RTRS - PREMIER OIL TO BUY EON'S OIL AND GAS ASSETS IN THE UK NORTH SEA - SOURCES
German Industry Lobby BDI: Sees German 2016 GDP of almost 2%, sees increased geopolitical risks and lack of clarity
- Economic upturn largely dependent on special factors such as low oil prices, low interest rates and weak Euro
January 13, 2016
Makor - Orange / Bouygues
Our thoughts in a nutshell:
•Wethinkdeal Orange / Bouygues Tel cango through although there are still a lot of obstacles to meet
•Valuation
•Political support from Orange shareholder (French State) in the wake of a major election–presidential election in 2017
•Antitrust (EU or France)
•At 10bnE valuation for Bouygues Tel, we estimate Bouygues trades«only» at 9,2% discount to its NAV
•We need to discount this discount (!) by 5% at least on execution risks, so real discount to NAV is more like 4,2% we think
•Also, future company will be a hold co. A 15/20% discount to NAV more likely
Risks to our case:
•Price tag of Bouygues Telecom
•We estimate 10bnE is a max price for Bouygues Telecom
•Any increase in price tag would obviously be a negative to the Chinese of the discount
•Every 1bnE variation of priceof Bouygues Tel represents roughly 3E of NAV per share
•If deal takes place, Bouygues will get circa 3bnE of cash in (1bnE from Alstom share buyback and 2bnE from Bouygues Tel according to market rumours)
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4 quality names with attractive entry points
In this edition of the EQM, we highlight four stocks that we believe are trading at attractive entry points (ARM, Burberry, Richemont and Safran). All are also on our Global GS SUSTAIN Focus List. Three are valued at a 12m fwd P/E discount to sector peers (Richemont, Burberry and Safran), which is highly unusual for a Q1Q1 stock. With an average 12m fwd P/E (I/B/E/S consensus) of <15x and average upside to GS price targets of c.60%, we believe these stocks offer very good value. The fourth stock (ARM) is now at an unusually low 12m fwd P/E premium of 52%.
--> Airlines & Retailers could be the more impacted by this new standard...could explain weakness of sector yesterday...
Companies around the world will be forced to add close to $3tn of leasing commitments to their balance sheets under new rules from US and international regulators — significantly increasing the net debt that must be reported by airlines and retailers.
A new financial reporting standard — the culmination of decades of debate over “off-balance sheet” financing — will affect more than one in two public companies globally.
Worst hit will be retail, hotel and airline companies that lease property and planes over long periods but, under current accounting standards, do not have to include them in yearly reports of assets and liabilities.
In these sectors, future payments of off-balance sheet leases equate to almost 30 per cent of total assets on average, according to the International Accounting Standards Board, which collaborated with the US Financial Accounting Standards Board on the new rule.
Hans Hoogervorst, IASB chairman, said: “The new Standard will provide much-needed transparency on companies’ lease assets and liabilities, meaning that off-balance-sheet lease financing is no longer lurking in the shadows”.
As a result of the accounting change, net debt reported by UK supermarket chain Tesco would increase from £8.6bn at the end of August to £17.6bn, estimated Richard Clarke, an analyst from Bernstein. However, while the new standard would make Tesco look more indebted, Mr Clarke added that the assets associated with the leases would also come on to the company’s balance sheet, so “the net effect would be neutral.”
Investors warned that the new standards could affect some groups’ banking covenants and debt-based agreements with lenders, but said they would make it easier to compare companies that uses leases with those that prefer to borrow and buy.
Vincent Papa, director financial reporting policy at the Chartered Financial Analysts Institute, which has been pushing for these changes since the 1970s, said: “Putting obligations on balance sheets enables better risk assessment. It is a big improvement to financial reporting.”
For some airlines, the value of off-balance- sheet leases can be more than the value of assets on the balance sheets, the IASB noted.
It also pointed out that a number of retailers that had gone into liquidation had lease commitments that were many times their reported balance sheet debt.
News of the accounting change follows long-running concerns over the use of off-balance sheet finance by some companies.
In 2005, the US Securities and Exchange Commission calculated that US companies had about $1.25 trillion of leasing commitments that were not included in assets or liabilities on balance sheets.
Six years later, the Equipment Leasing and Finance Foundation in the US said that “Capitalising operating leases will add an estimated $2 trillion — and 11 per cent more reported debt — to the balance sheets of US-based corporations . . . and could result in a permanent reduction of $96bn in equity of US companies.”
Under current rules, companies are required to differentiate between financial hire-purchase type of leases, which are put on to balance sheets, and operating leases. The latter are only disclosed as footnotes to annual reports although the payments and costs are included in income statements.
European Luxury Goods: Great uncertainty but valuation fair
*HUGO BOSS – Downgrade to EW from OW.Lower PT to €82.00 from €98.00
*JIMMY CHOO – Downgrade to EW from OW. Lower PT to 155p from 190p
*LVMH – Downgrade to EW from OW. Lower PT to €155.00 from €184.00
*ADIDAS (EW) Lower PT to €85.00 from €88.00
*BURBERRY (EW) Lower PT to Lower PT to £12.00 from £14.25
*GRANDVISION (OW) Raise PT to €30.00 from €28.50
*KERING (OW) Lower PT to €170.00 from €200.00
*LUXOTTICA (OW) Lower PT to €67.00 from €70.00
*MULBERRY (EW) Raise PT to £10.00 from £9.50
*RICHEMONT (OW) Lower PT to CHF85.00 from CHF95.00
*FERRAGAMO (EW) Lower PT to €24.00 from €28.00
*SWATCH (EW) Lower PT to CHF350.00 from CHF410.00
*TOD’S (UW) Lower PT to €72.00 from €75.00
The short-term outlook for luxury is uncertain with China macro issues a key sector concern triggering weak global stock markets that can also have a knock-on effect in trading. Given we are against a relatively tough H1 comparative, we have decided to cut LVMH, Hugo Boss and Jimmy Choo to EW from OW. We believe that the leather goods operations will continue to struggle as price differentials globally have undermined pricing power. We believe further price increases in Europe are likely and we have some concerns on the impact this has on the European domestic consumer. Watch destocking continues apace with no sign of any slowdown. We believe confidence will only return once organic growth momentum improves which seems unlikely in H1. Kering and Richemont are our preferred luxury investments. By contrast the eyewear and sportswear businesses continue to show strong growth and we remain positive on Luxottica and GrandVision.
>>> Up
*BABCOCK RAISED TO BUY VS NEUTRAL AT BOFA
*DATALOGIC RAISED TO BUY VS HOLD AT BERENBERG
*ENDESA RAISED TO OUTPERFORM AT MACQUARIE
*G4S RAISED TO BUY VS NEUTRAL AT BOFA
*GIVAUDAN RAISED TO BUY VS HOLD AT BERENBERG
*KONE RAISED TO BUY VS UNDERPERFORM AT BOFA
*L’OREAL RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE (Note attached)
*SWEDBANK RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
*TF1 RAISED TO BUY VS HOLD AT HSBC
>>> Down
*ARCELORMITTAL CUT TO UNDERPERFORM VS HOLD AT JEFFERIES
*BOLIDEN CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
*BUNZL CUT TO SELL VS NEUTRAL AT GOLDMAN
*DIALOG SEMICONDUCTOR CUT TO UNDERWEIGHT AT JPMORGAN
*DRAX GROUP CUT TO MARKET PERFORM AT BERNSTEIN
*HEXAGON CUT TO NEUTRAL VS BUY AT BOFA
*HUGO BOSS CUT TO EQUALWEIGHT AT BARCLAYS (Note attached)
*JIMMY CHOO CUT TO EQUALWEIGHT AT BARCLAYS (Note attached)
*LVMH CUT TO EQUALWEIGHT AT BARCLAYS (Note attached)
*RANDSTAD CUT TO NEUTRAL VS BUY AT BOFA
*SEB CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE
*SPIRAX-SARCO CUT TO NEUTRAL VS BUY AT BOFA
>>> PT Change
*ADIDAS (EW) Lower PT to €85.00 from €88.00 AT BARCLAYS
*BURBERRY (EW) Lower PT to Lower PT to £12.00 from £14.25 AT BARCLAYS
*GRANDVISION (OW) Raise PT to €30.00 from €28.50 AT BARCLAYS
*KERING (OW) Lower PT to €170.00 from €200.00 AT BARCLAYS
*LUXOTTICA (OW) Lower PT to €67.00 from €70.00 AT BARCLAYS
*MULBERRY (EW) Raise PT to £10.00 from £9.50 AT BARCLAYS
*RICHEMONT (OW) Lower PT to CHF85.00 from CHF95.00 AT BARCLAYS
*FERRAGAMO (EW) Lower PT to €24.00 from €28.00 AT BARCLAYS
*SWATCH (EW) Lower PT to CHF350.00 from CHF410.00 AT BARCLAYS
*TOD’S (UW) Lower PT to €72.00 from €75.00 AT BARCLAYS
>>> Initiation
*ABERTIS RATED NEW NEUTRAL AT GOLDMAN; PT EU13.8
*BBA AVIATION RATED NEW BUY AT CITI
*ISS RATED NEW NEUTRAL AT BOFA; PT DKK250
*TUI REINITIATED AT BUY AT KEPLER CHEUVREUX; PT EU18.40
>>> Call
>> Stock
*CAPITA ADDED TO EUROPE 1 LIST AT BOFA
Dow +0.72% S&P +0.82% Nasdaq +1.03% Russell+0.28% VIX 22.19 (-8.72%)
US Market closed higher after a volatile day. Oil rested on its overnight low until reports of a terrorist attack in Turkey pushed the energy-component higher. WTI crude was able to mount a rally into the U.S. open, but was unable to maintain that momentum. Declines in oil were mirrored across equities for the most of the day as WTI crude ended its pit session lower by 3.1% at $30.44/bbl. However, the energy component climbed in electronic trade and the stock market rallied alongside. Heavy weighted tech saw relative strength SBUX+2.8% on news of pace of having 2000 stores in China. IBB+1.6%. Volume were above average with more than 1bil shares. US After Hours ICLD +4.6%, ACST +4.4%, IRG +2.0%, PRGS +1.7%, TREE +1.6%, F -3.9%, CSX -2.5%, WBMD -1.5% following earnings/guidance, MET+7% on spin-off news, FXCM-11.6% on Q4 metrics, CYBR: Check Point reportedly in talks to acquire CyberArk - Haaretz; +13.2% afterhours Asian equities are tracking the gains on Wall St, with more positive regional developments helping in broad-based market recovery. Continued pause on currency devaluation by the PBoC along with stronger than expected China trade data have lifted risk-on sentiment across the asset classes. Nikkei225 is in the lead among the indices, boosted by weaker JPY, as USD/JPY rose some 70pips above 118.30. Imports declines were also not as severe as expected - in CNY -4.0% v -7.9%e and in USD -7.6% v -11.0%e. Shipments to Europe resumed growth, decline in Japan exports was cut in half below 5%, and US exports improved to -3.7% v -5.3% prior. Customs Office did acknowledge that challenges remain in China trade development, and that authorities will monitor exchange rate changes.
Nikkei +2.88% Hang Seng +2.01% Shanghai -1.29%
Eur$ 1.0833 CNH 6.5753 (offshore) CNY 6.5763 JPY 118.15 GBP 1.4448 CHF 1.0047 RUB$76.73 WTI $30.80 (+1.18%)
S&P +0.69% EuroStoxx+1.05% Dax +1.08% SMI +0.93%
Macro :
- Gundlach Paints Bearish Outlook for 2016 Investing, Economy
- Gundlach Says Technicals Call for S-T Bottom in Oil Price: Rtrs
- EIA Cuts 2016 WTI Forecast by 24%, Reduces Brent Outlook by 28%
- Global PC Shipments Down 10.6% Y/y in 4Q, IDC Says
- China’s 2015 Exports Fall 1.8% in Yuan
- China Trade Surplus Swells as Exports Rise in Boost for Yuan
- Cyber Security Stocks May Move After Report on CHKP/CYBR Talks
- Offshore Yuan Set for Record Five-Day Gain as China Curbs Supply
- KKR Holds Most Cash Since 2011 as Risks in Stocks Increases (1)
Keep an eye on :
- A2A IM : A2A to Buy 51% Stake in Linea Group Holding
- ABG SM : Abengoa Bondholders in Talks to Enter Co. Capital: Economista
- AV/ LN : Direct Line, Aviva Flood Losses Won’t Slam Book Value: Barclays
- BA/ LN : BAE Has Expressed Interest in ATRO in the Past: TheDeal
- BA/ LN : BAE Systems to Cut Up to 300 Addl Jobs in Florida
- CBK GY : Frankfurt Court Rejects Firings at Commerzbank: Handelsblatt
- CGG FP : CGG Holders Can Buy New Shares at EU0.66 in EU350M Rights Offer
- ENI IM : Eni Wants to Keep ‘Significant’ Stake in Versalis: Statement
- GEBN VX : Geberit FY Sales In Line, Says Sanitec Integration on Track
- GSK LN : GlaxoSmithKline Sees 2016 Core EPS W/ Double Digit Growth CER
- ILD FP : France’s ARCEP Wants End to Free-Orange Network Sharing http://bit.ly/1ZjTxMe
- JMT PL : J. Martins 2015 Sales Rise 8.3% Y/y to EU13.7b; Est. EU13.7b
- JMT PL : Jeronimo Martins Sales Show Competitive Advantage, Exane Says
- KTC NA : Consortium Increases Ten Cate Bid to EU26 From EU24.60
- OR FP : L’Oreal, Puig Study Bids for Dolce & Gabbana Perfumes: Figaro
- MKS LN : M&S Said to Have Approached EasyJet CEO McCall for Top Job: Sky
- ORA FP : France’s ARCEP Wants End to Free-Orange Network Sharing http://bit.ly/1ZjTxMe
- ORA FP : Orange to Acquire Airtel’s Units in Burkina Faso, Sierra Leone
- PMI IM : Pop Milano, Popolare Intensify Talks, Seek Deal by March: Rtrs
- ROG VX : Roche Says Troponin Test Cuts Time For Heart Attack Diagnosis
- SAB SM : Blackstone Acquires Sabadell Real Estate Portfolio: Expansion
- SAN FP : Sanofi CEO ‘Vigilant’ on Possible Deals, Looking for Bolt-Ons
- SHP LN : Shire: Will Continue Seeking M&A, Business Devt Opportunities
- SHP LN : Baxalta Ratings May Be Cut by S&P
- SW FP : Sodexo 1Q Organic Sales Growth Beats Ests., Confirms FY16 View
- SZU GY : Suedzucker Confirms FY16 Forecast; 9-Month Oper. Result Rises
- TEF SM : Telefonica’s Movistar to Distribute BeIN Sports La Liga Channel
- TNTE NA : Goldman Sachs Reports Smaller Indirect TNT Stake, Filing Shows
- VOW3 GY : California Regulators Reject Volkswagen Recall Plan - WSJ http://on.wsj.com/1l3V4IC
- VOW3 GY : VW CEO Said to Meet with House Energy Panel Chairman