FT : After Prigozhin, Putin reigns supreme

After Prigozhin, Putin reigns supreme
Hopes that the Wagner boss might have punctured the Russian president’s omnipotence have turned to dust

The meteoric rise to global prominence of Yevgeny Prigozhin, the notorious leader of the Wagner mercenary group, both peaked and came to a fiery end on August 23 when a private jet used by him and other senior Wagner figures, including its military commander Dmitry Utkin, crashed northwest of Moscow. The entire Wagner operation was deliberately shrouded by its creators in layers of myth, and the mysterious plane crash draws a final heavy veil over the affair.

But as the smoke disperses, one thing is already clear: there are no obstacles to Vladimir Putin’s ruthless system that are insurmountable for the Kremlin at this point. Consequently, Russia’s brutal war against Ukraine will continue unabated.

On June 23, many began to wonder whether somebody was finally going to solve the problem with Putin when Prigozhin, after months of lambasting the Russian military leadership for incompetence in Ukraine and even indirectly criticising the president himself, launched a brief mutiny. Wagner troops sped towards the capital in armoured vehicles, only to stop at the last moment under a murky deal negotiated with the Kremlin.

That months of Wagner’s unchecked insubordination and insults had culminated in a mutiny, and that the chief perpetrators of that humiliation had apparently got away scot-free, inflated hopes that Putin’s carefully crafted image of omnipotence had finally been pierced. Every day that Prigozhin and his men walked free, the thinking went, was a ticking timebomb under the president’s rule. In fact, the two months since the uprising were well spent by the regime in taking control of Prigozhin’s operations, dismantling his media empire and destroying his image.

Most Wagner fighters have now signed contracts with the defence ministry and been folded into regular units. And the Kremlin has made sure to reaffirm its ties to leaders in countries across Africa and the Middle East, where Wagner was active.

The day before Prigozhin’s plane crashed, Russia’s deputy defence minister, Yunus-Bek Yevkurov, visited Libya to meet with renegade general Khalifa Haftar. The Kremlin was putting in place a contingency plan to ensure that Russia’s broader interests wouldn’t be affected with Prigozhin out of the picture. That plan has a chance of success — after all, the Wagner boss operated as a shadow emissary of Putin’s Russia, not as an independent actor.

The impact of Prigozhin’s departure on Putin’s grip on power at home is even more straightforward. If there was any hope that some of the hardliners harboured a different opinion on the war to the ultimate boss, it has been shattered. The surgically precise repression of rightwing critics of the Kremlin, such as the recent imprisonment of Igor Strelkov, a former FSB operative involved in fuelling the conflict in the Donbas back in 2014, underlines that.

The Prigozhin saga has taught the Russian elites a few new lessons about Putin — his procrastination when it comes to correcting mistakes and his emotional volatility when confronted with the consequences of his own poor judgment. And it has reminded them of his ruthlessness when it comes to dealing with enemies and traitors.

For this reason, Prigozhin’s departure is unlikely to have an impact on the course of the disastrous war that for Putin is an obsession. After all, the Russian leader has been able to fight that war for 18 months and to stall the Ukrainian effort to liberate more of its territory — not because of Wagner’s much-vaunted performance on the battlefield, but because of the sheer volume of resources the government can mobilise, the skill of people helping to keep the embattled Russian economy afloat, and Putin’s unchallenged position at home.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance
:
  • WOOF -13.1%, OOMA -7.2%, HAIN -5.4%, DLTR -4.4%, ZUO -3.8%, NTES -3.2%, NTAP -1.6%, BURL -0.6%
Other news:
  • SPR -6.2% (issues 737 Aft Bulkhead Statement)
  • PLSE -6.2% (mentioned cautiously by White Diamond Research)
  • VHNA -2.2% (announces anticipation of continuation as a business company incorporated under the laws of the British Virgin Islands)
  • EHC -2% (EHAB satisfies TMA conditions with EHC to initiate strategic review; will consider sale merger)
  • IONS -2% (entered into separate privately negotiated agreements with holders of 0.125% Convertible Senior Notes due 2024 to repurchase approx. $30.2 mln of the 2024 Notes for approx. $29.2 mln)
  • RLI -1.6% (estimates catastrophe losses from Hawaiian wildfires of $65-75 mln)
  • MDT -1.6% (issues statement on the FDA Circulatory Systems Devices Advisory Panel vote for the Symplicity Spyral Renal Denervation System)
Analyst comments:
  • VZIO -5.8% (downgraded to Underperform from Buy at BofA Securities)
  • AGTI -2% (downgraded to Underweight from Equal-Weight at Morgan Stanley)
  • IART -1.9% (downgraded to Underweight from Equal-Weight at Morgan Stanley)
  • EL -1.6% (downgraded to Mkt Perform from Outperform at Bernstein)
  • IFF -1.3% (downgraded to Equal-Weight from Overweight at Morgan Stanley)

>>> US Research Calls

Research Calls I
  • Upgrades:
    • AMC Entertainment (AMC) upgraded to Neutral from Underperform at Wedbush; tgt $19
    • Discover Financial Services (DFS) upgraded to Outperform from Peer Perform at Wolfe Research; tgt $104
    • Kenvue (KVUE) upgraded to Buy from Neutral at Goldman; tgt $29
    • NeuroPace (NPCE) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt raised to $6
    • NVIDIA (NVDA) upgraded to Buy from Hold at WestPark Capital
    • NVIDIA (NVDA) upgraded to Buy from Hold at Stifel; tgt raised to $600
    • NVIDIA (NVDA) upgraded to Outperform from Neutral at Exane BNP Paribas; tgt $745
    • Prudential (PRU) upgraded to Strong Buy from Mkt Perform at Raymond James; tgt $125
    • TELUS International (TIXT) upgraded to Sector Outperform from Sector Perform at Scotiabank
    • Williams-Sonoma (WSM) upgraded to Neutral from Underperform at BofA Securities; tgt raised to $146
  • Downgrades:
    • Agiliti (AGTI) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt lowered to $10
    • Ally Financial (ALLY) downgraded to Peer Perform from Outperform at Wolfe Research
    • Analog Devices (ADI) downgraded to Neutral from Overweight at Piper Sandler; tgt $190
    • Estee Lauder (EL) downgraded to Mkt Perform from Outperform at Bernstein; tgt lowered to $160
    • Integra (IART) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt $44
    • Intl Flavors (IFF) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $75
    • Peloton (PTON) downgraded to Hold from Buy at Needham
    • Peloton (PTON) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $6.50
    • Sea Limited (SE) downgraded to Neutral from Outperform at KGI Securities
    • Sight Sciences (SGHT) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $8.40
    • Stevanato Group S.p.A. (STVN) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt $34
    • VIZIO (VZIO) downgraded to Underperform from Buy at BofA Securities; tgt lowered to $6
  • Others:
    • Civitas Resources (CIVI) initiated with a Buy at Jefferies; tgt $87
    • Concentrix (CNXC) initiated with a Sector Outperform at Scotiabank; tgt $120
    • EPAM Systems (EPAM) initiated with a Sector Perform at Scotiabank; tgt $265
    • Fifth Third (FITB) initiated with a Mkt Perform at Raymond James
    • Genmab (GMAB) initiated with a Buy at BTIG Research; tgt $44
    • Globant (GLOB) initiated with a Sector Outperform at Scotiabank; tgt $210
    • Ooma (OOMA) resumed with a Mkt Outperform at JMP Securities; tgt $18
    • Werewolf Therapeutics (HOWL) initiated with an Outperform at Wedbush; tgt $9
    • Xcel Energy (XEL) initiated with an Equal Weight at Barclays; tgt $60

>>> US Gapping up

Gapping up
In reaction to earnings/guidance
:
  • GES +17.7%, SPLK +13.6%, NVDA +8.1% (also approves additional $25 bln for share repurchases), ADSK +6.4%, SN +5.9%, HKD +4.9%, SNOW +4.1%, RY +3.5%, FRO +2.2%, WB +1.5%, TD +0.8%
Select semiconductor stocks trading higher after NVDA earnings:
  • SMCI +8.8%, MRVL +4.3%, AVGO +3.5%, TSM +3.2%, MU +2.6%, AMD +2.2%, NXPI +1.4%, FN +0.9%, QCOM +0.6%
Other news:
  • EHAB +8% (EHAB satisfies TMA conditions with EHC to initiate strategic review; will consider sale merger)
  • IXHL +4.6% (Incannex Healthcare subsidiary Psychennex commenced preparations of an investigational new drug application to FDA for the Company's psilocybin assisted psychotherapy development program)
  • AMLI +3.2% (Significantly Extends Falchani Lithium Mineralization with Ongoing Drilling )
  • NVTS +2.8% (to reveal new high-performance power platform at SEMICON Taiwan 2023)
  • RKLB +2.4% (accelerates next recovery mission)
  • PRO +2% (entered into privately-negotiated agreements with holders of its 1.00% Convertible Senior Notes due 2024 to exchange approx. $122 mln of existing 2024 Notes for an amount of the previously-issued 2.250% Convertible Senior Notes due 2027)
  • DNA +1.7% (stock offering by selling shareholders)
  • TSE +1.5% (approves restructuring plan)
  • ALGN +1.5% (Superior Court of California County of Santa Clara confirms $63 million arbitration award in favor of Align Technology and denies SmileDirectClub's motion to vacate)
  • RJF +1.3% (reports July operating data)
Analyst comments:
  • NPCE +1.5% (upgraded to Equal-Weight from Underweight at Morgan Stanley)
  • KVUE +1.4% (upgraded to Buy from Neutral at Goldman)
  • PRU +1.3% (upgraded to Strong Buy from Mkt Perform at Raymond James)
  • DFS +1.2% (upgraded to Outperform from Peer Perform at Wolfe Research)
  • WSM +0.9% (upgraded to Neutral from Underperform at BofA Securities)

FT : Coca-Cola/CCEP: roll-up of Asian bottlers clinks along

Coca-Cola/CCEP: roll-up of Asian bottlers clinks along
Philippines takeover primes the palate for more deals to bubble up

In a bid to keep costs down, US-listed Coca-Cola is divesting its bottling assets. It wants to focus on running and marketing its fizzy, syrupy drink brand.

That presents opportunities for Coca-Cola Europacific Partners. This month, the London-based bottler struck a deal to buy Coca-Cola Beverages Philippines for $1.8bn.

CCEP is one of a gaggle of independent bottlers worldwide. These make steady incomes from selling Coca-Cola and sometimes other beverages to boot.

CCEP started life as the main bottler for western Europe. It made the leap into Asia in 2021 with the acquisition of Amatil. It was already the largest Coke distributor by value of sales globally. With the Philippines added on it will become the largest by volume too. There is potential for further consolidation in the region.

The cyclical downturn that is sweeping Asia-Pacific is a cause for concern. CCEP’s second-quarter results showed that sales in its main Australian, Indonesian and New Zealand markets were 6.5 per cent lower over one year.

At least European consumers remain keen. Soft beverages are the best-performing staple category in the region. CCEP’s sales in Germany and the UK rose by high single digits. In France, they surged 20 per cent in the second quarter.

However, this could soon flip around. Indonesia and the Philippines are expected to be two of the faster-growing regional economies over the next decade.

CCEP is paying just over $1bn for a 60 per cent stake in Coca-Cola Beverages Philippines. Local partner Aboitiz Equity Ventures will take the rest. At 10 times forward ebitda, the valuation is broadly in line with CCEP’s own valuation.

Cost savings in the range of 2 per cent to 3 per cent of sales, the same proportion as in the Amatil deal, would equal $40mn to $60mn for the Philippines company. CCEP should hit its leverage target of net debts of 2.5 to 3 times ebitda by 2024. That is a year later than expected.

The Philippines takeover primes the palate for more deals to bubble up.

>>> US Early premarket gappers

Early premarket gappers
  • Gapping up:
    • GES +14.6%, SPLK +14%, SMCI +8.4%, EHAB +8%, NVDA +7.7%, ADSK +6.1%, MRVL +4.7%, IXHL +4.6%, HKD +4.6%, SNOW +3.7%, RKLB +3.5%, AVGO +3.3%, TSM +3.2%, MU +2.5%, AMD +2.3%, PRO +2%, DNA +1.7%, ALGN +1.5%, RJF +1.3%, NXPI +1.2%, FN +0.9%, RY +0.8%, QCOM +0.6%
  • Gapping down:
    • OOMA -7.2%, SPR -6.8%, ZUO -3.8%, NTES -2.6%, VHNA -2.2%, EHC -2%, IONS -2%, HRTX -1.8%, NTAP -1.7%, RLI -1.6%, MDT -1.3%

FT : Qatar combines rival tours in fast-growing sport of padel

Qatar combines rival tours in fast-growing sport of padel
Creation of professional circuit underlines wider transformation of world sport by Gulf investors

The Qatari owner of French football club Paris Saint-Germain is to merge its competition circuit in the fast-growing sport of padel with a rival, creating a global professional tour for the tennis-like game.

State-backed Qatar Sports Investments said on Thursday that it had struck an agreement to buy World Padel Tour from Spanish beermakers Damm. Padel, which originated in Mexico and is sometimes called Padel Tennis, is played on an enclosed court.

QSI, owner of Premier Padel, intends to combine the two competitions into a new global circuit that will start next year. Padel’s popularity among amateur players is sparking a rush to build and operate clubs and stirring strong interest from investors.

Globally, padel is worth about €2bn a year, spanning club operators, rackets, clothing and other accessories, according to Deloitte, which expects the industry to treble in size over three years.

In March, Premier Padel said more than 110 leading female players had signed up to the tour. Padel also has potential to become an Olympic sport, potentially further boosting interest.

The International Padel Federation (FIP), the sport’s governing body, estimates that 25mn people play padel around the world. The number of courts worldwide could more than double to 84,000 over the same period, Deloitte said in a report with sports booking app Playtomic.

A1 Padel, a separate tour, earlier this year attracted investment from the parent company of the New York Yankees baseball franchise.

The takeover is part of a wider transformation of the world sport environment by investors from the Gulf. It resolves a battle for influence between QSI’s Premier Padel and the World Padel Tour, which is based in Madrid and more than a decade old. QSI and the FIP launched Premier Padel in early 2022.

In golf, the US PGA Tour initially resisted a rival team-based competition backed by Saudi Arabia’s sovereign wealth fund, but is now in talks over a formal partnership after ending costly legal battles.

QSI chair Nasser Al-Khelaifi, a keen padel player and former tennis professional, described the acquisition of World Padel Tour as “an historic moment” in the sport.

“QSI is proud to be at the heart of driving the development of padel professionally all around the world, always placing the players at the centre of our mission to grow the sport everywhere,” he said.

Demetrio Carceller Arce, executive chair of Damm, said the deal would “contribute to speeding up the tour’s international growth”.

Luigi Carraro, president of the International Padel Federation, welcomed the deal and said it would create a “fantastic global circuit”.

Damm entered merger talks with QSI and Premier Padel in January.

>>> UK Fines Morgan Stanley For Energy Traders Using Private WhatsApp Messages

UK Fines Morgan Stanley For Energy Traders Using Private WhatsApp Messages

By Charles Kennedy of OilPrice.com

The UK regulator Ofgem said on Wednesday it had fined Morgan Stanley & Co. International plc (MSIP) for failure to record and retain electronic trading communications in energy trades after wholesale energy traders were found to have used WhatsApp on privately owned phones to discuss energy market transactions.
The failure to comply with the requirement to record and retain electronic trading communications was for the period between January 2018 and March 2020.

Ofgem has levied a fine of $6.8 million (£5.41 million) on Morgan Stanley for the use of WhatsApp on privately owned phones in the first-ever fine issued in the UK under legal requirements to record and retain electronic communications relating to trading wholesale energy products.

The rules have been designed to protect consumers and ensure market transparency and integrity by providing Ofgem the powers to investigate and sanction against market manipulation and insider trading, the UK regulator said in a statement.

The breach emerged following Morgan Stanley’s responses to information requests made using the information collection powers Ofgem has under these regulations.

Morgan Stanley has admitted the breaches between January 2018 and March 2020, and “has taken steps to ensure the breaches do not happen again, including enhanced staff training and the strengthening of its internal systems and controls,” Ofgem said.

The bank has fully co-operated with Ofgem’s investigation and has agreed to settle the case. The fine includes a 30% penalty discount for settling.

“This fine sends a strong message to market participants that they must comply with all REMIT rules or face enforcement action,” said Cathryn Scott, Regulatory Director of Enforcement and Emerging Issues at Ofgem.

“It is unacceptable that MSIP failed to prevent electronic communications which could not be recorded or retained. It risks a significant compromise of the integrity and transparency of wholesale energy markets.”