>>> Apple: Color on Quarter

Apple: Color on Quarter
  • AAPL down 8% near $96 premarket... the stock found support near $95 in February and Aug '15 corrections... AAPL now has a $532 bln market cap and trades at 11.6x FY16 EPS Capital IQ Consensus... Semi ETF SMH indicated 1.5% lower premarket.
  • RBC cuts tgt to $120 from $130. The June-qtr guide was exceptionally disappointing but they think valuation provides support in mid 90's near-term but for AAPL to sustain multiple expansion investors need to get comfort regarding iPhone 7 being a game changer and enabler of rev acceleration. From a stock perspective, as they lap the tough iPhone 6 compares and head into iPhone 7 launch, they should see return of growth in Dec-qtr that along with a modest uptick in gross-margins should enable AAPL to drive EPS growth (buybacks should also help).
  • Mizuho notes Apple reported F2Q revenues below expectations and toward the low-end of guidance. EPS came in below consensus with revenue downside driving margins lower. While risk to F3Q16 was anticipated, guidance implies significant deceleration and margin pressure. However, they look beyond the current cycle and remain grounded in their analysis of customer LTV supporting a fundamental value of the stock meaningfully higher than current levels. Reiterating Buy rating and $120 on attractive risk-reward.
  • Cowen cuts tgt to $125 from $135. While optically hard to defend and maybe range-bound near-term, their call here is unchanged. They areaggressive buyers <$100 and feel the market will look back on this as the last estimate cut ahead of a little better than expected iPhone 7 cycle providing a bridge to a new "cycle of innovation" with OLED in '17. They see risk/reward >2:1 to upside at <$100. They note inventories have been vleared; fundamental price/demand elasticity for iPhone that remains very strong (SE unit demand is well ahead of supply) and this is likely the last estimate cut.
  • Stifel is reducing their F2016-F2018 rev and non-GAAP EPS estimates by an average of 4% and 7%, respectively, following Apple's weak F2Q16 results and F3Q16 outlook (channel inventory burn considered). Based on a belief investors could consider a current trough non-GAAP EPS (including stock-comp) in the range of $8/sh. and their updated (6% reduced) estimate of $9.42/sh. for C2017, while they see downside into the $90/sh. range (~7.5x ex-cash P/E vs. ~9x median), they maintain their $120/sh. price target (10x ex-cash P/E on C2017 est; ~7x EV/EBITDA). Given their analysis/views on Apple's iPhone installed base expansion (>625M), they remain positive on the set-up into late-2016 / 2017.
  • Maxim lowers tgt to $157 from $162. iPhone Mar Q units miss their estimate by 2% on a sell-out basis. June quarter guidance implies iPhone sell-out likely down 15% to 17% y/y, 6% weaker than their prior estimate. While they are not lowering their FY17 revenue estimate ($239B, up 12% y/y, up 2% over FY15), they are shifting revenue slightly from iPhone (less inventory build) to services which is impacting gross profit estimate by 1%. Combined with lower projected net interest income, they are slightly lowering their FY17 EPS estimate by 3% from $9.90 to $9.68 (consensus was $9.95).
  • Needham expects AAPL to trade down today because it missed FY2Q16 consensus income statement metrics and lowered guidance for FY3Q16. What they liked about the quarter was: 1) accelerating services growth (to 20% y/y up from 15% last quarter); 2) capital return program increased by $50B, including a dividend increase of 10% (to $0.57/share); 3) Operating Free Cash Flow of $11.6B implying an annualized FCF yield of 8-10%; 4) iPhone units sales were 51.2 mm (better than their est of 50mm, and well above bear estimates). They view the tough y/y iPhone comps, strong currency headwinds, and $2B inventory drawdown as temporary issues, suggesting upside in FY2H16. They are buyers on weakness.
  • Oppenheimer downgrades to Perform.
  • Goldman cuts tgt to $136 from $155; removed from Conviction Buy; reiterate Buy rating
  • Piper Jaffray cuts tgt to $153 from $172
  • BMO cuts tgt to $117 from $130
  • Macquarie lowers tgt to $112 from $117

>>> Kinnevik Paints a Different Picture of Rocket Internet: Gadfly

"The usefulness of Kinnevik's methodology was highlighted further on Wednesday. As it reported first-quarter results, there was also news of a 300 million euro funding round for Global Fashion Group, an online retailer owned 26 percent by Kinnevik and 22.5 percent by Rocket. Kinnevik will kick in 200 million, Rocket 100 million and the funding values the company at about 1 billion euros. That’s way below the 3 billion euros in Rocket's last portfolio value; lower even than Kinnevik's 1.71 billion euros as of Tuesday night.

And there are recent signs of Kinnevik distancing itself from Rocket. Lorenzo Grabau, Kinnevik CEO and former Goldman Sachs banker, stepped down as Rocket chairman late last year, though he remains on the board. Kinnevik didn't take part in a $420 million co-investment fund that Rocket unveiled in January, and has been making its own bets on fintech and healthcare start-ups.

In any case, Kinnevik and Rocket both suffer from a similar difficulty: holding a bunch of different stakes in companies means their shares trade at a discount to net asset value. Rocket shares are at a 38 percent discount to its own last portfolio value. Kinnevik, which owns more listed assets so is easier to value, has a discount of about 17 percent."

>>> RKET -7.39% : *DJ Rocket Internet, Kinnevik are Key Shareholders of Global F

RKET -7.39% : *DJ Rocket Internet, Kinnevik are Key Shareholders of Global Fashion Group, Valuation of Global Fashion Group Drops Sharply
BERLIN--Rocket Internet SE said it would inject additional cash in online retailer Global Fashion Group at a sharply reduced valuation, highlighting uncertainty about the value of tech startups in recent months.
Global Fashion Group will be worth 1.0 billion euros ($1.13 billion) after a EUR300 million capital increase, Rocket Internet said. In August last year, Global Fashion Group had been valued at EUR3.04 billion.
Rocket Internet has agreed to underwrite up to EUR100 million of the financing. Investment AB Kinnevik said separately it has committed to invest up to EUR200 million.

>>> RKET -7.39% : *DJ Rocket Internet, Kinnevik are Key Shareholders of Global F

RKET -7.39% : *DJ Rocket Internet, Kinnevik are Key Shareholders of Global Fashion Group, Valuation of Global Fashion Group Drops Sharply
BERLIN--Rocket Internet SE said it would inject additional cash in online retailer Global Fashion Group at a sharply reduced valuation, highlighting uncertainty about the value of tech startups in recent months.
Global Fashion Group will be worth 1.0 billion euros ($1.13 billion) after a EUR300 million capital increase, Rocket Internet said. In August last year, Global Fashion Group had been valued at EUR3.04 billion.

(BarCap) Auto Sector - Volkswagen, Porsche Upgraded - see full note atatched

Porsche : A different way into VW
Porsche is winning the battles, but the war is not over yet: We are upgrade Porsche

to Overweight and raise our price target to €78 to reflect changes to our valuation of

VW now that we have incremental visibility on the cost of the emissions crisis. Although

we accept the potential high associate risks and that we remain a long way from a

conclusion to Porsche’s own litigation issues, we think recent legal developments

continue to suggest momentum is in Porsche’s favour. However, were legal cases in

Hanover to arrive at results contrary to those seen thus far in Stuttgart and

Braunschweig, and Porsche were required to pay out on all outstanding claims, we

would see c.19% downside to our PT at €42 (our downside case). Similarly, if Porsche

were to prevail in all the outstanding cases, we would see the shares being worth €88

(our upside case), a 79% premium to today’s share price.

A “cleaner” VW? Upgrading to OW on anticipation of corporate change

What has changed? As usual with a huge conglomerate company like VW, particularly

given its wide-sweeping emissions crisis, visibility is less than perfect. "We don't know

what we don't know", was the refrain in reply to what exactly the €16.2bn provision

(announced with Friday's FY15 results) incorporates. Clearly it is not possible to provide

under IFRS for unknown risks but it is evident that VW management have tried to

account for as much of the bad news as possible in one block, including criminal

liabilities. What else is new? This is where our knowledge grows even hazier; but it feels

to us that 2016E guidance and the new management compensation profile were

structured to highlight corporate change, in particular for VW's unwieldy cost structure.

So while the risks aren't past, and we believe the stock will remain uninvestable to

many, we think the balance of risk has moved in VW's favour and we upgrade to OW,

with a new PT of €160 for the Preference shares and €184 for the Ords (a 15%

premium for voting power).

WSJ : Heather Capital Manager Behind Advalorem’s Alleged Deceit, Regulator Concl

Heather Capital Manager Behind Advalorem’s Alleged Deceit, Regulator Concludes

Gibraltar’s financial regulator says Advalorem, which bought land from Scottish lawyer Gregory King, was run to the detriment of investors

Secretive offshore companies helped Gregory King, manager of a failed hedge fund, quietly return to investing four years ago.

Mr. King was a lawyer and a Glasgow car dealer before becoming a hedge- fund manager in Gibraltar, a British territory on the southern tip of Spain. But his $600 million property-lending fund, Heather Capital, crashed in 2010. Mr. King and three other men were investigated by Scottish police for suspected fraud, the police have said. Scotland’s prosecutor says it is now considering action, and Heather Capital is being liquidated in the Isle of Man.

So investigators at Gibraltar’s financial regulator were surprised when they found Mr. King, living nearby in Spain, at the heart of a second alleged investment fraud in 2013. Advalorem Value Asset Fund used money from investors to buy land Mr. King owned anonymously through several Gibraltar companies at inflated prices, according to the Gibraltar Financial Services Commission.

Mr. King, through a lawyer, said he strongly denies any wrongdoing in relation to Advalorem or Heather. Advalorem is now being liquidated. A lawyer for Mr. King previously said Mr. King “acted fully in good faith” during his involvement with Heather.

The issue of companies’ beneficial ownership has jumped to the forefront of government agendas this month after a trove of documents were allegedly leaked from Panamanian law firm Mossack Fonseca & Co. There is no indication that Mr. King was a client of the law firm.

An outpost of the former British Empire, Gibraltar is a popular place to incorporate offshore companies and trusts because of its 300-year ties to the U.K., low taxes and European Union membership. The listed owner of such companies, in Gibraltar and other places, is often a hired professional or an overseas company.

Last week, Gibraltar said it would start automatically sharing information on the real owners of companies with other national authorities, as part of a European effort to curb money laundering, tax evasion and other illicit activities. The moves were taken in the wake of the Panama Papers leak.

In the summer of 2012—two years after Heather Capital’s collapse—Advalorem was set up in Gibraltar to invest in land and housing development. A marketing brochure reviewed by The Wall Street Journal listed a British Virgin Islands company as Advalorem’s investment manager and projected 10% annual returns.

Two people with business and social ties to Mr. King were signed on to select land purchases and to raise money from investors, according to a confidential report by the Gibraltar Financial Services Commission, also known as the FSC. One person previously worked with Mr. King. The other had dealings with Advalorem and knew Mr. King, according to the FSC.

Within months, Advalorem had raised £7.8 million toward the ultimate goal of collecting £300 million, according to the report, which was reviewed by The Journal.

As investor money poured in, Advalorem started buying Mr. King’s land, the FSC said. In December 2012, the fund paid £6 million to a Gibraltar company called Thistle Holdings Ltd. for two companies that owned 37 acres of farmland near Glasgow. The land, on a river flood plain and protected from development, was worth about £190,000, according to a valuation commissioned by the FSC while it probed the fund.

Before Advalorem bought it, the Scottish land passed through a string of companies in Gibraltar and the British Virgin Islands, another offshore center, according to the FSC’s report. Those companies all belonged to Mr. King, the FSC found. The £6 million paid to Thistle for the land ended up in one of Mr. King’s bank accounts, according to the FSC report. Its investigation found that Mr. King had originally paid £305,000 to buy the 37 acres in 2008.

Advalorem was preparing to spend £21 million to buy more of Mr. King’s land in Scotland when the FSC received an alert from the U.K. pensions regulator, according to the FSC report.

The U.K. regulator had monitored British savers transferring their entire retirement pots into Advalorem after being offered cash incentives by financial advisers, according to the FSC. Britain has sought to clamp down on “pensions liberation” schemes, in which investors are told they can tap their retirement savings by moving them outside the U.K.

Overpaying for land is legal. But the FSC alleges that Advalorem was being run to the detriment of its investors in an apparent fraud. It said last week in a statement that it took “swift regulatory action,” suspending Advalorem and censuring the fund’s directors.

A lawyer for several directors on the fund and its BVI investment manager declined to comment. One director couldn’t be reached for comment.
People familiar with the case say Advalorem wouldn’t have been able to function under Gibraltar fund rules if the ties between Mr. King, the land and the alleged middlemen had all been fully disclosed.

The FSC referred the case to the Gibraltar police. A police spokesman said last week there wasn’t enough evidence to support a criminal prosecution.

To try to recoup investor money, the liquidator for Advalorem put a freeze on Mr. King’s assets in September, a Gibraltar court filing shows. The liquidator said he is pursuing a civil fraud case against Mr. King.

Mr. King’s exact wealth isn’t known, but he received nearly $52 million in fees from Heather Capital between 2005 and 2008, according to Heather’s financial reports. The money was paid to a BVI company controlled by Mr. King.

At his home in a gated mountainside complex near Marbella, Spain, Mr. King tried to avoid being served with legal papers, people familiar with the matter said. Without looking at the papers, he ripped them up and handed them back to the person who delivered them.

WSJ : Comcast in Talks to Buy DreamWorks Animation for More Than $3 Billion

Comcast in Talks to Buy DreamWorks Animation for More Than $3 Billion

Deal would join DreamWorks Animation with Comcast’s Universal Pictures

Comcast Corp. is in talks to buy DreamWorks Animation SKG Inc. for more than $3 billion, according to people familiar with the matter, in a deal that could make the cable giant a rival to Walt Disney Co. in the lucrative family-entertainment business.

Comcast’s Universal Pictures studio has enjoyed success in recent years with its animated “Despicable Me” and “Minions” movies but is still a relatively small player.

But its parent company has been moving aggressively to mimic Disney by using its animation properties to build out its consumer products and theme parks businesses, a strategy that could be accelerated by the addition of DreamWorks, which makes the “Shrek,” “Kung Fu Panda,” and “Madagascar” movies, among others.

As with all such talks, a deal may not be reached. The tentative purchase price represents a healthy premium over DreamWorks’ current $2.3 billion market value.

Comcast is set to report its financial results on Wednesday.

It wasn’t immediately clear what the deal would mean for DreamWorks’ chief executive, the veteran Hollywood mogul Jeffrey Katzenberg. One person with knowledge of the talks said that DreamWorks and Illumination Entertainment, Universal’s animation studio, would remain separate brands.

Mr. Katzenberg would receive a total payout of about $21.9 million if the company is sold and he leaves DreamWorks, according to the company’s most recent proxy statement. Additionally, he controls about 60% of the company’s common voting stock, according to the proxy.

He has been seeking a buyer for his studio, one of the last in Hollywood not part of a larger conglomerate, for several years.

In 2014, DreamWorks held talks with Japan’s SoftBank Corp. and toy maker Hasbro Inc. More recently it has held discussions with potential buyers in China, said people close to the company.

At the same time, Mr. Katzenberg has told investors in recent years he is working to diversify his company into new businesses such as television, online video, and consumer products, in hopes of stabilizing the inconsistent returns from movie releases.

Several box-office flops between 2012 and 2014 forced the company in early 2015 to lay off 500 employees, close a Northern California operation and cut its feature-film output to two movies a year, from three.

DreamWorks is in the midst of a multiyear deal to produce hundreds of hours of television for Netflix Inc. and has recently enjoyed success with digital video company AwesomenessTV, which it acquired in 2013.

Verizon Communications Inc. this month bought a 24.5% stake in AwesomenessTV that valued the online video studio at $650 million.

Some of DreamWorks Animation’s challenges have come from nimbler new competitors such as Illumination, which rather than building a large studio infrastructure such as DreamWorks’, produces its movies with foreign animators at significantly lower cost.

That has led investors to pressure DreamWorks to lower its costs of production, which typically range between $130 million and $145 million, compared with about $80 million for Illumination.

As brand-name franchises have become the most important markers of success in the movie business, family entertainment has become arguably the industry’s most valuable asset—capable of crossing cultural boundaries at the box office and driving spending on everything from DVDs to toys to vacation destinations.

Since it acquired the NBCUniversal media conglomerate in 2011, Comcast has invested billions in its theme-parks business and built up consumer-products licensing, both of which should allow it to better profit from DreamWorks’ brands and characters than that studio has been able to do independently.

The deal would also give Universal a stronger presence in China, where Mr. Katzenberg has focused much of his energy for the past few years. The CEO travels there at least once a month and opened a joint venture in Shanghai, Oriental DreamWorks, that co-produced the January release “Kung Fu Panda 3.”

DreamWorks Animation movies are marketed and distributed by 21st Century Fox’s Twentieth Century Fox, though that deal will expire in 2017. 21st Century Fox and News Corp, owner of The Wall Street Journal, were until mid-2013 part of the same company.

DreamWorks Animation spun off in 2004 from DreamWorks SKG, an entertainment company founded in 1994 by Mr. Katzenberg and fellow moguls Steven Spielberg and David Geffen.

DreamWorks SKG’s ambitions to become a seventh major Hollywood studio never came to fruition, but its animation division had some early success with hits like “The Prince of Egypt” and “Shrek” before it separated with a public stock offering.

The live-action movie business, run by Mr. Spielberg, has relaunched twice after near-death experiences and recently signed a distribution deal with Universal, meaning an acquisition of the animation company by Comcast would, in a way, bring the two units back together.

DreamWorks Animation shares closed Tuesday at $27.12, down three cents. Comcast stock closed at $61.05, up 5 cents.