TheChek News Flow

*INMARSAT TO START NEW CONV BOND OFFERING OF UP TO $600M DUE '23

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.