IMG LN - Tsinghua Unigroup raises stake above 3% - Unclear whether Tsinghua is looking to be a minority stakeholder or to acquire company
Japan Fin Min Aso: Reiterates will submit supplementary budget for Kumamoto earthquake - comments from Parliament
1) Earnings season has seen a modestly positive surprise...
With one remaining busy week for the European earnings season, results so far have been quite similar to last quarter, where we saw a slightly higher number of beats than misses. Having tracked 339 companies, we've seen 37% of companies beat EPS estimates by 5% or more, while 31% have missed. The net 6% of companies beating so far is exactly in-line with last quarter. Headline earnings have beaten by 1.7%, while the median stock has delivered in-line results. Trends at the sector level have been mixed, with six out of 10 sectors having delivered results ahead of expectations. Utilities, Consumer Discretionary and Tech have delivered the weakest results, while Energy has seen the broadest earnings beats.
2) ... but this is largely down to the downgrades ahead of earnings season
While euro strength and macro data suggested a tough environment for European earnings in 1Q, we thought that results would not be too bad given the extent of downgrades ahead of earnings season. The earnings releases can hardly be described as strong, given that they are down over 20% compared to 1Q15, but more that results have cleared a lowered bar. Consensus downgrades ahead of earnings season are not surprising, however, the downgrades we saw ahead of 1Q were the largest we've seen in 5Y of data. Page 5 shows the change in quarterly consensus estimates in the run-up to results over the last 5Y. The downgrade to 1Q16 numbers was 9.4% against an average downgrade of 3.4%.
3) Revenues have been weaker than earnings
While earnings have registered a net beat, top-line results have been weaker. 28% of companies have beaten sales estimates by 1% or more, while 40% have missed. The net miss of 11% of companies would be the worst results for two years. The median stock has also missed revenue estimates by 0.3% and revenues are down 6% year-on-year. Top-line weakness in quarters of euro strength are not uncommon, and as shown on page 17, the more internationally exposed large-caps have seen weaker top-line results than mid- or small-caps, which is consistent with the revenue miss being driven largely by FX.
4) Price reaction to results has been slightly positively skewed
Page 11 shows the relative performance of stocks on the day of results depending on whether they beat or missed estimates. Earnings beats have outperformed, while misses have underperformed, but the outperformance of beats has generally been more positive than the underperformance of misses. Revenue misses of as much as 1% have still seen the stock outperform on the day of results.
5) Downgrades persist, but showing signs of slowing...
After a fleeting period of net upgrades last year, Europe has endured a difficult period of earnings downgrades year-to-date, with earnings revisions recently hitting their worst levels in four years. The four-week earnings revisions ratio is falling, but this is usual during earnings season and a somewhat more encouraging sign can be seen on page 5. When comparing the pace of downgrades now to 3M ago, it does suggest the second derivative for earnings estimates is now turning. Also, while the data is relatively patchy still given the limited sample, another source of encouragement is that 2016 guidance has been slightly positively skewed during results.
6) ... but we still see downside to FY2016
Results so far in 1Q have been slightly better than expected, a trend we wouldn't be surprised to see continue given that estimates for 1Q earnings came down aggressively ahead of results season. While 1Q estimates look broadly achievable, full-year figures do not. We forecast 2016 earnings to contract by 5% driven by a weak global growth environment, little margin upside, headwinds from commodity and financials combined with evaporating FX tailwinds. While the rise in commodity prices rising in the last couple of months could suggest more upward pressure to our estimates, our FX team's recent upgrade to their forecasts for the euro negates this benefit. Bottom-up consensus is now for a 0.4% decline in EPS this year.
To be acquired by Total for €36.50/shr
- Total value for Saft at €950M
- The supervisory board of Saft has unanimously approved the friendly takeover by total and considers the proposed transaction to be in line with the interests of the company
Et si Orange rachetait Free?
La consolidation "restera une nécessité", a déclaré Ramon Fernandez, le directeur général délégué d'Orange sur BFM Business. "Il y a toujours des bouts de discussion", confirment plusieurs dirigeants des opérateurs mobiles français. Tout le monde se parle et ces semaines-ci, le dernier scénario jamais exploré, un rachat de Free par Orange, circule dans l'esprit des opérateurs. D'autant que fait rare dans ce secteur, leurs deux patrons, Stéphane Richard et Xavier Niel, s'entendent très bien. Cela permettrait à celui de Free de prendre position chez Orange, comme ce que visait Martin Bouygues. De plus, le fondateur de Free détient une participation de 15% dans Telecom Italia, voué à s'unir à terme à Orange. Il pourrait ainsi être le pivot d'une double consolidation, d'abord en France puis en Europe.
L'offre secrète d'Orange à Bouygues
Il y a un mois, l’opérateur, avec SFR et Free, a rouvert les négociations avec Bouygues pour aboutir à un accord. Sans succès.
Chacun fait des efforts
"C'étaient des points de détail à l'échelle de l'opération, note un des participants aux pourparlers. Mais cela avait contribué à la faire échouer quelques jours plus tôt." Rapidement, chacun fait un effort pour parvenir à un accord. Orange accepte de prendre à sa charge une plus grosse part de la pénalité prévue en cas de rupture de l'opération. De son côté, SFR assume davantage les garanties de passif. Quant à Free, dont les exigences avaient irrité Martin Bouygues, il lève les conditions suspensives autour des transferts des antennes-relais. En face, l'État, actionnaire d'Orange à 23%, envoie lui aussi des messages d'ouverture et accepte d'assouplir ses demandes à l'égard de Bouygues. Notamment la clause lui interdisant d'augmenter sa participation chez Orange et de profiter de droits de vote double. "L'État était prêt à ramener le gel de la participation de Bouygues à deux ans et demi", explique une source. "Nous étions aussi disposés à limiter les droits de vote uniquement pour les grandes décisions stratégiques, comme nous l'avons fait chez Renault", ajoute un proche de Bercy.
"A genoux devant Bouygues"
En deux jours, la voie semble dégagée. Les avancées sont présentées au groupe Bouygues sans, toutefois, que l'offre soit formalisée. Martin Bouygues ne leur en a pas laissé le temps. En milieu de semaine, le propriétaire de Bouygues Telecom éconduit de nouveau ses rivaux sans qu'ils se l'expliquent. "Il n'y avait plus d'obstacles, assure un des négociateurs. J'ai vraiment cru que l'opération aboutirait." "Free s'arc-boutait sur la prolongation de la location du réseau d'Orange", oppose un proche de Bouygues. "Faux, répond un négociateur, Free avait levé tous les obstacles." "La confiance a été rompue avec Xavier Niel", conclut un lieutenant de Martin Bouygues pour justifier l'irrationalité de la décision. "Martin Bouygues aurait pu nous demander n'importe quoi, s'agace un cadre d'un des opérateurs. On était à genoux devant lui."
Cette énième tentative a, en tout cas, permis de voir que tous les acteurs poussaient dans le même sens. "On a fait le maximum, tranche un proche d'Orange. On se demande si Bouygues ne nous a pas baladés depuis le début." S'est-il braqué ou bien avait-il un agenda caché? Certains se demandent s'il ne cherche pas, au fond, à forcer le gouvernement qui sortira des urnes à lui vendre la part de l'État dans Orange.
Asian equity markets are mixed though there's little doubt about the worst performer, as Shanghai Composite tumbled over 2%. China trade data are seen as the culprit - even though the terms of trade hit 3-month highs in CNY and USD terms, declines in Imports and Exports paint a dim view of the economy. A spike in oil prices on the news of shake-up in the Energy regime in Saudi Arabia also helped matters. S&P futures are little changed, WTI crude was up over 2.5% as high as $45.90, and commodity majors were tracking firmer. In Japan, both Fin Min Aso and BOJ Dep Gov Iwata shrugged off latest US Treasury report that flagged 5 counties - China, Japan, Korea, Taiwan, and Germany - for its monitoring list. Aso said he does not think US Treasury believes that Japan's FX policy is inappropriate, adding that negative rate policy is not hurting the public. Aso also stated that USD/JPY at ¥107 will not prompt govt to take action.
Nikkei+0.70% Hang Seng+0.40% Shanghai -2.48%
Eur$1.1398 CNH 6.5176 CNY 6.5040 JPY 107.59 GBP 1.4421 CHF 0.9716 RUB$ 65.5054 WTI$ $45.43)+1.72%)
S&P+0.11% EuroStoxx +0.83% Dax+0.84% SMI +0.86%
Macro :
- China’s April Exports Rise 4.1% Y/y in Yuan Terms
- BOE Prepares for Rate Cut in Event of Brexit: Sunday Times
- Juncker Says Brexit to Have ’Unforeseeable Effects’: Funke
- Soros Chart Signals BOJ Bond Buying Already Enough to Weaken Yen
Keep an eye on :
- ABI BB : Anheuser-Busch Inbev Debt Rating Cut Two Notches by Fitch
- ACMI IM : AC Milan owners to decide on whether to concede exclusive takeover talks to Chinese consortium at beginning of next week - Il Sole 24 Ore
- ALPH SW : Alpiq draws high interest for hydro-assets, firm bids due in next round - Sonntagszeitung
- AMZN US : CEO Bezos sells 1% of holding for $671M; Marks his largest company stock sale ever
- ASC LN : U.K. April Online Spending Rises, High Street Flat: Visa Europe
- BARC LN : Barclays to Provide U.K. Cos. With Mobile-Payments Platform: FT
- BMW GY : BMW to Offer Engineers Retraining as Software Experts: Spiegel
- BNP FP : BNP Paribas CIB IT Unit to Be Most Hit by Job Cuts: Echos
- BNR GY : Brenntag 1Q Sales, Operating Ebitda Miss Ests.; Confirms Outlook
- BB/ LN : Blackstone, Cerberus Study Bradford & Bingley Loans: Times
- CO FP : Casino to Sell More Assets in Coming Months, CEO Tells Figaro
- EDF FP : China National Nuclear May Take Hinkley Point Stake: Telegraph
- EMC US : Dell said to plan to market debt next week to raise funds for previously announced EMC deal
- ENEL IM : Enel makes informal offer for Metroweb - Il Corriere della Sera
- EOAN GY : Abandoning Coal May Cost Germany EU71.6b: Handelsblatt
- FRS SM : Fersa attracts final offers from Springwater, Audax and Oaktree; low bids may trigger hostile move - Expansion
- GALN VX : Galenica Says Vifor Fresenius Buys Marketing Rights for Rayaldee
- GALP PL : Galp Said to Seek Bids for Stake in Gas Distribution Ops: Rtrs
- G1A GY : GEA 1Q Sales Fall 6.5%, Ebit Down 12.6%; Confirms 2016 Outlook
- GILD US : Gilead Discloses U.S. Attorney’s Office Subpoena on 501(c)(3)s
- GLEN LN : Glencore in discussions with bidders including SALIC, Qatar, Canadian pension fund about sale of further 9.9% stake in agricultural arm - Reuters - http://bit.ly/1rB2TcS
- ILD FP : Telefonica considering options for O2 in light of expected EC block on sale to Hutchison; Iliad considering bid, Iliad Considering Bid for Telefonica’s O2: Sunday Times
- MC FP : Jeweler De Grisogono Buys Rights to Sell 404-Carat Rough Diamond
- LSE LN : LSE and Deutsche Boerse executives unlikely to be questioned by UK MPs about merger - Daily Mail
- NG/ LN : Chinese sovereign wealth fund joining Macquarie, Allianz and Dalmore Capital to bid on majority stake in National Grid’s £12bn gas business. (Sunday Times)
- NRF US : Colony Capital, NorthStar Asset, NorthStar Realty Confirm Talks -->+5.8% in After Hours
- OCADO LN : U.K. April Online Spending Rises, High Street Flat: Visa Europe
- PNL NA : PostNL 1Q Cash Underlying Operating Income Falls 10% to EU61m
- QIHU US : Qihoo 360 Says Speculation on Its Privatization Untrue
- RCS IM : Cairo Communication asked by Italian securities regulator for additional information on public offer
- RMG LN : Royal Mail Said to Line Up Rico Back for CEO Role: Times
- SFQ GY : SAF-Holland 1Q Earnings Drop; Company Sticks to 2016 Outlook
- STL NO : Statoil Declares Force Majeure Amid Oil Sands Wildfire
- TEF SM : Telefonica considering options for O2 in light of expected EC block on sale to Hutchison; Iliad considering bid
- TIT IM : Telecom Italia considers all-cash offer for Metroweb - Il Sole 24 Ore, Il Corriere della Sera
- TEL NO : Telenor Proposes Jacob Aqraou, Siri Beate Hatlen Join Board
- TESB BB : Tessenderlo Chemie CEO Tack Buys Additional EU1.75m of Stock
- VOLVB SS : Volvo Board Member Haakan Samuelsson Has Bought 106,000 B Shares
>>> Up
*AKER SOLUTIONS RAISED TO BUY VS NEUTRAL AT CITI
*EASYJET RAISED TO OUTPERFORM AT RBC CAPITAL
*HOIST FINANCE RAISED TO OVERWEIGHT AT MORGAN STANLEY
*IPSEN RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY
*ROTORK RAISED TO NEUTRAL VS UNDERPERFORM AT EXANE
*SMITH & NEPHEW RAISED TO BUY AT JEFFERIES
*TULLOW OIL RAISED TO OUTPERFORM VS MARKET PERFORM AT BMO
*WEIR GROUP RAISED TO OUTPERFORM VS NEUTRAL AT EXANE
>>> Down
*CENTAMIN EGYPT CUT TO SELL VS NEUTRAL AT CITI
*INTERCONTINENTAL HOTELS CUT TO NEUTRAL VS BUY AT ODDO
*RESTAURANT GROUP CUT TO NEUTRAL VS BUY AT UBS
*STATOIL CUT TO NEUTRAL VS BUY AT UBS
*TOTAL CUT TO NEUTRAL VS BUY AT UBS
*VALE CUT TO HOLD VS BUY AT SOCIETE GENERALE
>>> PT Change
>>> Initiation
*VALLOUREC RESUMED AT UNDERPERFORM VS RESTRICTED AT EXANE
>>> Call
>> Sector
*EUROPE HEALTHCARE RAISED FROM UNDERWEIGHT TO OVERWEIGHT AT BERNSTEIN
Asian Market Update: Soft China trade components weigh on mainland markets
***Economic Data***
- (CN) CHINA APR TRADE BALANCE (CNY TERMS): 298B V 255.0BE; 3-month high
- (CN) CHINA APR FOREIGN (FX) RESERVES: $3.22T V $3.20TE; 2nd straight increase
- (AU) AUSTRALIA APR ANZ JOB ADVERTISEMENTS M/M: -0.8% V +0.1% PRIOR
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +0.5%, S&P/ASX -0.3%, Kospi -0.6%, Shanghai Composite -2.2%, Hang Seng +0.3%, Jun S&P500 +0.1% at 2,054
***Commodities/Fixed Income***
- June gold -0.6% at $1,286/oz, June crude oil +1.7% at $45.36/brl, Jul copper -1.4% at $2.12/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 4.8 tonnes to 834.9 tonnes; highest since Dec 2013
- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥240B in 10-25yr JGBs and ¥160B in JGBs with maturity over 25-yr
- (CN) PBOC to inject CNY20B in 7-day reverse repos
- (CN) PBOC SETS YUAN MID POINT AT 6.5105 V 6.5202 PRIOR; first firmer setting in 4 days
***Market Focal Points/FX***
- Asian equity markets are mixed though there's little doubt about the worst performer, as Shanghai Composite tumbled over 2%. China trade data are seen as the culprit - even though the terms of trade hit 3-month highs in CNY and USD terms, declines in Imports and Exports paint a dim view of the economy. Improved China FX reserves softened the blow somewhat, keeping sentiment more neutral in other assets. A spike in oil prices on the news of shake-up in the Energy regime in Saudi Arabia also helped matters. S&P futures are little changed, WTI crude was up over 2.5% as high as $45.90, and commodity majors were tracking firmer - AUD/USD rose over 30pips from opening lows in 0.7350, NZD/USD traded up some 30pips toward $0.6850, and USD/JPY was in a 50pip range above 107.
- China trade balance in USD and CNY hit 3-month highs, but closely watched Imports component fell for the 18th straight month, suggesting falling domestic demand for materials - imports came in at -5.7% v +0.3%e and exports also below forecasts at +4.1% v +4.3%e. Shipments to US and Japan were especially soft: -9.3% y/y v +9.0% prior and -11.8% v 9.3% prior respectively, even as EU exports increased 3.2%. CICC said the trade figures showed that exports data weakened significantly, imports drop reflected weak domestic demand, and the weakness may extend in the near future. Separately, China state researcher estimated Q2 GDP to remain at 7-year lows of 6.7%, while a People's Daily feature called for govt to maintain prudent monetary policy and proactive fiscal policy.
- In Japan, both Fin Min Aso and BOJ Dep Gov Iwata shrugged off latest US Treasury report that flagged 5 counties - China, Japan, Korea, Taiwan, and Germany - for its monitoring list. Aso said he does not think US Treasury believes that Japan's FX policy is inappropriate, adding that negative rate policy is not hurting the public. Aso also stated that USD/JPY at ¥107 will not prompt govt to take action. Iwata also state that the US report won't constrain BOJ monetary policy, with negative rates policy designed to achieve 2% inflation target.
- After last week's surprise RBA rate cut and subsequent slashing of inflation projections in the central bank currency report, Westpac and JPMorgan research notes were confident that there will be more easing down the pike. Australia job advertisements softened, and ANZ economist said the level of jobs ads has been flat for 6 months now after a period of substantial growth. Australia banking was also in focus today, with a report by AFR uncovering hundreds of mortgage loans with fraudulent Chinese income documents, even though the estimated total of the loans was less than A$1B, or 0.12% of their combined $837B of residential mortgages. Report does warn that these mortgage deceptions may not be isolated to those banks, and smaller institutions could also be at risk. CBA also reported Q3 results that saw higher loan impairment provisions and flat net interest margins, while CET1 metric fell 20bps to 10%.
***Equities***
Notable movers by sector:
- Consumer discretionary: Skyworth Digital 751.HK -2.8% (Apr result, FY16/17 target); MGM China 2282.HK +0.4% (Q1 result); Fairfax Media FXJ.AU +3.% (spinoff speculation)
- Financials: Haitong Securities 6837.HK -1.6% (Apr result); CITIC Securities 6030.HK -1.9% (Apr result); Commonwealth Bank of Australia CBA.AU +0.5% (Q3 result)
- Industrials: Fuji Heavy Industries 7270.JP +0.8% (result speculation); Orica ORI.AU -11.7% (H1 result)
- Materials: Beadell Resources BDR.AU +3.1% (guidance)