TheChek News Flow

Post-investor meetings with Kering management, we come away with more confidence.

We see current strategies and trends at Kering offering stand-out resilience in a

deteriorating operating environment. We are also optimistic about a near-term Puma

exit, which could be a catalyst for further re-rating. Based on our revised EPS and

updated SOTP valuation, our new TP is €375 (was €340). Kering remains our top pick

and is part of Citi’s Focus List Europe. Shares have strongly outperformed the luxury

sector YTD (+54% vs. sector +25%), following significant outperformance in 2016

(+35% vs. +13%) reflecting industry-beating growth at Gucci and Saint-Laurent, and

optionality at Puma (disposal) and Bottega Veneta (restructuring). The shares continue

to look attractively valued to us, trading on a ~19x 2018E P/E, a ~10% discount to the

sector. We forecast 2017-19E Luxury sales and EBIT CAGRs of 11% and 18%

respectively and ~430bp cumulative Luxury EBIT margin expansion.

Buy | Target price €375.00

HERE / HERE welcomes Pioneer as new shareholder; HERE to invest in Pioneer . Processed and transmitted by Nasdaq Corporate Solutions. The issuer is solely responsible for the content of this announcement.

EUROPEAN APPAREL PRICING: Our September pricing work shows that entry level apparel pricing for Autumn/Winter (A/W) in the UK and Euro zone has started to increase. This is not being reflected in premium prices which continue to fall, so range architecture continues to narrow. However coupled with better weather, soft comps and the prospect of cheaper US$ buying, there is some better news for apparel retailers, which is in part reflected in our double upgrade of H&M last week. We remain structurally cautious of apparel but see some tactical opportunities: Inditex (UP, TP EUR25.00), H&M (OP, TP SKR240.00) and ABF's (OP, TP CBp3600.00).
FULL NOTE

■ Inditex (UP TP EUR25) – Zara A/W prices are largely flat Y/Y, but regional premiums continue to decline. Having been very price aggressive for the past two years Inditex's Euro-centric supply chain is now looking quite disadvantageous, geographic mix is negative and we do not believe that current valuations (29x 12m FWD PER) are sustainable give the likelihood of further margin declines. Please see our recent report 'Inditex – More pressure on margins'. 

■ H&M (OP TP SKr240) – Last week's double upgrade (see our report 'H&M: End of the downgrade cycle') was based on a 175bp recovery in 2018 gross margins as markdown normalises and US$ sourcing costs feed through. Inventory clearance comments in the 3Q IMS were encouraging. Entry price points look much firmer for AW 17 across the range. 

■ ABF's (OP TP 3,600p) Primark should be a key beneficiary of the return of entry level pricing power, particularly given the recent strength of demand in the UK (2H LFL c6%), Spain and Ireland.

US market closed higher, settling new revotds. in total, six sectors finished Monday's session in the green--financials (+1.0%), industrials (+0.6%), materials (+0.6%), telecom services (+0.5%), Energy (+0.4%), and consumer staples (unch)--while five settled in the red--technology (unch), health care (-0.1%), consumer discretionary (-0.4%), real estate (-0.5%), and utilities (-1.0%). Big tech names saw some profit taking and semi traded higher on ML call on NVDA. Aerospace & Defense trade higher on Northrop Grumnan after news of acquisition of Orbital ATK ($7.8nil deal, ie $134.5 per share in cash, $9.2bil including debt). US After Hours SCS +7% following earnings, SINA +1% on shareholder Board nominations / evaluation of options. Asian Market opened broadly stronger, with a 3rd consecutive day of gains, again tracking US markets. Hong Kong shares fell for the first time in 3 days, weighed down by Chinese developers. China’s MSCI Index fell 0.4% after closing at the highest level since January 1st, 2008. The HK$ surged 0.16% against the USD to 7.8045; which prompted the HKMA to add HK$40B in additional exchange fund bills to meet demand from banks. USD was broadly weaker against G7 currencies ahead of Fed meeting, where it is expected they will announce details on a balance sheet wind down.

Nikkei +1.96% Hang Seng -0.07% CSI -0.12% Shanghai -0.10% Shnzen -0.06%

Eur$ 1.1980 CNH 6.5914 CNY 6.5920 JPY 111.81 GBP 1.3535 CHF 0.9610 RUB 57.9757 WTI$ 50.31 -0.08%

S&P +0.02% EuroStoxx -0.06% FTSE -0.04% Dax +0.02% SMI +0.18%

Macro :

- Maria to Remain Category 4 or 5 Hurricane, NHC Reports

- China Cuts Dumping Duty Rate to 5.5% for Koninklijke Nedschroef

- Schaeuble Backs Tax Relief for Middle Classes: Boersen-Zeitung

Keep an eye on :

- AB1 GY : IAG Is Said to Be Among Bidders for Air Berlin: Reuters

- ALV GY : Allianz German Head Knof About to Leave for Health Reasons

- ATC NA : ESPN Said to Push College Channels on Altice in New Fee Talks

- ALIV SS : Autoliv’s CEO Main Candidate for Ericsson Chairman Post, DI Says

- BAS GY : Solvay to Sell Polyamides to BASF for EU1.6b

- BAYN GY : Shire’s Baxalta Sues Bayer to Block Hemophilia Drug

- BEFB BB : Befimmo to Use Reserves to Maintain Payout Amid EU450m Projects

- BLT LN : BHP Says Reviewing Ties With Industry Groups Over Climate Stance

- DBK GY : Deutsche Bank Transactional Unit Building AI: Boersen-Zeitung

- EDF FP : EDF Issues French Strike Notice for 24 Hours From Sept. 20: RTE

- ERF FP : Eurofins Agrees to Buy EAG Laboratories For $780 Million

- GEN DC : Genmab Sees Key Cancer Drug on Market Well Before 2025: Borsen

- HEIA NA : Heineken Holder Femsa to Sell up to EU2.5b of Shares

- NK FP : Natixis Names Namias as CFO; Debray as Chief Risk Officer

- SHP LN : Shire’s Baxalta Sues Bayer to Block Hemophilia Drug

- SGRE SM : Siemens Gamesa to Deliver D8 Turbine to 2 Projects Off France

- SOLB BB : Solvay Repeats FY Forecast After Sale of Polyamide Business, Solvay to Sell Polyamides to BASF for EU1.6b

- TELIA SS : Telia to Sell About 7% Turkcell Stake

- TIT IM : Telecom Italia Repeats No Plan to Spin Off or Sell Network

- TUI GY : Tuifly Needs to Cut EU30 Mln in Costs: Hannoversche Allgemeine