EU Commission authorizes sale of genetically modified soybeans in Europe
The European Commission has granted import approval for Roundup Ready 2 Xtend soybeans. This milestone allows for the import and food/feed use of Roundup Ready 2 Xtend soybeans into the European Union. The European Commissions approval follows Monsantos February announcement of Chinese import approval. With both the EU and Chinese import approvals and the U.S. Environmental Protection Agency (EPA) in the final stages of review for over-the-top use, Monsanto can now look forward to a full system launch in the United States in 2017 and continues to be in a strong position to supply roughly 15 million U.S. soy acres when the selling season arrives. A full system launch also is planned for Canadian soybean growers in 2017 given the previous Canadian regulatory approval for Roundup Xtend with VaporGripTM Technology and XtendiMax herbicide with VaporGrip Technology.
Roundup Ready 2 Xtend is Monsantos newest soybean platform that includes tolerance to dicamba. This new dicamba-tolerant trait is stacked with the current GenuityRoundup Ready 2 Yieldsoybean trait technology, which offers farmers the highest yield opportunity with more beans per pod and more bushels per acre.
Picking Battles: US Pricing
Post the close of the acquisition of Cablevision (CVC), Altice assets are now split 40/40/10/10 between France (SFR), USA (Suddenlink, CVC), Portugal and smaller markets (principally in Israel, Caribbean). In this note we review the coming quarter and carry out a deep dive on US broadband (and TV) pricing. Recent broadband tariff moves at Suddenlink in particular bode well for cable gross profit growth. We retain our Outperform rating on Altice OP PT €20/share (was €30) and Top Pick on SFR PT €45/share (was €54).
SFR (Top Pick PT €45, was €54). SFR has raised prices, is investing in 4G catch up, fibre coverage expansion which combined with 2H bias to cost savings should see them on track to deliver c€4.0bn EBITDA. We estimate that SFR will generate ~€0.75bn and ~€1.0bn FCF in 2016 and 2017 and that the shares trade on 5.5x EV/EBITDA and 8.3% equity FCF yield for 2016E offering potential upside. We lower our PT to €45.00/share (was €54.00) using a 2.0% terminal growth (was 3.0%) as we standardise assumptions across our coverage group.
Portugal and smaller assets. Portugal should face easier comps in the coming quarters reducing both enterprise and wholesale drag. Coming to resolution with NOS over access to premium sports cost remains a key driver for investors.
Picking battles - USA cable pricing. Along with our US colleague, Jonathan Atkin, we have done a deep dive on US broadband, dual and triple-play prices (see Broadband/Video Pricing & Product Update: 2Q16). Key to successful pricing is segmentation and the ability for cable players to driven higher gross profit by shifting consumers to higher speed broadband (on higher ARPU/gross profit) to mitigate risks from 'cord cutting' (consumers spinning down from high price TV bundles to cheaper OTT offerings).
Suddenlink moves in the right direction. Suddenlink has recently simplified its broadband offers to four tiers from 35mbps/US$39 per month, 100mbps/US$49, 200mbps/US$59 and 1Gbps/US$99 (with prices rising by US$5 per year, wifi-routers etc rented at US$10/month). Encouraging consumers to move to higher ARPU and gross margin broadband is key to cable profit growth.
Altice (Outperform PT €20, was €30). Altice has now closed the acquisition of Cablevision (CVC). Altice US cable assets combine high growth, lower competition Suddenlink and lower growth, more competitive urban franchise of CVC. We see future value creation driven broadly equally between FCF from France and USA, however more visible growth in the US, some initial easy wins on cost cutting at CVC mean we expect US trends to come into focus in the coming quarters. We lower our price target to €20/share (was €30) using an Sum-of-the-parts methodology compared with the prior method.
Altice and SFR — Mixing the good and the bad
Western Europe | Integrated Telecommunication Services, Wireless
Telecommunication Services, Telecommunications Operators
We reduce our TP on SFR to €23.5 (from €32.5), reflecting cuts in our forecasts.
We reduce our TP for Altice to €14.0 from €14.5 due mainly to our change in TP
for SFR. Both Altice and SFR remain Neutral-rated. In 2Q16, we expect Altice
group revenue to decline by -2.1% yoy excl CVC, which is a small improvement
on -2.7% excl CVC in 1Q due to moderating declines in France and Portugal
offset by slightly slower growth in the US on a tough comparable. We forecast
2Q16 EBITDA margin of 40.2% vs. 37.9% in 1Q with PT and SuddenLink making
a positive contribution to the margin mix. We expect core SFR revenue to decline
by -5.3% (from -6.1% in 1Q) despite the price rises applied to the subscriber
base during 2Q. Inclusion of Media sees the reported top line decline by -3.2%
and reported EBITDA decline by -7.9% yoy.
RTRS - THALES TCFP.PA CEO SAYS SHOULD NOT EXPECT COMPANY TO REPEAT STRONG PERFORMANCE OF H1 IN H2
Our view: Unilever’s become boring ... witness yesterday's 'in line' interim
results. That’s the best tribute we can pay to the management of a
company that we used to regard as ineffectual at best. EPS growth is solidly
underpinned and cash conversion has improved substantially. That’s now
in the price: downgrade to Sector Perform.
Key points:
Understanding desultory TSR performance. At first glance we
were intrigued by Unilever’s 16% total shareholder return (TSR)
underperformance versus the consumer staples sector since Paul
Polman’s appointment as CEO in January 2009. In part that reflects the
precisely corresponding outperformance in the preceding four months, in
anticipation of his arrival. In part it also reflects, in our view, an excessively
sanguine attitude from investors prior to his appointment. As a result,
the significant improvement in both the quality and quantity of Unilever’s
prospects has not been fully reflected in its share price.
Improved prospects are in the price. That said, the shares have performed
quite well more recently (+10% relative since the beginning of 2014).
In consequence we believe that the share price now fairly captures the
group’s prospects. Yesterday's interim results did nothing to alter our
opinion; we forecast organic sales growth at the higher end of a 3-5%
target range, 40 basis points of annual EBIT margin growth and ongoing
cash conversion of 85-90%.
Shares are fair value. This yields an Adjusted Present Value (APV) of €42
(£36) in line with the current share price. This is not to belittle the effort
required to deliver these results; merely to point out that the market
now expects it. Consequently we reduce our recommendation to Sector
Perform.
ML
SSAB - Beat with underlying EBITDA +18% v cons. Q3 demand looks stable....+5%
CRH - Raising EBITDA guidance based on trading in late Q2 to EU 1.1bn.....+3%
ACACIA - Beat. EBITDA +30% ahead driven by higher prodn & lower costs...+2-3%
EDENRED - Steady with EBIT +2.5% beat at EUR 161m. FY16 guidance inline...+2%
VODAFONE - MSR 1.9% ahead of cons on strong nos in Germany,Spain,SA&Turkey+2%
SWEDISH MATCH - Operating margin a 3% beat, margin in Snus also good......+2%
THALES - Solid growth with net sales 3% & operating profit a 2% beat....+1-2%
GAMESA - Awarded seven contracts to provide wind turbines for 460 MWs.....+1%
BIG YELLOW - Good, occupancy +7% from the same qtr last yr, LfL rev +8%...+1%
SYNGENTA - Sales $7.1b v bbg cons $7.15b, sales 2% lower at constant FX...u/c
GECINA - Inline. A little more yield compression drives +4.8% NAV growth..u/c
BEAZLEY - GWP +2%, ROE 19%, PBT $150.2m due to an uptick in activity......u/c
MINERS - Copper -0.45%, Iron ore -3.3% with RIO OZ -0.3%, BHP OZ +0.3%..-0.5%
RICHEMONT - Cartier to cut prices in Japan by average 10% from Aug 5th....-1%
HAVAS - H1 rev 0.6% beat but organic growth is 3.0% vs cons of 3.2%.......-1%
TODS - Same store sales growth -15.7% vs market expectation of -15%.....-1-2%
DASSAULT AV - Net income beat (due to Thales) but EBIT is a miss........-3-4%
ELRINGKLINGER - Very disappointing. Has cut its 2016 EBIT guidance......-5-6%
LSL - Warning on Brexit. Expects profits to be significantly lower....-10-15%
MF
*SYNGENTA-Ebitda 1.77b(1.91),Sales 7.1b(7.146),Ebitda 1.77b(1.9)....-1.2%
*TIETO-Sales 381m(383),OP 35.8m(34),outlook unch,strong into no's...U/C
*THALES-Sales 6.85b(6.55),No Brexit impact,confirms targets.........+1%
*EDENRED-Sales 526m(520),OP 161m(153.5),o/lk confirmed,SI 9.6%......+2%
*TODS-Rev 497.6m(488),Euro Ex Italy -2%(-3.4),Sales -4.3%(-5).......+1%
*DASSAULT AVIATION-Sales 1.66b(1.54),Cuts Falcon delivery outlk.....-4%
*ELRINGKLINGER-Cuts 2016 Ebit guidance 140-150m(164),stk -6% a/h....-7%
*LINDT-Sales 1.5b(1.51),Ebit 98.4m(100.5),Org Sales Grth 4.4%.......-1%
*HAVAS-Net 82m(93),Rev 1.09b(1.08),OG 3%,Confident on FY targets....-1%
*SKANSKA-Rev 37.3b(39.7),OP 1.66b(1.62),Brexit no impact on uk......-2%
*HUHTAMAKI-Sales 742m(755),Ebit 77.8m(75.7),Conditions stable.......+0.5%
*TF1-Rev 543m(545),Net 12.5m(20.3),op 22m(36.9),small grth on FY....-2%
*PHILIPS LIGHTING-Rev 1.73b(1.83),Sales Growth -1.5%,names CFO......+3%
*KONECRANES-Sales 523m(515),Sees 2016 Sales same level as '15.......+2%
*SFS-Sales 689m(687),Ebita 93.3m(88),NP 47.1m(48.4),o/lk mixed......+1%
*SWEDISH MATCH-Sales 3.92b(3.73),OP 1.06b(1.05),outlook unch........+2%
*SSAB-Sales 14.5b(14.4),OP 592m(341),Ebitda 1.6b(1.277),Q3 ok.......+3%
Why Oil Traders Are Writing Love Poems to Yahoo
End of trusty Messenger system has oil traders in despair; Mr. Barsamian’s poem
Powerful forces have been roiling oil markets this year. There are the vagaries of Chinese demand, shifts in American production, the enigma of OPEC policy.
And then, of course, there’s the imminent demise of Yahoo Messenger’s old software version.
“I’m very upset,” said Andy Lebow, an energy analyst and former oil broker who is lamenting the final days of the old version, which Yahoo plans to scrap Aug. 5 to steer customers to its new Messenger system. “My username is attached to all the people that I talk to. That’s important to me.”
For as long as many of them have been working in the field, tens of thousands of oil traders around the globe have relied on the Yahoo system when logging trades for millions of barrels of crude and fuels such as gasoline every day. But Yahoo’s new Messenger won’t separately archive chats and will include the ability to “unsend” a message, making it incompatible with many trading companies’ regulatory requirements.
That’s unsettling legions of oil traders who spend all day on Yahoo Messenger placing orders and circulating gossip, jokes and headlines the way others use Twitter.
“The first question that suppliers ask their customers in energy, and traders ask one another, is ‘What’s your Yahoo address?’ ” said Elaine Levin, president of brokerage Powerhouse, whose Yahoo username is elainetradesfutures.
Traders’ Yahoo shorthand, cribbed from the futures market, includes a letter for each month (January is “F,” December is “Z”) and abbreviations for ports and storage locations. The phrase “how’s WTI CS U7” translates: “What is the price for a West Texas Intermediate crude swap for September 2017?”
Brokers “blast,” or simultaneously message, hundreds of people at once, with price information or a friendly “gm” (good morning).
Fuel trader Marc Refsoe Holm has his Yahoo username on his business card and said about 80% of his financial trades are over Yahoo Messenger. His habit puzzles new hires.
“Young people are like, ‘Wait, what?’ ” said Mr. Holm, 33 years old, who is head of the U.S. fuel desk for Maersk Oil Trading Inc. “They are a little surprised that we’re using such an old-school system.”
On any given day, Mark Benigno, co-director of energy trading at INTL FCStone Inc., has 100 chat screens open. “Sometimes you’re just BS-ing with people,” he said. With some contacts, “you talk to them 50 times a day, like, ‘Take a look at this YouTube’…It’s like being a teenager.”
That makes trading floors quieter than they used to be, said Ms. Levin, the brokerage president. “My bread and butter—‘I need to do a TAS trade,’ ‘I have an EFP that needs to be posted,’ ” is all conducted over Yahoo, she said, rattling off transactions including “trade at settlement” orders and “exchange of futures for physical” trades.
The Messenger version’s sunset date has inspired nostalgia among old-timers. Ernie Barsamian, chief executive of storage brokerage The Tank Tiger, in a note to clients wrote a poem:
“We all agree that Yahoo Messenger was the natural habitat/For traders to discuss whether the market was volatile or flat…/Now Yahoo thinks they are the windshield and we are the gnat.”
Many traders express bewilderment, even anger, that Yahoo hasn’t done more to accommodate them. “I still cannot figure out why Yahoo couldn’t see the diamond they had,” said Jorge Montepeque, a senior vice president at Eni Trading & Shipping.
A Yahoo Inc. spokeswoman said the company was aware of its central role in the oil market. Traders are a “small fraction” of Yahoo Messenger’s millions of users, she said, adding that Yahoo is focused on its consumer audience with its new Messenger.
Instant messaging is popular with traders in every market, but Yahoo has a particular foothold in oil.
Some oil veterans take a less charitable view of Yahoo Messenger. Newer financial messaging systems tend to be more sophisticated, letting users share live data and charts and more easily record details about deals.
Mary Ellen Viola, a United-ICAP broker, communicates with friends and family on Facebook, Skype, Twitter and her iPhone. She has never used Yahoo Messenger outside of work, she said. “It’s outdated.”
When Yahoo launched it in 1998, Messenger was considered transformative. For years, oil trading was handled on exchange floors, with traders screaming at each other in chaotic pits or yelling into phones.
Once instant messaging arrived in the oil market, “I thought the floor was over,” said Ray Carbone, president of Paramount Options, who used to work on the New York Mercantile Exchange floor. “I just smelled it.” (Oil options are still traded on the Nymex floor, but not futures.)
It wasn’t long before Yahoo Messenger reached critical mass and became an essential trading tool. “It snowballed,” said Morgan Downey, who joined Yahoo Messenger in the 1990s while trading oil at a bank.
Brokers encouraged him to join the service, and soon the bank’s customers, such as refiners and airlines, were also on the system, he recalled. “After six months,” said Mr. Downey, now chief executive of data provider Money.net, “no one could leave Yahoo Messenger.”
With oil’s Yahoo Messenger era coming to an end, traders and brokers have been shopping around, signing up for multiple services or waiting to see what peers choose before making a decision.
The competition is fierce. Intercontinental Exchange Inc. cut the price for its chat application, ICE Instant Messaging, to zero in June and said its chat users are up 65% this year. CME Group Inc., which operates the Nymex, said it is using the Yahoo Messenger decommissioning to push its own instant-messaging application. Bloomberg terminals are widely used by banks, hedge funds and other traders, but many smaller participants in the oil market, such as gas-station chains, don’t use the terminals.
Doug King, chief investment officer at RCMA Asset Management, said he already communicates via Bloomberg, WhatsApp, email and telephone.
And his peers who are groaning about life after Yahoo? “They’re all dinosaurs,” he said.
RTRS - VODAFONE VOD.L CEO SAYS NOT WORKING ON A TIGHTER COLLABORATION WITH LIBERY GLOBAL
EUROPEAN BANKING STRATGEY: The next event is the EBA stress test on 29 July, and in isolation we argue this could be a positive outcome. We have run a model, which resembles the EBA exercise, covering 27 EU banks. We estimate total CET1 consumption to 164bp in the adverse scenario, but well above our Brexit 'shallow recession' impact of c.50bp. We note, banks should do better as 1) capital is better; 2) ESRB scenario is somewhat milder. Investors will screen for outliers; names with high NPL levels, small mgmt. buffer to SREP and/or material litigation costs since 2011 are sensitive: We see that UCG (N) and DB (N) could be c.100bp (or more) below their adj. SREP ratio, in the stress test.