TheChek News Flow

* Innogy’s share price, influenced by its high yield, provides a new influence for the RWE share, but other headwinds remain

* Rating upgraded to Hold with EUR15 target price from Reduce with EUR13.50 target price

In our initiation note on innogy (IGY GR, EUR36, Hold, TP EUR39), also published today, we argue that with its 70-80% pay-out, dividend yield is likely to underpin market value. Given that innogy accounts for nearly c90% of RWE's gross sum-ofparts and 90% of its 2018-19e EBITDA, according to our estimates, innogy’s share price should provide a new and positive influence on its parent company's shares.

Outside innogy, however, our view is that RWE remains fundamentally unattractive:

(i) we see risk of a loss of investment grade credit rating because RWE, in cutting its

stake in (innogy’s) defensive businesses by a quarter, raises its operational risk

profile; (ii) upcoming outgoings (premium for nuclear waste storage transfer, hybrid

first calls) are likely to eat up the proceeds from the disposal of innogy shares; (iii) we

expect no resumption of the dividend on 2016 earnings; (iv) upcoming German

elections provide some degree of uncertainty; and (v) RWE’s (in our view respected)

CEO and CFO have transferred to innogy. That said, there are some more positive

elements: (i) the transfer of the waste provisions will remove a source of fragility and

uncertainty albeit only when the transfer is completely concluded, (ii) we have seen

recent wholesale power price strength on French nuclear outages: although we do

not expect these to last, they show that the perennial sentiment of oversupply is not

set in stone, (iii) the UK capacity auction may provide a boost for 2017-18 earnings,

and (iv) there should be a Constitutional Court decision on the legality (or otherwise)

of Germany's nuclear tax over the coming months. In addition, the RWE share has

been weak recently, we believe on market concerns of slower ECB corporate bond

purchasing plus a view that RWE shareholders could switch into innogy.

We have raised our target price from EUR13.50 to EUR15 triggering an upgrade in

our rating to Hold. We value RWE equally on sum-of-parts (within which innogy on

asset value) with 40% discount (EUR15.5 from EUR15.0) and DCF (EUR15.4 from

EUR12.0 (WACC 7.0%, terminal growth 1.0%)).

The acquisition of SABMiller improves ABI’s ability to grow, increases its market shares and end-market concentration and diversifies its revenues. As a result, ABI appears a better business now than it was 12 months ago. Synergy targets look achievable, and we expect them to drive CAGRs of 9% in EBITDA and 13% in EPS over 2017-19. In 2020, we expect ABI to acquire again; in our forecasts, we assume an US$80 bn deal that adds 8% to 2020E EPS. A FCF yield of 5.0% in 2017E (4.4% for European staples) is compelling for a business that has doubled every four years. With 19% upside to our 12-month price target, we reinstate with a Buy rating.

Vodafone has acquired €2.74bn / c$3bn (cons €1-3bn) of spectrum in India in the

1800, 2100, and 2500 MHz bands. This compares with total auction proceeds of

$9.9bn, with Bharti Airtel spending $2.1bn, Idea $1.9bn, and R Jio c$2bn. None of the

700MHz or 900MHz spectrum was sold in the auction, and this spectrum may be reauctioned

in the future. However Vodafone has stated that it now has 4G capabilities

in 17 of 22 circles or 94% of mobile data revenues, so its future need for spectrum in

India may be relatively more limited.

Vodafone acquired 2 x 42.6MHz of 1800 MHz spectrum, 2 x 40MHz of 2100MHz

spectrum, and 200 MHz of 2500 MHz spectrum. This improves Vodafone's overall

spectrum position from 590MHz before the auction, to 958MHz of spectrum post the

auction, with improved coverage in the metro areas.

Near-term focus for the Indian market is likely to remain on the impact of Reliance Jio's

entry, and how the pricing of its offering develops. As visibility increases on Reliance

Jio's plans, the medium-term growth potential for the Indian market is likely to become

clearer.

Overall India is c10% of Vodafone compared to Europe at c65%, and with the UK at

c10% of EBITDA, VOD is likely to benefit from any GBP weakness. We reiterate our

view that recovery and operational gearing at Vodafone has been underestimated and

that growing mobile data usage should help drive 'more for more' price increases

across Europe. Separately, we see M&A optionality should Vodafone undertake a

broader deal with LBTY. On UBS estimates VOD offers a 7% EFCF yield on a

calendarised basis for 2017E rising to 9.5% for 2018E with a 5.5% dividend yield.

We think the factors burdening EZY in FY16 will persist or even intensify:

1) the GBP is now trading at a 30-year low vs the USD, which will gradually inflate EZY’s fuel bill, with hedging contracts expiring; 

2) the GBP has also fallen against the EUR, making holidays on the continent more expensive; and (

3) political uncertainties and terror risk are unlikely to disappear quickly. We expect further earnings declines in FY17e and FY18e and cut our EPS by 25%. Downgrade to Sell, new TP 820p.

BAML
WILL HILL: in deal talks with Amaya for a reverse takeover (315p)............+7%

MITIE GROUP: Ruby McGregor Smith stepping down as CEO (200p)................+3%

LADBROKES: DB upgrades the stock to buy (136)..............................+2/3%

Unite group: USAF prpty portfolio valued @ £2.264bln +5% in 3 mo (611p)......+1%

GIVAUDAN: 3Q16 trading update, Lfl growth of 3.1% vs cons 3.5% (1956.24)....-1%

NOVO: apart has received a complete response letter (267.597)................-1%

VIVENDI: Bollore increases stake above 20% (18.08)..........................unch

Investec
* ABN-may sell Asian p/banking unit(Bberg); Govt still lowering stake(ANP)..U/C

* ADP-cuts FY traffic and EBITDA f/casts (stable vs slight gwth).............-3%

* AIR FRANCE-Sep traffic +2.8%..............................................-1%

* ATLANTIA-may sell 15% of Autostrade (CRO in Messaggero)....................+1%

* DBK-Cryan leaves US with no DoJ deal; Qatar stake raise story denied......-3%

* DELTA LLOYD- NN needs to raise bid to €6.50 from €5.30 (press)............+2%

* GIVAUDAN-Q3 lfl sales look touch light, reits l/t targets. Comment follows..-1%

* INTESA-owns 50% Allfunds(see Santander news);also see Italian bank spec...+2%

* LVMH-Q3 sales due after close

* POSTNL-to raise domestic letter rates by 5c, international by 8c..........+1%

* SANTANDER-may sell it’s 50% stake in Allfunds for €2bn..................+1.5%

* SONOVA-CEO see ‘enormous’ demand for rechargeable hearing aids(NZZ).......+1%

* SYNGENTA-ChemChina bid is missing $15bn of funding for deal(Bloomberg)....-2%

* VIVENDI-Bollore raises stake to >20% from 15%, to have 29% voting rights..+2%

UK

* GEMFIELDS Telegraph article re but interest from Faberge.................+4-5%

* INTERSERVE decides to keep RMDK unit after strategic review...............unch

* MITIE group CEO steps down, Phil Bentley ex C&W will succeed her...........unch

* SVG Harbourvest said to approach SVG with an alternative bid..............unch

* UNITE GROUP USAF and LSAV valuation update, £2.264bn as at Sep 2016......+0.5%

* ULTRA ELECTRONICS small ($82m) contract win...............................unch

* VEDANTA Q2 update, copper up and Indian Zinc to rise significantly.........+2%

* WANdisco contract wins and director / management appmnts...................+5%

* WILLIAM HILL confirmed in merger talks/reverse t/o with Amaya - ST.........+4%

RBC
ADP -1% Guidance cut on traffic to 1-1.5% v 2.3% earlier, EBITDA flat.

AIR FRANCE 0% September traffic stats a tad weak, load factor light.

DT. BANK -3% Weak after BILD reported no agreement between Cryan and DoJ yet.

FRESNILLO +2% Likely to outperform on Silver (+3%), Gold (+1.5%) post hours

GIVAUDAN 0% Q3 sales in line with expectations - nothing done.

MITIE +5% New CEO announcement, Phil Bentley, previous C&W.

NOVO NORD -2% Fails to win FDA approval for faster acting insulin aspart

PANDORA -1% SILVER rallied 3% from the close Friday, Gold also higher

SWED/NDA -1% Following NORWAY Friday, talk of 15% Swedish payroll tax on Fin.

THYSSEN +1% Press reports TATA STEEL JV still on the cards

VIVENDI +2% BOLLORE statement announcing voting rights to rise to 29% in Apr.

W.HILL +5% AMAYA confirm in ongoing merger talks with WILLIAM HILL

MainFirst
*DBK-Talks with DOJ contin, Derivs exp o/done, Qatar may raise 2 25%....-4.5%

*ATLANTIA-May sell by Feb a minority stake of 15% in Autostrade.......+1%

*NOVO NORDISK-Fails to win FDA Approval 4 faster acting insulin.......-2%

*THYSEEN-Tata may merge European arm with ThyssenKrupp - S/Times......+1%

*NN-Should raise Delta Lloyd(+19%) bid to €6.5 vs €5.3 says FD........-1%

*BAE SYSTEMS-Information gets $618.3m IDIQ Navy Contract..............+1%

*WILLIAM HILL-In talks with Amaya to create $4.6b betting giant.......+5%

*SWISS LIFE-To buy Mayfair Capital with £1b property portfolio........+0.25%

*GIVAUDAN-9m Sales 3.52b(3.5),Fragrances 1.7b(1.7),Flav 1.8b(1.8).....+0.25%

*AIR FRANCE-Sept passengers +2.8%,Tramsavia +25%,Cargo -0.6%..........+1%

*ADP-2016 traffic +1-1.5% after a weak summer, Ebitda cut, Net lower....-2%

*POSTNL-To raise basic rates for domestic 5c & Intl 8c,from 1st Jan...U/C

CS
Air France -0.5% Load factor slightly worse than expected

Delta Lloyd +2% Spec NN Group should raise its Eu2.4b bid by Eu600m

Deut Bank -3% No fine agreement could be agreed in the US over weekend

Givaudan +1% Q3 sales in line, organic growth slightly better

Lundbeck +1% FDA approves Carnexiv injection as a S/T replacement

Miners +0.5% Copper +0.20%, Brent -1.30%, Iron Ore closed, China +1.10%

Mitie M/P Announces new Chief Executive - Phil Bentley

Novartis -0.5% Negatives from 2016 ESMO meeting

NN Group -2% Spec NN Group should raise its Eu2.4b bid by Eu600m

Roche +1% Tecentriq Extends Lung-Cancer Patients' Lives in Study

Ultra Elecs +0.5% $82m contract win over 4 years

Unite Group +1-2% Valuation update reads well

Vivendi R Bollore holds more than 20% of Vivendi

Volkswagen -0.5% EU Commission said to be sceptical on VW fix

Will Hill +7-10% Amaya/Will Hill said in talks about a £4.6b all-shr merger

SMI +0.1%

CSGN -0.4%

UBS -0.4%

Tradegate

DBK -4.3%

FME -0.6%

FRE +0.8%

RWE +1.2%

NDA -1%

BOSS +1.1%

DLG +1.2%

S32 -1.9%

VOD +1.1%

Macquarie
*Cityfibre CITY- Macquarie initiate with a Outperform . +1%

*Just Eat JE/- Invested £3.5m in UK start-up Flypay, strategic partnership. Unch

*Ultra-Electronics- Wins $82m 4 year contract with US Navy. +1%

*William Hill WMH- Confirms discussions about an all share merger of equals with Amaya. RSTR

*YouGov You- EPS beats est’s, Dividend increased 40% to 1.4p. Current trading inline. +2%

Air France -0.5% Load factor slightly worse than expected

Delta Lloyd +2% Spec NN Group should raise its Eu2.4b bid by Eu600m

Deut Bank -3% No fine agreement could be agreed in the US over weekend

Givaudan +1% Q3 sales in line, organic growth slightly better

Lundbeck +1% FDA approves Carnexiv injection as a S/T replacement

Miners +0.5% Copper +0.20%, Brent -1.30%, Iron Ore closed, China +1.10%

Mitie M/P Announces new Chief Executive - Phil Bentlet

Novartis -0.5% Negatives from 2016 ESMO meeting

NN Group -2% Spec NN Group should raise its Eu2.4b bid by Eu600m

Roche +1% Tecentriq Extends Lung-Cancer Patients' Lives in Study

Ultra Elecs +0.5% $82m contract win over 4 years

Unite Group +1-2% Valuation update reads well

Vivendi R Bollore holds more than 20% of Vivendi

Volkswagen -0.5% EU Commission said to be sceptical on VW fix

Will Hill +7-10% Amaya/Will Hill said in talks about a £4.6b all-shr merger

RBC PRE-MKT INDICATIONS

ADP -1% Guidance cut on traffic to 1-1.5% v 2.3% earlier, EBITDA flat.

AIR FRANCE 0% September traffic stats a tad weak, load factor light.

DT. BANK -3% Weak after BILD reported no agreement between Cryan and DoJ yet.

FRESNILLO +2% Likely to outperform on Silver (+3%), Gold (+1.5%) post hours

GIVAUDAN 0% Q3 sales inline with expectations - nothing done.

MITIE +5% New CEO announcement, Phil Bentley, previous C&W.

NOVO NORD -2% Fails to win FDA approval for faster acting insulin aspart

PANDORA -1% SILVER rallied 3% from the close Friday, Gold also higher

SWED/NDA -1% Following NORWAY Friday, talk of 15% Swedish payroll tax on Fin.

THYSSEN +1% Press reports TATA STEEL JV still on the cards

VIVENDI +2% BOLLORE statement announcing voting rights to rise to 29% in Apr.

W.HILL +5% AMAYA confirm in ongoing merger talks with WILLIAM HILL

Our detailed analysis paints a tough outlook for Ingenico and strategic choices need to be made to hit 2020 targets: i) In Terminals – lower unit growth and competitor catch-up will likely result in more price-led competition, especially as the mix moves more to emerging markets. We forecast high-single-digit unit growth but just midsingle- digit revenue growth and thus are below 2020 guidance. ii) In Payment Services – Ingenico will have to decide on its position in the value chain and its route to become a true global omni-channel provider. To achieve its goal of high-teens growth within ePayments it will have to step up innovation either via R&D or M&A. This will require bold strategic decision-making and in its absence growth will remain sub-par based on our estimates. The surprise US EMV slowdown caught us out and the stock is therefore largely reflecting our scenario. We lower our EPS estimates by -16% in 2017/18E and reduce our price target to €80 (from €120), placing the shares on 17x/15x 2017/18E P/E and 10x/9x EV/EBITDA - downgrade to Equal Weight.