From: elaumann@oscargruss.com At: 11/27/17 14:33:17
To: elaumann@oscargruss.com, lanreder@oscargruss.comSubject: TIME-MDP Initial Deal View 11-27-18
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Gapping down
In reaction to disappointing earnings/guidance:
In reaction to disappointing earnings/guidance:
- N/A.
Other news:
- SRAX -6.9% (continued volatility in pre-mkt (closed 11% higher on Wednesday))
- XNET -5.1% (continued volatility in pre-mkt - crypto play)
- AKER -5% (files Form S-1 Registration Statement)
- MU -2.8% (may be in sympathy with WDC downgrade)
- MICT -2.1% (disclosed entry into Securities Purchase Agreement at $0.90, provides update on spin-off of Enertec Systems )
- AMAT -1.4% (may be in sympathy with WDC downgrade)
Analyst comments:
- SQ -4.1% (downgraded to Sell from Neutral at BTIG Research; tgt $30 (closed at 48.86 on Friday))
- SEDG -3.7% (downgraded to Hold from Buy at Deutsche Bank)
- WDC -3.5% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- HIMX -3.5% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- KIM -1.1% (downgraded to Neutral from Outperform at Robert W. Baird)
Gapping up
In reaction to strong earnings/guidance:
In reaction to strong earnings/guidance:
- TOUR +1.8%
M&A news:
- MGCD +24.4% (Altus will acquire all outstanding shares of MGCD for $11.03/share in cash)
- TIME +8.9% (to be acquired by Meredith Corp (MDP) for $18.50 per share), MDP +4.8%
- CLNE +3.3% (Clean Energy Fuels and and Landi Renzo 'are combining their compressor manufacturing subsidiaries to form a new standalone company'), .
Other news:
- SSC +43% (cont strength, closed 26% higher on Friday, trading higher with Bitcoin nearling $10,000)
- MARA +29.4% (Cryptocurrency play MARA extends this week's break out to multi-month high)
- CPRX +8% (reports 'positive' top-line results from a second Phase 3 clinical trial (LMS-003) of Firdapse)
- RYB +6.6% (provides update: Police report indicates one teacher was detained for maltreatment of students; another fabricated info about child abuse)
- UEPS +5.1% (continued stre ngth, +20.5% last week)
- MDGS +3% (modestly rebounding following Friday's offering)
- DRYS +2.8% (continued volatility in pre-mkt)
- ALKS +2.4% (Alkermes and Biogen (BIIB) enter a global license and collaboration agreement to develop and commercialize ALKS 8700)
- SHOP +1.7% (reports Black Friday sales exceeded $1 mln per minute at peak time)
Analyst comments:
- ARWR +4.6% (upgraded to Overweight from Neutral at Piper Jaffray)
- ROKU +4.1% (target raised to $50 at Needham)
- SPRO +3.9% (initiated with a Buy at Stifel; tgt $26 (closed at 13.86 on Friday))
- CIEN +3.3% (upgraded to Buy from Neutral at BofA/Merrill)
- GSK +2.4% (upgraded to Buy from Neutral at UBS)
- FNKO +2% (initiated with a Buy at Goldman; initiated with a Overweight at JP Morgan)
- SBS +1.3% (upgraded to Overweight from Neutral at JP Morgan)
- NGG +1.1% (upgraded to Neutral from Underperform at Credit Suisse)
Early premarket gappers
Gapping up:
- SSC +41.7%, MARA +41.2%, MGCD +24.4%, NETE +20.6%, GROW +14.1%, LMFA +13%, TIME +9.1%, BNTC +8.7%, CPRX +8%, SGRP +6.1%, UEPS +5.1%, ARWR +4.6%, ROKU +3.9%, MDGS +3.6%, CLNE +3.3%, CAMT +2.8%, DRYS +2.8%, TRPX +2.2%, TOUR +1.4%
Gapping down:
- SRAX -12.2%, OMER -8.1%, SEDG -4.4%, MICT -4.3%, XNET -4%, WDC -3.8%, EGLT -2.7%, MU -2.6%, REGN -2.6%, IPDN -2.5%, NVMI -1.8%, AMAT -1.1%, BIDU -0.9%, OSTK -0.7%
Top 10 FX Trades
Large household balance sheets and poor asset quality suggest G10 currencies except EUR, JPY and USD will come under selling pressure. Moderate Fed rate hikes may not threaten the currencies of EM economies with strong balance
sheets and high real yields, but may unleash deleveraging pressures on economies which we call ‘FX canaries’. JPY and EUR have upside potential as policy normalization comes closer. Both currencies are internationally underowned.
USD may stay directionless for most of 2018 before heading lower for years to come.
1) Long USD/CAD
Widening interest rate differentials and debt worries in Canada.
2) Long EUR/NOK
Evolving away from selling oil to the world, and moderating housing market.
3) Short CHF/JPY
An accommodative SNB and widening inflation differentials with Japan.
4) Short USD/JPY
BoJ shifting its yield curve control and Japanese repatriation.
5) Long EUR vs. AUD, NZD basket
High leverage and weakening housing markets vs. strong growth in EMU.
6) Long CLP/MXN
Mexican election and NAFTA uncertainty are likely to weigh on MXN.
7) Long PLN/HUF
Monetary policy divergence plus growth dynamics suggest PLN outperformance.
8) Short USD/MYR
Pick-up in growth, cheap valuations, higher oil prices and policy normalization.
9) Short AUD vs. KRW, TWD basket
Policy divergence and strong exports helping TWD and KRW.
10) Long IDR/PHP
IDR valuation and carry is attractive. PHP stays weak, given its twin deficit.
The best analogy for our view on 2018 is that risk assets are like a highly skilled
but still relatively inexperienced tightrope walker. Our tightrope walker started his
career immediately after the GFC and earned his apprenticeship in very difficult
conditions with lots of crosswinds but with the knowledge that a huge safety net
existed beneath him. This allowed him to walk across the narrow line with slow
but ever increasing confidence, skill and aplomb. In our analogy the safety net
is the central bank put that has continued to help financial markets’ confidence
over the last several years in spite of very challenging conditions.
However in 2018 our tightrope walker will have to move onto the next phase
of his career where the structural support of the safety net will likely be slowly
weakened. Every time he looks down he’ll figuratively see a central banker loosen
or take away a supporting rope. As such his skills and confidence are likely to be
tested more than in recent years.
Figure 1 shows the rolling 12 month central bank balance sheet size from the big
four DM central banks over the last few years and likely path over the next two.
Assuming fairly neutral and consensus assumptions, central bank balance sheet
growth will fall sharply over the next 12-24 months from the near peak levels
currently seen. Meanwhile we think the risks to inflation are on the upside.
A combination of the two will likely mean that crosswinds pick up as we move
through Q2 and into H2 – a period where US inflation might start to more
consistently beat on the upside (or at least not consistently miss on the downside)
and markets start to think about a June ECB meeting where the end of Euro QE
is possibly announced.
If we’re correct on inflation it’s going to be difficult for central bankers to justify
anything other than the slow and steady removal of the safety net beneath our
intrepid tightrope walker. As such his task will get more difficult purely because
his confidence must surely weaken with more risks associated with any fall. As
such he’s likely to wobble more. So expect volatility to finally start to increase
after surprising many by staying as low for as long as it has done. At this stage the
tightrope walker may have enough skill to safely navigate across to the next point
(end 2018), however the probabilities of such a successful outcome are likely to
be getting lower as the year progresses.
Fortunately growth starts the year on a firm footing and unless there is an external
shock or the steady central bank withdrawal and/or inflation creates a bigger
volatility shock than expected, then the economy will likely ensure that credit
fundamentals remain relatively resilient and the spread widening manageable.
In the near-term we actually think spreads could tighten as crosswinds look light
in Q1 and the recent widening entices investors back into credit. Q1 will likely also
see evidence that CSPP hasn’t been tapered much relative to PSPP. As such this
could mark a fresh round of optimism about the technicals in European credit.
However Q1 might mark the best point of the credit cycle. Things may start to
become more challenging from this point as we leave the perfect scenario of noninflationary
growth and high central bank support behind us. We’ll also likely start
to see markets price in the end to the various ECB programs as Q2 progresses.
Risks
The biggest risks to our view on the positive side is that inflation stays slightly
below expectations and the carry trade continues all year.
The biggest realistic risks on the downside are that the US yield curve flattens
considerably perhaps through a perceived Fed policy error or that China’s
slowdown starts to percolate through to global growth. We go through this in a
bit more detail later in the piece.
Spread forecasts
IG and HY Summary Views
IG highlights
■ Corporate fundamentals remain resilient.
■ Leverage of BBBs has been flat and has only picked up among
higher-rated issuers.
■ Low-rate environment has kept interest coverage elevated across
the board.
■ Rating trends have turned positive.
■ We expect IG technicals to become more challenging in 2018 as the ECB
QE ebbs away. The key question will be timing.
■ Initially, expect carry trades to go on.
■ By next QE decision (June?) and perhaps with more signs of inflation
by then, expect some more volatility and wider spreads.
■ However, negative interest rates in the eurozone will continue to
make IG relatively attractive.
■ For now, we keep carry on, incl. high-beta such as subs/AT1s
■ Prefer CSPP-ineligible bonds over eligibles
■ Ineligibles underperformed recently, expect them to outperform
during the taper.
■ Ineligibles are higher-beta, should perform relatively well during
carry.
■ We would start to gradually reduce credit risk and duration during Q2.
■ Risks are on both sides; we clearly acknowledge that our view means
walking a tightrope.
HY highlights
■ Despite stretched valuations spreads should remain supported through
Q1 but wider by the end of the year as inflation, yields and volatility rise.
■ Marginally negative total returns in the coming year (-0.3%), although
we could see a total return of around +1-1.5% through the first quarter.
■ Fundamentals remain healthy while rating trends have improved. Default
rate to remain low consistent with recent ranges (1-2%).
■ Net issuance may rise on the back growth led investment spending and
M&A, providing a potential headwind to the technicals.
■ But a net flow of rising stars over fallen angels may balance against this
somewhat.
■ After the recent sell-off EUR Bs offer relative value over EUR BBs.
■ Loans to outperform bonds as credit spreads widen, possibly from Q2.
TechnipFMC could consider sale of onshore/offshore operations – report (translated)
TechnipFMC [EPA:FTI] [NYSE:FTI], the listed French-US specialist in subsea, onshore/offshore, and surface projects, is understood to be willing to consider a potential sale of its onshore/offshore division, French daily Les Echos reported. The report referred to information from newsletter “La Lettre A” claiming that the board of TechnipFMC could examine the option during its next meeting scheduled in December.
According to the report, the onshore/offshore division represents the core operations of Technip before the merger with FMC, 15,000-16,000 employees, and about 50% if the total revenues of the TechnipFMC group. The report cited insider sources as saying that the potential sale, which could be viewed as a spin off, would not be “that surprising” since the onshore/offshore division has few synergies with the other activities of the group and is focused on managing infrastructure projects.
TechnipFMC expects 2017 revenues of more than EUR 7.3bn for its onshore/offshore division, with an EBITDA margin of more than 8%. The French government indirectly owns 6.5% of TechnipFMC, the report noted.
Swiss regulator rules HNA provided false ownership information in Gategroup takeover
The Swiss Takeover Board (STB) has ruled that HNA Group, the Chinese conglomerate, provided false information regarding its ownership structure for the takeover of Swiss air services company Gategroup.
The STB issued a ruling on 22 November stating there are considerable discrepancies in the ownership structure, namely failing to disclose stakes held by co-founders Bharat Bhise and Guan Jun, disclosed in its offer prospect of 20 May 2016, and the HNA press release of 24 July.
The regulator has asked Ernst & Young AG to look into whether the controlling group (Chen Feng, Wang Jian, Tan Xiangdong, Li Xianhua, Li Qing and Chen Wenli) and Bharat Bhise and Jun Guanhas complied with minimum price rules and best price regulations.
The fee payable by HNA Aviation (Hong Kong) Air Catering Holding Co., Ltd. and HNA Group Co., Ltd. for the proceeding is CHF 50,000.
Swiss daily Der Bund reported the ruling in its 27 November edition stating HNA disclosed it cooperated fully with the Swiss board’s inquiry, and it respects its authority in this matter.