>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: PDFS -17.8%, JRJC -8%, TA -5.2%, SANW -4.1%

M&A news: DWA -9.1% (Softbank (SFTBY) merger talks with DWA being donwplayed, according to reports; also reports indicate SFTBY may purchase Legendary Pictures)

Select metals/mining stocks trading lower: AU -2.1%, GFI -2%, SSRI -1.6%, AG -1.5%, IAG -1.4%, SLV -1.4%, PAAS -1.4%, FSM -1.2%, GDX -1.1%, ABX -0.9%, GLD -0.8%, SLW -0.8%

Other news: MTL -13.3% (cont bankruptcy speculation), TSL -3% (announces the offering of ~7 mln American Depositary Shares), FDUS -2.2% ( announces commencement of public offering of common stock), WUBA -1.8% (still checking), F -0.9% (following late weakness on comments from Investor Day -- says it will miss its 2014 pretax profit goal of $6 bln), SVU -0.9% (announced the discovery of malware on some of its point of sale systems; protective technology believed to have limited the risk of data theft)

Analyst comments: ARMH -2.1% (downgraded to Underperform from Mkt Perform at Bernstein), CRR -1% (downgraded to Underweight from Equal-Weight at Morgan Stanley), SGEN -1% (downgraded to Underperform from Neutral at BofA/Merrill), K -0.9% (downgraded to Underweight from Equal-Weight at Morgan Stanley)

(Makor) Special Situations/Relative Value: TNT: BUY

{MKOR <GO>}

Special Situations/Relative Value: TNT, remember?

BUY  

TNTE NA: Eur4.99

September 30, 2014

With TNT below Eur 5/sh, it may be worth getting back in the company for which UPS had offered Eur9.50/sh in Feb 2012.  Since then, revenues and operating income have remained stable, and the net income has gone from a loss to an expected gain, although ebitda will be slightly lower in 2014 than in 2012.  Moreover, because of the Eur200 terminating fee, TNT has most solid balance sheet of the major delivery companies with a net cash position in excess of Eur 400m.  The company recently had a profit warning and the stock collapsed by over 10% last week. We view the price dislocation as an opportunity to build up an investment position in TNT. FY2014 could be a trough year, and a recovery is not priced-in the current share price. Obviously, a bid by Fedex or another party is not priced-in either.

FULL REPORT ATTACHED

 

WSJ : EBay to Spin Off PayPal Business

EBay to Spin Off PayPal Business Activist Carl Icahn Pushed Similar Plan for Online Marketplace

EBay CEO John Donahoe, who will lead the separation, had opposed such a split when activist Carl Icahn proposed the move. AFP/Getty Images EBay Inc. EBAY -0.51% said it plans to spin off its PayPal business into a separate publicly traded company next year, a victory for activist investor Carl Icahn, who had pushed for the company to split.

EBay said Tuesday that it expects to complete a tax-free spinoff of PayPal during the second half of next year.

Devin Wenig, the current president of eBay Marketplaces, will be the chief executive of the new eBay, while American Express AXP -0.48% executive Dan Schulman will lead the new PayPal. Mr. Schulman will immediately take over as president of PayPal, eBay said.

Current eBay CEO John Donahoe won't have an executive role in either new company, nor will finance chief Bob Swan. Both executives, however, will oversee the separation of the businesses.

"For more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value," Mr. Donahoe said in a news release. "However, a thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively."

He added: "The industry landscape is changing, and each business faces different competitive opportunities and challenges."

Mr. Donahoe and the company's board had said earlier this year that they believed the company would be stronger with PayPal in the fold. They were responding to a push from Mr. Icahn to split off the payments business, whose revenue has been on pace to soon eclipse that of eBay's legacy business.

Mr. Icahn eventually backed off his demands to split the company and eventually agreed to insider status at eBay. In August, he disclosed that he boosted his position in eBay.

His firm is eBay's sixth-largest shareholder with about a 2.5% stake, according to FactSet.

Talk of a spinoff didn't end after Mr. Icahn's shift, however. EBay's shares jumped in August when a media report said that the company was discussing a possible spinoff, two months after then-PayPal president David Marcus left to join Facebook. FB +0.27% Mr. Marcus had been one of the executives battling calls to split PayPal from eBay.

The announcement Tuesday also comes as PayPal faces fresh competition from Apple Inc.'s new Apple Pay service, which is focused on the growing mobile-commerce segment. Analysts have characterized the Apple Pay launch as a threat to PayPal.

PayPal has more than 152 million active registered accounts, while revenue over the past 12 months grew by 19% to about $7.2 billion.

EBay bought PayPal in 2002 for $1.4 billion in stock.

>>> US Early premarket gappers

Early premarket gappers

Gapping up: MOVE +37.6%, CPRX +18.7%, VIMC +11.6%, BLDP +8.2%, CRNT +7.6%, RADA +7.4%, SNX +6.4%, HTZ +5.4%, SMPL +4.9%, SCOK +4.7%, PLUG +3.4%, MBLY +3%, CTRP +2.5%, GPRO +2.4%, HIMX +2%, EXXI +1.5%, SDRL +1.3%, AA +1.1%, CTAS +1.1%, HTGC +0.8%, TIF +0.7%, CSC +0.5%

Gapping down: MTL -13.3%, JRJC -9.4%, DWA -7.7%, PDFS -6.5%, SANW -4.1%, IAG -3.1%, ARMH -2%, SLV -2%, WUBA -1.4%, AU -1.4%, GDX -1.3%, SLW -1.3%, GLD -1%, CRR -1%, SVU -0.9%, ABX -0.8%, SSRI -0.8%, FDUS -0.6%

WSJ - EU Believes Apple's Irish Tax Deal Breached Rules

BRUSSELS—European Union regulators said Tuesday they believe that tax deals granted to Apple Inc. AAPL -0.64% in Ireland constitute illegal state support for the U.S. company, in a letter to the Irish government that set out the reasoning behind the decision to open an in-depth investigation in June.

The European Commission, the 28-member bloc's central antitrust authority, said it had reached the "preliminary view" that tax deals struck in Ireland in 1991 and 2007 in favor of the Apple group constitute state aid.

"Through those rulings the Irish authorities confer an advantage on Apple" that is "granted in a selective manner," the commission wrote.

"That advantage is obtained every year and ongoing, when the annual tax liability is agreed upon by the tax authorities in view of that ruling," the letter said.

"The Commission has doubts about the compatibility of such state aid with the Internal market," it said.

Interested parties, including Apple, will have a month to comment once the notice is published in the EU's official journal in the next few weeks. From that point, state-aid cases usually take up to 18 months to reach a conclusion.

(Makor) Yahoo (YHOO US) - It only took one week…

Special Situations: Yahoo (YHOO US)

It only took one week…

YHOO US: US$ 40.80

September 29, 2014

It only took one week to see a Yahoo shareholder becoming a vocal activist.  While we disagree with Starboard Value’s idea (get Yahoo to buy AOL to achieve synergies), it just highlights the value in the stock and we re-iterate our buy recommendation on Yahoo.  Moreover, we note that Alibaba can be shorted (stock borrowing costs around 8-10%) and that options started to trade today.  It is therefore possible to hedge the stake in Alibaba (about 1 baba for 2 yhoo).  One alternative recommended strategy would be to go long Yahoo and sell out of the money calls on Alibaba.  For example Dec 100 calls can be sold for around $3.00 as of this writing.  In other words, one could essentially collect the call premium, and only be effectively short BABA from 103 upward, or 15% higher than now. However, if Yahoo’s discount was to remain constant at the current level of 30-32%, the shares would need to rise to $44 or 7.5%. This does not take into account the fact that we believe that Yahoo’s discount should contract south of 20%.

FULL REPORT ATTACHED


 

>>> WOLSELEY

WOLSELEY THOUGHTS –
EPS up 9.9%, dividend up 25%, new £250m buyback. Continued strong growth in the USA; Europe and Canada remained subdued. USA achieved a record 7.7 per cent trading margin. “We expect the Group's like-for-like revenue growth rate for the next six months to be about 5 per cent”(was 4.2% in results just announced). US (55% sales) did see price deflation (Price deflation was 0.7% principally due to falling commodity prices) whilst UK (15% sales) lfl were down 0.1% BUT price inflation of 0.7% as sought to protect margins. Inflation too in mixed Nordic and European markets. Plenty re-leverage scope x1-2 ND:ebitda targeted but prevailing just <x1. X16 prospective p/e, 2.5% dividend yield, 4%+ free cash flow. £32 -> £35 likley to remain the range shorter term

FT : US regulators monitor Pimco $223bn fund

US regulators are monitoring trading and fund flows surrounding Pimco’s $223bn Total Return Bond fund and other products, in what could prove a test case in the debate over whether asset management groups contribute to systemic risk.
Officials at the Securities and Exchange Commission, the Federal Reserve and the US Treasury, among other bodies, have been talking to industry executives and other investors and warning they should contemplate unintended consequences of pulling their money from Pimco.

Meanwhile Morningstar, the influential mutual fund research group, stripped the Total Return fund of its “gold” analyst rating late on Monday, downgrading it to “bronze” because of the “uncertainty regarding outflows and the reshuffling of management responsibilities”.
California-based Pimco is trying to staunch outflows from its funds, including its flagship bond fund, following the acrimonious departure of its founder and star bond investor Bill Gross on Friday.
Many of the assets held by his Total Return fund have tumbled in price as traders anticipate that many Pimco investors will pull their money, and rivals report strong flows into their own products in recent days.
Regulators around the world are discussing new rules for large asset management firms and curbs on some of their activities, amid concern that the next “too big to fail” institutions may not be banks but asset managers.
US officials want to make sure that investors, including hedge funds and other investment managers, are not exacerbating risks if they contemplate moving their money from Pimco, people familiar with the efforts said.
Representatives from the agencies concerned are telling investors to be sure they understand the potential knock on effects of their actions.
The conversations with executives do not signal imminent concern so much as an effort to understand the market dynamics when a large asset manager finds itself under pressure. Outflows have so far been managed in an orderly way, according to people familiar with the regulators’ efforts.
Pimco, which manages almost $2tn in total, has been trying to ease clients’ concerns in a series of calls and one-on-one meetings that included a conference call with Asian clients on Tuesday morning. Rival groups, meanwhile, are working to exploit the management upheaval and tempt Pimco clients to move at least some of their money.
A report commissioned by the US Financial Stability Oversight Council argued last year that the largest asset management firms are interconnected in complex ways through their various businesses and suggested that in a panic, counterparties might not distinguish between the firm and its funds, which could exacerbate stress in the markets.
It also warned that large funds might be subject to “runs” if investors believe there is an advantage to pulling their money first, and it suggested regulators gather more data to test the concerns.
Pimco and other large asset managers intensely and successfully lobbied against the idea that they should be designated as systemically important financial institutions, which would subject them to tougher oversight. In July, FSOC decided instead to focus on particular industry activities, such as lending securities or taking on leverage, and types of funds, rather than focusing on firms themselves.