(Makor) Tech View Dax30 Index (11,228 last) - taking 5% profit on short position at mkt price


Summary

 

·         The Index has tested the 11,167 level today and so far this level is holding nicely

·         A move below 11,167 would be negative but till this happens will take profit and look to sell bounce or a breakdown

·         The Weak Euro is also a warning sign that we might bounce from here

 

Strategy; Short from 11,841 taking profit at 11,228 for 5% gain, step aside for now

 

Daily chart

 

 

(Makor) Special Situations: PSA PEUGEOT CITROËN (UG: FP) - Is The Race Over?



Special Situations: PSA PEUGEOT CITROËN (UG: FP) - Is the Race Over?

 

For full report and additional data please refer to our new format https://relayto.com/makor-capital/DhUmV21v

 

PSA stock rallied 80% since the beginning of the year. The company, which suffered in the last few years from shrinking market share and declining profits is now going through a reconstruction plan, and has managed to show operating profitability in 2014 for the first time since 2010. We believe that further improvement in the operational performance together with a continued recovery of the European Auto sector (which was seen year to date), can lead to further share gains. However, at the current stock level we prefer to wait for a better entry point that will reflect a more attractive risk-reward ratio.

 

Valuation & Investments strategy

 

We identify two potential catalysts which we recommend investors to follow: 1) PSA reconstruction plan -   in April 2014 Carlos Tavares, Chairman of the PSA and former Renault executive, announced the 2014-2018 “back in the race” business plan, with a clear focus on returning the group to profitability. The plan includes three main financial metrics - recurring positive group operating free cash flow by 2016 at the latest, €2 billion in total Group operating free cash flow over the 2015-2017 period (this was lately updated by management from 2016-2018); and a 2% operating margin in the Automotive Division by 2018 with a long term target of 5%. The company aims to achieve these goals by reducing overall models numbers, improving capacity utilization through restructuring, and SG&A cost reduction. We believe that strong execution can continue to drive the stock up especially if the recovery in the Auto sector continues through 2015. 2) Potential M&A candidate - we see PSA as a natural candidate for M&A deals given the fact that it is one of the smallest OEM’S in Europe and could be acquired by a bigger OEM which could drive scale out of it. We point out that this could be a major catalyst.

 

We value PSA at €19 per share using a sum of the parts analysis based on the following assumptions and adjustments: 1) The automotive segment was valued at 0.2x EV/SALES on FY16 estimated revenues in order to reflect a certain level of improvement in the operational performance. 2) Faurecia stake (51.1%) was taken at market value based on a share price of €40.7 (the closing price as of June 4, 2015). 3) BANQUE PSA finance was taken at 20% discount to book value. 4) PSA China was taken at 0.55x EV/SALES on the FY14 revenue which we believe is quite conservative given the good performance of PSA in China together with its local partner DPCA (this valuation is also supported by the DDM method based on 2014 dividend). 5) PSA net debt and pension liabilities were taken excluding Faurecia. 6) We accounted the dilutive effect from the equity warrants issued in April 2014 by adding 120 million shares and €770 million to assets.

 

We note that PSA management stated in 1Q15 revenue release that the Group is ahead of schedule with its "Back in the Race" recovery plan and is benefiting from a favorable economic environment. We ran a sensitivity analysis for PSA share value in order to reflect a number of potential scenarios for the automotive segment and for PCA China. We took a 0.10-0.35x EV/SALES multiple range for the automotive segment and 0.55-0.70x range for China PSA. We believe the appropriate range of the share value is @ a €16-€21 range (an average of €18.5). Therefore, at current market price of €18 we see PSA as Natural but we recommend to follow the stock and the company’s operational progress and take advantage of a potential pull back.

 

Key risks

 

Main risks include: (1) unexpected drop in European and global vehicle demand; (2) poor execution of PSA restructuring plan and lack of management’s ability to improve profitability and become cash flow positive in the short term; (3) market share declines in Europe and globally which will lead to declining revenues. (4) Strengthening of the euro particularly relative to sterling or emerging market currencies.

 

>>> Fitch: Greece IMF bundling highlights extreme liquidity pressure; No direct

Fitch: Greece IMF bundling highlights extreme liquidity pressure; No direct implications for Greece's 'CCC' sovereign rating 

Greece's decision to bundle four payments due to the IMF this month highlights the extreme pressure on government funding, Fitch Ratings says. It does not have direct implications for Greece's 'CCC' sovereign rating.

The risk that Greece misses its larger IMF payment at end-June cannot be discounted. The prospect of fiscal disbursements from Greece's official creditors is highly uncertain. The Greek government has not accepted the proposals presented by the institutions (the European Commission, European Central Bank, and IMF) this week. If the two sides do agree a deal, it will meet political opposition from elements of Syriza most hostile to the institutions' proposals for pensions and public sector wages. Time constraints mean we expect that an agreement would take the form of a further extension of Greece's existing programme beyond end-June and partial disbursements, conditional on Greece demonstrating its commitment to its terms. These funds would primarily be used to meet redemptions, which will rise sharply in July and August as bonds held by the Eurosystem fall due, as well as enabling Greece to fund a small ongoing deficit. Missing the larger end-June payment to the IMF would be credit negative. If no outline agreement between Greece and the institutions were in place, it would increase the risk that the ECB restricts Emergency Liquidity Assistance (ELA) to Greek banks. This may ultimately lead to restrictions on the banking sector to reduce liquidity strains, including capital controls. The risk of capital controls is reflected in our 'B-' Country Ceiling for Greece, which is just one notch above the sovereign IDR.

NY Post : Bulgarian ‘bandit’ behind fake Avon bid: SEC

A shadowy Bulgarian trader is the alleged mastermind behind last month’s bogus bid for Avon.
Nedko Nedev, 37, sent shares of the cosmetics maker into a tizzy on May 14 when he filed a rambling, typo-filled offer to buy the troubled company for $18.75 a share — 180 percent above the $6.60 price it was trading at, the Securities and Exchange Commission said Thursday.
Nedev, who lives in the capital city of Sofia, took advantage of his fake offer, which sent Avon shares spiking to $12 in 30 minutes, to unload a portion of his position in the stock — netting him a total profit of $4,879, according to the SEC complaint, filed in Manhattan federal court.
The SEC later froze two US brokerage accounts with a total of $2 million.
Nedev also schemed in the last four years to pump up the stocks of insurer Tower Group, Rocky Mountain Chocolate Factory and Euroins Insurance through fake press releases and regulatory filings, the SEC alleged.
All the fake offers used similar phrases in filings and press releases, according to court papers.
“It is highly unlikely that Nedev’s trading was mere coincidence given that the manipulation occurred over four years, involved very different issuers, and occurred in at least one extremely lightly-traded stock,” the SEC said.
Neither Nedev nor PTG Capital, his company, also charged by the SEC, could be reached for comment.
While Nedev is alleged to have pulled similar hoaxes for years, it was the Avon play that finally prompted the SEC to investigate — perhaps because it was a bit red-faced after Nedev was able to push a registration document through its corporate filing system.
PTG’s offer was dubious from the start. No one had heard of PTG Capital, which sounded suspiciously like real private-equity giant TPG Capital

NY Post : Bulgarian ‘bandit’ behind fake Avon bid: SEC

A shadowy Bulgarian trader is the alleged mastermind behind last month’s bogus bid for Avon.
Nedko Nedev, 37, sent shares of the cosmetics maker into a tizzy on May 14 when he filed a rambling, typo-filled offer to buy the troubled company for $18.75 a share — 180 percent above the $6.60 price it was trading at, the Securities and Exchange Commission said Thursday.
Nedev, who lives in the capital city of Sofia, took advantage of his fake offer, which sent Avon shares spiking to $12 in 30 minutes, to unload a portion of his position in the stock — netting him a total profit of $4,879, according to the SEC complaint, filed in Manhattan federal court.
The SEC later froze two US brokerage accounts with a total of $2 million.
Nedev also schemed in the last four years to pump up the stocks of insurer Tower Group, Rocky Mountain Chocolate Factory and Euroins Insurance through fake press releases and regulatory filings, the SEC alleged.
All the fake offers used similar phrases in filings and press releases, according to court papers.
“It is highly unlikely that Nedev’s trading was mere coincidence given that the manipulation occurred over four years, involved very different issuers, and occurred in at least one extremely lightly-traded stock,” the SEC said.
Neither Nedev nor PTG Capital, his company, also charged by the SEC, could be reached for comment.
While Nedev is alleged to have pulled similar hoaxes for years, it was the Avon play that finally prompted the SEC to investigate — perhaps because it was a bit red-faced after Nedev was able to push a registration document through its corporate filing system.
PTG’s offer was dubious from the start. No one had heard of PTG Capital, which sounded suspiciously like real private-equity giant TPG Capital