Special Situation: Bouygues price reflects the chances of a sale of Bouygues Telecom - Short EN: FP / Long NUM: FP, ORA: FP and ILD: FP
On January 5, Bouygues confirmed earlier press comments that it was in early-stage talks with Orange for a potential combination of the two companies. We believe Orange-Bouygues deal can go through although there are still a lot of obstacles to meet including regulatory risks combined with uncertainties regarding the ability of Orange to make asset disposals on good terms to a third party player.
In this report we do not attempt to take a view on the likelihood of such deal but we rather argue that a merger between Bouygues and Orange is already priced in Bouygues share price. In other words, if consolidation occurs, we see little upside whereas the downside risk in a no-consolidation scenario would be considerable based on the current share price. We base our thesis on a SOTP analysis for Bouygues in which we take the Telecom Business at the maximum estimated deal price (€10bn, 13.5x EV/EBITDA 2015). This analysis shows that in a best case scenario the discount to NAV is 24%. The question is of course what discount would be adequate for Bouygues post the telco disposal. While there is no “correct “answer, we believe that given the portion of the unlisted assets in addition to the expected structure of the deal in which Bouygues will have a minority stake in orange, the appropriate discount should be at least 15-20% (in a strong market). Another variable is what use will Bouygues make of the cash from the sale. In any event, to our view, the current level doesn’t not leave room for meaningful upside.
Full report attached.
Dow+0.09% S&P-0.13% Nasdaq+0.04% Russell-0.30%
US Market closed near from the flat line despite early weakness and pressure on oil. Equities stumbled at the start of today's session as a downturn in oil weighed on the broader market. Today's oil trade centered on news from Iranian officials that the country will not be joining production cap efforts until its exports grow to four million barrels per day. As a result, the potential March meeting was called further into jeopardy as investors turn to April for action from OPEC and non-OPEC members. For its part, WTI crude ended its day lower by 3.8% at $37.19/bbl. Four of ten sectors were able to finish their session above their flat lines with consumer discretionary (+0.4%), utilities (+0.1%), and technology (+0.1%) leading the pack. Meanwhile, materials (-0.7%), energy (-0.6%), financials (-0.4%) and health care (-0.4%) rounded out the board. US After Hours CPXX +346.4%, CTIC +30.8%, IMMU -15.1%, NVIV -10.9% following news. Asian equity markets tracked a relatively less volatile US session going into the Bank of Japan decision but have since seen some modest selling. The risk-off mode after the BOJ statement was less the result of what they said (much of which was speculated in Japanese press this week) but rather the function of what they didn't say - namely omitting promise to take rates deeper into negative territory as they claimed in January.
Nikkei-0.68% Hang Seng -0.61% Shanghai +0.17%
Eur$ 1.1086 CNH 6.5038 CNY 6.5092 JPY 113.14 GBP 1.4255 RUB $70.58 WTI $ 36.68
S&P -0.36% EuroStoxx -0.39% Dax -0.33% SMI -0.42%
Macro :
BOJ Keeps Monetary Base Target Unchanged, Neg. Rate at -0.1%
European Commission Proposes Relaxing VAT Rules: Handelsblatt
ValueAct’s Jeff Ubben Says Oil Can Go to $100 by 2019: CNBC
Keep an eye on :
- ABE SM : Abertis Prepares Bid for M6 Toll Road in U.K.: Expansion
- ABI BB : AB InBev Board Member Van Damme Sells EU2.47m of Brewer’s Stock
- ASSAB SS : Assa Abloy Buys U.S.-based Lighthouse With Expected Sales $41m
- ATC NA : Altice Sees Improving Revenue Trend, Adj. Ebitda Growth in 2016
- BPE IM : Pop Emilia Said to Put EU900m NPLs Up for Sale: Rtrs
- FIM FP : Fimalac to Buy Back Shares at EU101 Per Share Including Div.
- DL NA : Dutch Court Allows Delta Lloyd Rights Offer Vote at EGM
- EDF FP : EDF Dismisses Report of Unsafe Nuclear Plant Backup Systems
- MALA FP : Campari to Start Takeover Offer for Grand Marnier Owner
- GEBN VX : Geberit FY In Line, Outlook Cautiously Optimistic: Berenberg
- IAG LN : Iberia Airline Plans New Job Cuts, Chairman Says: Reuters
- INW IM : Cellnex, F2i Present Binding Offer for Inwit: Expansion
- ISP IM : Intesa Said to Be in Talks for Sale of EU3b Consumer Loans: Rtrs
- KUNN VX : Kuoni Group Posts 2015 Loss
- NUM FP : Numericable-SFR 2015 Adj. Ebitda Beats Ests.
- SBRY LN : Sainsbury 4Q LFL Sales Ex-Fuel Beat Ests.
- SCHS GY : Schaeffler AG: Schaeffler AG revenue increases to above EUR 13 billion 2016-03-15 -->+4,1%
- SIX2 GY : Sixt 2015 Rev. Rises 18%, Misses Est.; 2015 Pretax Up 18%
- TIT IM : Vivendi May Ask for Telecom Italia Board Renewal in May: Sole
- TODS IM : Tod’s 2015 Ebitda In Line With Ests.; Ebit, Dividend Miss
- VIRP FP : Virbac FY Net EU9.4M; Est. EU5.56M
- VIV FP : Vivendi May Ask for Telecom Italia Board Renewal in May: Sole
- VOW3 GY : VW Shareholders File EU3.26b Suit Against Co., Sueddeutsche Says -->-2%
After Hours Summary: CPXX +346.4%, CTIC +30.8%, IMMU -15.1%, NVIV -10.9% following newsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: SZYM +31.6% (also announces multi-year global supply agreement with Unilever), BORN +23.5%, AMPH +14.9%, ESI +14.1%, INGN +12.7%, BDE +12.4%, ARTX +5.1%, PFSW +4.9%, VSLR +4.3%,
Companies trading higher in after hours in reaction to news: CPXX +346.4% Announced 'positive' results from Phase 3 trial of VYXEOS Liposome for Injection in patients with high-risk acute myeloid leukemia. CTIC +30.8% Provides update regarding the availability of pacritinib to certain patients with myelofibrosis, says FDA has expressed interest in allowing patients to continue receiving pacritinib under a single patient IND program. OUTR +10.5% To explore strategic and financial alternatives; increases quarterly dividend to $0.60/share from $0.30/share. BCRX +5.4% D.E. Shaw & Co discloses 5.1% passive stake. AVP +2.5% To reduce headcount by 2,500 positions as part of 3-year plan.
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: MNKD -15.8%, DCO -7.6%, DOV -2.1%, JMBA -2%, KANG -1%,
Companies trading lower in after hours in reaction to news: IMMU -15.1% To terminate the Phase 3 PANCRIT-1 trial with yttrium-90-labeled clivatuzumab tetraxetan in patients with metastatic pancreatic cancer. NVIV -10.9% Commences an underwritten public offering of common stock for unspecified amount. APPY -5.8% Terminates proposed transactions with Strand Life Sciences. TCON -5.4% Initiates phase 1B study of TRC105 in patients with lung cancer. CBPX -3.9% Announces 4.5 mln share secondary common stock offering by selling shareholders & 900,000 share repurchase. PRTY -2.7% Acquires Festival SA for ~$5 mln.
>>> Up
*BANKIA RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
*HANNOVER RE RAISED TO NEUTRAL VS SELL AT GOLDMAN
*NYRSTAR RAISED TO NEUTRAL VS UNDERPERFORM AT MACQUARIE
*OASIS PETROLEUM RAISED TO OVERWEIGHT AT JPMORGAN
*SOPRA STERIA RAISED TO BUY VS HOLD AT BERENBERG
*WEIR GROUP ADDED TO CONVICTION BUY LIST AT GOLDMAN
>>> Down
*AIR LIQUIDE SA CUT TO MARKET PERFORM AT BERNSTEIN
*ALSTOM CUT TO UNDERPERFORM VS SECTOR PERFORM AT RBC
*ANGLO AMERICAN CUT TO UNDERWEIGHT AT MORGAN STANLEY
*ANTOFAGASTA CUT TO UNDERPERFORM VS NEUTRAL AT MACQUARIE
*ASTRAZENECA CUT TO HOLD AT JEFFERIES
*AURUBIS CUT TO NEUTRAL VS OUTPERFORM AT MACQUARIE
*BASF CUT TO MARKET PERFORM AT BERNSTEIN
*BHP BILLITON CUT TO UNDERPERFORM AT MACQUARIE
*CREDIT AGRICOLE CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
*INFORMA CUT TO HOLD VS ADD AT PEEL HUNT
*FLUGHAFEN WIEN CUT TO HOLD VS BUY AT HSBC
*LEG IMMOBILIEN CUT TO HOLD VS BUY AT BANKHAUS LAMPE
*LINDE CUT TO UNDERPERFORM AT BERNSTEIN
*NETENT AB CUT TO SELL AT NORDEA
*PGS CUT TO SELL VS REDUCE AT ALPHAVALUE
*RIO TINTO CUT TO EQUALWEIGHT AT MORGAN STANLEY
*WOOD GROUP CUT TO SELL VS HOLD AT CANACCORD
>>> Initiation
>>> Reinitiation
>>> Call
>> Stock
*WEIR GROUP ADDED TO CONVICTION BUY LIST AT GOLDMAN
Asian Market Update: BOJ holds policy steady but cuts economic assessment and exempts Money Reserve Funds from NIRP as speculated
***Economic Data***
- (AU) AUSTRALIA FEB NEW MOTOR VEHICLE SALES M/M: -0.1% V +0.4% PRIOR; Y/Y: 2.3% V 5.2% PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 116.4 v 114.8 prior
- (JP) JAPAN JAN TERTIARY INDUSTRY INDEX M/M: 1.5% V 0.3%E
***Index Snapshot (as of 04:15 GMT)***
- Nikkei225 -0.7%, S&P/ASX -1.4%, Kospi -0.2%, Shanghai Composite -1.1%, Hang Seng -0.7%, Jun S&P500 -0.3% at 2,004
***Commodities/Fixed Income***
- Apr gold -0.8% at $1,230/oz, Apr crude oil -0.8% at $36.87/brl, May copper -0.6% at $2.23/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 8.7 tonnes to 790.1 tonnes; lowest since Mar 2nd, biggest decline since Dec 2nd
- (LY) Militants reportedly stage an attack near Sarir - a key oil field in Libya - financial press
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5079 V 6.4913 PRIOR; 2nd straight weaker setting
- (CN) PBOC to inject CNY20B in 7-day reverse repos
***Market Focal Points/FX***
- Asian equity markets tracked a relatively less volatile US session going into the Bank of Japan decision but have since seen some modest selling. The risk-off mode after the BOJ statement was less the result of what they said (much of which was speculated in Japanese press this week) but rather the function of what they didn't say - namely omitting promise to take rates deeper into negative territory as they claimed in January. USD/JPY is down nearly 50pips around 113.30 in the first hour after the decision, SP500 futures down 5pts or 0.3%, and oil is down over 0.5% below $37/brl. In other USD majors, AUD/USD and NZD/USD saw their lows earlier in the day around 0.7490 and 0.6640 - down 50 and 40 ticks respectively. GBP/USD slid about 30pips to 1.4270 after another UK press report survey suggesting a narrow majority of respondents favor a Brexit.
- BOJ policy update in detail included maintained ¥80T annual monetary expansion target and -0.1% rate on excess reserves, however the field of dissenters for the latter winnowed down to 2 from 4. As anticipated, BOJ also announced it will exempt the Money Reserve Funds (MRFs) from negative rates policy as speculated in the Nikkei overnight and promised to review financial institutions' balance, to which 0% rate is applied, to be reviewed every 3 months. Lastly, BOJ also unveiled a new slate of economic assessment and risks to its policy outlook relative to the prior year. Specifically, they cut overall economic assessment for the first time since late 2014 (also as speculated in Japanese press earlier today) to state "Japan continued moderate recovery trend, although exports and production have been sluggish due to slowdown in emerging economies." BOJ was cautious on exports as having recently paused, viewed consumption as resilient, and business investment on moderate increasing trend. In terms of Outlook, BOJ expects exports and production to remain sluggish and CPI still around 0% due to decline in energy prices, while Risks to Outlook section saw notable additions of slowdown in China and developments in US monetary policy.
- Down under, RBA's March meeting minutes did not break any new ground from this month's policy statement that was largely a reiteration of the prior month. Specifically, RBA reiterated low inflation could provide scope for further easing, adding it was too early to determine the extent of market volatility on real economy. Australia also saw some notable cross-border M&A, as Asciano was the target of a joint Qube/Brookfield bid in a A$9.1B proposed deal.
***Equities***
US equities / ADRs:
- CPXX: Phase 3 trial for VYXEOS (CPX-351) demonstrates statistically significant improvement in overall survival; +368% afterhours
- OUTR: To explore strategic alternatives; Raises dividend 100%; +8.1% afterhours
- DOV: Guides Q1 well below prior forecasts; -2.2% afterhours
Notable movers by sector:
- Consumer discretionary: Midea Group Co 000333.CN -1.1% (acquisition speculation)
- Consumer staples: Labixiaoxin Snacks Group 1262.HK -4.0% (guidance)
- Financials: Shanghai Shimao Co 600823.CN +1.3% (private placement)
- Technology: Toshiba Corporation 6502.JP -1.1% (speculation to sell white goods business to Midea); Sony Corp 6758.JP -0.5% (to acquire Sony/ATV Music Publishing); Sunny Optical Technology Group Co. 2382.HK +4.8% (FY15 result)
- Materials: 2393.HK +4.6% (FY15 result)
- Industrials: Asciano AIO.AU Halted (Qube/Brookfield consortium announce A$9.15/shr offer for Asciano in a A$9.1B deal)