Zealand FY14/15 GDP forecast to 3.6% from 3.1% prior forecast.

***Equities*** US markets: - ECA: Said to be in advanced talks to sell Jonah Field in Wyoming to Carlyle/Natural Gas Partners for about $2B - financial press - SHLD: Board approves separation of Lands' End business; shareholders to receive 0.300795 shrs Lands' End common stock/Sears common stock - update - TGA: Enters into merger agreement with Caracal Energy Inc - HTZ: Said to be planning spin off its construction equipment rental business valued at about $4.5B - FT - SINA: Sina's Weibo microblog unit files for IPO of up to $500M in the US - F1 filing - UPS: Announces 2014 Rate Adjustment for freight by +4.4%; effective March 31

Notable movers by sector: - Consumer Discretionary: Matrix Holdings Ltd 1005.HK +6.2% (positive profit alert); Trinity Ltd 891.HK -3.2% (FY13 results); Besunyen Holdings 926.HK -4.3% (FY13 results); Future Bright Holdings 703.HK -6.0% (FY13 results) - Financials: Chinese Estates Holdings 127.HK -2.5% (Chairman found guilty for bribery) - Materials: China Hongqiao Group 1378.HK -5.1% (FY13 results) - Industrials: Kai Shui International Holdings 822.HK -9.6% (profit warning); Leo Group 002131.CN +2.5% (acquires stake in advertisement company); Sihayo Gold SIH.AU -3.5% (H1 results) - Technology: Wangsu Science & Technology 300017.CN +8.9% (FY13 results); Nikon Corp 7731.JP (accuse from China's CCTV) - Telecom: Softbank 9984.JP +5.7% (Alibaba said to file for IPO in US)