TheChek News Flow

Ferrari Bets Racetrack Wins Will Lead to Showroom Sales

As Italian company prepares to launch new model, it counts on costly Formula One sponsorship to help lure buyers

MILAN—In the world of elite sports car manufacturing, it is an article of faith that victory on the racetrack translates into sales in the showroom. “Win on Sunday, sell on Monday,” goes the old saw.

So for Italian sports car maker Ferrari NV, the end of a decadeslong losing streak on Formula One racetracks is a great relief, more so as it comes just when the company—the biggest spender on Formula One racing—is stretching its brand by removing a longstanding ceiling on the number of cars it sells and expanding into other products.

All that provides a backdrop for Tuesday’s unveiling of the Portofino model at Germany’s Frankfurt auto show. Like its predecessors, Ferrari’s newest road car will benefit from technology developed for the racetrack.

That technology, which includes new metal alloys for the frame, engine and bodies, and steering wheels decked out with all the controls including the gear shifter, trickles down from the handful of race cars made annually to limited-edition road models costing more than $1 million. It then makes its way into higher-volume Ferraris like the Portofino, which is expected to start at about $225,000.

After failing to win a Formula One racing title for almost a decade and closing out the 2016 season without a single victory, Ferrari’s Sebastian Vettel has won four of this year’s 13 races and is close on the tail of Mercedes’ Lewis Hamilton with seven races to go, including the U.S. Grand Prix on Oct. 22 in Austin.

Ferrari is expected to battle Mercedes for the win in the next Formula One stop in Singapore this weekend.

Ferrari Chief Executive Sergio Marchionne, who also is CEO of Fiat Chrysler Automobiles NV, has called winning in Formula One “nonnegotiable,” reflecting the belief that victory on the racetrack is critical in luring weekend enthusiasts to shell out huge amounts for the road cars.

Ferrari’s financial success over the past 15 years has “been achieved on the back of Formula One,” the CEO said in March, adding that the company couldn’t afford many more losing seasons without suffering financially.

But there is little empirical evidence that winning races translates into increased sales. AllianceBernstein, a wealth manager, argues Ferrari doesn’t need Formula One.

“There can’t be a soul on earth who doesn’t know that Ferrari makes fast red cars, with excellent technology and that it has a motor sport heritage,” AllianceBernstein wrote in a report last month, adding that Lamborghini, Porsche and other high-end brands have no trouble selling cars despite being absent from Formula One for many years.

Mr. Marchionne, who personally owns more than 10 Ferraris and follows most races from inside the paddock, berates his team when it loses. The CEO’s impatience with losing stems in part from the huge investment Ferrari is believed to sink into Formula One racing each year, which some outsiders estimate at hundreds of millions of dollars.

Defying hopes that after its 2015 stock market listing Ferrari would begin disclosing how much it spends, and loses, on racing, the company still reveals virtually nothing. However, in late July, Mr. Marchionne dropped a hint, telling analysts the company has lost money on its Formula One team every year for close to a decade.

The bonuses Ferrari has paid out to teams during winning seasons can compound the losses over time, he said, a price the CEO is willing to pay given “the huge repercussions on the quality of the brand” when they win. “I don’t mind going slightly negative” in the racing business, added Mr. Marchionne.

Investment bank Jefferies estimates Ferrari’s racing team generated €420 million ($502 million) in revenue last year while booking an operating loss of €100 million. AllianceBernstein, says Ferrari mostly racks up losses, though “may break even or even squeak a profit” in a good year.

Ferrari generates racing revenue through sponsorships—including all those ads plastered on the race cars—and payouts from the company that organizes the races. Ferrari’s quarterly revenue breakdown includes a line titled “sponsorship, commercial and brand” that includes Formula One, but is also thought to encompass licensing and other items.

The Mercedes racing team, winner of the last three seasons and the current leader, is more forthcoming, disclosing that the team lost £22.3 million ($29.4 million) in 2015. The loss narrowed to about £5 million last year and Mercedes, a unit of Daimler AG of Germany, expects the racing team to break even soon.

While Ferrari doesn’t reveal its estimates for the financial and promotional benefits it derives from Formula One, Mercedes said that in 2016 it got the equivalent of $3 billion in advertising value from the team.

Ferrari’s recent return to its winning ways and the positive aura that produces is especially important as Mr. Marchionne stretches the brand.

For years, the company limited its sales to no more than 7,000 cars annually to stoke demand. Now, Mr. Marchionne plans to raise that limit to 10,000 in the coming years, while also moving Ferrari into new areas such as home furnishings and technology products.

A hot brand would help protect Ferrari from losing its desirability amid the expansion. Ferrari’s stock has risen by more than 50% since the team won the first race of the Formula One season in March and has more than doubled since its IPO on the back of investor enthusiasm for the company’s expansion plans.

What Apple’s iPhone Launch Could Mean for Its Suppliers

History shows suppliers’ shares outperform in the months ahead of a launch and underperform after

It’s the $1 trillion question in markets: Will Apple ’s AAPL 1.81% latest iPhone, due to be unveiled later Tuesday, be another hit? No matter the answer, investors might be wise to cool their bets on some of the U.S. tech giant’s Asian suppliers: History suggests they don’t do so well once the razzmatazz has passed.

On average, iPhone suppliers have outperformed the market by 7.2% in the six months before a launch, only to underperform by 3.9% in the three months after, according to brokerage firm Bernstein.

Prelaunch excitement has certainly fueled the likes of Hong Kong-listed AAC Technologies , an iPhone-speaker supplier whose share price is up 46% in the past three months—even though analysts over that period have raised their earnings estimates for next year by only 9%, according to S&P Global Market Intelligence. Around half of AAC’s revenue comes from Apple, according to Bernstein. The shares of Taiwan-listed lens maker Largan and Shenzhen-listed microphone supplier Goertek , both with AAC-levels of exposure to Apple, have also run significantly ahead of earnings expectations recently

A better iPhone bet may be component makers that take a smaller bite from Apple, but are riding the latest trends in smartphones. Take Sony , a supplier of iPhone image sensors: It gets less than 5% of its revenue from Apple, but should benefit from the continuing shift toward dual lenses in smartphone cameras.

Similarly, Samsung Electronics , a leader in both memory chips and display, should benefit as smartphones add more memory and sharper screens. Almost the sole supplier of screens using a technology called organic light-emitting diodes, Samsung is in a strong position.

As the hype around Apple’s latest iPhone liftoff builds, investors should keep one eye on the likely winners and losers in its aftermath.

Citigroup is expecting a significant drop-off in trading this quarter, as investors put off buying and selling amid a lengthy stretch of calm on Wall Street.

Trading revenue is expected to decline about 15 percent for the three months ending in September compared to last year, John Gerspach, Citigroup’s chief financial officer, said during an industry conference on Monday.

Volatility “has remained somewhat subdued throughout this quarter,” he said, according to CNBC.

Trading levels last year were heightened after Brexit, which occurred in late June, and ahead of the election, he added.

Some insiders speculated that Gerspach’s comments might be part of the quarterly cat-and-mouse game where Wall Street executives lower analyst expectations, then deliver better than expected results and see a surge in the stock price.

Banks start releasing their third quarter results in October.

That 15 percent slide would mean a drop of $610 million to about $3.5 billion, according to regulatory filings.

Who knew discount avocados could draw such a crowd?

Foot traffic at Whole Foods stores spiked by more than 25 percent over two days last week — one week after Amazon.com completed its acquisition of the grocer and cut prices on some item as much as 43 percent.

The price of organic bananas was cut to 69 cents a pound from 99 cents, organic brown eggs were cut to $3.99 from $4.29 and organic avocados were discounted to $1.99 each from $2.79.

The spike in traffic was tracked by Foursquare Labs, which compared shoppers’ mobile whereabouts.

Online sales also soared last week when shoppers were able to purchase more than 2,000 Whole Foods items on Amazon.com, according to One

Click Retail, which found that Amazon sold $500,000 worth of products via its Prime Pantry and Amazon Fresh venues.

Top selling items were water, turkey breast lunch meat, frozen berries, canned beans, coconut water and tomato paste, some of which sold out entirely.

“There will be an increase in irrational exuberance leading to higher store traffic and sales initially,” said retail consultant Burt Flickinger, managing director of Strategic Resource Group. “But Whole Foods’ prices are still in the highest stratosphere.”

Flickinger estimates that Whole Foods prices are between 25 percent and 35 percent more expensive than many of its competitors’ and that it will take Amazon a decade to bring them down to a competitive level.

To be sure, the Amazon price cuts affected some 50 items out of 15,000 carried by a typical Whole Foods store.

“Whole Foods dropped the prices on less than 1 percent of its offerings, but at the same time competitors [like Target] have lowered prices in response,” Flickinger said. “We are entering a food price war of unprecedented proportions.”

BAML:
AA - Confirms had prelim discussions with Hastings in early summer (174).+5-10%

JD SPORTS - Positive outlook, expect yr end results to be at upper end (360)+5%

PREMIER OIL - Selling entire Wytch Farm interests for $200m v $142m val (60)+5%

ASHTEAD - EBITDA up 18% v cons of £425m. AHT US rental revs up 17% (1700)...+1%

CAPGEMINI - Group reits targets for '17 ahead of its capital mkts day (97)..+1%

CRED AG - Kingdom to buy $1.54b Saudi Fransi stake from Credit Ag (15.1)..+0.5%

TELENET - The CEO John Porter has sold EU 0.28m of telenet stock (56.44)....u/c

UCB - Amgen/UCB data shows 48% cut in spine fracture risk thru 24 Mos (59)..u/c

HASTINGS - AA confirming is had prelim discussions with co in summer (309)..u/c

MINERS - Brent -0.1%, Copper -0.5% and miners in OZ; BHP +1.3%, RIO +1.9%.-0.5%

RBC:
*ASHTEAD: +2% Q1 strong & outlook in line, margins improving.

*BASILEA: +2% distribution agreement with Cardiome Pharma for antibiotic.

*CAPGEMINI: 0% reiterates FY targets on CMD.

*FAROE PETRO: -1% dry well @ North Sea Goanna prospect.

*FLUGHAFEN WEIN: 0% August traffic solid, Vienna passengers +4%.

*FRAPORT: 0% August traffic solid, Frankfurt passengers +5% & cargo +5.5%.

*JD SPORTS: +4% H1 numbers solid, revenue beat, raises FY capex guidance.

*PARTNERS GROUP: +4% H1 results solid, FY'17 guidance confirmed.

*PREMIER OIL: 0% confirmation sale of 33% stake in Wytch Farm field complete.

*REDROW: -3% placing of 25.9M shares @ 590p.

*UNIPER: +1% HB: CEO prefers company independence versus sale to investor.

*WOOD GROUP: 0% CMA accepts proposed remedies on WG/ purchase of AMFW.


Investec:
UK

* AA-Confirms spec(FT)that held talks with HSTG, now ceased..................+3%

* ASHTEAD-Q1.PTP £238m(I/L)Hurricane season underpin current mkt exp's.......+1%

* CAIRN HOMES.Founders selling 15.65m (2.1%) shares via ABB................-2-3%

* EQUINITI-£122m rights issue to part fund Wells Fargo Registrar acq's......unch

* FAROE PETROL-Goanna well(N.Sea) is dry. Plugged & abandoned..............-2-3%

* GOOD ENERGY-H1.Challenging H1, #'s a miss. D/G FY 17&18 fcast..............-5%

* HASTINGS-AA confirms it had talks, now ceased..............................+2%

* HILTON FOOD-H1.#'s ahead (FX +ve) FY outlook remains in line...............+1%

* JD SPORTS-H1.Guiding to top end.c4% U/G to FY18&19 PBT.(shs +4.7% yday)....+3%

* MIDWICH-H1.Continues strong performance. Confident of meeting exp's........+1%

* OLD MUTUAL-Hellman&Friedman approached about buyout of OMGI(SKY)..........unch

* OXFORD INSTRU-AGM.Trading in line, no chg to FY exp's but H2 weighted....-2-3%

* PREMIER OIL-Confirms disposal of Wytch farm for $200m......................+1%

* REDROW-Steve Morgan's Charity sells 25.9m shs(via ABB)@590p(closed 632.5p).-5%

* TARSUS-Expands Mexican JV. Small upgrade to #'s...........................unch

* AHLSELL- CVC's Keravel sells 66m (15%) shares via abb, priced SEK51.50....-4%

* ARKEMA-US probe safety practices after fire.............................-0.5%

* CAP GEM-Cap Mkts Day-reits short and medium term targets..................U/C

* INGENICO-Vacheron leaves 4 personal reasons, had been tipped as poss CEO..-1% * PARTNERS GRP-H1 numbers very strong, rev +25%, confirms guidance..........+4%

* UNIPER-CEO prefers independence vs sale to investor (HB)..................U/C

* VAN LANSCHOT-Rabobank selling 4m (9.7%) shares via abb, priced €25.10.....-3%

* VIVENDI-placed €850m bond last night.........................


ShoreCap:

OXFORD INST. - agm, sees H2 benefiting from new product and ccy impact......UNCH

JD SPORTS - H1 pbt 102.7m.Expect yr end result to be at upper end of est.....+3%

ASHTEAD - Performing in line with views at end of quarter....................+1%

AA - Confirms did have preliminary discussions with Hastings but have ceased.+2%

HILTON FOOD - revs +9.3%,op.profit +9%,eps +13.6%,sees FY in line...........UNCH

APPLEGREEN - revs +21% €672.5m,LfL +10%,profit +20%,well positioned for H2...+2%

VAN ELLE - Q1 encouraging,good levels of activity,rail remains challenging..UNCH

SAFECHARGE - strong transaction growth,rev growth from tier 1 taking longer..-2%

GOALS SOCCER - LfL sales growing in H2 but a slower rate than anticipated....-5%

REDROW - Steve Morgan sells 25.9m shares in placing at 590p..................MKT

EQUINITI - 3 for 14 rights issue at 190p,raising £122m to fund acquisition...MKT


Mainfirst:
*VW-To invest €20b for electric versions of all models by 2030.......+0.5%

*FRAPORT-FFT Aug Passengers 6.29m,Passengers +5%,Cargo +5.4%.........U/C

*SCOR-CEO says Florida Cat.Exposure very low(stk +3% yest)-Echos.....+0.5%

*PARTNERS-H1 Rev 565m(500),Ebitda 374m(306),Confirms FY guidance.....+4%

*DORMAKABA-FY Ebitda 387.3m(370.9),Sales 2.52b(2.5),NI 224.6m........+2%

*BMW-Sees 110k elec cars sales this yr,Diesel still part of mix......+0.5%

*INGENICO-Vacheron leaves 4 personal reasons,Huss 2 lead retail......-1%

*DAI-Plans up to 50 elec models '22,to ivest €10b,Smart pure elec....U/C

*UNIPER-CEO prefers co.independence to sale to investor - HB.........+0.5%

*VIRBAC-H1 Sales 438m(438),Ebit 33m(35),NP 14m(16),Cuts FY o/lk......-4%

*CAPGEM-CMD today,reits meduim-term tgts and reits tgts for FY.......+0.5%

*NOVARTIS-Biosimilar rituximab accepted for review by the FDA........+0.25%


Numis:
* AA -2-3% Confirms it had talks with Hastings re combination of insurance operations , talks now ceased

* ASHTEAD +1% Numbers small beat (FX helping), +ive momentum, Hurricanes will generate increased demand

* CAIRN HOMES -3%: ABB, Co-founders of CRN are selling 15.65m shares (2.1% of ISC).

* EMPIRIC -2% Interims, NAV inline, earnings behind, rental margin behind target

* EQUINITI -1% Expected rights issue to fund Wells Fargo deal – 3 for 14 @ 190p

* FAROE PETROLEUM: -1%, Dissapointing well results from Goanna well

* HASTINGS mkt Confirms had talks to combine insurance operations with AA , talks have ceased

* HILTON FOODS MKT Small headline beat, Op Profit 18.8m vs 17.5 NUM (e) but no change to forecasts

* OXFORD INSTRUMENTS -3% Trading statement; revs and profit for the first 5 months behind expectations, shares have been strong into the statement

* PREMIER OIL: +2%, Confirms sale of Wytch Farm to Verus for $200m cash consideration and releasing $75m in letters of credit for future decommissioning.

* PTSG MKT Acquisition of UK Sprinklers Ltd for £2.5m

* REDROW -5%: ABB announced after close last night, 25.9m shares (7% of ISC), vendors Steve Morgan & his charitable trust. Stock placed at 590p, approx 7% discount to last night's close (632.5p).

* SAFECHARGE: +1%, Solid H1 followed by a strong start to H2. Successful launch of global payment service to Tier 1 customers. Mgmt still confident with FY expectations


CS:
AA +2-3% Potential transaction with Hastings with its insurance biz
Amec R CMA Accepts Proposed Remedies
Ashtead +2-3% Q1 PBT ahead at £238.5m vs CS ests £230.7m
Atlas Copco +1% Komatsu China digger sales jump +77% in August
Banks +0.5-1% Banks strong in Japan, US 10 year yields back above 2.13%
Basilea +3% Announces distribution agreement with Cardiome
CNH Ind +0.5% Peer Deere sees Aug US/Canada tractor sales up +67%
Dorma Kaba +1% FY EBITDA 387.3mln vs cons 372mln, guidance ahead
Fraport M/P Traffic stats - passengers August +5.0%, cargo +5.4%
Hastings UNCH Potential transaction with Hastings with its insurance biz
JD Sports +3% PBT 102.7mln cons 95mln, guidance towards the upper end
Julius Baer +2% Positive read from Partners Group numbers
Miners UNCH Copper -0.45%, Brent +0.45%, Iron Ore +0.65%, China UNCH
Novartis +0.5% Sandoz Biosimilar Rituximab Accepted for Review by FDA
Partners +5-7% H1 EBITDA CHF374m vs cons 304m, higher performance fees
Sandvik +1% Komatsu China digger sales jump +77% in August
Thyssen +1-2% Tata finally frees itself from £15bn UK pension liability
Vivendi M/P Said to try last minute move to avoid $359m fine. BB


Citi:
UK
*AA -Confirms prelim talks with Hastings rergards to a merger +1%
*Ashtead-Q1 ebitda £431.1m,performance in line with expectations +2%
*JD Spts-H1 grp revs £1.37b,FY results to be top end of estimates +3%
*Redrow -Bridgemere,Chairmans Charity sells 25.9m shares vis Barcap -2%
*Whitbd -Citi Double D/G -2%

EU
*Arkema -U.S EPA probing Arkema’s safety practices after fires.RTR u/c
*Fraport -Frankfurt Aug airport passengers +5%. +1%
*Partners Grp -H1 ebitda 374m and confirms FY '17 guidance. Margin +66%. +2%
*SCOR -CEO Kessler says Florida exposure very low. Echos. u/c
*Novartis -Rituximab accepted for review by FDA. +1%
*BMW -Sees 100000 electric car sales this year. u/c
*Basilea -Announces distribution agreement with Cardiome. +1%


Commerz:
B5A -2.7% Lampe cuts to Hold (Buy)

DBK +0.9% Keefe, Bruyette & Woods raised to Outperform (Mkt Perform),PT €19

DRI unch Deutsche Boerse adjusted free float to 38.94% (from 70.14%)

FRA unch Frankfurt Airport August passnegers up 5%

JEN -1.4% DZ Bank cuts to Hold (Buy), PT €26.50

LEG +1.3% Baader raised to Buy (Hold), PT €93

PBB +0.8% HSBC raised to Buy (Hold), PT €14

SRT3 -0.7% Feedback from management roadshow - limited surprise potential

UN01 +0.6% CEO prefers Co to remain independent over sale to investor

VOW3 +0.5% CEO vows to offer electric version of all 300 models by 2030


N+1 Singer:
UK 100

ASHTEAD (AHT) +0.5% * Q1 Rev. up 16%, Pretax profit up 20%.

PRUDENTIAL (PRU) UNCH * To redeem $1bn in 6.5% notes in December after PRA approval.

SMURFIT KAPPA (SKG) +0.25% * Goldman raises to ‘BUY’ (‘NEUTRAL’) – PT 2750p (2600p).

WHITBREAD (WTB) -0.25% * Citigroup cuts to ‘SELL (‘BUY’).

AA PLC (AA/) +2% * Confirms had discussions with Hastings to explore possible combination of insurance businesses

JAMES FISHER (FSJ) +0.25% * Raised to Hold at Canaccord

JD SPORTS (JD/) +2% * H1 revenue £1.37bn, H1 pbt £102.7m, raises FY capex guidance to £106m, expects FY results to be at upper end of estimates

REDROW (RDW) -3% * Placing of 25.9m shares at 590p

SSP GROUP (SSPG) -0.25% * Cut to Neutral at Citi

WIZZ AIR (WIZZ) Unch * New Neutral at Citi

WOOD GROUP (WG/) +1% * CMA decides merger will not be referred for an in depth investigation

HILTON FOOD (HFG) UNCH *1H rev. £690.7m, PTP £18.4m, Sees FY in line. Div. 5p.

CIRCASSIA PHARMA (CIR) UNCH *European Launch of NIOX VERO® Nasal Mode

OXFORD INST. (OXIG) -4% *Rev. and OP at constant currency behind last year. Lower sales of optical microscopy products. Longer lead times. FY expectations unch,

PREMIER OIL (PMO) +1% *Proposed sale of Wytch Farm Interests for $200m.

RAVEN RUSSIA (RUSP) *1 in every 52 tender offer at 52p.

TARSUS (TRS) +0.5% *Mexican JV now owns all of EJK Mexico's Event Portfolio.

In the UK Lawmakers voted against opposition labor party attempt to block EU withdrawal bill; vote 326-290, Brexit bill to move to next stage. The Sterling showed muted gains on the news.

Nikkei +1.09% Hang Seng +0.02% CSI +0.31% Shanghai +0.14% Shenzen +0.30%

Eur$ 1.1967 CNH 6.5354 CNY 6.5316 JPY 109.31 GBP 1.3187 CHF 0.9551 RUB 57.2150 WTI$ 48.05 -0.04%

S&P +0.02% EuroStoxx +0.37% FTSE +0.28% Dax +0.30% SMI +0.39%

Macro :

- Juncker is Said to Plan Foreign Investment Screening in EU: FT

- Lithium Companies Rise; China Plans End of Fossil-Fuel Vehicles

Keep an eye on :

- AIR FP : May Asked Trump to Intervene in Boeing, Bombardier Row: Times

- AA/ LN : AA Confirms Had Talks With Hastings About Combination of Unit

- ATC NA : Irma Wiped Out Cable, Wireless Service in South Florida (1)

- AAPL US : Stocks to Watch During Apple’s IPhone Unveiling Event Today

- AAPL US : Apple Is Said to Be Wary of Active WD Role in Toshiba: Sankei

- AHSL SS : CVC’s Keravel Sold 65.5m Ahlsell Shares at SEK51.5 a Share

- AIXA GY : Aixtron Surges Before IPhone Event, Oddo Sees ‘Ample Upside’

- BSLN SW : Cardiome to Commercialize Basilea’s Zevtera in Europe, Israel

- CAP FP : Capgemini Reiterates FY, Medium-Term Targets on Capital Mkt Day

- HSTG LN : AA Is Said to Plan Merger of Unit With Hastings: FT (Earlier)

- IAG LN : IAG Most Exposed to Low-Cost Atlantic Competition; MS Downgrades

- NOVN VX : Novartis Sandoz Biosimilar Rituximab Accepted for Review by FDA

- RWE GY : RWE Is Said to Hire Endesa, Osaka Gas LNG Traders in Expansion

- SCR FP : Scor’s Kessler Says Florida Cat. Exposure ‘Very Low’: Echos

- UMI BB : Leysen Family’s Tradicor Sells EU0.66M of Umicore Stock: FSMA

- UN1O GY : Uniper CEO Prefers Co. Independence to Sale to Investor: HB

- VIV FP : Vivendi Said to Try Last-Minute Move to Avoid $359 Million Fine

- VOW3 GY : VW Plans 300 Electric Models, EU20b in E-Mobility Capex by 2030