>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: HIBB +13.3%, ANW +12.7%, INTU +9.8%, ROST +7.4%, FL +4.8%, SPLK +3.6%, (announces the retirement of CEO Godfrey Sullivan, effective immediately), CNC +2.3%, NGVC +1.8%, CISG +0.5%

M&A news: LBMH +24.8% (to be acquired by C. R. Bard (BCR) for ~$181 Million, or $3.35/share), HZNP +2% (withdraws offer to acquire Depomed (DEPO) following court ruling), PSEM +1.3% (Pericom Semi reiterates support for Diodes (DIOD) transaction; responds to Montage's offer)

Select metals/mining stocks trading higher: AU +2.4%, ZINC +1.9%, RIO +0.9%, BHP +0.8%


Other news: SRPT +25.5% (BMRN competitor, benefiting from BMRN's negative FDA briefing docs), KBIO +22.6% (appoints Martin Shkreli as CEO; announces new financing), HART +10.2% (CEO and CFO disclose stock purchases), CAB +6.1% (reports that Bass Pro considering bid for CAB), VIPS +5.9% (Tiger Global Management reported 9.96% passive stake in 13G filing),HABT +5.7% (postpones proposed follow-on offering of common stock by certain stockholders in light of current capital market conditions), NKE +4.3% (announces new $12 billion share repurchase program, 14 percent increase in quarterly dividend, and two-for-one stock split), VOD +1.6% (cont strength)

Analyst comments: TRMB +3.7% (upgraded to Buy from Neutral at Goldman), DEO +1.3% (upgraded to Overweight from Neutral at JP Morgan), INTC +0.6% (upgraded to Mkt Outperform from Mkt Perform at JMP Securities

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: NMBL -45.1%, MENT -28%, WDAY -7.5%, KEYS -6.8%, ZOES -5.3%, JMEI -5.3%, ADSK -3.8%, WSM -3.3%, TFM -3%, GPS -2.8%, MOMO -1.9%, WAIR -1.4%

M&A news: DEPO -5.5% (Horizon Pharma (HZNP) withdraws offer to acquire Depomed following court ruling)

Other news: NBG -31.8% (completed the book-building process to institutional and other investors by way of a private placement of its new ordinary registered shares), APTO -26.7% (suspends clinical dosing of APTO-253 to review its drug manufacturing processes and procedures; FDA places the Phase IB clinical trial on hold), PSTG -9.8% (in symp with NMBL), BMRN -7.8% (FDA briefing docs released for co's drisapersen for DMD; evidence of efficacy is 'inconsistent and in some cases contradictory'; safety a concern), PTCT -7.6% (BMRN peer), MNKD -6.6% (CEO steps down), BLDR -4.1% ( announces the commencement of a public offering of 7 mln shares of its common stock to be sold by Warburg Pincus), AVH -3.6% (following October traffic data), LYG -2.2% (in symp with BCS dg), CLVS -1.2% (PointState Capital disclosed 7.7% stake in 13G filing), S -1.2% (signs $1.2 bln deal w/ newly formed Mobile Leasing Solutions, LLC for the sale and lease-back of certain leased devices), SNPS -1.1% (on MENT earnings/guidance), ING -0.9% (may be in symp with BCS dg)

Analyst comments: BTU -5.4% (downgraded to Sell at UBS ), EXPR -2.8% (downgraded to Sell from Neutral at Goldman), AKAM -2.6% (downgraded to Sell from Neutral at Goldman ), BCS -2.2% (downgraded to Equal-Weight from Overweight at Morgan Stanley), GRFS -1.9% (downgraded to Hold from Buy at Berenberg), AMWD -1.5% (downgraded to Neutral at Robert W. Baird
)

>>> US Early premarket gappers

Early premarket gappers
Gapping up: KBIO +15.4%, ANW +12.7%, INTU +12.3%, ROST +8%, VIPS +5.9%, CAB +5.4%, HART +5.4%, NKE +4.4%, ZINC +4.3%, AU +3.3%, UVE +2.9%, CNC +2.3%, NGVC +1.8%, SPLK +1.5%, RIO +1.3%, RAD +1.2%, HIBB +1.2%, VOD +1.1%, BBL +0.9%, BHP +0.8%, FL +0.8%

Gapping down: NMBL -47.2%, MENT -32.7%, NBG -22.4%, DEPO -12.3%, WDAY -6.2%, ZOES -4.3%, BLDR -4.1%, AVH -3.6%, WSM -3.5%, SUNE -2.8%, SNPS -2.6%, MOMO -2.5%, BCS -2.1%, SAN -1.8%, TFM -1.7%, GPS -1.6%, WAIR -1.4%, RDS.A -1.3%, JMEI -1.3%, BP -1%, CHK -0.9%, ING -0.8%, SHPG -0.7%, AEG -0.7%, SNY -0.7%, VRX -0.6%, ADSK -0.6%

(CS) K+S AG - K+S or S+K

We reduce our average K+S EBITDA forecasts by 11%, our target price to
€22/share, and our rating to UNDERPERFORM (from Neutral). We
implement our CS Global Potash price forecasts and update our estimates
following the Q3 2015 result and CMD. We remain concerned surrounding the
near and medium-term supply/demand balance across global Potash markets.
For K+S (in the upper half of the global cost curve), this increases pressure on
forward margins/returns/cash flow.

* Potash Price Pain: We drop Global Potash price forecasts by avg.
-12.5% as a function of adverse supply/demand dynamics across global
Potash markets – CS forecast op. rates decrease to 70-75% by decade-end,
from ~78%. This leads to avg. ~25% EBITDA downgrades to K+S Potash &
Magnesium earnings through the forecast period. We recognise limited
protection to earnings from K+S' speciality/SOP product offering.

* Legacy Issues: We estimate the K+S Legacy Project expansion is
~€1.4/share value dilutive, in our view. We estimate K+S require Potash
prices >$400/t for the project to be value-neutral.

* Above the Salt: We are impressed by the margin resiliency of the Salt
business through FY15E, and now forecast the division to achieve its 'Salt
2020' targets in FY18E (2 years early vs. company targets). We believe this
driven by underlying business improvement, CS est. ~300bps margin
contribution from cost saves, and holding record prices.

* Catalysts: Q1 result – 10 March 2016. Potash prices.

* Valuation: Our K+S valuation is €22/sh. This is derived using our
Discounted Cash Flow analysis for its existing European Potash assets
(€12/sh – assuming a run-off of existing reserves), and an average SOTP
approach for the Salt business (€19/sh). Our Legacy Project valuation is
€(1.4)/sh on Forward NPV / €(7.8)/sh on Total Project NPV.

(MS) Eur. Equity Strat. : Large gap of Perf. between Cycl. vs Def. in US & Eur.

* Cyclicals are leading in the US, lagging in Europe. In the US, Cyclicals have outperformed Defensives by 6% over the last quarter. However, over the same period European Cyclicals have underperformed Defensives by 2%. These two relative series have tracked each other closely in recent years and hence this divergence is significant. In fact, the size of the gap between the relative performance of Cyclicals vs Defensives in the US against the same series in Europe has only been exceeded twice in the last decade (moments of extreme stress in Oct-08 and late 2011).

* Diverging monetary policy is temporarily boosting European defensives – an opportunity to sell. There has been no significant change in the growth outlook for the US or Europe recently, hence this divergence most likely reflects diverging monetary policy (cyclicals traditionally outperform defensives post the first Fed rate hike as we showed in ‘1st Fed rate hike should be good for cyclical value and bad for defensives’, 12 November). Improving fundamental trends should ultimately trump interest rate differentials (and a weaker EUR is also good for European growth), and hence we’d expect this divergence to narrow driven by a period of cyclical outperformance in Europe – this is a good opportunity to sell European defensives.

(MAKOR) Merger Arb. Research - ENEL GREEN POWER / ENEL - EASY BEING GREEN

ENEL GREEN POWER (EGPW IM) / ENEL (ENEL IM)

Easy being Green  

On 18 November 2015, the boards of Enel and Enel Green Power announced the approval of the non-proportional spin-off of part of EGP into Enel.

The spin-off envisages:

·         Assignement by EGP to Enel of the spun-off assets, essentially represented by (i) the 100% stake held by EGP in Enel Green Power International B.V., a Dutch holding company that holds investments in companies operating in the renewable energy sector in North, Central and South America, Europe, South Africa and India; and,

·         The assets, liabilities, contracts and other legal relationships associated with those investments (the "Spun-Off Assets"); and - the retention by EGP of all remaining assets and liabilities other than those that are part of the SpunOff Assets (and thus, essentially, all Italian operations and a small number of remaining foreign investments).

The transaction will help simplify Enel’s current business structure and EGP have performed very well since its listing, registering an 82.7% increase in installed capacity, reaching the current 10.6 GW from 5.8 GW, and a 38% EBITDA increase to €1.8bn expected for full year 2015 (to date 12% of Enel Group’s EBITDA) from €1.3bn euros in 2010 (which was 8% of Enel Group’s EBITDA), which may help balance a weaker outlook elsewhere e.g. in Latin America.

The transaction does not require any regulatory approvals and is only conditional on: (i) EGP shareholder approval (2/3% of shares present and voting with a 20% quorum), (ii) Enel shareholder approval (2/3% of shares present and voting with a 20% quorum), and, (iii) recesso rights not exceeding €300m (recesso rights price using the 6M VWAP is €1.78 per EGP share).

Under Italian law, Enel are allowed to vote their c.70% stake in favour of the transaction making the EGP shareholder approval a “no brainer”, consequently minority shareholders have no choice but to accept the offer.  We do not expect any issues in obtaining Enel shareholder approval.

Both shareholder meetings are scheduled for 11 January 2016 (the record date has not been set yet) and following the 2-month creditor period for the recesso rights the transaction should be on track to close/settle by mid/late March.

(UBS) Alstom - Time for a stop at the station – rec to Neutral

Time for a stop at the station – rec to Neutral

* Fair value at EUR 29 – fundamentals solid but look for more detail on strategy
We downgrade Alstom to Neutral from Buy with a PT of EUR 29. We continue to view
the fundamentals in the rail market as solid, at least relative to the general industrial
peer group. Alstom should be able to drive low to mid-single digit organic revenue
growth in coming quarters and on the back of that it should have above average scope
to lift margins. However, with the lack of margin progression in 1H16 and little visibility
into 2H16 and onwards, we do not think it is warranted to push the valuation higher at
this stage. Similarly we think there is scope for management to spell out its strategy for
the company in more detail (growth vs. profitability, M&A vs. organic, cost opportunity,
etc.).

* Incorporating GE Signalling, JV income and the cash distribution
We make various changes to the model, including adding GE Signalling, the JV income
(EUR 166m) and the impact from the coming cash distribution (EUR 3.2bn). Small
underlying downgrades and a lower assumed profitability in GE Signalling lead to take
down the PT to EUR 29 from EUR 30. We assume that GE signalling comes in at 8%
margins and revenues of EUR 364m. At our PT the stock trades on 11.4x and 10x
calendar 2016e and 2017e EBITA post restructuring, respectively. Our 2017e income
from ops and order estimates are 2% and 8% below consensus, respectively.

* GE Signalling offsets underlying downgrade
Our income from operations are EUR 374 (-1%), EUR 414 (+5%) and EUR 422 (+5%)
for fiscal 2016, 2017 and 2018, respectively. The inclusion of GE Signalling masks a low
single digit downgrade. We forecast margins from income from operations to be 5.5%
for FY16 (big 2H uptick) and stable at 5.7% for FY17 and FY18. The order backlog
should enable Alstom to grow revenues by 2-4% LFL per year.

* Valuation: PT 29
Our price target multiple is circa 10x 2017e EBITA, about 10% above what we think is
fair for an average industrial business in Europe. We justify the higher multiple because
of the better than average near-term opportunities to lift margins and create value
through M&A.

(BofA-ML) FLow Show : "short conviction"

>>> Asset Class Flows
* Equities: $2.2bn outflows (first outflows in 6 weeks) (note $4.2bn mutual fund outflows partially offset by $1.9bn ETF inflows)
* Bonds: $2.5bn outflows (2 straight weeks)
* Commodities: largest inflows in 12 weeks ($1.1bn) (mostly via oil/energy funds)
* Money-markets: $15.6bn inflows (huge $120bn inflows over past 7 weeks)

>>> Equity Flows
* Europe booming: $1.7bn inflows (inflows in 25 of past 27 weeks)
* Japan: tiny $36mn outflows (2 straight weeks of small outflows)
* EM: $2.4bn outflows (3 straight weeks) (biggest outflows in 10 weeks)
* US: $1.8bn outflows

>> Fixed Income Flows
Govt/tsy funds eke out inflows for first time in 6 weeks (albeit tiny $13mn)
$1.0bn outflows from EM debt funds (outflows in 16 of 17 weeks)
$0.9bn outflows from HY bond funds (2 straight weeks)
First outflows from IG bond funds in 6 weeks ($0.8bn)
Bank loan funds have seen outflows in 15 out of past 16 weeks
9 straight weeks of inflows to muni bond funds