FT : Changing fortunes for Nokia and Ericsson (Nokia -3% ERICB -2.2%)

How corporate fortunes can change. Five years ago, Ericsson was riding high as the world’s largest seller of telecoms equipment while Nokia was suffering under the weight of its struggling mobile handsets business. 

Fast forward to today and the roles seem to have been reversed. The Finnish company has a renewed confidence after a series of deals and restructurings while Sweden’s Ericsson is under pressure. 

The contrast between the two arch-rivals manifests itself in different ways. M&A advisers say Nokia is on the prowl for another deal just as Ericsson abandons its efforts to sell some of its more troubled assets. 

Both have just acquired new large shareholders, although of different complexions. Nokia has attracted Finland’s state investment fund Solidum while Ericsson has picked up Europe’s largest activist investor, Cevian Capital. The differences were underlined by the two groups’ most recent results: Nokia’s numbers beat expectations and its shares rose 9 per cent, while Ericsson’s loss was bigger than expected and its shares fell 9 per cent on the day of its results.

However, for investors weighing up both companies there might be more hesitation over which to choose despite all the apparent differences. It is true that over the past five years Nokia has far outperformed Ericsson: its shares have almost doubled, while those of the Swedish group have nearly halved. But in the past six months, the picture is reversed. Ericsson’s shares are up by a fifth while Nokia’s are down almost 10 per cent.

What both have in common is that 2018 will be a year of waiting ahead of the much-anticipated rollout of the 5G telecoms networks on which they have pinned so much of their hopes. Both companies are essentially promising better times, just not yet. 

They are also seeking to head off any doubts about how big a success the next generation networks will be. Nokia and Ericsson both have 5G deals with T-Mobile in the US, where they dominate the market. Elsewhere, they are likely to feel the competition from China’s Huawei, which can compete not only on cost but also increasingly on technology. 

China, South Korea, Japan and the Nordic countries are likely to be the first to follow the US but there is still some scepticism about how quickly telecoms operators need to upgrade their networks from 4G.

“We are ahead of Huawei in technical development. Nokia is the only company with a strong market position in all key markets . . . The fifth-generation mobile technology increases network capacity per cell by nearly twentyfold,” Rajeev Suri, Nokia’s chief executive, told Helsingin Sanomat newspaper this week.

Market chatter over Nokia doing another deal — after digesting its Alcatel-Lucent purchase from 2015 — has increased. M&A advisers have long touted the likes of Juniper Networks of the US, which has a market capitalisation of $8.7bn, as a possible target. Nokia denied in November that it was in negotiations with Juniper, while Mr Suri said this week that he doubted his company would be interested in a “large acquisition of €10bn-€20bn in the coming years”.

One thing Nokia has in common with Ericsson is a struggle to find good businesses beyond its core networks operations. Ericsson bet on media but then tried, only in part successfully, to sell off those assets. Nokia’s experiments with virtual reality cameras (Ozo) and health technology (Withings) have been similarly unsuccessful. 

Across the Gulf of Bothnia in Sweden, some investors such as Cevian see Ericsson offering greater potential, in part because of just how far it has fallen. It has suffered five consecutive quarterly losses. Gross profits in the fourth quarter were under half the level they were at five years ago while revenues were only down 15 per cent. 

Borje Ekholm, Ericsson’s chief executive for the past year, has reported some progress with his turnround plan but some remain doubtful about the pace of the company’s restructuring. “The tech world is moving so fast and I just don’t know if Ericsson will keep up,” says one Swedish investor.

The US, meanwhile, has clearly signalled its desire to foster 5G-focused companies in its protection of Qualcomm from the hostile bid from rival Broadcom. Europe has long suffered from a lack of great technology companies and it can ill-afford for either Ericsson or Nokia to slip again.

>>> Hammerson’s merger talks with Intu said to have stalled -

Hammerson’s merger talks with Intu said to have stalled - report
22 MAR 2018
Hammerson’s [LON:HMSO] takeover talks with rival UK property company Intu [LON:INTU] were said to have stalled, according to a speculative report in the Financial Times. The newspaper’s market report section did not cite a source for the rumour.
Traders cited by the report said that Hammerson would be more likely to be acquired by the French shopping mall company Klepierre [EPA:LI] if Hammerson’s proposed takeover of Intu collapses.
Klépierre on 19 March announced that it was interested in acquiring Hammerson in a cash plus shares deal worth 615p per share. Hammerson rejected the proposal, describing the non-binding offer as 'wholly inadequate and entirely opportunistic'.
Hammerson’s share price closed 28.4p up at 570.0p in London on Wednesday, 21 March, giving the company a market capitalisation of GBP 4.52bn (EUR 5.17bn).




Retailers biggest UK fallers amid stronger pound
Kingfisher posts unexpectedly weak UK sales for both its B&Q and Screwfix chains


Retailers were the day’s biggest fallers after Kingfisher posted unexpectedly weak UK sales for both its B&Q and Screwfix chains.

Premier Inn owner Whitbread slipped after industry data from Morgan Stanley suggested UK occupancy rates declined last month.

Hammerson jumped after rumours that talks had stalled over its proposed merger with sector peer Intu Properties. According to traders, a collapse of the Intu deal could leave Hammerson more vulnerable to a formal bid from Klépierre, which has until April 16 to clarify its intentions after making a 615p a share approach at the start of March.

Softcat, the IT infrastructure provider, dropped from a record high after interim results triggered profit-taking. Credit Suisse cut Softcat to “neutral”, saying that at about 25 times 2019 earnings the stock had already priced in future growth.

ConvaTec, the medical products maker, climbed after RBC turned positive. History suggested management guidance could be beaten, yet the shares traded at a discount to peers, in spite of Convatec’s leading position in its markets and its strong cash generation, RBC said.

>>> What to look at today - 22nd of MArch 2018

The dollar maintained losses, Treasuries rose and Asian stocksfluctuated as traders assessed the implications of higher borrowing costs in the U.S. and China alongside global trade tensions, with President Donald Trumpset to announce tariffs against Asia’s largest economy on Thursday.
Japanese stocks rose as the yen came off the day’s highs. Korea pared early gains while Hong Kong and Chinese shares fell after China’s central bank alsolifted market interest rates. The greenback remained under pressure as the Fed didn’t suggest that it was leaning toward four rate hikes this year, as some had expected. The yen was the strongest of the Group-of-10 currencies and the ringgit led gains in Asia’s emerging-market currencies. The U.S. 10-year yield slid while yields on two-year U.S. Treasuries, which are more sensitive to changes in Fed policy than longer debt, extended its decline.

Nikkei +0.99% Hang Seng -0.59% CSI -1.01% Shanghai -0.53% Shenzen -0.49%

Eur$ 1.2366 CNH 6.3156 CNY 6.3189 JPY 105.81 GBP 1.4158 CHF 0.09480 RUB 56.88 WTI$ 65.11 -0.09%

S&P -0.15% EuroStoxx -0.42% FTSE -0.28% Dax -0.62% SMI -0.34%


Macro :
- Bank of England Seen on Hold, China Tightens, Tariffs: Eco Day

Keep an eye on :
- AIR FP : Pentagon Sees $655b in Deal That Boosts F-35s, Super Hornets
- ALFEN IPO : Alfen IPO Priced Below Initial Price Range at EU10/Shr
- ALM LN : Allied Minds Full Year Revenue $5.00 Mln
- BNP FP : Taiwan FSC Will Decide on Response After BNP Incident Report
- CA FP : Carrefour to Launch New E-Commerce Site By Year-End: Echos
- CWC GY : Cewe Sees 2018 Ebit Increase of Up to 10%
- ECONB BB : Econocom Group Names Robert Bouchard as CEO
- ENGI FP : Engie Eyes New Center in Singapore to Keep Cities Cool for Less
- GTO NA : Gemalto Set to Win Deal to Make Blue British Passport: Telegraph
- HEI GY : HeidelbergCement Expects to Significantly Improve Profit in 2018
- HLE GY : Hella Nine Month Adjusted Ebit Margin +8%
- HBH GY : Hornbach Holding Full Year Sales Match Estimates
- IBABA BB : Ion Beam Full Year Revenue Misses Lowest Estimate
- IIA AV : Starwood Capital Makes Offer for Stakes in CA Immo, Immofinanz
- KU2 GY : Kuka Expands China Presence With New Joint Ventures
- LAM LN : Lamprell Full Year Revenue $370.4 Mln
- MC FP : Zenith CEO Sees Up to 25% 2018 Sales Growth on China, Defy Model
- MDG1 GY : Medigene Sees Full Year Ebitda Loss EU21 Mln To EU23 Mln
- METN SW : Metall Zug Full Year Gross Sales Meet Estimates
- MBTN SW : Meyer Burger Full Year Sales 1.7% Above Estimates
- MS U : *MORGAN STANLEY IS SAID TO MULL ADDING 80 STAFF IN PARIS: ECHOS
- NEXT NO : Next Biometrics Offering Prices NOK120m Shares at NOK42/Share
- OTE1V FH : Outotec Holder Tamares to Offer 10.2m Shares via Deutsche Bank
- PHM SM : Pharma Mar: CHMP Confirms Denial of Aplidin Marketing Request
- RB/ LN : Reckitt Ends Talks for Pfizer’s Consumer Health Business
- SVA PL : SAG Shareholders to Vote on Loss of Public Company Status
- TED LN : Ted Baker Full Year Revenue Meets Estimates
- TIT IM : Paul Singer Held 5.74% in Telecom Italia as of March 15: Consob
- TRI FP : Trigano 2Q Sales Jump 42%; Co. Sees 1H Profit ‘Substantially’ Up
- UCB BB : FDA Approves Label Update for UCB’s Cimzia in U.S.
- SENSIRION IPO : Sensirion Prices IPO at CHF 36 Per Share
- UHR SW : Swatch’s Omega Gained Market Share in 2017, Chief Tells L’Agefi
- VOW3 GY : Bosch Ordered by German Court to Disclose VW Diesel Files: HB
- MF FP : Wendel Posts FY Profit; Co. Sees Large Investments Ahead
- ZO1 GY : Zooplus Full Year Pretax Profit EU4.1 Mln

>>> Europe : Brokers Upgrades & Downgrades - 22nd of March 2018

>>> Up
* Aixtron Upgraded to Hold at DZ Bank; PT 16.80 Euros
* ERG Upgraded to Reduce at AlphaValue
* Esure Upgraded to Neutral at JPMorgan
* General Mills Upgraded to Hold at SocGen; Price Target $48
* Glaxo Upgraded to Equal-weight at Morgan Stanley; PT 14 Pounds
* Hastings Upgraded to Overweight at JPMorgan
* Reckitt Benckiser Upgraded to Buy at SocGen; PT 65 Pounds
* SKF Upgraded to Hold at Berenberg
* Wacker Chemie Upgraded to Overweight at JPMorgan

>>> Down
* Commerzbank Cut to Reduce at Kepler Cheuvreux; PT 11 Euros
* Kambi Group Cut to Hold at SEB Equities; Price Target 115 Kronor
* Schoeller-Bleckmann Cut to Reduce at Kepler Cheuvreux
* Suez Downgraded to Underperform at RBC; PT 11 Euros

>>> Initiation
* MercadoLibre Reinstated Underweight at Morgan Stanley; PT $330
* NOS Reinstated at Goldman With Neutral; PT 5.50 Euros
* Puma SE Reinstated at DZ Bank With Hold; PT 450 Euros
* Sweco Rated New Hold at Kepler Cheuvreux; PT 190 Kronor

>>> Call

>>> US After Hours Summary: MLHR -3.2% following earnings/guidance, MG


After Hours Summary: MLHR -3.2% following earnings/guidance, MGPI +4.5% / TRHC +3.7% joining the S&P SmallCap 600

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: ALTR +1.7% (light volume), FIVE +0.3%

Companies trading higher in after hours in reaction to news: TTNP +21.5% (executes agreement for acquisition by Molteni of Probuphine in Europe and other select territories), GERN +10.8% / TEUM +1.5% (continued strength), TELL +5.3% (Bechtel has made a $50 million zero coupon preferred equity investment in Tellurian which has an implied Tellurian common share price of $8.16 per share), MGPI +4.5% and TRHC +3.7% (ticking higher; to join S&P SmallCap 600), CTL +2.8% / FEYE +1.2% (still checking), MIK +2.6% (ahead of earnings tomorrow before the open)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: MLHR -3.2%

Companies trading lower in after hours in reaction to news: RESN -9.7% (to sell shares of its common stock in an underwritten public offering), PLUG -4.6% (announces private offering of $100 mln of convertible senior notes), GAIA -1.9% (launches offering of shares of its Class A common stock), CRON -1.3% (to sell 10.42 mln common shares on 'bought deal' basis at $9.60 per share for gross proceeds of approx $100.0 mln), NYCB -1.1% (initiated with Sell ratings at UBS), AVEO -1% (announces the publication of long-term follow-up results from Study 902, where patients were treated with tivozanib FOTIVDA as second-line treatment in advanced renal cell carcinoma)

>>> Asian Update

Asia Market Update: Asian equities pare gains amid focus on rates and earnings; Nikkei rises after recent holiday

***Headlines/Economic Data***
General Trend:
-Tencent declines after Q4/FY17 results; some analysts issue cautious commentary
-China Mobile FY17 earnings beat ests, Revs below
-Japan Exchange raises FY guidance on higher forecast for daily trading value and volumes
-USD trades generally weaker in aftermath of Fed amid focus on 2018 rate path
-Reserve Bank of New Zealand (RBNZ) does not mention currency in statement
-China and Hong Kong raise rates after US Fed
-Hong Kong reiterates currency peg to US dollar
-Short-term rates move higher in Australia and Hong Kong
-Aussie employment rises for 17th straight month in Feb, misses estimates; Unemployment rate rises as participation hits highest since Dec 2010
-US budget situation again in focus

Australia/New Zealand
-ASX 200 opened -0.4%; closed -0.2%
-ASX 200 Telecom Index -1.7%, Utilities -1.2%, REIT -1%, Financials -0.4%; Resources +1.9%, Energy +1.4%
-(AU) AUSTRALIA FEB EMPLOYMENT CHANGE: 17.5K V 20.0KE; UNEMPLOYMENT RATE: 5.6% V 5.5%E
-(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%, AS EXPECTED

China/Hong Kong
-Shanghai Composite opened flat, Hang Seng +0.5%
-Hang Seng Information Tech Index -2.9%, Services -1.2%, Consumer Goods -0.7%, Property/Construction -0.6%, Financials -0.5%; Energy +0.8%
-Shanghai Composite Property index declines over 1%
-Sportswear company Li Ning [2331.HK] rises over 3% after earnings report
-(CN) PBOC RAISES RATE ON 7-DAY REVERSE REPO BY 5BPS TO 2.55% FROM 2.50% (tracks Wed's 25bps rate hike by US Fed, as speculated)
-(HK) Hong Kong Monetary Authority (HKMA) raises base rate by 25bps to 2.0% (tracks Fed, as expected)
-(CN) China said to increase the net profit requirement for IPO applications - Chinese Press
-(CN) China Dalian City said to begin home purchase restrictions – US financial press
-(US) Follow Up: White House: President Trump to sign memo on China trade at 12:30 PM EST on Thursday [**Reminder: Earlier on Wednesday, White House spokesperson Shah confirmed that Trump would announce trade actions on China intellectual property on Thursday]
-(CN) China said to name Guo Shuqing (current CBRC Chairman) as head of new regulator for banking and insurance sectors
-(CN) China PBoC sets yuan reference rate at 6.3167 v 6.3396 prior
-(HK) Hong Kong Monetary Authority (HKMA) Chan: HKD will 'very soon' hit lower end of trading band at 7.85; to buy HKD when currency touches weak end of trading band (HK$7.75-7.85)
-(CN) Moody's: US tariffs have limited impact on China so far, but broad-ranging measures would pose greater challenges

Japan
-Nikkei 225 opened -0.1% (closed prior session for holiday); closed +1%
-TOPIX Electric Appliances Index +0.9%, Real Estate +0.6%; Securities -0.4%, Iron/Steel -0.3%
-(JP) Japan 3-month basis swap rate rises to highest since 2014
-(JP) Japan MAR Preliminary PMI Manufacturing: 53.2 v 54.1 prior (slows for 2nd straight month)
-(JP) Japan Jan All Industry Activity Index M/M: -1.8% v -1.8%e
Looking Ahead: Japan Feb National CPI due for release on Friday
-(JP) New BoJ Dep Gov Wakatabe to appear in parliament at 5:14 PM local time on Thursday (4:14 AM EST)

Korea
-Kospi opened +0.4%
-(KR) South Korea President Moon said to propose lowering the voting age by 1 year to 18, proposed two 4-year presidential terms vs one 5-year term currently; The proposals are part of the constitutional amendment bill. - US financial press
-(KR) Bank of Korea Gov Lee: Sees little market impact from Fed interest rate hike; Don't see capital outflow on rate gap in recent moves
-(KR) Hana Financial says Bank of Korea (BoK) may raise rates in May and H2 2018 – US financial press

North America
-US equity markets ended mostly lower: Dow -0.2%, S&P500 -0.2%, Nasdaq -0.3%, Russell 2000 +0.6%
-S&P500 Consumer Staples -1.2%; Energy +2.6%
-(US) DOE CRUDE: -2.6M V +2.5ME;
-(US) US House and Senate leaders said to agree on $1.3T omnibus spending bill; Republicans said to expect vote during Thursday afternoon - financial press
-(US) The House Republican Freedom Caucus said that it is opposed to the spending measure.
-(US) FOMC RAISES TARGET RATE RANGE 25BPS TO 1.50-1.75% (AS EXPECTED); Affirms Median forecast for end-2018 rate 2.125% (prior 2.125%)

Summary of Comments from Fed Chair Powell’s Post Rate Decision Press Conference
-Overall financial conditions remain accommodative
-Trying to take middle ground on rate hikes, consisting of further gradual rate hikes as long as economy remains on path
- Rate path could become more or less gradual depending on how economy is doing
-Cannot give exact number on how far they might allow inflation to rise above 2% target but goal is keeping around 2% level;
-No sense in data that we are on the cusp of an inflation acceleration
-There's no thought that changes in trade policy should have any effect on current outlook;Trade policy has become a concern for businesses

Europe
-(EU) US Commerce Dept: EU and US have agreed to begin discussion on trade issues; Talks will include discussions of steel and aluminum - joint statement with EU's Malmstrom
-(EU) EU Council Pres Tusk: economy continues to grow above expectations; Cautiously optimistic about receiving exemption from US aluminum/steel tariffs
-(GE) Germany Finance Ministry Monthly Report: Feb Tax Rev +8.1% y/y; Indicators suggest German economic growth slowed at start of 2018
-(ES) Catalan Parliament expected to meet tomorrow and nominate Turull as the new President – press
Looking Ahead: Bank of England (BoE) rate decision due later today


***Levels as of 01:00ET***
- Hang Seng -0.5%; Shanghai Composite -0.6%; Kospi +0.5%
- Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax +0.1%; FTSE100 flat
- EUR 1.2337-1.2370 ; JPY 105.57-106.10; AUD 0.7736-0.7787 ;NZD 0.7222-0.7246
- Feb Gold +0.6% at $1,329/oz; Feb Crude Oil +0.1% at $65.25/brl; Mar Copper -0.1% at $3.076/lb