THYSSENKRUPP CEO SAYS ANY STEEL CONSOLIDATION MAY TAKE A WHILE
Late cycle: pipeline is king, and IHG is lagging. Downgrading IHG to UW, AC to N, retain WTB OW
supply growth puts pressure on RevPAR? Only if supply growth in turn
fuels stronger room openings. In our coverage, IHG (downgrade from
Neural to Underweight) appears most at risk, with its pipeline not
warranting much acceleration in room openings, and leaving it as
essentially a cycle play. In contrast, we see Whitbread (reiterate
Overweight) as now a de-risked “pure rollout” story with little reliance on
cyclical upside. Accor (downgrade from Overweight to Neutral) has a
more balanced profile, but consensus expectations appear high.
* IHG: UW, 17.9x CY17e P/E, PT 2,865p ie 2% potential downside.
IHG’s December 2015 pipeline does not support a marked acceleration
in room openings, in our view. Signings represent 30% of the existing
network, compared to 40% at a similar stage of the past cycle. We
believe management is addressing these concerns, but the short-term
consequence is an increase in development costs ($7m guided for
FY16e, ie a -40bp margin drag for the group). Market expectations seem
optimistic in this context (JPMe FY16e EBIT $687m, -2.5% below
Bloomberg consensus). Our 6.1% comparable 2016e-2018e EPS CAGR
is predicated on 2.7% RevPAR growth and 3.3% room openings.
* Whitbread: OW, 13.7x CY17e P/E, PT 4,400p ie 17% potential
upside. WTB looks set to deliver 10% EPS CAGR by 2018e, predicated
on only 1.7% RevPAR growth and 6.8% room openings. FY16 ended on
a supportive note with regard to the ongoing rollout, with over 4,000
room openings in Q4 alone and a higher mix of lower-risk room
extensions announced for FY17e. Market expectations are now largely
rebased on both the P&L and the cash flow side (JPMe FY17e PBT
£570m, -0.7% below consensus, and capex £705m, now only +3.5%
higher vs +29% higher in January).
* Accor: N, 17.2x CY17e P/E, PT €42 ie 8% potential upside. Accor boasts
a record strong pipeline, and benefits from more margin upside than peers
on the back of ongoing real estate restructuring. Our 12.5% comparable
2016e-2018e EPS CAGR is predicated on 2.8% RevPAR growth, 6.0%
room openings, and +220bp margin improvement. But following the
acquisition of OneFineStay, we now see the investments in digital opex as
unlikely to be phased out in the short term, which consensus expectations
do not yet reflect (JPMe FY16e EBIT €720m, -5.5% below consensus).
Not yet time for profit taking ahead of Q1; revisiting the upside
given the strong YTD performance; we, however, believe this could be too
early. Q1 should be a strong quarter, with French toll road traffic expected to
be c. 5% (JPMe), and order intake momentum likely to be supportive. We
continue to see meaningful upside to estimates and share prices. We reiterate
our OW recommendation for both stocks. Our revised April-17 PTs of €73
and €79 for Vinci and Eiffage suggest 11.1% and 15.6% upside.
Q1 should be strong. We expect toll road traffic to be very strong in Q1,
continuing on the 3% underlying trend observed in Q4, and further boosted
by one extra day in the period from the leap year and the positive impact of
the Easter holidays falling in Q1 this year. Overall, we expect 5% traffic
growth for the sector in Q1. Although we believe it is still too early to see a
bounce in contracting revenues, we expect order intake momentum to
remain encouraging.
See upside risks to estimates. We see upside risks on: 1/ traffic
expectations, given our (and we believe consensus) traffic growth
assumption remains conservatively 1.5% for 2016E; 2/ contracting revenue
which we expect to decline this year; 3/ margins assumptions which we
model flat at best in toll roads and only slightly improving from a low base
in contracting; and 4/ refinancing opportunities where we continue to see
material upside at Eiffage in particular. We revisit the upside potential in
this note for both stocks.
Valuations remain attractive. We mark to market our PTs for the current
French yields, which boosts our April-17 PTs for Vinci to €73 (11.1%
upside) and Eiffage to €79 (15.6% upside). Despite the YTD strong
performance, the stocks are trading on a small premium to their 10-yr
historical average, whereas the share of profits coming from the concession
divisions has increased materially, justifying in itself a material premium, in
our view. FCF yields for Vinci and Eiffage are 6.6% and 6.9% in 2016e.
See a further €18 per share on Eiffage by 2018 purely on deleveraging.
We forecast net debt to fall from €11.8bn in 2016E (including swaps) to
€9.9bn in 2018E (excluding swaps) at Eiffage. This in itself should boost
Eiffage’s equity value per share by €18 by 2018, and remains, in our view, a
material source of upside. We note that a placement from BPI (13% of
FGR’s capital) post the expiry of the lock up on April 22 would increase the
free float, which we think would be welcomed by the market.
European Luxury - Global Blue tourism spend data turns negative in March; Q2 looks
set to remain difficult
Tourism spend is an important component of luxury revenue making up c35% of sales globally
according to Bain. Our monthly report on VAT refund provider Global Blue's data gives us a good
indication of travel spend trends. Overall Q1 has seen a marked slowdown notably from the Chinese
consumer in Europe (-18.9% y/y vs. +51% in 2015) likely due to the fallout from November's events in
Paris. With Hong Kong remaining weak, we estimate that the Chinese consumer outside of the Mainland
(c25% of sales) is down at least high single digit YTD. Early Q1 reporting has indicated that Chinese
spending worldwide has been "flattish"(LVMH) to "down" (Burberry) suggesting that Mainland China
(c10% of sales) and other key tourist destinations not captured by Global Blue have not fully
compensated for the above loss of tourist sales.
* Q2 could see further pressure on tourist flows
Last year the peak growth rates y/y of tourists took place between March and August. Currencies played
an important role in stretching luxury price differentials and making regions including Europe relatively
more attractive destinations. Ease of access was also improved by streamlined visa processes and more
direct flights. Fast forward twelve months and the RMB:EUR has depreciated c3% y/y. Security concerns
are top of mind following events in Paris and Brussels. Regional price differentials have been narrowed in
soft luxury and substantially reduced in much of hard luxury. Added to which the comparison base for
global tourism remains very tough in Q2 (+42.7% y/y), albeit below the March level (+47.4%). In our
view all the main indicators point to global tourism remaining under pressure in Q2. Such a scenario
would likely have a greater impact on Q2 trading than Q1 given the greater importance of tourism for
this quarter.
* By destination: Europe (-22.1%) is underperforming Asia (-1.1%)
France saw -29.3% y/y in March (Q1 -21.1%) but all the other main European destinations also saw
declines in March, such as Italy -20.8%, as the comparison base began to toughen substantially. Japan
continues to outperform though even here the growth rate moderated (March +14.1%, Q1 +30.7%).
* By nationality: Chinese tourism spending (ex HK) fell -8.0% in Q1
Chinese spend in March was -26.4% y/y against the major step up in tourist numbers m/m last year. The
US consumer remained strongest (+9.7% in March, +28.7% in Q1); the Middle East consumer was
stable despite the weaker oil price (-0.1%, +8.7% Q1).
ML
* NN GROUP - Clean up. ING selling 45.7m shrs @ EUR 30.15; CS/ING/JPM/UBS....
* ELIS - Eurozeo's LH27 selling 17.1m shrs (will own 23.47% stake); DB.......
* GLOBAL DOMINION ACCESS - Primary of $170m; JPM/SG/Santander................
BILFINGER - Confirms in talks with Blades from Linde to become new CEO.......
MITTAL - Spec to be in talks on merger with ThyssenKrupp; Handelsblatt..+3-5%
FAURECIA - Solid. Org growth 4.6% v BAML 3.5%. FY guide looks conservative+2%
OVS - 4% net income beat vs BAML est, div of EUR 0.15 is encouraging......+2%
ELISA - Rev inline at €390M. EBITDA 2.5% ahead at €137M. Guidance reit..+1-2%
MAN GROUP - 3% beat. Strong AHL flows and a not so bad perf from GLG....+1-2%
EDF - Co preparing EUR 18bn of cost savings according to Le Figaro........+1%
STMICROELECTRONICS - Said to seek successor to CEO Carlo Bozotti..........+1%
CREDIT SUISSE - Partial RMBS settlement but bigger charges still to come..u/c
THYSSEN - Said to be talking with Tata Steel, Salzgitter and Mittal.......u/c
MEDA - Mylan convinced 90% of Meda shareholders will accept bid; DI.......u/c
CARREFOUR - Q1 sales slight beat. Soft in France, strong international....u/c
VOLKSWAGEN - 1Q EU market share drops to 23.4%, lowest level since 2011...-1%
EDENRED - 1Q16 sales 2% miss. FY16 guidance reit at lower end of 8-14% tgt-2%
CS Indications:
Burberry M/P Luxury fashion retailer's shares look cheap, Lex article
Carrefour UNCH Sales beats estimates, China better
Comhem -2% Jon James Resigns as COO
Draegerwerk -4-5% 1Q order intake declined 2.5%, Net sales decline 2.4%
Edenred -2% Pressures remain in Q1 but FY guidance re-iterated
Elisa +3-4% 3% beat at EBITDA, guidance reads fine
Faurecia UNCH Numbers mixed, maintain cautious view
Gemalto -1-2% CS reiterate UNDERPERFORM (Risk to guidance)
H&M M/P March Sales Increased 2%
Man Group +1-2% AUM $78.6b (CSe $79b, cons $78.5b).
Miners -0.5% Copper -0.15%, Brent -0.85%, Iron Ore -0.95%, China -0.30%
Mittal +3% ThyssenKrupp/MT/SZG, merger spec, Handelsblatt
OVS +1-2% Sales known, gross margin ok, Outlook for 2016 upbeat
Saltzgitter +2-3% ThyssenKrupp/MT/SZG, merger spec, Handelsblatt
Thyssen +2% ThyssenKrupp/MT/SZG, merger spec, Handelsblatt
Zumtobel -7-8% Lowers forecasts, unsatisfactory March and weak April
MainFirst Pre Mkt Indications
*THYSSEN-Looking to merge with comp,spoken 2 Tata,Salzgitter,MT.....-1%
*CARREFOUR-Sales 20.1b(20),French Sales 9.335b(9.38),C/C 8.30.......U/C
*UNICREDIT-To place up to €1b or 20% of fund in Atlante - CEO.......+1%
*ZUMTOBEL-Sees Adj Ebit 55-60m vs prev 70-80m,Orders April weak.....-10%
*ELISA-Rev 390m(390.5),Ebitda 137m(133.5),EPS 39c(37c),o/l flat.....+2%
*STM-To seek successor to CEO Bozotti,we see this as a +ve..........+0.5%
*DRAGERWERK-Q1 Sales -2.4% 532.4m,Ebit -16m,Exp 5-10% EPS d/g FY....-6%
*FAURECIA-Q1 Rev €4.66b,FY Cash Flow 300m,Op Margin +20-60bp's......-2%
*EDENRED-Q1 Rev 249m,Issue Vol +7.4% LFL,FX -ve impact from Latam...+2%
*H&M-March Total Sales +2%,already known............................U/C
*VW-Q1 European market share drops to 23.4%,lowest since 2011.......+0.25%
*MAN GRP-Net inflows $0.5b,Sales $5.1b,Redemptions $4.6b............+2%
Shore call
ACAL - sales +6%,margins continue to be strong,sees FY slight better then est+3%
MAN GROUP - FuM stable at $78.6bn,positive net inflows.......................+2%
POLYMETAL - gold production -4% yr-on-yr,net debt increased..................-1%
BEGBIES - number of manufacturers in distress +20% on prev yr...............UNCH
FAIRFX - revs +35.7%,profits +31.8%,pre-tax loss widens,sees FY inline......UNCH
VICTORIA - ceased discussions re potential acquisition of Lano Carpets......UNCH
Bata France sold to consortium of buyers; brand to disappear in France
French shoe retailer Bata France, put into receivership by the Commercial court of Nanterre, has been sold to a consortium of buyers including the Etam and Courir groups, French daily Les Echos reported.
The unsourced report said that the consortium will take over 47 points of sales and 267 employees, as well as EUR 8m of debt. The report added that the Bata brand will disappear in France.
Bata France operated 72 stores with 355 employees.
Les Echos
Steven Cohen Eyes Return to Hedge Fund World
Billionaire investor is listed as owner of Stamford Harbor but won’t act in a supervisory capacity
Steven A. Cohen is starting a new hedge-fund firm months after a settlement with regulators put constraints on the veteran investor’s return to the business.
The billionaire is listed as the owner of Stamford Harbor Capital L.P., in documents filed earlier this month with the Securities and Exchange Commission. The Stamford, Conn.-based firm can seek outside money as hedge funds do, according to the documents.
In Mr. Cohen’s January settlement with the SEC he agreed to a two-year restriction from serving as a supervisor at a registered fund. According to the April 1 documents filed with the SEC, he will “not act in a supervisory capacity” with Stamford Harbor.
He previously ran one of most country’s most profitable hedge fund firms, SAC Capital Advisors LP. He now is chief executive of Point72 Asset Management L.P., which manages the wealth of Mr. Cohen, his family and employees. Stamford Harbor Capital’s address is located across the street from Point72 Asset Management, according to the filing. Some executives working for the new firm also have dual roles with Point72.
James Cox, a Duke University law professor, said the development represented a “black eye” for the SEC, which agreed to a settlement that allowed Mr. Cohen to open a new fund as long as he wasn’t the supervisor of it.
“This is consistent with other times where the SEC has just blinked when stared down,” he said. “I’m completely dumbfounded.”
The SEC declined to comment. The SEC agreement with Mr. Cohen requires that an independent consultant review any entity Mr. Cohen “directly or indirectly wholly owns or controls” until the end of 2017.
Bloomberg News earlier reported Stamford Harbor Capital’s filing.
Mr. Cohen had been widely expected to return to the hedge-fund world after his prior firm, the eponymous SAC Capital Advisors, pleaded guilty to criminal insider-trading charges in 2013.
Despite years of investigations, prosecutors never charged Mr. Cohen himself with criminal charges. The government’s last effort, an SEC civil case for failure to supervise employees, weakened considerably after a 2014 appeals court ruling eventually forced the agency to cut half of its case.
A spokesman for Mr. Cohen said in a statement that Stamford Harbor may or may not seek outside capital. The firm has no assets under management at present.
But Mr. Cohen has been building in recent years an operation that could quickly transition to managing outside money, people close to the firm said.
Point72 has been interviewing job candidates in areas like business development that would face the outside world. It is also been rebuilding its London and Hong Kong offices, which were gutted amid the government investigations, said the people familiar with the situation.
Still, Mr. Cohen has told associates and potential investors that he is careful to avoid outright fundraising, lest he trip the agreement of his settlement, two of the people familiar with the situation said. Point72 isn’t allowed to raise outside money because of the SEC’s agreement with Mr. Cohen.
Dow+0.10% S&P+0.02% Nasdaq-0.03% Russell-0.12% VIX 13.70
US Market closed near the flat line. BAC gained 2.5% after reporting a bottom-line beat on light revenue. The company attributed part of the revenue shortfall to a 16.0% decline in trading revenue for the quarter. Meanwhile, WFC ended its day beneath its flat line as investors weighed a $200 million increase to its loan loss reserves against a top and bottom-line beat. The broader sector has gained 4.3% this week, but remains down 3.7% on the year. WTI crude ended its day lower by 0.6% at $41.45/bbl. Volume were below average at 882mil shares. US After Hours GBSN +39%, XXIA -15% following preannouncements, DEPO +1.7% (decides not to pursue reincorporation proposed by Starboard),RLYP-14% Said to have dropped M&A advisor Centerview Partners. Asian equity markets are trading mixed, as the tidal wave of China economic data did not alter the perception of a managed slowdown in the world's 2nd biggest economy. Q1 GDP came in at a 7-year low of 6.7% - in line with expectations - while industrial production, retail sales, fixed asset investment, and new Yuan loans beat estimates. China Stats Bureau spokesperson reiterated that the economy operation is better than expected but downward pressure on cannot be underestimated, warning that L-shape in economy likely to persist. PBOC Dep Gov Yi Gang reiterated that China GDP will be 6.5-7.0% this year. In Japan, Fin Min Aso said that despite the G20 pledge to avoid competitive devaluation, the govt will not hesitate to intervene in FX markets if conditions become disorderly. local press report hinted that the central bank could consider boosting its purchases of ETFs. This is also in line with speculation that the BOJ might return to QQE for easing rather than push rates deeper into negative territory.
Nikkei -0.34% Hang Seng -0.11% Shanghai -0.25%
Eur$1.1257 CNH 6.4903 CNY 6.4844 JPY 109.56 GBP 1.4152 CHF 0.9674 RUB$66.1967 WTI$41.56 (+0.12%)
S&P+0.01% EuroStoxx-0.10% Dax-0.03% SMI+0.06%
Macro :
China’s Economy Grows 6.7% in 1Q Y/y; Est. 6.7%
Lagarde: Greek Debt Operation Doesn’t Necessarily Mean Haircut
EU Finance Ministers to Mull Options on Bank Sovereign-Debt Risk
EU28 March Car Registrations Rise 6% Y/y to 1.701m Units
Keep an eye on :
- ABI BB : AB InBev, South Africa Agree Approach to SABMiller Purchase
- AC FP :
- AF FP : Air Europa attracts Air France-KLM interest - El Confidential
- MT NA : ThyssenKrupp Looking to Merge With Competitors: Handelsblatt
- GBF GY : Bilfinger Says Decision on Future Chairman Not Yet Taken
- CA FP : Carrefour 1Q Sales In Line; Other Europe LFL Sales Beat Ests.
- CSGN VX : Credit Suisse to Pay $50.3m Penalty to National Credit Union
- DBK GY : Deutsche Bank Abbey Life arm may get offers from Phoenix and Swiss Re this week; Legal & General only interested in Abbey annuity business - FT
- DRW3 GY : Draegerwerk Reports Negative Earnings in 1st Quarter
- EDEN FP : Edenred 1Q LFL Issue Vol. Growth Beats, Had Negative Latam FX, Edenred 1Q Had Few Surprises, Outlook Looks Achievable: Barclays
- EDF FP : EDF Is Preparing EU1B Program of Cost Savings, Figaro Says
- ELI1V FH : Elisa 1Q Ebit Beats Ests; Sees FY Revenue Little Changed
- ENEL IM : Enel Open Fiber majority stake could be put up for sale at future date
- EO FP : Faurecia 1Q Reported Sales Rise 0.1%: FY Forecast Reiterated
- FIA1S FH : Finnair could be target for large industrial player - Kauppalehti Online
- GALP PL : Galp Raised Output in First Quarter, Processed Less Crude
- GLEN LN : Glencore, Nyrstar Seen Reversing Zinc Output Cuts, BMI Says
- HMB SS : H&M Chairman Stefan Persson Has Bought Further 3.7m H&M Shares
- IHG LN : -1.85% in NY on JPM Dwg from Neutral to UW, closed @ 2928 should open ~ 2870 if in line with NY
- LONN VX : Catalent Potential Deal Premium Likely to Be Small: Jefferies
- MEDAA SS : Mylan Convinced 90% of Meda Shareholders Will Accept Bid: DI
- MRL SM : Merlin Properties Sells EU850m of 7-Year Bonds
- COX FP : Nicox 2015 Operating Loss Widens to EU28.9m; Cash EU29.6m Dec 31
- NN NA : ING Selling Remaining 14.1% Stake in NN Group, Terms Show, NN Group Prices 45.7m-Shr Offering at EU30.15
- SAS SS : Lufthansa issues EUR 475m promissory note; speculation over SAS grows - Borsen
- SHP LN : Baxalta Sets May 27 for Shire Deal Vote; Sees Closing Early June
- STM FP : STMicroelectronics Is Said to Seek Successor to CEO Bozotti
- TKA GY : ThyssenKrupp Looking to Merge With Competitors: Handelsblatt
- TLW LN : Tullow to Restart Jubilee Output on April 23, Joy FM Reports
- UCG IM : UniCredit to Place Up to EU1B or 20% of Fund in Atlante: CEO
- VOw3 GY : *VW'S 1Q EUROPEAN MARKET SHARE DROPS TO 23.4%, LOWEST SINCE 2011
- ZAG AV : Zumtobel Group Lowers Forecast for Current Financial Year