TheChek News Flow

Affaire LSK: enquête préliminaire contre DSK pour escroquerie et abus de biens sociaux

Le parquet de Paris a ouvert le 28 juillet une enquête préliminaire contre Dominique Strauss-Kahn pour escroquerie et abus de biens sociaux en lien avec son ancienne société d'investissement luxembourgeoise en faillite LSK, ont annoncé vendredi 16 octobre France Inter et Le Parisien magazine. Une source judiciaire a confirmé qu'une enquête préliminaire avait été ouverte cet été à la suite d'une plainte déposée par un ex-actionnaire de LSK. Une des premières tâches des enquêteurs devrait être d'entendre le plaignant, Jean-François Ott, pour lui faire préciser les termes de sa plainte, a ajouté cette source.

Se posent en effet des questions de compétence du tribunal de grande instance de Paris, les infractions présumées visées ayant au moins pour partie été commises à l'étranger, précise cette source. La plainte avait été déposée le 30 juin par Jean-François Ott, qui affirme avoir souscrit une augmentation du capital de LSK de 500.000 euros. Persuadé qu'on lui a présenté, en amont de cet investissement, une situation financière de LSK qui n'était pas conforme à la réalité, il a porté plainte pour "escroquerie", "abus de biens sociaux" et "faux" contre les anciens administrateurs de LSK, dont l'ancien directeur général du Fonds monétaire international (FMI).

Depuis, selon France Inter et Le Parisien Magazine, "une seconde plainte a été déposée par un ex-banquier macédonien". La radio ajoute que l'avocat de Dominique Strauss-Kahn, Jean Veil, explique que son client n'avait pas de "rôle opérationnel" dans le groupe et a lui-même été trompé.

Ou sont les 100 millions d'euros?

"La première question que devra se poser la brigade financière de la Police Judiciaire de Paris, qui a été saisie de l'affaire, est: comment ont été dilapidés les 100 millions d'euros aujourd'hui réclamés par 156 créanciers de multiples nationalités?", peut-on lire sur le site de France Inter.

LSK, dont Dominique Strauss-Kahn voulait faire un fonds spéculatif de 2 milliards de dollars, a été déclarée en faillite en novembre 2014, quelques semaines après le suicide à Tel Aviv de son fondateur et dirigeant, Thierry Leyne. DSK avait quitté la présidence de LSK quelques jours avant ce décès.

Selon France Inter et Le Parisien magazine, "DSK a pris la tête d'un groupe à la gestion douteuse. A l'été 2013, soit un mois avant son arrivée, elle affiche déjà une perte de 13 millions d'euros. Sa principale filiale, Assya Luxembourg a du mal à payer ses notes de téléphone, d'électricité, de fournitures de bureau... Les salaires seront bientôt versés avec du retard. Quant aux dossiers clients, beaucoup sont incomplets, rangés dans des dossiers papiers, alors que tout devrait être informatisé".

"Plutôt que de placer l'argent des clients sur le marché, Assya Luxembourg outrepasse ses mandats de gestion et l'investit en partie dans des actions +maisons+. En clair: elle rachète les titres de ses filiales pour en faire monter artificiellement le cours", selon l'enquête journalistique.

Le cabinet Ernst & Young avait émis "des réserves sur la valeur réelle des filiales de LSK. Puis, à l'automne 2013, incapable d'attester de la sincérité des bilans qui lui sont présentés, il démissionne de son mandat de commissaire aux comptes", s'étonnent les journalistes.

* Equities: $2.6bn inflows (first inflows in 4 weeks) (note $4.3bn

* ETF inflows vs $1.7bn mutual fund outflows)

* Bonds: $3.8bn inflows (largest in 12 weeks)

* Precious Metals: $0.3bn inflows (largest in 7 weeks)

* Japan cracks: $1.6bn outflows (biggest 3w outflows since Nov’14)

* EM is back: first inflows in 14 weeks ($0.7bn)

* Europe defiant: $3.1bn inflows (inflows in 20 out of past 22 weeks)

* US: muted $0.7bn inflows ($2.8bn ETF inflows vs $2.0bn mutual fund outflows)

* By sector, Healthcare: 4 straight weeks of outflows (longest streak since Jan’13); by contrast, Consumer funds see largest inflows in 3 months ($0.9bn)

* First outflows from Govt/tsy funds in 15 weeks (albeit small $0.1bn)

* $2.6bn inflows to HY bond funds (largest in 8 months)

* $0.4bn inflows to EM debt funds (first inflows in 12 weeks & largest in 5 months)

* $0.5bn inflows to IG bond funds (first inflows in 5 weeks)

* 11 straight weeks of outflows from bank loan funds (albeit tiny $56mn)

Risk-on: equity & bond funds both record inflows for first time in 10 weeks...signals turn

in risk-off sentiment...note BofAML Trading Rules remain in "buy" territory, bar the

Breadth Rule which flipped from "buy" to "neutral" this week (Table 3 & Chart 4).

Junk-on: largest HY bond inflows in 8 months & largest EM debt inflows in 5 months

(Chart 1)...collapse in Fed hike expectations gives oversold junk "yield" a bid.

Quality-off: first outflows in 15 weeks from Government bond funds.

Japan-off: $1.6bn outflows & largest 3-week outflows since Nov’14 (Chart 2)...as faith

in higher US rates/dollar evaporates, as does confidence upcoming BoJ QE weakens yen.

Gold-on: largest inflow in 7 weeks...reflects weaker US$ and QE "policy failure" hedging.

EM-on: first EM equity inflows in 14 weeks...first signs of rotation to "weak US$" plays

Europe-defiant: $3.1bn inflows (inflows in 20/22 weeks)...many clients using Eurozone

as hedge against surprise EM-upside.

US cyclical-on: muted $0.7bn inflows belie divergence between $2.8bn ETF inflows &

$2.0bn mutual fund outflows; ETF inflows all to macro-sensitive, cyclical themes e.g.

QQQ, IWM, XLI, XLY...hints that growth expectations troughing.

Unhealthy: 4 straight weeks of global Health Care fund outflows (longest streak since

Jan’13); by contrast, global Consumer funds see largest inflows in 3 months ($0.9bn).

GWIM resilient: BofAML private clients have added risk in each of the past 4 weeks

(Chart 5); and note 2015 on course to be first year since 2012 that private clients have

bought more common stocks than ETFs (Chart 6).

Consensus is currently: low growth/low EPS/low rates here to stay, but no recession;

trading ranges hold (SPX 1850-2050, GT30 2.8-3.2%, DXY 93-100); sell rallies into

strength; own (sensible) growth, (safe) yield, (high) quality; rent

EM/resources/commodities.

Contrarian trader: FMS/flows argue for rotation to "weak dollar" plays e.g. CRB, EM

resources/FX, industrials; breach of SPX 2050 requires ECB/BoJ to boost growth

expectations without FX devaluation.

Beat Factor identifies our most out-of-consensus stock ideas within BofAML coverage

of FTSEEurofirst 300 stocks. It compares our analysts’ price objectives and earnings

estimates from our proprietary iQdatabase with sell-side consensus estimates of those

items, using a quantitative approach. By aggregating bottom-up estimates of all our

developed Europe coverage, the framework also finds sectors where our analysts are

most upbeat/downbeat vs consensus, as well as our bottom-up Pan-European market

view. We would be updating the Beat Factor every month.

On aggregating 460 stocks, BofAML analysts expect a 12 month return of 13%, broadly

in line with consensus. However, our analysts are more optimistic on FY1 earnings than

consensus, expecting FY1 EPS growth of 3.6% (versus consensus nil growth) but

downbeat on FY2 EPS growth of 5.3% (versus 7.7% consensus). The sentiment is

broadly neutral as we upgraded ratings for seven stocks and downgraded for equal

number of stocks last month (Chart 8).

BofAML analysts expect above-market returns in Technology (25% upside), Health Care

(21%) and Telecoms (19%). Based on Beat Factor, Technology and Financials are most

favored (Chart 11). Energy is the only sector where we expect absolute negative returns

(-5%) and is the most downbeat sector as per Beat Factor (Chart 11).

Stock Beat lists the top 30 most out-of-consensus stock ideas from our coverage in the

FTSEurofirst 300 Index. Table 1 shows the top-10 out-of-consensus longs and shorts -

for the full list of 30 stocks, please see Table 3. Lists are updated monthly.

We initiate coverage of Christian Dior with a Hold rating, a target price of €182 and a TSR

of 8%. We highlight five key considerations: 1) the resilience of its two assets, Dior Couture

and LVMH, given the current uncertainties; 2) Dior couture has one of the strongest top-line

growth rates in the sector; 3) ongoing margin expansion; and 4) a proven management

team; but 5) a holding company discount that has shrunk materially recently.

A well positioned name with regard to current uncertainties Dior Couture in our view is

in a position to face the current EM uncertainties with more ease than some competitors

thanks to: 1) a smaller contribution from EM, 2) exposure to the less cyclical soft luxury

segments, and 3) its proactive DOS expansion strategy in the region.

Financials are set to improve Guidance is for sales of €2bn in 2016. CEO, Mr Toledano,

has informally mooted €4bn for 2021, which we find too ambitious (implying a 14.6%

CAGR vs SGe at 11.7%). However, we do think a scale effect from revenue growth will

boost the EBIT margin through better absorption of fixed costs (A&P at 16.2% in FY14 and

14.8% in FY17e, vs 6-7% at peers). This takes the margin from c.13% to 18% over time.

A below-average holding company discount The recent all-time low in the holding

company discount (at c.5-10%) and current equity market volatility lead us to adopt a

cautious stance. In particular, we don’t see any structural changes in the stock’s catalysts:

1) no short- to medium-term change in the shareholding structure; and 2) market multiples

are at an all-time high since 2003-2004.

We value the stock at €182 Our target price is based on SOP calculations: 1) We value

the commercial Christian Dior operations on DCF (WACC at 9.5% and LT growth at 4%);

2) we value the 40.9% stake in LVMH both at the average of our €182 LVMH TP and the 1m

stock price average of €152 (and average them); 3) We value its 6,000sqm of real estate at

€240m and treasury shares at €495m (combined c.2% of our EV); and 4) we apply a 15%

discount to EV to reflect the last three years’ average discount.

The main risks to our TP Upside: 1) change in the holding structure; 2) upgrade to LVMH

estimates. Downside: 1) slowing demand among EM consumers; 2) lack of operating

leverage; 3) downgrade to LVMH estimates; and 4) strong equity market volatility. The main

catalysts Newsflow on EM, margin levels and rationalisation of the shareholding structure.

appeal, we highlight our preference for LVMH vs Christian Dior. This note reviews the rationale

for our LVMH Buy rating, the risks attached to the stock, and the suggested investor strategy.

Buy rating rationale: Our thinking, previously given (details overleaf), boils down to this. LVMH

now offers superior organic sales growth vs the sector, EBIT margin stabilisation at 18-19% (in

line with the sector average from H2 after a drop of c.100bp p.a. since 2011), FCF generation

now supported by below-sector-average capex /sales ratio (5% vs peers at 5.0-6.0%), albeit

slightly hampered by now-above-average c.33% tax rate (sector at 28%), and 5-10% PE

discount vs peers even though financials are mostly in line or better than the sector and in our

view are less uncertain. Lastly, it is possible that the rapid expected degearing will lead to

enhanced shareholder return. What is hampering the stock then? a) Stock status: the

combination of low investor interest in the sector, an already large positive consensus on the

stock, and the stock’s high liquidity and role as a sector proxy; b) Group profile: as it is highly

diversified, the group is vulnerable to much of the negative macro-economic / political / FX /

financial markets newsflow currently weighing on consumers’ discretionary spending and

investors’ minds. This creates short-term spikes in demand volatility and gives investors a sense

of a lack of sustained consumer demand/consistent industry trends. c) Earnings profile:

volatile divisional performances from one quarter to the next remove any sense of a stable and

predictable environment. However, its diversification is currently an asset rather than a liability in

our view, as it enables LVMH to generate quarterly sales growth trends in the mid single digits.

SG view Putting all of this together leads us to the following strategy: in volatile markets a

buy-and-hold works for periods beyond our investment horizon because the share price is

more volatile than the fair value of the portfolio (currently boosted by the KPIs described

above). So investors should take advantage of the low entry points that appear periodically.

Note that our recent upgrade to Buy was triggered by the low share price in late August.

How we value the stock SG’s TP is the average of SOP/DCF with a 9.5% WACC and 4% LT

growth (see models pages 4, 5).

Events, catalysts & risks Risks to the price target: if the cognac sales rebound is shortlived;

if LV growth remains low.