>>> Disney Cut at Loop Capital; Says EPS Growth Priced Into Stock

Disney’s stock is fairly valued and it is pricing in strong earnings growth, writes Loop Capital analyst David Miller in a note downgrading to hold from buy, PT $118 unchanged.
  • DIS is trading at 16.5x FY18 adj. EPS, with adj. EPS growing in mid-teens
  • Says upside from opening of Avatar-World and profitability at the Shanghai park is “built into the stock”
  • Sees DIS hovering around current levels until there is a long-term resolution of CEO Bob Iger’s succession plan

>>> US early premarket gappers


Early premarket gappers

Gapping up:

  • BCR +19.7%, DB +10.2%, ING +7.5%, BBVA +7.4%, SAN +6.4%, WLL +5.9%, BCS +5.8%, STM +4.8%, TOT +4.8%, AEG +4.6%, CS +4.6%, ERIC +4.3%, NOK +4%, EDU +4%, MT +3.9%, SAP +3.8%, ALV +3.8%, JCP +3.8%, MTL +3.3%, UN +3.2%, ASML +3%, BBL +3%, CCE +2.8%, GLPG +2.7%, BHP +2.7%, AKS +2.7%, HAS +2.6%, X +2.5%, MS +2.3%, C +2.3%, ABB +2.3%, HSBC +2.3%, RIO +2.2%, BAC +2.2%, RDS.A +2.2%, GS +2.1%, JPM +2%, F +2%, RBS +1.9%, BP +1.8%, NVO +1.7%, PDS +1.6%, HAL +1.1%, OPB +1%

Gapping down:

  • CYOU -9.5%, SOHU -5.7%, GFI -5.5%, HMY -5.5%, AU -4%, SBGL -3.8%, IAG -3.2%, AG -2.9%, GOLD -2.5%, GDX -2%, BDX -1.9%, GG -1.7%, ABX -1.6%, NEM -1.6%, TRUE -1.3%, SLW -1.1%, GLD -1.1%, VALE -0.8%, AUY -0.7%, SLV -0.7%

FT : Jimmy Choo put up for sale by JAB Holdings

Jimmy Choo put up for sale by JAB Holdings
German owner of shoemaker is switching focus from luxury goods to coffee

Jimmy Choo, the UK shoemaker made famous by TV show Sex and the City, has been put up for sale after its owner decided to switch its focus from luxury goods to coffee.

The company’s management said on Monday that it was seeking buyers following a decision “to conduct a review of the various strategic options open to the company to maximise value for its shareholders”. It said it was “not in receipt of any approaches” so far.

The shares have risen a third in the past year, valuing the company at £390m.

Jimmy Choo said Joh A Benckiser Holdings, a private German investment company that owns 70 per cent of the shares according to S&P Capital IQ, “has confirmed that it is supportive of the [sale] process”.

A person close to Jimmy Choo said JAB Holdings felt luxury goods companies such as Jimmy Choo were “surplus to requirements” now that it had decided to spend tens of billions of dollars building a presence in the coffee business. It has spent $30bn on such deals in recent years, including the $14bn purchase of Keurig Green Mountain, a maker of household coffee machines.

The deals have signalled that JAB wants to challenge Nestlé as the dominant provider of coffee worldwide.

Jimmy Choo staff own 3 per cent of the shares and the sovereign wealth funds of Singapore and Kuwait own 2.7 and 2.5 per cent respectively.

On Friday the shares had risen 33 per cent over the past year and rose a further 6 per cent on Monday morning following the announcement, to 178p.

JAB, which is controlled by the billionaire Reimann family, floated a quarter of the business in 2014 at 140p. It bought the business for £500m in 2011 from TowerBrook Capital, a private equity firm.

Jimmy Choo was founded in 1996 by former Vogue accessories editor Tamara Mellon and Malaysian designer Jimmy Choo. The brand shot to fame after featuring in US sitcom Sex and the City.

Last month Jimmy Choo said sales rose 1.6 per cent in 2016 once currency effects were excluded, with growth in China being offset by difficult trading in the US and Europe. Including the effects of the strong pound, sales were £364m, a 15 per cent rise.

(MS) European Chartfest

Global reflation and good EU economic momentum. We continue to believe in a base case of global reflation – that is, moderate increases in growth, inflation and rates. Macro newsflow remains strong and our economists have recently lifted their Euro Area GDP growth forecast to 1.8% for 2017.

Strong EPS growth in Europe in 2017. European earnings look set to rebound significantly in 2017 as margins and top line growth improve. We recently increased our top-down 2017 EPS growth forecast from 12% to 16%. This is the first year since 2017 when EPS estimates are being upgraded.

8% upside to our base case price target. Our base case rolling 12m price target offers 8% upside from here and assumes little change in Europe’s N12M PE on a 12m view. Investor sentiment metrics have moderated significantly in recent weeks and set the scene for a near-term rebound if political uncertainties start to fade. Our MTI and CVI indicators are still in sell territory, but only just.

Value stocks still look depressed. Value stocks have underperformed YTD as the global reflation trade stalls. Provided our base case view on global reflation is correct we’d still look for Value to outperform over the medium-term and continue to expect a revival in the efficacy of the PBV factor.

OW Financials. We believe Financials are likely to be the biggest beneficiary of the reflationary theme, driving both an upturn in earnings and a valuation re-rating as interest rates/yields rise. We are overweight Banks and Insurance.

OW Energy/Steel. Within the commodity space we prefer Energy to Miners at this point given the latter’s stronger performance and higher valuation and our bullish view on oil prices. Oil stocks (majors and service names) should see a strong rebound in EPS (margins are rebounding) and FCF, with the latter suggesting a valuation re-rating over time. We also like Steel stocks that should benefit from ongoing policy changes in the US.

UW Cyclicals. We believe cyclicals are pricing in the largest amount of good news with relative valuations close to 40-year highs and consensus positioning likely elevated. The sector has arguably already priced in the improvement in economic data and earnings upgrades and would be vulnerable to any peaking out in economic lead indicators. We are underweight Consumer Discretionary and Industrials.

UW Defensives. We are underweight Defensives as earnings momentum remains poor (relative revisions are at a 5Y low) and (high) valuations are under pressure from increasing bond yields. Predominantly due to lower valuations, we prefer Pharmaceuticals to Consumer Staples and Telecoms to Utilities.

UK mid-caps look interesting. We are UW the UK given our FX team’s bullish view on GBP. The latter recommendation suggests ‘weaker GBP beneficiaries’ should underperform going forward and that UK mid-caps look increasingly attractive post poor performance and given low relative valuations.

Prefer Europe to US. After many years of earnings and price underperformance, the relative case for Europe looks more favourable for this year given a combination of stronger EPS growth, attractive relative valuations and a reflationary macro backdrop.



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(GS) Financial Services

Second key election constructive for sector …

Post the Dutch election, the 1st round of the French presidential elections yielded a result which we think is constructive for the European Financials sector.

… as the pro-EU candidate wins 1st round

Following the 1st round of voting, Mr. Macron, the pro-EU centrist candidate, won with 24% of the vote, followed by Marine Le Pen (22%). The runoff voting round takes place on 7th May. With polls indicating that Mr. Macron is likely to emerge as the winner, we believe the market will interpret the result as positive for Financials

overall, and banks in particular.

Banks: BNP, UCG, CABK, KBC key calls

We see the 1st round election outcome as beneficial for Eurozone banks overall, with the French, Italian and German banks likely to react most positively. Our positioning, which assumed a “benign” outcome, remains relevant and we recommend investing in BNP, UCG, CABK and KBC (all CL Buy). The attractiveness of these stocks rises with a normalizing political situation, in our view.

Insurance: Life insurers most geared

In an economically adverse scenario, non-life names would have benefited from their perceived ‘defensive’ qualities. As the market moves to price in lower political risks, we see life insurers as most exposed given their macro gearing, and therefore best placed to benefit from an economically positive outcome (e.g. Buy-rated PRU (on CL), STJ).

Diversified Financials: Volumes and asset price moves are key

Volatility is likely to boost trading volumes at Euronext (Buy) in any unexpected election outcome. An adverse election scenario is likely to boost appetite for non-EU assets, supporting Ashmore (Buy). Italian asset managers are likely to be strong in an unexpectedly positive outcome.

Real Estate: Prefer non-Eurozone in ‘adverse’

In an economically benign scenario, we see upside potential from Colonial (CL-Buy) and FDR, Icade and Gecina (Buy). In a more adverse election scenario, we would expect UK, Swiss and Nordic landlords to outperform and highlight Buy-rated Entra, Big Yellow, and Secure Income.