Early premarket gappers
Gapping up: RLOG +21.2%, ZAIS +17.1%, CGA +15.2%, SINO +12.8%, GIG +11.8%, BLIN +11.8%, KOOL +9.7%, URRE +8.9%, PDFS +6%, DCIX +5.9%, TRXC +5.2%, BLDP +5%, GM +4.9%, STNG +4.8%, SDRL +4.1%, GUID +3.9%, DRYS +3.8%, CSOD +3.8%, NVTA +3.7%, QTNA +3.3%, IAG +3.2%, BBVA +2.5%, CS +2.4%, SBGL +2.3%, MPEL +2.3%, HMY +2.2%, IDTI +2%, F +1.8%, PBR +1.7%, CHK +1.7%, NVMI +1.7%, NE +1.5%, SCI +1.5%, NBL +1.4%, RIG +1.2%, GG +1.2%, GILD +1.2%, LVS +1.2%, CHGG +1.2%, BRKR +1.2%, SHLD +1.1%, WYNN +1.1%, AU +1.1%, SAN +1.1%, KGC +1%, MUX +1%, GDX +0.9%, OMF +0.8%, SMI +0.7%, INCY +0.7%, GOLD +0.6%
Gapping down: AVIR -42.6%, GEVO -24.5%, AMKR -10.9%, ATOS -9.8%, TTM -5.6%, HIBB -5.4%, BGFV -5.1%, GLNG -4.9%, RNG -4.6%, PFLT -4%, NTWK -4%, BKD -2%, FLO -1.9%, DBD -1.8%, FXCM -1.7%, NVLS -1.7%, AZN -1.5%, AGII -1.4%, NVS -1%, BRX -0.9%, WFT -0.8%, DKS -0.8%, GSK -0.7%, CUTR -0.5%
Why we are bullish on China
We expect China to avoid a financial shock and achieve high income status by 2027. Our view is that moving to higher value-added activities will propel the economy forward and drive the continued medium term outperformance of MSCI China versus MSCI EM, providing significant investment opportunities.
* China’s macro challenges have been well-telegraphed – a high leverage ratio, excess capacity in industrial segments, an over-reliance on investment as a growth driver. More recently, the risks of protectionism have cast an additional shadow. There is much common ground amongst investors on the need to address these challenges. However, that's where the debate starts. There is wide dispersion on views on the steps needed to be implemented to resolve
these challenges and what the end outcome will look like.
* Investors appear most concerned about the risks of a financial shock happening in China and, by extension, there has been greater and rising scepticism on whether China can ensure continued prosperity. This caution is also reflected in the fact that EM investors have consistently held an underweight position in China equities relative
to the benchmark and the underweight position is at a decade-low.
--> However, we take a positive view that China will be able to navigate these challenges:
1) We view the risks of a financial shock as low because of the specific characteristics of this debt cycle.
Investors are concerned that China could face a financial shock similar to that of the US in 2008 and Asia in 1997/98, as debt has risen from 147% of GDP in 2007 to 279% in 2016, leading to concerns about the sustainability of the debt buildup.
However, there are three mitigating factors at play. First, the buildup of debt has been funded by China's own savings and has been used to fund investment, rather than consumption. Second, strong net asset positions both domestically and externally (with a positive net international investment position of 15% of GDP) provide adequate buffers against shocks.
Finally, from a macro stability management perspective, the starting point of a strong external position in the form of current account surplus, high level of FX reserves and the lack of significant inflationary pressures does mean that China will be able to manage its domestic liquidity conditions and thus avoid a financial shock.That said, the high levels of debt to GDP reflects that China has borrowed a lot from the future. The payback will be in the form of a significant slowdown
in growth rates.
A connected debate is the issue of a potential one-off, sizable devaluation of the currency. It is our view that policy makers would not opt to devalue the currency as it would risk upsetting the management of the trilemma pressures, which could potentially lead to a spike in interest rates and cause a period of risk aversion in the financial system.
That said, we do recognise that there will be manageable, moderate currency depreciation ahead.
2) Notwithstanding slower growth in the years ahead, a high income status is attainable and is the most likely outcome over the next decade.
The second key macro debate is whether China can transition towards high income status (US$12,500) from its current
status of middle-high income (US$8,100). In the context of the recent macro challenges and the prospect of a financial shock, investors have expressed reservations as to whether China will be able to continue on its journey towards high income status.
FCC agrees to sell concessions in Spain as part of EUR 4.5bn banking debt refinancing deal - report (translated)
14 FEB 2017
Fomento de Construcciones y Contratas [BME: FCC] (FCC) will sell some of its concessions in Spain as part of the agreement to refinance EUR 4.5bn in banking debt, Expansion reported on Tuesday (14 February).
According to the report, which cited financial sources, the portfolio of planned divestitures includes FCC’s 34% in the concession company Cedinsa, the 49% stake in Linea 9 of the Barcelona underground (Metro de Barcelona) and its 29% stake in the residential and car park complex Ciudad de la Justicia de Cataluña.
FCC has also agreed to give the banks the second payment it will receive for Globalia, due this month and amounting to about EUR 106m and another payment due for Proactiva of about EUR 15m. In total, FCC could raise more than EUR 120m from the sale of the concessions to cut its bank debt.
FCC declined to comment, the paper said.
FCC’s proposal is backed by 70% of its banks, which include BBVA, Santander, CaixaBank, Bankia and Sabadell.The main aspect of the restructuring is a EUR 1.3bn bond issue underwritten by its water unit Aqualia. Another EUR 2bn will be refinanced at 5-years and with improved terms, according to Expansion.
Línea 9 del Metro de Barcelona reported 2015 revenue of EUR 113m and profit of EUR 23.5m; Cedinsa reported 2015 revenue of EUR 97m, EBITDA of EUR 52m and profit of EUR 22.6m; Ciudad de la Justicia reported revenues of EUR 35.7m and EBITDA of EUR 25.9m.
Closing the dividend gap… more to come in 2017
● Coverage universe: nine companies; the European large-cap IOCs and US supermajors Exxon and Chevron. Aggregate market capitalisation is cUSD1.4trn.
● What’s changed: MTM 2017 oil price to USD55/bbl (EPS +16%, CFFO +5%), upgraded Repsol to Outperform, closed ENI Short.
● Top picks unchanged: BP, Total and Galp
● Top level views: Macroeconomic outlook remains cautious: low-cost producers bring oil to market faster than consensus expects. Challenging industrial outlook for Big Oil: Low growth, low returns, higher operational and financial risk, decarbonisation. Positive equity proposition: based on a FCF turning point that is now accelerating for the next 12 months.
● What’s the debate: With OPEC and Non-OPEC agreeing to manage oil supply, what are the risks to the upside and the downside? Can Big Oil sustain dividend yields that are meaningfully higher than the market while investing sufficiently to maintain its upstream portfolio?
● Framework: A Big Oil Scorecard for 2017, which encompasses
1) Financial resilience, 2) Operational resilience, 3) 2017 cash flow bridge, 4) Balance sheet stress, and 5) The path to 2020 & long-term dividend coverage. We overlay our scorecard against valuation to drive our recommendations.
● Ratings: (+) BP, Total, Galp, Repsol (=) Chevron, Royal Dutch Shell, ENI (-) Exxon, Statoil Exane BNP Paribas
● Where are we versus consensus? We remain lower than consensus on both our oil price assumptions and cash flow estimates. Within the supermajors we continue to favour BP & Total. We upgraded Repsol to Outperform based on: 1) potential upside from lower capital intensity in the medium term, 2) the removal of the credit rating overhang, and 3) an ability to positively surprise on cash return.
● How to pitch the sector: Still positive on a 6- to 12-month time horizon. If we are right on a >520bps improvement in 2017 FCF yield, driving cash dividend coverage to 1.2x, Big Oil multiples will expand further this year. Mean reversion to the historical relative dividend yield premium versus the market (140bps) implies further 20% upside. Poised to benefit from any extension of the reflation trade.
● Risks/Pushback? Oil deck overly conservative… based on historical deal, which includes both OPEC and Non-OPEC producers. Been here before…FCF dependent on a combination of growth, execution and restrain on future capital investment.
Calls remain too defensive: Statoil, ENI & RD Shell highly geared to rising oil price. Repsol‘s outperformance in 2016 limits further upside.
Dow +0.70% S&P +0.52% Nasdaq +0.52% Russell +0.25%
US Market closed again higher. President Trump's upcoming tax-related announcement was yet again the driver of today's bullish sentiment. The top-weighted technology sector (+0.7%) finished just a step ahead of the benchmark index, thanks in large part to Apple's (AAPL 133.29, +1.17) strong performance. Apple+10% since reporting record revenues, earnings, and iPhone sales on January 31st. Energy (unch) was the worst performing cyclical space as crude oil broke its three session wining streak. The commodity finished lower by 1.7% at $52.95/bbl as an uptick in U.S. production overshadowed the release of an OPEC report, which showed high compliance with last year's agreed upon production cuts. only group to finish behind energy was the lightly-weighted telecom services sector (-1.3%) thanks to heavy losses from Verizon -0.9% AT&T -1.8%. Fed Chair Janet Yellen will be delivering her semiannual monetary policy report to the Senate Banking Committee today. US After hours Drybulk shipping names extending even higher in after hours trade... HIBB -15%, AMKR -10%, RNG -4%, BKD -3%, FLO -2% following earnings/guidance. "Re-flation Trump trade" sent US equities to record highs on Monday, but risk is on the back foot in the latter part of the Asia session. After days of DOJ investigations, National Security Advisor Michael Flynn has submitted his resignation after acknowledging he gave "incomplete information regarding phone calls with the Russian ambassador" about US sanctions prior to inauguration, potentially sending the US administration into damage control mode. White House press Sec Spicer will hold a press conference on Tuesday and may be faced with questions about the timing when the cabinet became aware of compromising intel on Flynn, particularly in light of Pres Trump stating Flynn had his confidence as recently as Monday. China released its January CPI and PPI numbers that topped expectations while hitting multi-year highs. Toshiba remains in focus on Japan. After confirming several recent press reports estimating rougly ¥700B charge related to Westinghouse writedown, the company has once again postponed its earnings release as it continues to work with its auditor on the review. A Nikkei report earlier today also noted the company may not be able to continue as a "going concern", potentially requiring bankruptcy proceedings and/or state bailout.
Nikkei -1.13% Hang Seng -0.09% CSI -0.01% Shanghai +0.03%
Eur$ 1.0610 CNY 6.8731 CNH 6.8626 GBP 1.2539 JPY 113.45
S&P -0.9% EuroStoxx -0.15% Dax -0.12% FTSE -0.23% SMI -0.15%
Macro :
- EU’s Vestager Says Commission is Advancing Three Google Cases
- Germany Said Moving Ahead With Defense Cooperation: Reuters
- Greece Said to Plan to Hire Rothschild to Advise on Its Debt: FT
- China Jan. Consumer Prices +2.5% Y/y; Est. +2.4%
Keep an eye on :
- ATLN VX : Actelion Full Year Profit Beats Estimates; No Cash Dividend
- AF FP : KLM Low-Cost Unit Transavia Stops Flying From Munich Hub
- GBF GY : Bilfinger FY Group Output Declined to EU4.2b From EU5b Y/y
- GBF GY : Bilfinger Sees 2017 Output Volume Decline, Margin Improvement
- EN FP : French Telco Operators Restart Consolidation Talks: L’Expansion
- CPR IM : Campari Buying Opportunity on Any Potential Weakness: Mediobanca
- CA FP : Carrefour Halts Vietnam Catfish Sales in Europe: Saigon Times
- CSGN VX : Credit Suisse 4Q Net Loss CHF2.35b; Est. Loss CHF2.07b
- DWNI GY : Deutsche Wohnen Rated New Buy at Commerzbank, PT EU35.10
- EDF FP : EDF Board Approves Launch of EU4b Capital Increase, Figaro Says
- EDF FP : EDF Targets Ebitda of at Least EU15.2b in 2018
- FCC SM : FCC to Sell Spain Concessions to Reduce Debt: Expansion
- G IM : Intesa Said to Sound Out Investors Ahead of Bid for Generali
- G IM : Generali Board to Meet Wed., May Discuss Stake in Intesa: Sole
- GSK LN : Glaxo’s ViiV Says 2-Drug HIV Regimen Comparable to 3-Drug Combo
- HEI GY : HeidelbergCement Prelim. 4Q Sales Up 25%, OIBD Rises 18%
- MAU FP : Maurel & Prom 2016 Revenue Climbs 15%; Oil Production Stabilizes
- NK FP : Imerys to Review Supply of Talc From Afghanistan, Pakistan
- ORA FP : French Telco Operators Restart Consolidation Talks: L’Expansion
- RAND NA : Randstad 4Q Revenue Beats Estimate; Sees Lower Profit Margin 1Q
- SCH GY : Schaeffler Open for Acquistions, CEO Rosenfeld Tells FAZ
- SFR FP : French Telco Operators Restart Consolidation Talks: L’Expansion
- TUI GY : TUI AG Reaches Pact W/ KKR to Sell Travelopia
- VOW3 GY : Volkswagen Annnounces Mobileye Accord in E-Mailed Statement
TICKER ALERT: WRAPX
After Hours Summary: Drybulk shipping names extending even higher in after hours trade... HIBB -15%, AMKR -10%, RNG -4%, BKD -3%, FLO -2% following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: RLOG +33.3%, BLIN +17.9%, KOOL +9.7% (thinly traded), PDFS +6%, CSOD +5.1%, QTNA +4.7%, GUID +3.9%, NVTA +3.7%, SCI +1.5%, BRKR +1.2% (ticking higher)
Companies trading higher in after hours in reaction to news: GIG +12.2% and IDTI +2% (GigPeak to be acquired by Integrated Device Technology for $3.08/share, or approximately $250 mln), ZAIS +11.2% (thinly traded; higher after reporting estimated unaudited net performance returns for the month ended January and Christian Zugel active stake disclosure), TRXC +5.2% (announces first clinical use of Senhance Robotic Surgical System in France; now used to treat gynecologic cancer patients in France), BLDP +5% (has joined consortium with New Flyer to deploy 20 zero-emission fuel cell electric buses in California), URRE +4.3% (continued strength)
Drybulk shipping names are extending even further in after hours trade: SINO +12.8%, DCIX +6.3%, DRYS +3%After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: HIBB -15% (sees Q4 results below estimates, offers light FY18 guidance), AMKR -10%, RNG -4.4%, BKD -3%, FLO -2.1%
Companies trading lower in after hours in reaction to news: AVIR -45.4% (announces top-line data from its Phase 2b SPIRITUS trial of Vapendavir; Vapendavir did not demonstrate a statistically significant reduction in the asthma control questionnaire-6 at day 14, the primary endpoint, for either the 264 mg or 528 mg cohorts compared to placebo), GEVO -20.2% (announces proposed public offering of common stock and warrants; announces that WB Gevo, Ltd., the holder of the Co's issued and outstanding 10% Convertible Senior Notes, due 2017, and the Co have agreed to extend the maturity date of the 2017 Notes from March 15, 2017 to June 23, 2017), ATOS -9.8% (files for $4 mln common stock offering), GLNG -5.3% (to offer $350 million aggregate principal amount of Convertible Senior Notes), PFLT -3.1% (plans to make a public offering of 5,000,000 shares of its common stock), DKS -1.6% and BGFV -1.6% (following HIBB guidance)
>>> Up
*Kvaerner Raised to Buy at Arctic Securities, PT NOK13
*Nemetschek Raised to Buy at Berenberg, PT EU60
*RWE Raised to Overweight at Morgan Stanley
>>> Down
*Henderson Group Cut to Sector Perform at RBC, PT 225p
*Ipsen Cut to Hold at SocGen, PT EU83
*Oriola-KD Cut to Hold at Nordea Securities, PT EU4.50
*Raisio Cut to Hold at Nordea Securities, PT EU3.80
*Ratos Cut to Sell at ABG Sundal, PT SEK41
>>> PT Change
>>> Initiation
*ADO Properties Rated New Hold at Commerzbank, PT EU35
*Air Products Rated New Sell at Evercore ISI, PT $131
*Akzo Nobel Rated New Buy at Evercore ISI, PT EU75
*Arkema Rated New Buy at Evercore ISI, PT EU112
*BASF Rated New Buy at Evercore ISI, PT EU100
*Brenntag Rated New Sell at Evercore ISI, PT EU50
*Clariant Rated New Hold at Evercore ISI, PT CHF19.60
*Covestro Rated New Sell at Evercore ISI, PT EU65
*Croda Rated New Buy at Evercore ISI, PT 38p
*Deutsche Wohnen Rated New Buy at Commerzbank, PT EU35.10
*DSM Rated New Buy at Evercore ISI, PT EU70
*Givaudan Rated New Buy at Evercore ISI, PT CHF1900
*Grand City Properties Rated New Buy at Commerzbank, PT EU19.60
*Johnson Matthey Rated New Sell at Evercore ISI
*Lanxess Rated New Sell at Evercore ISI, PT EU63
*LEG Immobilien Rated New Buy at Commerzbank, PT EU85.90
*Linde Rated New Sell at Evercore ISI, PT EU147
*Norwegian Air Rated New Underweight at Barclays, PT NOK230
*Praxair Rated New Sell at Evercore ISI, PT $107
*Solvay Rated New Buy at Evercore ISI, PT EU124
*Umicore Rated New Sell at Evercore ISI, PT EU42
*Vonovia Rated New Hold at Commerzbank, PT EU32.80
>>> Call
>> Stock
**DAIMLER ADDED TO ALPHA LIST AT BANKHAUS LAMPE