RTRS - EXPLOSION AT BRUSSELS METRO STATION CLOSE TO EU INSTITUTIONS - BELGIAN BROADCASTER RTBF
* Lower growth for longer
The China-driven commodity and emerging markets boom has run its course. The capital goods industry has shifted from a 10-year super cycle to a low-growth decade, characterized by a multi-year down-cycle for process industries and by ever-increasing low-cost competition.
* Initiating on large-cap European electricals
We are initiating coverage on European electricals with BUY ratings on Schneider and Alstom, Hold ratings on Legrand and Siemens and a Sell rating on ABB. We also upgrade Philips to Buy (Hold). In this report, we assess the 'China' risk, evaluate the impact of slower growth in emerging markets and review companies' strategic options to address a multi-year low-growth environment and mounting price pressures.
Key stock recommendations. For valuation and risk comments, see p. 129
Schneider (BUY, target of €65) - We like its end-market exposure skewed towards construction and discrete industries. The group will now reap the benefits of a 10-year transformation with a greater focus on organic growth, M&A integration and operational efficiency.
Alstom (BUY, TP €27) – The group has significant financial leeway to build a more competitive cost base and participate in the much-needed sector consolidation. Adjusted for the JVs with GE, the P/E falls to 9.7x in FY17/18, a 40% discount to the sector average.
Philips (BUY, TP €29) –We expect the EV/EBITA multiple to expand from 10x today to 12x as the new entity is reclassified from ‘capgoods’ to ‘medtech’. There are also signs of recovery in the healthcare market (Chinese tenders bottoming out, growing US hospital construction spending).
ABB (Sell, TP SF18) – The shares trade at a 15% premium to the sector average despite unattractive end-markets (utilities, oil & gas, metals & mining and marine account for >60% of sales). We also doubt management favours the exit option for Power Grids as it would go against the group’s long-standing strategy to offer customers an integrated power and automation offering.
ACCOR/IHG -2% Explosion at Brussels Airport
BELLWAY +1% H1 volume ahead, ASP strong and outlook positive
CARNIVAL +1% Approval to sail/dock to Cuba
DT.BANK -1% Moody's warned company may have rating cut
EZJ/RYA/AF -2% Explosion at Brussels Airport
IG GROUP +3% Q3 revenues +18%, strong start to Q4.
JIMMY CHOO +2% FY EBITDA a touch ahead, cost management strong, 09:30 present.
SP.DIRECT -5% Mike Ashley says "we are in trouble, not trading very well"
SWATCH/CFR 0% Feb watch export data -7.9% v January -8% - APPLE cut prices.
TOMTOM +1% Break-up speculation in the local press
T.COOK -2% Summer'16 40% sold, bookings light, challenging but reit. FY
WOLSELEY -2% H1 trading a touch light, LFL weak, marings -10bp v +10bp exp.
ICL CEO Borgas tipped to takeover as CEO at Syngenta
Stefan Borgas, Chief Executive at Israeli chemicals group Israel Chemicals (ICL), has emerged as a candidate to take over from Michael Mack as Chief Excutive at Swiss crop sciences group Syngenta, Tagesanzeiger reported. The Swiss daily cited unidentified Israeli press reports on Monday that said Borgas, a German citizen and former CEO at Swiss Lonza and current Syngenta board director, is a promising candidate to take over as CEO at Syngenta.
Tagesanzeiger
Dow+0.12% S&P+0.10% Nasdaq+0.28% Russell-0.28%
US Market closed slightly higher after a volatile day following volatile oil. Six of ten sectors ended their day in positive territory with countercyclical telecom services (+0.6%) and health care (+0.5%) leading the upside. Meanwhile, commodity-sensitive materials (-0.5%) and energy (-0.5%) rounded out the leaderboard while the financial sector (-0.2%) settled just below its flat line. WTI crude ended its day higher by 1.0% ($41.57/bbl), extending its month-to-date climb to 23.2%. This compares to a 11.2% gain in the energy sector (-0.5%) over that period. On the M&A front, HOT climbed 4.5% after the company received a revised merger proposal from MAR, at $85.36 per share. Separately, and MRKT agreed to a merger of equals after IHS reported an earnings beat. Volume were below average @ 812mil shares. US After Hours MFRM -6%, NQ +5.5% following earnings. Japan March preliminary PMI fell to its lowest level since early 2013, returning to contraction for the first time in a year. Fin Min Aso reiterated that he does not believe fiscal action is needed at this time and that economic fundamentals are solid. Cabinet Sec Suga was less resolute than last week when he ruled out delay to sales tax hike, stating govt may in fact delay the hike if revenues fall. Econ Min Ishihara said it was too soon to evaluate the negative rate policy impact, calling for a 3-month period before judging its success. In China, PBoC weakened Yuan fix for the 2nd straight session, while Finance Ministry official denied rumors of a sideline deals at the recent G20, stating there is no secret pact between US and China for FX adjustment path. Earlier, a note from a Goldman analyst forecast capital outflows in Feb to slow to $36B from $88B in Jan and deemed near-term credit risks in China as manageable, though medium-term challenges remain.IHS
Nikkei +1.94% Hang Seng-0.11% Shanghai -0.57%
Eur$1.1251 CNH 6.4885 CNY 6.4901 JPY 112.07 GBP 1.4388 CHF 0.9702 RUB$67.6825 WTI$ 41.48 (-0.10%)
S&P-0.18% EuroStoxx -0.03% Dax -0.22% SMI +0.12%
Macro :
‘Brexit’ May Lead to Downgrades and Slower Economy, Moody’s Says
Low Oil Prices to Slow Growth in GCC Countries in 2016: Moody’s
Fed Goldman/GE Approval May Mean Some Mega-Bank M&A: Guggenheim
Fed’s Go-Slow Message on Rate Hikes May Get Burned by Prices
Keep an eye on :
- AIR FP : Airbus in Talks With Bharat Forge, Mahindra to Forge Parts: ET
- AIR FP : Airbus’s First U.S.-Manufactured Aircraft Makes Maiden Flight
- AAPL US : Apple reveals new smaller iPhone SE
- AKZA NA : AkzoNobel could sell chemicals division, buy Jotun, analysts say - de Telegraaf
- CS FP : Axa’s De Castries to Take Time Deciding What to Do Next: Figaro
- BALN SW : Baloise 2015 Net Income Beats; Dividend Proposal Misses
- POP IM : Banco Popolare Said to Propose Cap Increase of Up to EU1b: Ansa
- SAN SM : Santander to Roll Out Voice Recognition in Mobile App: FT
- BLT LN : BHP Likely to Cut FY16 Iron Output Target a 2nd Time: Macquarie
- CCL LN : Carnival’s Fathom Granted Cruise Approval by Cuba
- CO FP : Groupe Casino Sells Big C Thailand Stake to TCC Unit for EU3.1b
- CO FP : Casino Serves Controlling Owner Not Investors, Carson Block Says
- CTF SM : Cortefiel Seeks to Refinance EU1.2b Debt: El Confidencial
- DBK GY : Deutsche Bank May Be Cut by Moody’s on Rising Execution Hurdles
- DPB GY : Deutsche Bank CFO Sees Postbank Deconsolidation in 2017: BZ
- EGPW IM : Enel Green Power 2015 Rev. Stable Y/y; Net Income Falls
- EVT GY : Evotec Spins Off Auto-Immune Disease Unit as Topas Therapeutics
- G IM : Generali Said to Seek Sale of EU1b Property Portfolio: Radiocor
- ITP FP : Inter Parfums Rises 5 Days to Highest in 8 Mos.; RDEN Jumps
- ISP IM : Intesa Sanpaolo Set to Name Gros-Pietro Chairman, Il Sole says
- IRE IM : Banca IMI Starts Sale of 1.4% IREN Stake Held by STT: Terms
- JEN GY : Jenoptik Plans Higher Dividend; Confirms 2018 Outlook
- LTAN FP : Qatar May Sell 86% Stake in Le Tanneur, Les Echos Says
- LHA GY : Lufthansa Puts Conditions on Deliveries of More Airbus A320neos
- MDVN US : Sanofi & AstraZeneca mentionned as potential suitor - Daily Mail
- ROG VX : Genmab Says J&J/Roche to Study Daratumumab Combos
- UHR VX : Blancpain, Breguet Aim to Boost U.S. Market Share, L’Agefi Says
- HO FP : Thales May Get Contract When Hollande Visits Egypt: Tribune
- TIE1V FH : Tieto updates strategy; could even make large acquisition - Kauppalehti
- RIGN VX : Transocean CEO Sees No Chance to Push Up Rig Prices Until 2019
- TOM2 NA : TomTom should be divided and put up for sale, shareholder says - Het Financieele Dagblad
- VRX US : Sequoia Fund Sold 1.5m Valeant Shrs Last Week: CNBC/DJ