TheChek News Flow

* Aker BP Raised to Buy at DNB Markets; PT 285 kroner

* DSM Raised to Accumulate at KBC Securities

* Hapag-Lloyd Raised to Buy at Deutsche Bank; PT 265 euros

* Kuehne + Nagel Raised to Buy at Deutsche Bank

* Maersk Raised to Buy at Deutsche Bank; PT 23,500 kroner

* NB Aurora SA Sicaf-Raif Raised to Buy at Intesa Sanpaolo (+)

* Telia Raised to Neutral at Citi; PT 37 kronor

>>> Down

* BHP Group PLC Cut to Equal-Weight at Barclays; PT 2,000 pence

* Cairn Energy Cut to Hold at Investec; PT 210 pence

* Carlsberg Cut to Sell at Berenberg; PT 883 kroner

* Delivery Hero Cut to Neutral at Oddo BHF; PT 135 euros

* Fine Foods & Pharma Cut to Accumulate at Banca Akros (+)

* IAG Cut to Neutral at Exane; PT 170 pence

* Kering Cut to Reduce at AlphaValue/Baader

* LVMH Cut to Reduce at AlphaValue/Baader

* Media & Games Invest Cut to Hold at Hauck & Aufhaeuser (+)

* Merck KGaA Cut to Sell at UBS; PT 170 euros (+)

* Savencia Cut to Neutral at Oddo BHF (+)

* Tecnicas Reunidas Cut to Neutral at JPMorgan; PT 9.50 euros

>>> Initiation

* 2020 Bulkers Rated New Buy at HC Wainwright; PT 181 kroner

* Fluidra Maintained Hold at Grupo Santander

* OEM International Rated New Buy at SEB Equities; PT 201 kronor

* Tethys Oil Rated Buy at Pareto Securities

>>> Call

* Carlsberg Double-Downgraded at Berenberg on ‘Inflation Storm’

* Deutz PT Raised at Warburg on Guidance Lift, End Markets Strong (+)

* Inditex Upgraded Amid Strong Fashion Recovery: Jefferies

* ITM Power Cut to Sell at Berenberg as Risks Playing Out

* JD Sports Results Ahead of Even Most Bullish Hopes: Peel Hunt (+)

* Luxury ‘Very Vulnerable’ to China, Alphavalue Cuts LVMH, Kering (+)

* Ocado Shares Seen Reacting Negatively to Erith Fire Impact: MS (+)

* Telia Raised to Neutral at Citi on Better Market Conditions (1)

China’s most indebted property developer hires restructuring advisers to tackle almost $310bn in liabilities

Evergrande has hired restructuring advisers and warned that its liquidity is under “tremendous pressure” from collapsing sales as China’s most indebted property developer faces protests by home buyers and retail investors.

In a statement to the Hong Kong stock exchange, Evergrande disclosed that its monthly sales had almost halved from June to August, falling from Rmb71.6bn ($11bn) to Rmb38.1bn.

While September is usually a bumper sales month for developers, Evergrande, which last month warned over the risk of default because of a spiralling liquidity crisis, blamed “negative media reports” for depressing confidence in the company from potential property buyers.

The company said it had hired Houlihan Lokey and Admiralty Harbour Capital to evaluate its liquidity and “explore all feasible solutions” to ease its mounting debt crisis.

Based in Shenzhen in southern China, Evergrande is saddled with almost Rmb2tn ($310bn) of total liabilities, raising concerns that any failure to repay its debts could pose a broader risk to the country’s financial system and international bond markets, where it has borrowed heavily.

The group’s mounting credit woes have coincided with a Chinese government regulatory drive against big technology groups, the real estate industry and other sectors.

On Monday, the country’s housing ministry announced a three-year inspection campaign to tighten regulation of the property sector. Last year, the government implemented a strict “three red lines” policy aimed at reducing developers’ leverage, which China’s banking regulator has labelled the country’s biggest financial risk.

In recent days, Chinese social media platforms have been flooded with complaints from property buyers worried that their new homes would not be completed and from investors who bought wealth management products sold to fund Evergrande’s real estate projects.

State media reported that hundreds of people protested at Evergrande’s Shenzhen headquarters and met senior executives on Sunday after the group suspended payments on some of its wealth management products.

Police were deployed to keep order as the demonstrations continued on Monday, according to videos circulating online. Other protests have been held at Evergrande’s offices and developments across China, including in Guangzhou, Zhengzhou and Qingdao, according to social media posts.

Evergrande relies heavily on customers paying for flats before the projects are completed.

In its statement, Evergrande also revealed that two of its subsidiaries had not been able to “discharge their guarantee obligations as scheduled” on about Rmb934m in wealth management products issued by other third parties.

To reduce its debts, Evergrande is seeking to slash costs and sell assets including stakes in an electric vehicles business and a property services group, both of which are listed in Hong Kong, as well as a flagship property in the territory.

Evergrande’s Hong Kong-listed shares fell as much as 11 per cent on Tuesday, bringing their total decline for the year to date to about 80 per cent. Shares of Evergrande New Energy, the electric car company, dipped 22 per cent.

On Tuesday, the group’s Beijing office was stripped bare. A worker said the company had relocated to premises outside the city centre last month.

Retail investors in Evergrande’s wealth management products said they were entitled to interest rates of 7-9 per cent, and the company’s inability to repay overdue products has created a stampede of investors intent on getting their money out.

To compensate investors holding products or demanding to redeem them ahead of schedule, Evergrande has offered new repayment plans or swaps for flats and parking spots.

Evergrande’s misery has rippled across global bond markets, where its debt maturing next year traded as low as 30 cents on the dollar, helping push yields higher across riskier Chinese issuers.

“Fear and uncertainty are dominating market sentiment,” said Paul Lukaszewski, head of corporate debt for Asia-Pacific at Aberdeen Standard Investments.

Is it too late for Japan’s semiconductor industry?

Efforts to revive the sector may be doomed by too little investment and insufficient government expertise

Picture a motorist who, after many decades behind the wheel, is clearly no longer fit to drive. They know it, the people around them know it, but the confrontation with reality is excruciating. The practical decisions are bad enough; nearly intolerable is the acknowledgment of incompetence and decline.

This, more or less, is where some see Japan’s semiconductor industry. Once a producer of more than half the world’s chips, it is now struggling to retain its 10 per cent share despite a still formidable concentration of factories and critical links in the global supply chain. The car keys haven’t been handed over yet, but a life-changing moment is looming.

In Japan, where past dominance of this industry fits into the national sense of self, it is difficult to overstate the discomfort this issue is causing. Back in the late 1970s, the world’s emerging demand for computer chips proved to be a gift for a national economy that had had its confidence rocked by the “oil shock” earlier that decade. 

Suddenly, a country whose oft-bemoaned lack of natural resources had been confirmed as an economic liability was leading the world in producing a commodity that would go on to rival oil and iron ore in global and strategic importance. More critically, though, it was leading through its own skill and determination rather than geological luck. Chips, for Japan, were not only a physical symbol of manufacturing merit, but a globally tradable token of industrial ambition.

The problem now is that others, notably South Korea, Taiwan and a reinvigorated US, have demonstrated that ambition more effectively over the past 30 years. And, in a game where the ante is measured in tens of billions of dollars, they have risked ever bolder financial commitments too.

For some time, Japan’s gradual slide down the world’s chipmaker rankings has been a source of disquiet to those who foresaw profound consequences for its overall industrial competitiveness. Their worries intensified as other cherished sectors, such as autos, became more voracious consumers of chips. But most in the industry, along with successive Japanese leaders, seemed to view the issue as a curiosity rather than a crisis.

Quite suddenly, that has changed. Trade war between China and the US, the spectre of unremitting tension between the world’s two biggest economies, has crystallised the strategic importance of chipmaking. Prolonged chip shortages after the Covid-19 pandemic continue to severely affect the production of everything from cars to games consoles. They have also prompted a global rethink, with a new world order in prospect. The US has vowed to invest heavily in securing its position. China will do likewise. The EU has a grand catch-up plan. 

Japan, meanwhile, has realised that its decline as a chipmaker may have become irreversible – at the precise moment its old skills and ambition are desperately required. One government projection has put 2030 as the moment Japan’s global share could fall to nothing; the former prime minister, Shinzo Abe, warned of the need to approach the issue “at a completely different level”.

Yet, for now, efforts by the Ministry of Economy, Trade and Industry (Meti) to shape, at record speed, a national effort to remain among the high rollers lack the funding, the diplomacy and the zeal necessary for success. The hope of convincing the world’s most dominant players to set up foundries in Japan is slim.

This bleak conclusion was confirmed recently in a chat with Yukio Sakamoto, the gruff former chief executive of the Japanese chipmaker Elpida Memory. He experienced first hand the repeated failures of Meti to orchestrate the kind of master plan that might, at various times since 1990, have restored the dominance of Japanese chipmakers. The current, horribly belated efforts are, he says, doomed by too little investment, too few engineers and far, far too little government expertise. 

Japan’s strategy on semiconductors “was not put together by someone who knows much about semiconductors”, says Sakamoto. Meanwhile, its relatively slow-moving digital revolution means fewer cutting-edge chip customers are now on home soil.

Sakamoto is certainly at the embittered end of the spectrum on this matter, but his misgivings have the air of the person charged with telling the elderly driver that their days at the wheel are over. It’s a terrible message to deliver and it always ends up having to be done at the worst possible time. 

Tens of millions have fallen into extreme poverty during the Covid-19 pandemic, Gates Foundation says

Bill Gates warned six years ago that the biggest potential killer the world faced was a pandemic.

Now, he says, not enough is being done to prepare for the next one.

“I’m a little worried that the attention to pandemic preparedness is lower than I would have expected,” the billionaire philanthropist and Microsoft Corp. co-founder said in an interview. He said that proper preparedness included the ability to make a vaccine in 100 days and manufacture enough for the entire world in the next 100 days after that.

The Bill & Melinda Gates Foundation called in a report published Monday for nations to invest more in health systems, including the capacity to manufacture vaccines. The tools to end the pandemic are largely the same as those used to fight other infectious diseases, the report said: widespread testing, treatment and immunization.

Some 49 million doses of Covid-19 vaccine were administered in the first half of this year in Africa compared with 43 million in California, according to the report, highlighting inequity in vaccine availability between low-income and wealthy nations.

“The only real solution to this problem is to have factories that can make enough for the entire world in 100 days,” said Mr. Gates. “And that is doable.”

A new $65 billion plan by the Biden administration to strengthen pandemic preparedness is a step in the right direction, he said, but will have to be funded. “We’re going to have to keep pushing for that,” said Mr. Gates, who is co-chair of the foundation with his former wife, Melinda French Gates.

Mr. Gates and Ms. French Gates, whose divorce was completed in August, remain co-chairs of their foundation. The two have an agreement that Ms. French Gates could depart after two years, if they decide they can no longer work together.

Mr. Gates said he is as engaged in his work with the foundation as ever because of the pandemic and other pressing challenges. “It’s a very positive part of our life and back to being the primary focus of my work,” said Mr. Gates, who also works on reducing climate change.

The Gates Foundation, a family charitable trust, has said it plans to add more trustees to enhance governance and independence. Mr. Gates and Ms. French Gates are its sole trustees after Warren Buffett resigned.

Mr. Gates said that he, Ms. French Gates and the foundation’s chief executive officer, Mark Suzman, plan to identify new trustees by the end of the year. He wouldn’t say how many new trustees might be named. ““We won’t have as large a board as some people have,” he said.

He also said the foundation wouldn’t change its focus on topics including health and agriculture globally as well as education in the U.S.

“It will be nice to have additional trustees, but I wouldn’t think that in terms of what we actually do that you’ll see much in the way of change,” he said.

The Gates Foundation’s “Goalkeepers” report tracks progress toward sustainable development goals set by the United Nations. The report also looked at the impact of the Covid-19 pandemic.

The pandemic resulted in 31.3 million more people ending 2020 in extreme poverty, the report found, and an economic recovery under way this year is leaving women behind.

Women are expected to hold 13 million fewer jobs this year than they did in 2019, before the pandemic began, while employment among men is forecast to recover largely to pre-pandemic rates, according to the report.

The pandemic didn’t damage the global economy or some developmental measures as badly as the foundation anticipated. “It wasn’t the worst case, but it’s still a huge setback,” Mr. Gates said.

The percentage of children globally who are fully vaccinated against diphtheria, tetanus and pertussis has fallen back to 2005 levels, according to the report. The Gates Foundation uses that rate as a measure of vaccination overall against childhood diseases.

Most of the 33.9 million people who fell into extreme poverty in 2020—defined by the World Bank as living on less than $1.90 per person a day—live in sub-Saharan Africa. There were also about 2.6 million people in Southeast Asia, Eastern Europe and other regions who rose above the extreme poverty line, yielding the 31.3 million total.

While data from the report show that the percentage of the global population living in extreme poverty will likely decline this year compared with 2020, Mr. Gates said he is concerned that the economic recovery is uneven world-wide. “The scary thing is that whenever there’s trouble in rich countries they have a tendency to turn inward,” he said. “I am worried going forward about the debt levels of the low-income countries and the global outlook.”

Per capita income levels are expected to return to pre-pandemic levels in 90% of advanced nations by 2022 but only a third of low- and middle-income countries, according to the report. Nearly 700 million people are projected to remain in extreme poverty in 2030, it said.

Security researchers say Israel’s NSO Group has been exploiting the vulnerability since February

An Israeli cybersecurity firm has been exploiting a significant Apple Inc. AAPL 0.39% software vulnerability since February to silently infect iPhones using iMessage, the company’s messaging software, according to the research group that discovered the issue.

On Monday, Apple supplied a critical security update fixing the flaw, but the vulnerability had been used in attacks by Israel’s NSO Group, according to Citizen Lab. Citizen Lab is an academic research group that investigates cyberattacks on journalists and dissidents.

“After identifying the vulnerability used by this exploit for iMessage, Apple rapidly developed and deployed a fix in iOS 14.8 to protect our users,” Apple said in a statement. “We’d like to commend Citizen Lab for successfully completing the very difficult work of obtaining a sample of this exploit so we could develop this fix quickly.”

The intrusion is particularly worrisome because it is what researchers at Citizen Lab refer to as a “zero click” attack, meaning, unlike most other iPhone hacks, the user doesn’t need to click on a link or open a document to be infected. “Anyone with iMessage on their phone could be silently infected,” said John Scott-Railton, a researcher with Citizen Lab. “They would see nothing.”

“People should update their devices immediately,” Mr. Scott-Railton said.

In addition to the iOS operating system used by the iPhone, the attack works against the iMessage software on Apple’s Mac computers, the iPad, and Apple Watches, Citizen Lab said.

Users who want to update their iPhone or iPad should go to Settings > General > Software Update, and tap Download and Install if an update is available. If the device shows iOS 14.8 or iPadOS 14.8, it is up to date and already patched.

On Macs the software update can be found under System Preferences. The newest version is MacOS Big Sur 11.6. Apple Watches can be updated via the Apple Watch app on an iPhone, under General > Software Update.

The update process can sometimes take extra time when many users are queuing to download the new software.

Cyberattacks like the one discovered by Citizen Lab cost millions of dollars to develop and are used to break into the devices of specific individuals and “are not a threat to the overwhelming majority of our users,” Apple said.

Citizen Lab linked the flaw to NSO Group, which sells hacking tools used by governments world-wide to conduct surveillance.

Asked to comment on a report that Citizen Lab published on the issue Monday, an NSO spokesman said, “NSO Group will continue to provide intelligence and law enforcement agencies around the world with lifesaving technologies to fight terror and crime.”

The software used in the iPhone attacks “is rare and probably expensive thing and it would have represented a substantial amount of development work,” Mr. Scott-Railton said.

Citizen Lab began pulling on the threads that led to the bug’s discovery in March, when they found that a phone belonging to an anonymous Saudi activist had been infected by the Pegasus software, which was built by NSO Group to monitor the phone’s activities.

At the time, it was unclear how Pegasus had been installed, but last week, while examining a backup of the phone, Citizen Lab discovered a copy of the attack code that had been used to infect it, by exploiting a bug in Apple’s image processing software, Mr. Scott-Railton said.

“What showed up there was a bunch of files labeled as GIFs but they weren’t actually GIFs,” Mr. Scott-Railton said. “They contained this exploit that exploited Apple’s image processing.” GIF is an image file-formatting standard.

Examining the files, Citizen Lab discovered attack code that it linked to NSO Group, based on the naming conventions and behavior of the software it installed, Citizen Lab said.

While Apple has invested heavily in bolstering the iPhone’s reputation for privacy and security, that reputation has come under strain this year. Earlier this month, the company paused the rollout of a system it had developed for detecting child pornography on its phones, after critics said it could undercut the iPhone’s privacy.

Apple has also had to fix an unusually large number of iPhone bugs this year, many of which have been exploited by cyberattackers, according to Katie Moussouris, chief executive of Luta Security, a firm that advises companies on how to work with outside security researchers. “Zero-click is both rare and especially dangerous,” she said, “though I’m more concerned with how many new unpatched iOS security holes have been exploited this year.”

After surviving near shutdown of live entertainment, concert promoter revives deal with Mexican rival

The Delta variant has pulled the plug on the hopes of live music fans this autumn. After a promising return of big music festivals and concerts, a resurgence of Covid cases has prompted artists and concert organisers to reschedule their shows. 

But one company has bet that live concerts will make a high-decibel encore this year. Concert promoter Live Nation will push ahead with plans to buy a controlling stake in Mexican rival Ocesa for $8.8bn pesos ($444m). 

Live Nation originally announced this deal for the industry’s third largest concert promoter in July 2019. But after last year’s pandemic triggered a near total shutdown of the live events industry the deal went on hold. Good thing, as Live Nation had a predictably bruising 2020. The company, which pre-pandemic hosted more than 40,000 events around the world, racked up $1.7bn in net losses last year amid a near total collapse in revenue. It lost another half a billion dollars in the first six months of this year. 

All this makes for a strange time to revive a multimillion dollar cross border deal. That is, unless your fans have sent your stock price on a record setting run. Live Nation’s market value has more than doubled from its pandemic lows to hit an all-time high of $20bn in June. The market has admired Live Nation’s ability to generate cash flow from live streaming while cutting costs. It plans to sell shares to help pay for Ocesa.

Investors are right to be bullish on Live Nation. Before the pandemic, the company had enjoyed record revenue and profit. It has scale and pricing power as the biggest live music promoter in the world, with twice the market share of its closest rival, Anschutz Entertainment Group. It is also the biggest concert ticket seller in the world thanks to its 2010 merger with Ticketmaster.

This dominance, previously challenged by US competition watchdogs, leaves the ears of new entrants ringing, not to mention infuriating ticket buyers. A deal for Ocesa will only strengthen its position.

Billionaire Lawrence Stroll targets £1bn value for resurrected F1 team within five years

The Canadian billionaire owner of Aston Martin Formula One Racing is backing a £150m-£200m investment in a new manufacturing headquarters as he looks to build a £1bn outfit within five years.

Lawrence Stroll, who led the consortium that rescued UK luxury carmaker Aston Martin Lagonda last year in a £500m bailout, is pressing on with the investment despite inflationary pressures driving up costs.

“Steel’s gone up, lumber has gone up, labour prices have gone up because of a shortage of labour,” Stroll told the Financial Times. “We probably have a 10 per cent cost increase pre-Covid price to post-Covid price.”

Stroll’s ownership of Racing Point, the former Force India team he bought out of administration for £90m in 2018, meant he was able to bring the Aston Martin marque back to F1 for the first time in more than 60 years this season after rescuing the carmaker.

Following F1 rule changes, including spending limits and a more even distribution of revenues among the teams, Stroll said the investment would help power the Aston Martin F1 outfit to a valuation of more than £1bn in the next five years.

Stroll, who built his fortune through upmarket fashion businesses such as Ralph Lauren and Michael Kors, said the new factory campus would help give the team a competitive advantage as Aston Martin seeks to win races and new fans, as well as boost the main marque.

British industrialist JCB chair Anthony Bamford, who was part of the Stroll-led consortium that rescued Aston Martin and whose company sponsors the F1 team, said: “It’s substantial amounts of money. It just shows confidence in the way forward for Aston Martin but also for all the manufacturers.”

The 37,000 square metre campus, which will include a wind tunnel to test and help improve aerodynamic performance and speed, is located near the Silverstone racetrack in Northamptonshire. Work on the site is under way and Aston Martin said it would be the first new F1 factory in the UK since rival McLaren opened its Woking campus in 2004.

Aston Martin F1 expects to complete work on its new headquarters by early 2023, after construction had been delayed by the pandemic.

Stroll is talking to banks about various funding options, including bond issuance or a traditional mortgage, though said he was less keen on sale-and-leaseback arrangements.

“Right now, I’m just financing it myself,” he said. “I’d like to be in control of the building . . . you know, I don’t wanna have to go to somebody every time we want to change a lightbulb.”

Stroll, who recently lured four-time world champion driver Sebastian Vettel to Aston Martin, added that he intended to add hundreds more staff on top of the roughly 550 employees the team has now.

Otmar Szafnauer, team principal, said the new facilities would help attract top engineers and drivers.

“Everybody’s in Formula One because they’re competitive, they want to win,” he added. “Once we show the world, look, we’re serious, we’re putting the infrastructure in place, then like-minded individuals will come.”

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