Gapping up
In reaction to strong earnings/guidance:
- PING +18.8%, TGP +10%, PRSP +8%, HI +7.8%, DDS +7.7%, CPA +6.9%, IGT +4.7%, TNK +4%, WMT +3.1%, CHNG +2.4%, CBPO +2.2%, BAM +2.2%, VIAB +1.1%, PUMP +0.8%, NICE +0.7%
M&A news:
- QGEN +3.2% (after seeing late move higher on speculation of Thermo Fisher [TMO] interest in Qiagen)
Other news:
- XCUR +19.9% (Exicure & Allergan (AGN) enter global collaboration agreement -- Exicure will receive upfront payment of $25 mln)
- AVXL +6.7% (received the RPD designation from the FDA for ANAVEX2-73 (blarcamesine) for the treatment of Rett syndrome)
- AXNX +5% (announces FDA approval for its sacral neuromodulation system for urinary clinical indications)
- REPL +4.2% (prices public offering of 3,678,031 shares of its common stock at a public offering price of $13.61 per share)
- RETA +2.7% (upsizes offering by 400K shares and prices 2.4 mln shares of common stock at $183.00 per share)
- AZN +1.7% (US FDA accepts regulatory submission for selumetinib in neurofibromatosis type 1 and grants Priority Review)
- TPB +1.1% (promotes Graham A. Purdy to COO)
- SMPL +1% (CEO disclosed the purchase of ~16K shares worth ~$400K)
- AOBC +0.7% (announces intention to separate into two independent publicly traded companies)
- ATHX +0.7% (Healios receives notification of orphan designation for acute respiratory distress syndrome clinical program)
- LNT +0.7% (to make a public offering of $195.6 mln of shares of its common stock)
Analyst comments:
- FVRR +3% (upgraded to Buy from Neutral at BofA/Merrill)
- GLYC +2.2% (initiated with a Buy at ROTH Capital)
- SAH +1.9% (upgraded to Equal-Weight from Underweight at Morgan Stanley)
- BYND +1.4% (initiated with a Buy at Berenberg)
- ALSN +0.9% (upgraded to Buy from Neutral at BofA/Merrill)
- PCAR +0.9% (upgraded to Buy from Neutral at BofA/Merrill)
Early premarket gappers
- Gapping up:
- PING +20.1%, TGP +9.3%, PUMP +8.2%, PRSP +8%, NBEV +8%, HI +7.8%, CPA +6.9%, AXNX +5%, REPL +3.6%, QGEN +3%, CHNG +2.4%, AZN +2.3%, TNK +2%, CBPO +1.5%, TPB +1.1%, SMPL +1%
- Gapping down:
- FLGT -13.9%, WB -8.1%, BCRX -6.9%, BZH -5.9%, CSCO -5.5%, SINA -5%, TCOM -3.8%, WIX -3.2%, NTAP -2.8%, VRRM -2.4%, SRPT -2%, KDMN -1.7%, LNT -1.3%, PSNL -0.8%, NICE -0.6%
H2O auditor flags rule breach during summer liquidity squeeze
Fund manager suffered redemptions after FT reports of ties to racy German financier
H2O Asset Management broke rules governing open-ended funds during a liquidity crisis in June, according to newly published accounts that reveal that the fund manager blew through limits on counterparty risk.
The London-based firm, a subsidiary of French bank Natixis, saw clients take out €8bn from its funds over the summer after the Financial Times detailed the scale of its illiquid bond holdings linked to the racy German financier Lars Windhorst.
While H2O met all of these redemptions and its chief executive Bruno Crastes vowed to never halt withdrawals, the firm still came under scrutiny. Influential ratings group Morningstar downgraded one of the key funds, Allegro, a bond and currencies vehicle, citing H2O’s “loose risk controls”.
The €1.5bn-in-assets fund recently filed annual accounts covering the year ending June 28, in which auditor KPMG disclosed that Allegro breached French rules implementing Ucits — an EU-wide framework governing funds that allow retail investors to withdraw money on a daily basis.
H2O’s breach was because of “transactions with a single counterparty that is not a financial institution”. KPMG said those transactions represented 9.9 per cent of the Allegro fund’s net assets, far in excess of the 5 per cent limit set out in French law.
A person close to H2O said the firm had since corrected the breach and that its funds were now in compliance with these regulations.
Governance of Ucits funds has been in the spotlight since the meltdown at the flagship investment fund run by Neil Woodford, the UK stockpicker. Mr Woodford chose to freeze withdrawals, a move that sparked fury among investors.
In a section of Allegro’s annual report detailing the fund’s exposure to bonds related to Mr Windhorst, H2O explains that it conducted a number of “purchases followed by deferred settlement sales”, transactions commonly referred to as “reverse repos”, on these securities with a single counterparty.
The report then explains that the fund had a receivable with the same counterparty representing 9.9 per cent of its net assets, because it was owed €111m under “deferred payment sales”. This disclosure is included in the French-language version of H2O’s accounts, but is missing from the English version.
H2O declined to comment on the identity of the counterparty and the discrepancy in disclosures.
This is not the first time H2O has breached Ucits rules this year. In March, an equities-focused fund exceeded the 10 per cent threshold that caps holdings of illiquid assets, often referred to as the “trash ratio”, because of its holdings of unlisted shares linked to Mr Windhorst. H2O later rectified this breach.
Natixis said last week that it had taken measures to increase its oversight of its asset management division, following the furore over H2O.
KPMG’s audit report also includes an “emphasis of matter” related to the uncertainty around H2O’s valuations of illiquid bonds linked to Mr Windhorst. Audit firms include such notices to flag matters that are thought to be fundamental to readers’ understanding of the financial statements, but not sufficiently serious to merit a “qualification”.
Allegro was previously audited by firm PwC, which included a qualification in its 2016 audit of H2O’s separate Adagio fund. That related to “significant discrepancies” in the valuation of bonds from Mr Windhorst’s flagship investment vehicle.
These same bonds were referenced in litigation from several parties alleging that the German financier reneged on repurchase agreements, including a lawsuit linked to the former energy minister of Russia that was later settled. Mr Windhorst has often turned to a close network of trusted brokers, including London’s Shard Capital, to help carry out these repo transactions.
DAX:
- RWE (RWE TH) +2.3%
- RWE Raises Profit Guidance on Return of U.K. Capacity Payments
- Henkel (HEN3 TH) +0.9%
- Henkel 3Q Adj. Ebit Below Est., FY Outlook Confirmed
- Merck KGaA (MRK TH) +0.8%
- Merck KGaA 3Q Adj. Ebitda Beats; Raises FY Views (2)
- Wirecard (WDI TH) +0.8%
- Wirecard, Yeepay in Pact for Payment Processing Outside China
- Deutsche Post (DPW TH) +0.6%
- Deutsche Post Raised to Neutral at JPMorgan; PT 30.07 euros
- Infineon (IFX TH) -0.5%
MDAX:
- Qiagen (QIA TH) +10%
- Thermo Fisher Said to Weigh Buying Diagnostics Firm Qiagen (2)
- Nemetschek (NEM TH) +2.9%
- Cancom (COK TH) +1.3%
- Cancom 3Q Adj. Ebitda +18% Y/y; On Track to Achieve FY Outlook
- Hugo Boss (BOSS TH) +1%
- ProSieben (PSM TH) +1%
- K+S (SDF TH) -1.5%
- K+S Cuts Production Again on Weak Potash Market; Forecasts Pared
SDAX:
- Steinhoff (SNH TH) +1.7%
- Aixtron (AIXA TH) +1.2%
- SAF Holland (SFQ TH) +1.2%
- Wacker Neuson (WAC TH) +0.9%
- RIB Software (RIB TH) +0.8%
- Nordex (NDX1 TH) -1.4%
- Zooplus (ZO1 TH) -2.5%
- Zooplus Keeps FY Sales Growth, Ebitda Views (1)
- Schaeffler (SHA TH) -3.1%
- Schaeffler Cut to Hold at HSBC; PT 10.50 euros
Stocks in Asia were mostly lower Thursday, with weak Chinese economic indicators, some disappointing earnings releases and the continuing unrest in Hong Kong weighing on sentiment. Treasuries edged up.
Shares in Hong Kong and Tokyo led losses. The Hang Seng Index fell as much as 1.1%, with Tencent on the retreat. Japanese shares extended losses and S&P 500 futures reversed gains after China’s factory output, retail sales and fixed-asset investment all missed estimates. Shares edged higher in Shanghai, Seoul and Sydney. Australia’s dollar and bond yields retreated as the jobs market unexpectedly cooled.
US After Hours PING +13%, PRSP / HI +8%, BZH / CSCO -5% among notable earnings/guidance movers
Nikkei -0.76% Hang Seng -1.01% CSI +0.18% Shanghai +0.18% Shenzen +0.60%
Eur$ 1.0998 CNH 7.0204 CNY 7.0194 JPY 108.75 GBP 1.2831 CHF 0.9899 RUB 64.2080 TRY 5.7566 WTI$ 57.49+0.65%
S&P -0.15% EuroStoxx -0.09% Dax +0.01% FTSE -0.04% SMI +0.05%
Macro :
- U.S. Investor Bull-Bear Spread 15.9: AAII
- S&P 500 Downside Puts Target 11% December Correction
- U.S., China Trade Talks Hit Snag Over Agriculture Buys: WSJ
- U.S. Oct. Budget Deficit at $134.5b; Est. $-130b
Keep an eye on :
- III LN : 3i First Half Net Asset Value Per Share 873p
- ANA SM : Acciona in Talks to Buy Odebrecht Asset in Brazil: Expansion
- ADL GY : Adler Real Estate Third Quarter FFO I EU62.0 Mln, +13% Y/y
- ARM SM : Arima Real Estate SOCIMI to Offer Shrs EU10.40/Shr
- POST AV : Austrian Post 9M Net EU100.1 Million; Outlook Confirmed
- B5A GY : Bauer Nine Month Ebit EU48.5 Mln
- BCART BB : Biocartis Maintains FY Cash Balance EU170 Mln To EU175 Mln
- EN FP : Bouygues Nine Month Current Operating Income EU1.12 Bln
- BRBY LN : Burberry First Half Retail Comparable Sales Match Estimates
- CEV GY : Centrotec Expects to Reach Upper Ends of Forecast Ranges for FY
- CDR SM : Codere Confirms Reduction in 1H Latam Revenue, Adjusted Ebitda
- DAI GY : Daimler CEO Faces Showdown With Investors Amid Industry Shift
- DLG GY : Dialog Semiconductor Says Finding Good Deals Is ‘Hard Work’
- EDF FP : EDF Cuts Annual Nuclear Output Forecast to 384TWH-388TWH
- ERICB SS : Cisco Sales Forecast Falls Short on Slowing Global Economy --> CSCO -4.8% in After Hours
- EVS BB : EVS Broadcast Cuts FY Rev Guidance, Sees Lower SG&A Expenses (1)
- FRU GY : Ferratum Nine Month Revenue EU218.1 Mln
- FLUX BB : Fluxys Belgium Names Christian Leclercq Finance Chief
- HLAG GY : Hapag-Lloyd Narrows FY Ebit, Ebitda Forecast Range to Upper Part
- HEN3 GY : Henkel 3Q Adj. Ebit Below Est., FY Outlook Confirmed
- INH GY : Indus Holding Nine Month Adjusted Ebit EU103.1 Mln, -11% Y/y
- KBC BB : KBC Group 3Q Net Interest Income Beats Highest Est. (1)
- KVW NA : Regulator Investigates Insider Trading VolkerWessels Stock: FD
- KIN BB : Kinepolis 3Q Change In Attendance +21.7%, Adj. Net Profit Rises
- 3938 JP : LineCorp : Line's Possible Merger With Z Holdings to End Payment War: React
- SDF GY : *K+S CUTS FY EBITDA TARGET TO EU650M ON POTASH PRODUCTION CUT
- MB IM : Del Vecchio Says Mediobanca Plan Goes in Right Direction
- MRK GY : Merck KGaA 3Q Adj. Ebitda Beats; Raises FY Views (2)
- MLP GY : MLP 9M Ebit Drops 17% to EU19m, Confirms FY Outlook
- KN FP : H2O Auditor Flags Rule Breach During June Liquidity Squeeze: FT
- NLFSK DC : Nilfisk Reports 3Q Revenue in Line With Preliminary Numbers
- NN NA : NN Third Quarter Operating Profit Beats Highest Estimate (1)
- NOKIA FH : Cisco Sales Forecast Falls Short on Slowing Global Economy --> CSCO -4.8% in After Hours
- OLT NO : Olav Thon Eiendomsselskap 3Q Net Rental Income NOK654 Mln
- ORK NO : Orkla Names Harald Ullevoldsæter EVP, Chief Financial Officer
- QIA GY : Thermo Fisher Said to Weigh Buying Diagnostics Firm Qiagen
- RWE GY : RWE Raises Profit Guidance on Return of U.K. Capacity Payments
- SALM NO : Salmar Third Quarter Operating Ebit Meets Estimates
- SBMO NA : SBM Offshore Boosts FY Adj. Ebitda, Adj. Revenue Guidance (1)
- SAE GY : Shop Apotheke Sees FY Adjusted Ebitda Margin -2% To -2.3%
- F3C GY : SFC Energy Cuts 2019 Sales, Adj. Ebitda, Adj. Ebit Guidance
- G24 GY : Scout24 CEO ‘Not 100% Certain’ of Auto Unit Conclusion This Year
- SIGN SW : SIG Combibloc Offering by Holder Prices 31.4m Shrs CHF13.30/Shr
- SON PL : Sonae 3Q Net Doubles to EU50m Y/y as Supermarket Sales Rise (1)
- SRAIL SW : Stadler Signs First Contract for Hydrogen-Powered Train
- TEF SM : Telefonica Approached by Oi Advisers Over Mobile Assets Sale
- VEI NO : Veidekke Third Quarter Revenue Misses Lowest Estimate
- WDI GY : Wirecard, Yeepay in Pact for Payment Processing Outside China
- ZO1 GY : Zooplus Keeps FY Sales Growth, Ebitda Views
- ZURN SW : Zurich Ins. Targets ‘20-’22 Business Oper Profit ROE >14% (2)
After Hours Summary: PING +13%, PRSP / HI +8%, BZH / CSCO -5% among notable earnings/guidance moversAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: PING +13.3%, PUMP +8.6%, PRSP +7.9%, HI +7.7%, CPA +6.9% (light volume), PSNL +6.5%, TGP +6.5%, CHNG +2.1%
Companies trading higher in after hours in reaction to news: QGEN +1.6% (after seeing late move higher on speculation of Thermo Fisher [TMO] interest), TPB +1.1% (promotes Graham Purdy to COO), SMPL +0.8% (CEO disclosed the purchase of ~16K shares worth ~$400K)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: BZH -5.2%, CSCO -4.8%, TTEK -2.8%, NTAP -1.7%, LNNF US
Companies trading lower in after hours in reaction to news: FLGT -12% (announces proposed public offering of common stock), KDMN -5.1% (to offer and sell shares of common stock in a public offering pursuant to existing shelf registration statement),I -3% (extending today's nearly 30% decline), VRRM -1.4% (light volume; announces secondary offering of 15 mln shares of common stock by holders), BHP -0.6% (light volume; announces Mike Henry to become Chief Executive Officer, effective January 1, 2020)
>>> Up
* Basic-Fit Raised to Outperform at RBC; PT 35 euros
* Capital & Counties Raised to Buy at Peel Hunt; PT 300 pence
* Deutsche Post Raised to Neutral at JPMorgan; PT 30.07 euros
* DWS Raised to Buy at BofAML; PT 36 euros
* Qiagen Raised to Overweight at JPMorgan; PT $40
>>> Down
* ADO Properties Cut to Equal-Weight at Barclays; PT 33 euros
* Altice USA Cut to Hold at HSBC; PT $28
* Ambu Cut to Hold at SEB Equities; PT 130 kroner
* Assa Abloy Cut to Neutral at UBS
* Baloise Cut to Reduce at HSBC; PT 155 Swiss francs
* Belimo Cut to Hold at Berenberg; PT 6,630 Swiss francs
* DCC Cut to Neutral at Exane; PT 6,650 pence
* Fraport Cut to Underperform at Exane; PT 65 euros
* ITV Cut to Hold at Kepler Cheuvreux; PT 150 pence
* Ryanair Cut to Underperform at Exane; PT 12 euros
* Schaeffler Cut to Hold at HSBC; PT 10.50 euros
* Sika Cut to Hold at Kepler Cheuvreux; PT 180 Swiss francs
* Tullow Cut to Hold at Jefferies; PT 168 pence
>>> Initiation
* Boskalis Rated New Buy at Berenberg; PT 28 euros
* CFE Rated New Hold at Berenberg; PT 97.50 euros
* Heidelberg Pharma Rated New Outperform at MainFirst
* Verallia Sasu Rated New Buy at SocGen; PT 34 euros
* Verallia Sasu Rated New Buy at Kepler Cheuvreux; PT 32 euros
* Zalando Reinstated Buy at BofAML; PT 50 euros
>>> Call
* Boskalis New Buy, CFE Hold at Berenberg on Offshore Prospects
* Tullow Oil Cut After Key Objectives For 2019 Fail: Jefferies