TheChek News Flow

European food retail has outperformed Stoxx 600 11% YTD and now trades at a 15% premium. While volume growth has been a focus, food inflation has historically been the driver of sector growth and relative valuation. However, with food

CPI still low in many markets and the gap with input costs closing, valuations look stretched to us. We remain cautious on the space.

We reinstate Casino with a Sell rating (12m TP €40) and are 5% below FY16E Bloomberg consensus EBIT. We downgrade Morrisons to Sell, and are 5% below FY18E Vuma consensus PBT. We downgrade Jeronimo to Neutral and reinstate Ahold Delhaize and Metro at Neutral. Ex-Ocado 12m PTs for our store-based food retail coverage imply an average of 4% downside potential.

 1H Trading in Line; Strategic Review Ongoing: At the recent 1H results,

management suggested group trading was in line with previous FY16 guidance.

The first phase of the strategic review focusing on the Frankie & Benny’s offer has

been completed identifying a number of issues, particularly around the menu, which

the group is in the early stages of addressing. The business will now look to review

the remaining Leisure brands as well as the Pubs and Concessions.

 Site Closures Identified: As well as the issues highlighted regarding the offer, the

group also announced plans to close 33 sites and write down the asset value on a

further 29. In total the group took a £59.1m exceptional charge (£19m cash costs).

 Limited Near-Term Catalysts: As per our recent note Valuation Supportive, But

Headwinds Remain we maintain our view that, whilst there may be valuation

support on a SOTP basis, Restaurant Group still faces significant trading

headwinds, with limited near-term positive catalysts. Whilst we think recent

management appointments of a new CFO and CEO are positive steps in the

group’s rehabilitation, we suggest there could be further store closures and

exceptional costs as new management looks to revitalize the Leisure operations.

 Estimates Updated: Within the note we revise our estimates for Restaurant Group

following the recent 1H16 results. We largely maintain our FY16 revenue forecasts

whilst reducing FY17E by and FY18E revenues by -1% following changes to our

LFL and store opening assumptions. We also update our group cost assumptions,

reducing FY16E EPS by 1%, with FY17E cut by 10% and FY18E by 8%.

 Return to Sell Rating: Following our updated estimates we reduce our DCFderived

price target reducing to 320p (from 350p). Restaurant Group’s share price

has bounced over 50% of late. Given this significant move, and our view that the

group faces ongoing operational headwinds, we downgrade the stock to Sell, with

an ETR of -16%.

German Bank thinks carefully about the Commerzbank (Google Trasnlation)

The considerations were theoretically and therefore in a very early stage. Whether they are resumed, is unclear. Currently the idea is given internally only a very small chance of being implemented.

Nevertheless, the considerations are a testament to the uncertainty of the Bank. After the new board had decided under CEO John Cryan last year, on the model of a universal bank principle hold that sell mass retail bank Postbank but, the situation of the money the house has deteriorated further. The second quarter was operationally bad among customers and regulators is discussed constantly over an alleged capital weakness of the bank - the market value crashed by about half to about 17 billion euros.

Internally, a debate is therefore unofficially broke out which way the German Bank to actually follow and if not, for example, even the reintegration of Postbank or more radical alternatives would be an option, as manager magazin already in its August issue reported.

That now has even thought timid about a combination with Commerzbank, shows how fundamentally the strategy question is asked. So far was the Commerzbank, holds about 15 percent of the shares in Berlin, the German bankers as not qualified for a merger. A merger would give rise to a large mass retail bank with a strong presence in the SME sector. However, Commerzbank fights like the German Bank with growth and yield problems.

The German bank has also unsettled legal risks and an outdated information technology, which is particularly important for banks. Completely uncertain is whether the financial regulators would approve a merger ever.

A spokeswoman for the bank declined to comment on the information.

Dow -0.26% S&P -0.20% Nasdaq -0.18% Russell +0.09%

US MArket closed lower. On the M&A front, Agrium (AGU 95.76, +6.28) and Potash (POT 18.00, +1.95) announced that they have entered into discussions regarding a potential merger. The two posted respective gains of 7.0% and 12.2% while peer Mosaic (MOS 30.45, +2.50) climbed 8.9%. Crude oil erased an early gain after reports indicated that Iran's Deputy Minister of Industry stated that the country could increase oil production to four million barrels per day by the end of the year. The reports fueled some uncertainty regarding the potential success of supply limiting measures that could be announced after next month's OPEC meeting. WTI crude ended the day lower by 1.3% (46.34). Nine sectors ended in negative territory with consumer staples (-0.6%), consumer discretionary (-0.6%), and utilities (-1.0%) rounding out the leaderboard. On the flipside, the heavyweight financial sector (+0.8%) finished with the only gain. Volume were below average at 737mil shares. US After Hours CCUR +8%, VEEV +4.5%, NCS +2.8%, CHS +2.4%, OOMA +1.9% , AVAV -12.7%, HRB -6.8%, CAL -6.7%, PANW -5.1% on Earnings. Asian equity markets are mixed despite the down day on Wall St, as Nikkei225 has led key indices amid fresh selling in JPY. With expectations building for a close Fed decision in September, barring a disappointing non-farm payrolls report this Friday, USD/JPY has tested ¥103 level for the first time in a month, consolidating those gains in Asian hours. Japan industrial output missed expectations, coming in flat m/m and falling by bigger than expected margin y/y. BOJ's Funo reiterated central bank's position that all tools can be mobilized to achieve 2% inflation target, and while he maintained FY17 time frame for achieving that forecast, the risks to achieving that objective are seen as significant. Funo added that private consumption is showing some weakness but maintaining resilience as a trend. In China, all 4 top banks have now reported their results with BOC and ICBC disclosing H1 earnings overnight. The trend of marginally higher NPL's has been consistent for the top 4 - ICBC saw a 5bp rise to 1.55%, BOC a 4bp rise to 1.47%, CCB a 5bp rise to 1.63% and AgBank a 1bp increase to 2.40%. Other metrics such as ROE and NIMs for ICBC were lower y/y, sending the stock slightly lower

Macro :

- Blackstone Said to Weigh Buying $3.6b German Landlord

- Swedish Review Proposes 8% Cap on Welfare Profits, SVT Reports

Keep an eye on :

- AIR FP : Airbus Working on Two Pilot-Less Aircraft Projects: Figaro

- ALV GY : Allianz Sees Tougher German Industrial Insurance Price War: B-Z

- APPL US : Vestager Says Apple Case Is About Specific Benefits to Company

- AREVA FP : Areva Initiates Process to Transfer Nuclear Fuel Ops to Newco

- AKE FP : Arkema Says Legros, André to Join Executive Committee

- AZN LN : AstraZeneca to Pay $4.33m Disgorgement for FCPA Violations

- BLT LN : BHP CEO Mackenzie Won’t Get Bonus After Samarco Dam Failure

- BIM FP : Biomerieux Lifts Targets; Sales Growth May Exceed 6%-8% Range

- EN FP : Bouygues 1H Sales Decline, Keeps Outlook; Names Two Deputy CEOs

- RLD SW : Edmond de Rothschild 1H Net Inflow CHF2.3B up 1.7% vs Yr End

- XOM US : Exxon Said Seeking Potential Buyer for Montana Refinery: Reuters

- LEY FP : Faiveley/Wabtec Said on Track for EU Approval, MLex Says

- GAM SM : Gamesa, Siemens Reject GE’s Offer for Adwen JV: Reuters

- GSK LN : Glaxo Sees Sales Boon From Addition of Novartis Vaccines

- ILD FP : Iliad 1H Revenue, Ebitda Climb; Keeps 2020 Margin Target

- ISAT LN : Rumors of US Interest (Echostar & Dish)

- KLM NA : KLM CEO Elbers Says EU2b of Investments Needed in Next 4 Years

- LISP SW : Lindt & Sprungli Names Martin Hug Group CFO

- MAU FP : Maurel & Prom: 1H Current Op. Loss EU2M; Sales EU142M

- NOKIA FH : Nokia Technologies Unit Chief Haidamus to Step Down

- NOVN VX : Novartis Wins FDA Approval for Biosimilar of Amgen’s Enbrel

- NYR BB : Nyrstar Hedges ~70% of Free Zinc Metal for Sept. 2016-1Q 2017

- OCDO LN : Still rumors of Walmart interest - Guardian

- OPERA NO : Opera Software 2Q Revenue Grows; Sees Deal Closing End Sept.

- RIO LN : Rio Tinto Outlook to Stable from Neg by S&P, L-T Rating Affirmed

- SAND SS : Sandvik Can Reach Operating Margin of 15% or More, CEO Says: DI

- SIE GY : Gamesa, Siemens Reject GE’s Offer for Adwen JV: Reuters

- SLB US : Schlumberger Sees Drilling Group 3Q Results Lower vs 2Q

- SHP LN : Shire ADR Sept. $202.50 Calls Active on Bidside

- TKA GY : Thyssenkrupp-Tata Venture Talks Said Focused on U.K. Unit Value