Deutsche Bank Markets Research Global Periodical CEEMEA & Latam Daybook Date 9 November 2017 Thursday,9 November 2017 ________________________________________________________________________________________________________________ Deutsche Bank AG/London Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017. Pascal Moura Head of Research (+971) 4 4283-864 [email protected]Mairead Smith Equity Focus (+44) 20 754-71054 [email protected]CEEMEA Companies RECOMMENDATION CHANGE Tatneft (Hold, TP RUB525.00) - Good dividend news sparks the stock rally; we downgrade Tatneft to Hold TARGET PRICE CHANGE Emaar Malls Alert (Hold, TP AED2.70) - Namshi weighing on margin; HOLD COMPANY UPDATE Arabtec Holding Alert (Hold, TP AED2.96) - 3Q17 still showing receivables growing: Hold CCC (Buiy, TP PLN340.00) - 3Q: soft earnings in relatively unimportant quarter Sberbank Alert (Buy, TP RUB215.00) - October 2017 RAS results: core revenues strength SECTOR UPDATE Earnings sensitivity - Testing USD65/bbl Brent and RUB60/ USD FX rate LATAM Companies TARGET PRICE CHANGE Multiplus (Buy, TP BRL54.00) - Expanding the network; raising 2017 to reflect non-recurring tax gain COMPANY UPDATE Copa Holdings, S.A. Alert (Buy, TP USD137.00) - Sep Q beat; raising 2017 margin guide again; introducing 2018 outlook GOL S.A. (Buy, TP USD27.00) - Sep Q beat; plenty of opportunity for margin expansion going forward GOL S.A. Alert - Better-than-expected op. results; EPS beat boosted by FX/tax credit TIM Brasil - Multiple tail winds: +17% 3Q EBITDA growth SECTOR UPDATE Metals & Mining Alert - Daily prices and news: China's October trade data relatively subdued STRATEGY EM Daily - Real opportunity – Go long BRL (vs. ILS) EMEA Snap - Poland: NBP: Steady for now, yet datacontingent path is nigh MENA Equity Flows - Qatar fund flows turn positive in October COFFEE report - Data from 7-Nov-2017 MACRO Brazil Update - Trying to salvage the pension reform Macro Bites - A Happy 12 Month Trumpiversary For Markets? VALUATION CEEMEA and Latam valuation tables Stock Performance(US$)–Gainers & Losers (CEEMEA) Top 10 Ticker Price %Chg Magnitogorsk Steel MMK LI 10.2 5.3 Telecom Egypt ETEL EY 0.8 4.7 RAKBANK RAKBANK UH 1.4 4.2 IDH IDHC LN 4.1 3.6 Brait BAT SJ 3.5 3.3 Tekfen Holding TKFEN TI 3.8 3.3 Telkom SA Ltd TKG SJ 3.8 3.1 Massmart MSM SJ 7.9 3.1 Emaar Economic City EMAAR AB 3.2 3.1 Surgutneftegaz SNGSP RX 0.5 3.0 Bottom 10 Ticker Price %Chg Damac Properties DAMAC DB 1.0 -4.7 Lonmin Plc LON SJ 0.9 -4.7 NMC Health NMC LN 40.1 -4.7 Steinhoff SNH SJ 4.2 -3.7 Al Tayyar ALTAYYAR AB 6.9 -3.5 SACO SCH AB 27.4 -3.0 Dana Gas DANA UH 0.2 -2.7 mBank MBK PW 127.3 -2.5 Northam NHM SJ 3.6 -2.4 Turkcell TCELL TI 3.6 -2.2 Stock Performance(US$)–Gainers & Losers (LATAM) Top 10 Ticker Price %Chg GOL S.A. GOL US 21.5 12.2 Arezzo&Co ARZZ3 BS 14.9 7.0 Natura NATU3 BS 9.1 6.6 Banco do Brasil BBAS3 BS 10.2 6.2 B2W BTOW3 BS 5.8 5.7 Azul S.A. AZUL US 24.7 5.3 Smiles Fidelidade SA SMLS3 BS 25.0 5.0 TIM Participacoes TSU US 18.3 4.5 Minerva BEEF3 BS 3.4 4.3 Santander Brasil BSBR US 9.2 4.2 Bottom 10 Ticker Price %Chg Gentera GENTERA* 1.0 -2.3 Gruma GRUMAB MM 13.3 -2.2 Grupo Bimbo BIMBOA MM 2.4 -2.1 MercadoLibre MELI US 260.1 -2.1 Multiplus MPLU3 BZ 10.9 -1.8 Cencosud CENCOSUD CI 3.0 -1.7 Bolsa Mexicana BOLSAA MM 1.7 -1.1 Banorte GFNORTEO 6.0 -1.1 Kimberly-Clark de KIMBERA MM 1.8 -1.0 Embraer ERJ US 19.9 -0.9 Source::Bloomberg Finance LP Distributed on: 09/11/2017 04:46:06 GMT 0bed7b6cf11c
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Deutsche Bank Markets Research
Global
Periodical
CEEMEA & Latam Daybook
Date 9 November 2017
Thursday,9 November 2017
________________________________________________________________________________________________________________ Deutsche Bank AG/London
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.
CEEMEA Companies RECOMMENDATION CHANGE Tatneft (Hold, TP RUB525.00) - Good dividend news sparks the stock rally; we downgrade Tatneft to Hold
TARGET PRICE CHANGE Emaar Malls Alert (Hold, TP AED2.70) - Namshi weighing on margin; HOLD
COMPANY UPDATE Arabtec Holding Alert (Hold, TP AED2.96) - 3Q17 still showing receivables growing: Hold CCC (Buiy, TP PLN340.00) - 3Q: soft earnings in relatively unimportant quarter Sberbank Alert (Buy, TP RUB215.00) - October 2017 RAS results: core revenues strength
SECTOR UPDATE Earnings sensitivity - Testing USD65/bbl Brent and RUB60/ USD FX rate
LATAM Companies TARGET PRICE CHANGE Multiplus (Buy, TP BRL54.00) - Expanding the network; raising 2017 to reflect non-recurring tax gain COMPANY UPDATE Copa Holdings, S.A. Alert (Buy, TP USD137.00) - Sep Q beat; raising 2017 margin guide again; introducing 2018 outlook GOL S.A. (Buy, TP USD27.00) - Sep Q beat; plenty of opportunity for margin expansion going forward GOL S.A. Alert - Better-than-expected op. results; EPS beat boosted by FX/tax credit TIM Brasil - Multiple tail winds: +17% 3Q EBITDA growth SECTOR UPDATE Metals & Mining Alert - Daily prices and news: China's October trade data relatively subdued
STRATEGY EM Daily - Real opportunity – Go long BRL (vs. ILS) EMEA Snap - Poland: NBP: Steady for now, yet datacontingent path is nigh MENA Equity Flows - Qatar fund flows turn positive in October COFFEE report - Data from 7-Nov-2017
MACRO Brazil Update - Trying to salvage the pension reform Macro Bites - A Happy 12 Month Trumpiversary For Markets?
VALUATION CEEMEA and Latam valuation tables
Stock Performance(US$)–Gainers & Losers (CEEMEA) Top 10 Ticker Price %Chg
Magnitogorsk Steel MMK LI 10.2 5.3 Telecom Egypt ETEL EY 0.8 4.7 RAKBANK RAKBANK UH 1.4 4.2 IDH IDHC LN 4.1 3.6 Brait BAT SJ 3.5 3.3 Tekfen Holding TKFEN TI 3.8 3.3 Telkom SA Ltd TKG SJ 3.8 3.1 Massmart MSM SJ 7.9 3.1 Emaar Economic City EMAAR AB 3.2 3.1 Surgutneftegaz SNGSP RX 0.5 3.0 Bottom 10 Ticker Price %Chg Damac Properties DAMAC DB 1.0 -4.7 Lonmin Plc LON SJ 0.9 -4.7 NMC Health NMC LN 40.1 -4.7 Steinhoff SNH SJ 4.2 -3.7 Al Tayyar ALTAYYAR AB 6.9 -3.5 SACO SCH AB 27.4 -3.0 Dana Gas DANA UH 0.2 -2.7 mBank MBK PW 127.3 -2.5 Northam NHM SJ 3.6 -2.4 Turkcell TCELL TI 3.6 -2.2
Stock Performance(US$)–Gainers & Losers (LATAM) Top 10 Ticker Price %Chg
GOL S.A. GOL US 21.5 12.2 Arezzo&Co ARZZ3 BS 14.9 7.0 Natura NATU3 BS 9.1 6.6 Banco do Brasil BBAS3 BS 10.2 6.2 B2W BTOW3 BS 5.8 5.7 Azul S.A. AZUL US 24.7 5.3 Smiles Fidelidade SA SMLS3 BS 25.0 5.0 TIM Participacoes TSU US 18.3 4.5 Minerva BEEF3 BS 3.4 4.3 Santander Brasil BSBR US 9.2 4.2 Bottom 10 Ticker Price %Chg Gentera GENTERA*
1.0 -2.3
Gruma GRUMAB MM 13.3 -2.2 Grupo Bimbo BIMBOA MM 2.4 -2.1 MercadoLibre MELI US 260.1 -2.1 Multiplus MPLU3 BZ 10.9 -1.8 Cencosud CENCOSUD CI 3.0 -1.7 Bolsa Mexicana BOLSAA MM 1.7 -1.1 Banorte GFNORTEO
6.0 -1.1
Kimberly-Clark de
KIMBERA MM 1.8 -1.0 Embraer ERJ US 19.9 -0.9
Source::Bloomberg Finance LP
Distributed on: 09/11/2017 04:46:06 GMT
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Russia / CIS LatamGeorge Buzhenitsa Metal & Mining +971 4 361 1734 Ryan Todd Oil & Gas +1 212 250 8342Ivan Kachkovski Banks/Financials +44 207 5411735 Xavier Marchand Building materials +44 207 545 1400Pavel Kushnir Oil & Gas +971 4 361 1732 Chris Terry Metals & Mining +1 212 250 5434Masha Kahn TMT +1 212 250 9619 Tito Labarta Financials/Banks +1 212 250 5944Marc Hammoud Healthcare +971 4 4283910 Joana Barros-Magalhaes Financials/Banks +1 212 250 1002Tomasz Krukowski Consumer +48 22 579 8732 Michael Linenberg Airline +1 212 250 9254Aleksandar Stojanovski Transport +971 4 361 1786Lloyd Walmsley Internet +1 212 250-7063 Marcel Moraes Retail +1 904 271-2470
Emerging EMEA/Latam ResearchHead of Company Research Pascal Moura +971 44283864
Source: Deutsche Bank
9 November 2017
CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 3
ASIAN MARKET TOP STORIES ZTE-A and -H – Caution, speed bump ahead; initiating ZTE-H with Hold, ZTE-A with Sell (James Wang) http://pull.db-gmresearch.com/p/835-630F/60455204/0900b8c08dc4f20c.pdf Link REIT (0823.HK, Hold) – Sustainable high single-digit DPU CAGR; Hold on fair valuation (Jeffrey Gao) http://pull.db-gmresearch.com/p/713-355A/57960012/0900b8c08dcaa86f.pdf
RECOMMENDATION CHANGES Uni-President China (0220.HK, Buy) – Channel restructuring proves successful; upgrading to Buy (Anne Ling) http://pull.db-gmresearch.com/p/934-1EBE/58781633/ecf35cb2-8ed9-4f12-adbd-218093604d2b_604.pdf Siam Commercial Bank (SCB.BK, Buy) – Brighter credit quality and customer engagement outlook (Peach Patharavanakul) http://pull.db-gmresearch.com/p/757-7570/58944443/0900b8c08dcc37b4.pdf
ESTIMATES AND TARGET PRICE CHANGES Future Land (1030.HK, Buy) – Sales to beat RMB110bn in 2017F; earnings to surge in 2H17F (Jeffrey Gao) http://pull.db-gmresearch.com/p/813-4D34/57896640/0900b8c08dcc3497.pdf Hong Kong Exchange (0388.HK, Sell) – 3Q17 results: Elevated expectation (Franco Lam) http://pull.db-gmresearch.com/p/629-B570/56327357/0900b8c08dcc2c8b.pdf Olympus (7733.T, Hold) – Guiding to better growth in 2H (Jack Hu) http://pull.db-gmresearch.com/p/1022-DCE4/57285189/c6d6b9c0-6938-4ee0-a6bc-8629009062e3_604.pdf Commonwealth Bank (CBA.AX, Hold) – 1Q18 update strong, but regulatory risk remains (Anthony Hoo) http://pull.db-gmresearch.com/p/629-8D21/56366730/0900b8c08dcbdc21.pdf Nufarm (NUF.AX, Sell) – Acquisition of European herbicide product portfolio for US$90m (Mark Wilson) http://pull.db-gmresearch.com/p/577-450D/56200202/0900b8c08dcc2966.pdf CJ Cheiljedang Corp (097950.KS, Buy) – Multiple growth drivers to enable c.20% OP CAGR until 2019E (Jihyun Song) http://pull.db-gmresearch.com/p/847-FEA1/59783755/0900b8c08dcc851c.pdf CJ E&M (130960.KQ, Sell) – 3Q witnesses large miss, along with earnings guidance cut (Dan Kong) http://pull.db-gmresearch.com/p/669-A192/56364164/0900b8c08dcc2845.pdf GS Retail (007070.KS, Buy) – 3Q17 earnings largely in line, excluding one-off (Jeremy Kim) http://pull.db-gmresearch.com/p/831-B095/50840996/0900b8c08dcb4eca.pdf Mando (204320.KS, Buy) – Second verdict largely remains a one-off; maintaining Buy (Ryan Kwon) http://pull.db-gmresearch.com/p/813-C527/60124647/0900b8c08dcc5923.pdf Wistron Neweb (6285.TW, Buy) – 3Q17 EPS missed on margin erosion from component price hike (James Chiu) http://pull.db-gmresearch.com/p/597-CD2D/58525669/0900b8c08dc23b6d.pdf Bharat Forge Limited (BFRG.BO, Buy) – Strong revenue traction continues (Amyn Pirani) http://pull.db-gmresearch.com/p/546-35C8/57283825/e98b28bd-afcb-4075-bdb8-f4ced861ac4f_604.pdf CESC Ltd (CESC.BO, Buy) – Restructuring before the demerger - EGM on 15-Dec (Abhishek Puri) http://pull.db-gmresearch.com/p/543-1C8F/58020609/e61a32c7-624b-4e5f-b00b-1ce05abd186f_604.pdf Petronet LNG Limited (PLNG.BO, Buy) – Strong volume growth drives earnings beat, Reiterate Buy (Harshad Katkar) http://pull.db-gmresearch.com/p/595-CEE1/58546270/0900b8c08dcc5825.pdf Shree Cement (SHCM.BO, Buy) – Market share gains continue, margin surprises positively (Amit Murarka) http://pull.db-gmresearch.com/p/633-605B/60725529/0900b8c08dccb2be.pdf Voltas (VOLT.BO, Sell) – A good quarter; but headwinds ahead (Abhishek Puri) http://pull.db-gmresearch.com/p/516-A745/58075825/f101e3a3-f4b5-4944-9b0b-31c111f8a844_604.pdf
MACRO/STRATEGY DBDaily – A quiet day as market awaits progress on tax reform… (Ken Crompton) http://pull.db-gmresearch.com/p/9272-A351/61715227/DB_DbDailyAPAC_2017-11-08_9693b9e8-c3fe-11e7-bf02-2d390be1d4c2_604.pdf Dollar Bloc Strategy – Tune AUD swap to a common frequency and pay 3Y/5Y/7Y butterfly (Ken Crompton) http://pull.db-gmresearch.com/p/964-9CCA/54092800/54fca01b-1191-4b3f-8dd4-37e757575e3f_604.pdf
HONG KONG / CHINA MGM China (2282.HK, Buy) – 3Q in-line; Cotai may add junkets rather soon (Karen Tang) http://pull.db-gmresearch.com/p/877-CA58/59934702/263fb4ec-6787-4755-ab7c-4317179f6709_604.pdf
9 November 2017
CEEMEA & Latam Daybook
Page 4 Deutsche Bank AG/London
HONG KONG / CHINA Wharf (0004.HK, Hold) – HSI Company announces index treatment for REIC spin-off (Jason Ching) http://pull.db-gmresearch.com/p/717-8043/54678542/0900b8c08dcbff05.pdf
JAPAN Chiba Bank (8331.T, Hold) – Domestic lending up a healthy 6.1% (Yoshinobu Yamada) http://pull.db-gmresearch.com/p/535-E56F/55531477/0900b8c08dcc4fbb.pdf INPEX (1605.T, Buy) – 1H FY3/18 Result - NPAT in line with Dbe (John Hirjee) http://pull.db-gmresearch.com/p/730-2069/54866836/0900b8c08dcbe8f9.pdf Japan Display (6740.T, Sell) – 2Q results: challenging conditions to persist in 2H FY3/18 (Hiroshi Taguchi) http://pull.db-gmresearch.com/p/535-B293/56890308/0900b8c08dcc80cd.pdf Mitsubishi UFJ lease (8593.T, Hold) – 2Q: Unchanged guidance seems conservative; CEO Yanai's briefing (Hiroshi Torii) http://pull.db-gmresearch.com/p/256-F571/57408144/0900b8c08dafbb69.pdf Nissan Motor (7201.T, Hold) – 2Q initial impression – Charges around inspection issue lower outlook (Kurt Sanger) http://pull.db-gmresearch.com/p/713-FCB1/55014378/0900b8c08dcbdf7a.pdf Non-life insurance sector – 1H preview for 3 non-life firms: Extent of downward revision, share buyback (Masao Muraki) http://pull.db-gmresearch.com/p/558-6ACA/54732373/0900b8c08dcbe50e.pdf Obayashi (1802.T, Hold) – 2Q results: neutral first impression (Yoji Otani) http://pull.db-gmresearch.com/p/229-7DD8/54815727/0900b8c08dcbd217.pdf Shimizu (1803.T, Hold) – 2Q results: negative first impression (Yoji Otani) http://pull.db-gmresearch.com/p/229-F7B7/55440311/0900b8c08dcbd2a5.pdf Shizuoka Bank (8355.T, Hold) – In line: one-off factors cancel out (Yoshinobu Yamada) http://pull.db-gmresearch.com/p/538-8D3C/51564857/0900b8c08dcb0dad.pdf SMC (6273.T, Buy) – 2Q results: No surprises, but 2H guidance still looks cautious (Takeshi Kitaura) http://pull.db-gmresearch.com/p/225-4680/55038356/0900b8c08dcc4ada.pdf Sumitomo Rubber (5110.T, Hold) – 3Q first impression: negative pricing surpise drives 3Q miss (Gordon Heaton) http://pull.db-gmresearch.com/p/544-B006/56988238/0900b8c08dcc9d4a.pdf Sysmex (6869.T, Buy) – Another robust quarter, guidance lifted modestly (Jack Hu) http://pull.db-gmresearch.com/p/1022-490B/58083767/e34581f8-130f-4c4e-a4b3-870af8b60fb3_604.pdf Universal Entertainment (6425.T, Buy) – Glimpse of good news in 2QFY18 (Jeffrey Ng) http://pull.db-gmresearch.com/p/193-12C0/58657938/0900b8c08dcc5d1e.pdf Yamada Denki (9831.T, Hold) – Results comment: OP down on discount sales (Takahiro Kazahaya) http://pull.db-gmresearch.com/p/234-04FC/57885397/0900b8c08dcc95d0.pdf
AUSTRALIA Commonwealth Bank (CBA.AX, Hold) – 1Q18 update ahead of expectations (Anthony Hoo) http://pull.db-gmresearch.com/p/632-F6B6/53134559/0900b8c08dcbb5fb.pdf Domino's Pizza Enterprises (DMP.AX, Sell) – AGM - Growth to be 2H weighted (Michael Simotas) http://pull.db-gmresearch.com/p/548-4B61/55895622/39c976c0-fd9d-4306-a56d-724fc29e0452_604.pdf Eclipx Group (ECX.AX, Buy) – Result in line with DBe, acquisitions performing to expectations (Wassim Kisirwani) http://pull.db-gmresearch.com/p/632-5EA4/55693432/0900b8c08dbd572d.pdf James Hardie Industries (JHX.AX, Buy) – European acquisition of Fermacell for US$549m (Emily Smith) http://pull.db-gmresearch.com/p/501-B877/55296832/0900b8c08dcc14a7.pdf
KOREA/TAIWAN Celltrion (068270.KQ, Sell) – Q3-17 preliminary results have limited implication on investment thesis (Sanghi Han) http://pull.db-gmresearch.com/p/736-8643/52637096/0900b8c08dc99f8c.pdf DGB FG (139130.KS, Buy) – More M&A than results (Jeehoon Park) http://pull.db-gmresearch.com/p/805-FBA5/58527305/0900b8c08dcc5e80.pdf Eclat Textile (1476.TW, Buy) – 3Q17 first take: earnings better than feared (John Chou) http://pull.db-gmresearch.com/p/611-E9D9/56079866/0900b8c08dcc5317.pdf Hyundai HS (057050.KS, Hold) – 3Q17 earnings ahead of DBe on lower SO commission burden (Jihyun Song) http://pull.db-gmresearch.com/p/823-A47A/56185392/0900b8c08dcc7d96.pdf Kingpak (6238.TWO, Buy) – On track auto business (Grace Hsu) http://pull.db-gmresearch.com/p/617-4D89/54529451/0900b8c08dcbfb74.pdf
INDIA GSK Consumer (GLSM.NS, Buy) – Getting out of the woods (Manoj Menon) http://pull.db-gmresearch.com/p/691-3DB8/56479721/0900b8c08dcc326e.pdf India Consumer – The curious case of "cost savings" (Manoj Menon) http://pull.db-gmresearch.com/p/674-33B6/59612216/0900b8c08dcccd5c.pdf
ASEAN CapitaLand Ltd (CATL.SI, Buy) – 3Q in line; ROE on target; accounting change a precursor? (Joy Wang) http://pull.db-gmresearch.com/p/932-7AC7/53968140/9be8d774-3619-4e77-b020-29b59d4cff6b_604.pdf ST Engineering (STEG.SI, Buy) – 2017's q/q earnings momentum is improving, and 4Q would be better (Joshua Lee) http://pull.db-gmresearch.com/p/710-3BEF/54284522/6ebb1a44-c41f-11e7-bf02-2d390be1d4c2_604.pdf Central Pattana (CPN.BK, Hold) – Quarterly profit up on extra gains (Nash Shivaruchiwong) http://pull.db-gmresearch.com/p/602-8FD9/55492339/0900b8c08dcc3d01.pdf PTT Global Chemical (PTTGC.BK, Hold) – 3Q17 earnings: in-line with consensus (Wattana Punyawattanakul) http://pull.db-gmresearch.com/p/687-C3EE/55257828/0d122d52-37c9-436a-81ad-3bc14545f5d5_604.pdf Sansiri (SIRI.BK, Hold) – Sansiri goes shopping, gives PACE a look (Nash Shivaruchiwong) http://pull.db-gmresearch.com/p/602-C5B2/54944844/0900b8c08dcc3da1.pdf Aboitiz Power (AP.PS, Hold) – 3Q: Hydros drive outperformance (Gio Dela-Rosa) http://pull.db-gmresearch.com/p/834-6503/55695460/0900b8c08dcc5e7a.pdf Megaworld (MEG.PS, Hold) – 9M17 earnings +11%, ahead; strong office preleasing in Fort Bonifacio (Carl Sy) http://pull.db-gmresearch.com/p/867-4180/56195745/0900b8c08dcc67fa.pdf Semirara Mining and Power (SCC.PS, Buy) – 3Q17 profit disappoints; Better outlook ahead (Klyne Resullar) http://pull.db-gmresearch.com/p/857-A4C2/57312726/0900b8c08dcaee01.pdf SM Investments Corporation (SM.PS, Hold) – 3Q: On track with rise in profits from retail (Gio Dela-Rosa) http://pull.db-gmresearch.com/p/723-B254/55067100/0900b8c08dcc43e1.pdf Vista Land & Lifescapes Inc (VLL.PS, Hold) – Rental segment boosts 3Q17 profit; OFW presales rebound (Carl Sy) http://pull.db-gmresearch.com/p/823-1917/55629525/0900b8c08dcc0504.pdf
APAC Equities - APAC Research In Focus UPCOMING DB CONFERENCES dbAccess China Healthcare Corporate Day 27 Oct @Hong Kong dbAccess Indonesia Conference 7-9 Nov @Jakarta, Indonesia dbAccess Global Quant Conference 2017 14-15 Nov @Hong Kong dbAccess Thailand SET Corporate Day - 22-23 Nov @Singapore
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EPS changes
NAME COUNTRY DB EPS FY1 DB EPS FY2 DB EPS FY3 RECOMMENDATION TARGET PRICE
From To Change IBES
DB vs IBES
(%) From To Change IBES
DB vs IBES
(%) From To Change IBES
DB vs IBES
(%) From To From To Change
CEEMEA
Arabtec Holding United Arab
0.0 0.1 +0.0 0.2 -61.1 0.0 0.1 +126.3 0.3 -73.6 Hold Hold 3.0 3.0
Emaar Malls United Arab
0.2 0.2 -1.1 0.2 0.2 -1.6 Hold Hold 2.9 2.7 -6.9
Tatneft Russia 1.0 1.0 -2.3 0.9 0.9 -1.7 Buy Hold 520.0 525.0 +1.0
LATAM
GOL S.A. Brazil 0.5 0.9 +88.0 0.0 6,079.2 0.8 0.8 +0.2 1.4 1.4 -0.0 Buy Buy 27.0 27.0
Good dividend news sparks the stockrally; we downgrade Tatneft to HoldCorrected (and improved) interpretation of the dividend announcementIn our Tatneft report yesterday, we erroneously used RUB22.78/share interimdividend for the first nine months of 2017, which – together with the company'sencouraging comments on its principles of cash distribution – already made usexcited. The actual recommended dividend amount, however, was much bigger:RUB27.78/share. The dividend yield on the ords is 5.6% (6.3% before the shareprice growth that took place yesterday on the back of the dividend news) andon the prefs 7.7% (8.5%). Note that the implied pay-out ratio based on our IFRSearnings forecasts for 9M17 is 61% vs. our assumption of 50%. We downgradeTatneft from Buy to Hold given a limited upside potential to our updated DCF-based target price.
Board of Directors has committed to distribute cash not employed in a strategicdevelopment programmeIn a press release, the company's Board of Directors named its key principlesfor future cash distribution. Specifically, in making the 9M17 dividend decision,the directors relied on Tatneft's operating results, the implementation of theDevelopment Strategy to 2025, and FCF forecasts. The Board believes thatsuccessful strategy implementation supports cash generation in excess of thecompany's initial estimates. The Board in the release referred to a 50% pay-outratio on the basis of IFRS consolidated earnings (applied the first time to 2016IFRS consolidated earnings) as a target level for dividend payments. However, thatlevel was exceeded in 9M17, given the efficient implementation of the Strategyto 2025. Simultaneously, the Board has committed to distributing to shareholdersthe cash not employed in the development of Tatneft.
We upgrade our DPS estimates using an assumption that dividend cash outflowis equal to FCFWe make changes to our forecasts for Tatneft's dividends to match the dividendcash outflow with the cash generation. For the 2017 dividend forecast, we takethe actual interim recommendation and use a 50% pay-out ratio to estimate thefinal dividend. We upgrade the total 2017 DPS by 21% from RUB30.10/shareto RUB36.50/share. Note that the 2017 dividend outflow may materially exceedour FCF forecast for the year, given that the company has started to pay aninterim dividend. We assume in our model that the 9M17 dividend is distributedto shareholders during this financial year. We raise our DPS forecasts for 2018-20by more than 10% (we apply a 55% pay-out in the period vs. a 50% pay-out in
Namshi weighing on performance; negative on overall margin Emaar Malls recorded AED485m (+1% QoQ, +11% YoY) NP in 3Q17, 5% below DBe and 10% below Bloomberg consensus. Total revenues reached AED876m (+11% QoQ, +13% YoY) 10% above DBe / c.5% above cons. mainly driven by Namshi acquisition (online fashion retailer in MENA) which was completed in Aug. EBITDA margin dropped 300bps below 3Q16 at 72% (DBe: 77%) mainly due to Namshi’s lower profitability. We believe Namshi is at best merely profitable at EBITDA level.
Emaar Malls: better standalone performance based on DBe We assume no profit contribution from Namshi in 3Q17. Emaar Malls ex. Namshi would have recorded NP of AED 487m (+11% YoY). Emaar Malls standalone EBITDA margin should have reached c.80% (+500bps above 3Q16). Full financials expected next week. Footfall increased by +5% YoY in 9M17 while rental income revenues remained stable highlighting more challenging retail outlook.
Figure 1: Estimated impact of Namshi acquisition – DB estimates
AEDm Namshi Consolidated Emaar Malls
3Q16 3Q17E 3Q17E 3Q17 2Q17
Revenue 774 785 91 876 787
% YoY growth 7.5% 1.4% 39% 13.2% 0.3%
COGS (123) (99) (44) (143) (101)
as of % sales -15.8% -12.7% -48% -16.3% -12.8%
Gross profit* 651 686 47 733 687
margin 84.2% 87.3% 52% 83.7% 87.2%
% YoY growth 9.2% 5.3% - 12.5% 2.1%
SG&A (75) (54) (44) (98) (60)
as of % sales -9.7% -6.9% -48% -11.2% -7.7%
EBITDA** 577 631 4 635 626
margin 75% 80% 4% 72% 80%
Net profit 437 487 (2) 485 482
margin 56% 62% -2% 55% 61%
% YoY growth 18% 11% - 11% 5%
Emaar Malls Standalone
Source: Company, Deutsche Bank, All Namshi Data are DBe except revenues * Assuming 52% margin ** Assuming 4% margin
Discounted valuation despite higher growth: investors focused on risks Emaar Malls trades at c.20% discount to peers (P/E of 14.5x 2017E vs. 18.7x for global malls) and implied cap. rate of 8.2% vs. 5.6% for global malls (6.7% at DB target price) despite strong earnings growth (+10% p.a. in 2016-18E vs. +4% for global malls).
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 9
Rating
Hold Middle East
UAE
Real Estate, Construction and Building Materials
Construction
Company
Arabtec Holding Alert
Date
8 November 2017
Results
3Q17 still showing receivables growing: Hold
Reuters Bloomberg Exchange Ticker ARTC.DU ARTC DB DBX ARTC
3Q17: small miss; 9M17 EBITDA margin at 4.2%, positive Arabtec recorded AED18m NP in 3Q17 or below DBe / Cons. of AED21m. Revenue came in at AED 2.1bn (+2% QoQ / +5% YoY) and gross profit margin increased slightly to 5.5% (vs. 5.1% in 2Q17) and SG&A decreased by c.25% (YoY) in 3Q17. Higher than expected EBITDA margin in 3Q17 (3.5%) is positive but our estimates already incorporate a ramp up going forward (DBe 4.2% in 2017E and moving up to 8.5% sustainable level). 9M17 EBITDA margin 4.2% in line with DBe for FY 2017. Backlog reached AED16.8bn or -15% YoY. 3Q17 recorded new awards worth c.AED1.5bn. 9M17 new awards represents c.65% of 2017 DBe of AED8bn.
Margin 0.8% 1.0% -11.3% 1.0% Source: Company, Deutsche Bank estimates, Bloomberg Finance LP
Free cash Flow still negative, receivables increasing Arabtec generated FCF of -AED563m in 3Q17 (-AED1.1bn in 1H17) after increase in WCR (mainly on higher receivables or 229 receivable days in 2016 vs. 279 days in 3Q17). 3Q17 net debt stood at AED1.5bn (gearing: 119%).
Potential collection of receivables is the key upside risk to the equity story Across MENA, contractors are facing high receivables. Arabtec is pursuing more aggressively claims for outstanding receivables. c.AED8bn of trade and other receivables remain (c.90% of which are current, 279 days and 1.8x its current m. cap.). Out of c.AED3bn of receivables, c.65% are amounts due from customers on contracts that represent work done by Arabtec but neither billed nor certified (WIP). These receivables represent the amount that Arabtec’s new management is trying to recover in the coming years. Cash collection of receivables c.AED3bn if done within two years can potentially represent c.2.0/sh. (undiscounted). Mgt. is on track with its first phase of thetransformation program of the stabilizing business.
Expensive contractor given early stage of the recovery story 9M17 NP is supportive, in our view, and we see recent Mgmt. initiatives (stabilizing the group’s organization structure, implementing risk approach) as positive. The stock remains expensive among EM/global contractors (P/E of 41.5x 2017E vs. EM: 9.0x / global: 15.2x).
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 10
8 November 2017
Retail
CCC
Rating
Buy
Valuation & Risks
RetailPrice at 8 Nov 2017 (PLN) 265.50
Price Target (PLN) 340.00
52-week range (PLN) 298.00 - 179.37
ResultsEmerging EuropePoland
Company
CCC
Reuters Bloomberg Exchange Ticker
CCCP.WA CCC PW WSE CCCP
Date8 November 2017
3Q: soft earnings in relativelyunimportant quarterOverall strong quarter, but earings missed expectations by 5-10%CCC posted preliminary results for 3Q 2017. Although the quarter in generalwas very strong (sales up by 50%, EBITDA up by 75%), EBITDA missed ourand consensus estimates by ca. 5-10%. Third quarter, traditionally dominated bysummer sales activity, has low contribution to overall full year profitability. CCCdelivers its FY earnings in fourth and second quarter of the year. Having said that,we keep our FY 2017 forecasts unchanged, as well as Buy rating and PLN 340target price. Our investment thesis is based on further expansion of CCC's valuestore concept as well as rapid growth of the e-commerce, which is an independentbusiness line.
A 25% LFL growth contributed to SG&A inflationIn 3Q 2017 CCC posted a 49% increase in sales, to which an impressive 25% rise inLFL was a significant contributor. Gross margin came in at 51%, flat YoY and in linewith our expectations. EBITDA increased by 75% YoY to PLN 82m, however thatfigure was lower than our forecast (PLN 88m) and consensus collected by PAP(PLN 91m). Detail disclosure is not yet available (full results are due on November14) but it appears that SG&A inflation was the reason for lower profitability.Earlier in 2017 CCC introduced bonus system for its store workforce based onLFL performance,. The latter was at historical high, which inflated SG&A line, webelieve. At the bottom line, CCC posted net profit of PLN 41m (most likely preminorities), vs. our forecast of profit attributable to equity holders of PLN 42m.
Sberbank’s net profit reached RUB64bn in October (RoE of 23.8%) bringing 10M17 result to RUB560bn vs RUB430bn a year before (growth of 30%, and RoE of 22% vs 20%). Our 3mma NIM proxy indicator came in at 6.64%, 5bp lower vs September. This is a third consecutive month of a 4-5bp slip in the number so it appears the NIM is finally at its peaks. (It is hard to expect a decline in the traditionally strong 4Q though). Asset repricing is here but still the bank seems to see support from funding costs which keep grinding lower. F&C income grew some 22% YoY in October and 16% in 10M17.
Net loan loss provisioning for the month was just RUB13bn, which means CoR of 94bp without any significant effect from FX. 10M17 provisioning amounted to RUB261bn (CoR of 194bp). Operating expenses were up 7% YoY in October and 5.5% up for 10M17 as C/I improved to 30.7%. October net profit was also affected by an elevated tax rate of 25.5%.
Corporate loans resumed growth at 0.4 % MoM in October. Retail loans grew 2% MoM driven by mortgages (+2.5% MoM and 11% YtD). On the funding side, retail deposits contracted 0.4% MoM while corporate accounts added 2.5%.
Net gain / (loss) from FX revaluation and trading 56.5 - 9.3 nm
Operating income before provisions 1,372.7 1,182.1 16.1%
Total provision (charge) / gain - 260.9 - 245.6 6.2%
Operating costs - 413.0 - 391.5 5.5%
Profit before tax 698.9 545.0 28.2%
Net profit 559.9 429.8 30.3%
RoE 22.2% 20.4%
C/I ratio 30.1% 33.1%Source: Company data, Deutsche Bank
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 12
8 November 2017
Oil & Gas
Earnings sensitivity
Oil & Gas Industry Update
Emerging EuropeKazakhstanRussia
Industry
Earnings sensitivityDate8 November 2017
Testing USD65/bbl Brent and RUB60/USD FX rateFavourable combination of crude oil price and roubleCrude oil price and rouble exchange rate have recently both developed in afavourable way for the Russian energy sector (with the exception of Transneft).While our base case assumptions are more conservative on both fronts, webelieve the market may become interested in more optimistic scenarios, inparticular if the current relatively high crude oil price and the relatively weak roubleprove to be sustainable.
■ Brent of USD65/bbl and RUB60/USD would increase our rouble Brentassumption by 26% in 2018, by 22% in 2019 and by 19% in 2020.
■ Oil & gas companies' EBITDA would grow by 15-18% and net income by26-32%.
■ The most sensitive companies are gas companies (due to their differenttax structure with a lower marginal tax rate), high-leverage Rosneft andKMG EP (due to different tax structure in Kazakhstan).
■ Transneft is an outlier with a negative effect on the earnings due to its zerocrude oil price sensitivity and a negative earnings sensitivity to weakerrouble: -5-6% at EBITDA and -7-9% at net income.
Pavel Kushnir
Research Analyst
+971-4-361 1732
Top picks
Transneft (TRNF_p.MM),RUB184,500.00 BuySource: Deutsche Bank
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 13
Rating
Buy Global Emerging Markets
Brazil
Banking / Finance
Payment Services
Company
Multiplus Date
8 November 2017
Results
Expanding the network; raising 2017 to reflect non-recurring tax gain
Multiplus reported Sep Q EPS of R$1.00, well ahead of our R$0.72 forecast and R$0.76 consensus. However, the result included a non-recurring benefit from a tax restatement, excluding which, EPS was R$0.69. Net revenue increased 1.6% y-o-y, underlying which was breakage growth of 14.3% and an increase in the sale of points of 0.6%. Points issued declined 4.3% y-o-y as points issued to LATAM Brazil and points to banking, retail, industrial, and services were -12.4% and -2.4%, respectively. Going forward we expect to see an increase in the level of points issued as Multiplus expands its network to customers outside of Brazil, which should drive EPS higher; Buy.
Expanding partnership with LATAM Group Multiplus disclosed at the end of September that it would be expanding its partnership with LATAM Group; on today’s call we got more details. Under the new agreement, Multiplus members can redeem air tickets on any of LATAM Group’s subsidiary airlines rather than just LATAM Brazil previously, which now opens up unrestricted access to members on double the number of flights. Furthermore, Multiplus will be able to expand its coalition program to members in the US, Europe, Mexico, and Paraguay. Regarding Europe specifically, management commented that the focus will be on countries with large Latin populations and highlighted Portugal, Spain, Italy, and France as opportunities. We believe this should drive accruals (and redemptions) higher as the company builds its membership base in new countries. Management noted that they intend to build out operations in these additional countries similarly to the Brazil operation, forging partnerships with local banks and retailers. When questioned if they expected to see Multiplus’ accrual network expand into the countries in South America currently exclusively in the LATAMPASS network, management noted that many of these countries had unfavorable tax codes for coalition programs and therefore they did not foresee expanding there.
Raising 2017 forecast We are raising our 2017 EPS estimate from R$3.10 to R$3.35 to incorporate the Sep Q beat (driven by non-recurring benefit) vs. consensus of R$2.94.
Valuation and risks Given our improved outlook and that we are now using our 2018 forecast in our valuation analysis, we are raising our 12-month price target for MPLU3 shares from R$50 to R$54, derived by applying a 16 P/E multiple to our 2018 forecast. The stock’s historical P/E trading range has been in the mid/high teens to low twenties. FX volatility is a key risk. See page 4 for more.
Copa reported Sep Q diluted EPS ex-specials of $2.38, ahead of our $2.10 forecast (recently lowered from $2.25) and the consensus of $2.21 (up $0.05 over the past four weeks). The airline produced an 18.1% operating margin, higher than our 16.3% estimate and up 470 bps year-over-year.
Top-line increased 15.6% year-over-year (versus a 16.8% increase in the prior Q), driven by a capacity increase of 13.0% and unit revenue (“RASM”) growth of 2.4% (better than our +1.2% forecast). Passenger unit revenue (“PRASM”) increased 3.1% year-over-year which compares to the June Q’s +8.2% and our +1.4% forecast. Unit costs (“CASM”) ex-fuel decreased 1.2%, better than our +0.4% estimate.
Copa ended the Sep Q with $972 million in cash, short-term and long-term investments, $47 million greater than prior Q end. Copa’s cash position represented 40% of last-twelve-month (“LTM”) revenue, up from 39% last Q (industry average 15% - 20%).
Copa raised its 2017 operating margin outlook again this Q to 17% - 18% from 16% - 18% previously and 15% - 17% originally. Underlying the improved margin guidance is a higher load factor (83% vs. 82% previously) and higher RASM (10.5 cents, up ~4% year-over-year and from previous guidance of 10.4 cents), partially offset by a higher jet fuel forecast of $1.85/gallon up from $1.75 previously. The company maintained its CASM ex-fuel guidance of 6.4 cents (flat year-over-year). Copa maintained its 2017 capacity guidance of 8% (which started the year at +5%). The company also introduced its 2018 operating margin guidance of 17% - 19%, underlying which is 9% capacity growth and a jet fuel price of $1.85/gallon. Underlying our 2018 EPS estimate of $8.50 is a 15.5% operating margin; we estimate that underlying consensus of $9.70 is a ~17% margin.
We will have more details following Copa’s 11 A.M. (ET) conference call tomorrow.
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 15
Rating
Buy Global Emerging Markets
Brazil
Aviation
Company
GOL S.A. Date
8 November 2017
Forecast Change
Sep Q beat; plenty of opportunity for margin expansion going forward
Reuters Bloomberg Exchange Ticker GOL.N GOL US NYS GOL
GOL reported an operating profit of R$327 million (12.0% operating margin, up 290 bps y-o-y) in the Sep Q beating our estimate of R$307 million by R$20 million. The company posted net income after minority interest of R$328 million driven in part by a non-cash, FX gain and a R$179 million deferred tax credit from the merger of Smiles and Webjet in the Q. RASK was up 8.3% in the Sep Q, driven by yield growth of 8.6% and load factor growth of 0.4 pp. to 80.2%. Strong unit revenue trends coupled with an improving Brazilian economic backdrop bode well for shares of GOL as airline stocks tend to outperform early cycle; Buy.
GOL management see opportunities for margin expansion going forward GOL management highlighted various opportunities for margin expansion going forward. The implementation of bag fees has not yet met its full revenue-generating potential given that many fares booked for flights in the Sep Q were booked before the carrier had the ability to charge for bags. We should get a glance at the full impact of bag fees in the coming quarters. The company indicated that 25% of passengers are opting to purchase a bag. Additionally, the company highlighted the benefits associated with the delivery of the 737-MAX 8 aircraft. Management estimate that the MAX 8 will reduce fuel consumption by 15.0%, and reduce fleet cost overall by 3.0% to 4.0% as the aircraft is gradually phased into GOL’s fleet. GOL is taking delivery of 5 MAX 8 aircraft next year, 13 in 2019 and 21 in 2020.
Liquidity At quarter end, GOL had cash, cash equivalents, short-term investments of R$1.2 billion (equivalent to 11.3% of LTM revenue up from 9.2% in the June Q), an increase of R$245 million from the June Q.
Raising 2017 forecast to reflect Sep Q non-cash FX/tax impact We are raising our 2017 EPADS forecast from $0.75 to $1.40 (versus consensus of a loss per ADS of $0.35) to reflect the Sep Q non-cash FX gain as well as a non-recurring R$179 million deferred tax credit from the merger of Smiles and Webjet. It is important to note that we are not changing our more aggressive FY 2017 operating margin forecast of 9.9% (vs. company guidance of ~9.0%).
Valuation and risks We are maintaining our 12-month price target for GOL shares of $27. Our price target is derived by applying a ~8.0x EV/EBITDAR multiple to our 2018 forecast, which compares to historical Latam airline range of 6x - 8x. Fuel price volatility is a key risk. See Page 4 for more valuation and risks.
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 16
Rating
Buy Global Emerging Markets Brazil
Aviation
Company
GOL S.A. Alert Date 8 November 2017
Results
Better-than-expected op. results; EPS beat boosted by FX/tax credit
Reuters Bloomberg Exchange Ticker GOL.N GOL US NYS GOL
GOL reported an operating profit of R$327 million (12.0% operating margin, up 290 bps y-o-y) in the Sep Q beating our estimate of R$307 million by R$20 million. The company posted net income after minority interest of R$328 million driven in part by a non-cash, FX gain and a R$179 deferred tax credit from the merger of Smiles and Webjet in the Q. This translated to EPADS of $1.49, beating our estimate of $1.15 (which did not include the tax credit) and the consensus of $0.37.
Total revenue for the Q was R$2.7 billion, up 13.2% y-o-y (versus 7.0% in the June Q) and R$62 million higher than our forecast. Net passenger unit revenue (PRASK) increased 9.2% (versus 8.5% in the June Q and -3.9% in the Mar Q), driven by 8.6% yield growth and a 0.4 pp increase in the load factor to 80.2%. Adjusted unit costs ex-fuel increased 7.1% (versus a 2.0% decrease in the June Q and a 7.6% decrease in the Mar Q); the result was worse than our estimated increase of 2.6%.
GOL tightened its FY 2017 operating margin guidance to 9%, the high end of the prior guide of 7.0% - 9.0% (which had been raised from 6.0% - 8.0% earlier this year). GOL raised its 2017 capacity to ~+0.5% y-o-y from flat to down 2.0% previously. The company lowered CASM ex-fuel guidance from 14.0 real cents to 13.7 real cents.
At quarter end, GOL had cash, cash equivalents, short-term investments and accounts receivable of R$2.1 billion, an increase of R$348 million from the June Q. GOL’s adjusted net debt/LTM EBITDAR decreased to 4.8x from 5.6x at June Q end, but was up from 4.6x at Mar Q end.
We will have more details following GOL’s 11:30 A.M. (Eastern) conference call
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 17
8 November 2017
Telecom
TIM Brasil
Rating
Buy
Valuation & Risks
TelecomPrice at 7 Nov 2017 (USD) 17.52
Target price 22.00
52-week range 19.22 - 11.21
ResultsLatin AmericaBrazil
Company
TIM Brasil
Reuters Bloomberg Exchange Ticker
TSU.N TSU US NYS TSU
Date8 November 2017
Multiple tail winds: +17% 3Q EBITDAgrowthEBITDA growth exceeds our bullish estimatesTIM Brasil reported yet another quarter of very strong EBITDA growth, up17.2% YoY in 3Q17 (+15.5% in 2Q17). TIM Brasil beat our expectations by1%/2%/6% at the revenue/EBITDA/EBIT lines and 3Q Net Income was in line atBRL279m, up 52% YoY. The company also announced (for the first time) intereston equity payment of BRL190m - an important step towards higher dividends andsignificantly lower cash taxes.
Gross revenues accelerate on higher ARPUs /subscriber mix shiftIn the previous two quarters TIM Brasil posted solid net revenue growth (+3% YoYin 1H17) whilst gross revenue actually declined (-3% YoY in 1H17), suggestingmuch of the net revenue gains came from tax optimization (inclusion of lower-taxcontent revenues). As of 3Q17, taxation remained a tail wind, yet, note that grossrevenue growth is back in the black +1% YoY. TIM continues to execute well interms of migrating subscribers from pre-paid to recurring pre-paid and controlpackages. TIM saw 935K net adds in the post-paid segment (mostly control) in 3Qwith post-paid subscribers now >28% of the base compared to ~20% in 3Q16.
Costs remain under control, visible impact of digitalization effortsTIM's opex surprised to the upside with solid cost-control as total expensesdeclined 2% YoY. Personnel expenses were down 6%YoY and sales & marketingdeclined by 2% YoY in 3Q17. The company highlighted its digitalization effortswith sales of control packages via digital channels tripling YoY in 9M17, and digitalrecurring pre-paid top-ups increasing by 80% YoY. E-billing and e-payment growthwas also at 15%/13% YoY respectively.
Fixed-line growing but remains sub-scale, more capex and/or M&A?TIM is predominantly a mobile-only business but its ultra broadband revenues aregrowing at 54% YoY, yet this is from a very low base (<300k subscribers). We thinkTIM will ultimately need to invest a lot more in fixed fiber, the question is whetherthe operator will choose to do so organically or via M&A. With abundant pent-up demand for high speeds, little overbuild with competitors and strong pricingpower in broadband, we see an opportunity for TIM to accelerate investments.TIM has 0.7x net debt/EBITDA and can afford to pursue both organic an inorganicopportunities to expand its fixed-line footprint.
Buy for 26% potential upside to our $22 PTFollowing the recent sell-off, the stock price implies more than 26% total returnpotential to our US$22/ADR price target. We expect consensus upgrades on the
Masha Kahn, CFA
Research Analyst
+1-212-250-9619
Price/price relative
TIM Participacoes BOVESPA (Rebased)
Jan '16 Jul '16 Jan '17 Jul '17
10
20
0
Performance (%) 1m 3m 12m
Absolute -5.2 -0.2 28.4
BOVESPA -4.8 6.6 13.1Source: Deutsche Bank
Key indicators (FY1)
ROE (%) 6.1
ROA (%) 3.1
Net debt/equity (%) 2.5
Book value/share (BRL) 7.64
Price/book (x) 1.5
Net interest cover (x) 4.3
EBIT margin (%) 11.6Source: Deutsche Bank
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 18
North America
United States
Industrials
Metals & Mining
Periodical
Metals & Mining Alert
Date
8 November 2017
Periodical
Daily prices and news: China's October trade data relatively subdued
China’s exports and imports growth eased in October. Unwrought copper imports totaled 330kt in October (-23% MoM, +14% YoY). YTD total at 3.8mt (-8% YoY). Iron ore imports fell to 80mt (-23%, -2%). YTD imports reached 896mt (+6% YoY). Coal imports were 21mt (-21%, -1.4%), with YTD total at 226mt (+12% YoY). Steel exports totaled 5mt (-3%, -35%), with YTD at 65mt (-30% YoY). Aluminum exports reached 350kt (-5%, flat), with YTD total at 3.98mt (+4% YoY). (Bloomberg Finance LP)
Chinese battery makers are looking into upstream investments in raw materials like cobalt to ensure stable supply as demand for Electric Vehicle (EV) rises. Cobalt is used in battery cathodes and increased supply uncertainty from Congo, which is world’s largest producer has boosted price. Several Chinese companies along the EV supply chain have bought stakes in overseas mines, amid expectations that supply will not keep up with demand. (Reuters)
India’s largest-listed jeweler, Titan, expects jewellery sales to rise this year as tighter rules on cash flows and a new sales tax are expected to impact smaller informal retailers. Larger outlets are expected to benefit from greater transparency. (Reuters)
Goldcorp completes sale of its interest in Camino Rojo oxide project, Mexico to Orla Mining Limited. Goldcorp received 19.9% of Orla’s outstanding shares in return. Goldcorp plans to hold Orla’s shares for investment. (Company)
China’s Ministry of Commerce approves merger of equals transaction between Potash Corporation and Agrium under the condition that PotashCorp will divest its minority holdings in Arab Potash Company and SQM within 18-months and in Israel Chemicals within 9-months. PotashCorp owns ~32% stake in SQM. The companies have now received clearance for the merger in Brazil, Canada, China, India and Russia. Regulatory review and approval process continues in the US and is expected to close by 4Q17 end. (Company)
Allegheny Technologies (ATI) offers 17m common shares, priced at $24/sh, in an underwritten public offering, with a 30-day option to purchase an additional 2.6m shares. Proceeds to redeem $350m 9.375% notes due 2019 and general corporate purposes. Assuming full over-allotment (+18% basic or +15% diluted shares), gross proceeds = $469m. Net Debt-to-LTM EBITDA would decline from 5.6x to 4.1x. DBe interest cost savings at $33m (15c/sh) or 17% 2018E net income. (Company, DB)
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 19
8 November 2017
EM Daily
GlobalLatin America
Emerging Markets
EM DailyDate8 November 2017
Real opportunity – Go long BRL (vs.ILS)To watchMXN: CPI (Oct'17,YoY). Previously 6.35%. DB expects 6.30%.MXN: Overnight rate (Nov'17). Prev. 7.00%. DB exp. 7.00%.PEN: Reference Rate (Nov'17). Prev. 3.50%. DB exp. 3.50%.CZK: CPI (Oct'17, YoY). Prev. 2.7%. DB expects 2.8%.HUF: CPI (Oct'17, YoY). Prev. 2.5%. DB expects 2.3%EG: CPI (Oct'17, YoY). Prev. 31.6%. DB expects 30.3%
Key recent developmentsBRL: FGV Inflation IGP-DI (Oct'17, MoM). In line with expectations at 0.10%.CLP: CPI (Oct'17, YoY). Above expectations at 1.90%.PLN: MPC meeting (Nov'17). Rates on hold as expected at 1.50%.
Figure 1: FX Best/Worst Performers
0.53%
0.47%
0.38%
0.33%
-0.02%
-0.03%
-0.06%
-0.08%
ZAR
MXN
PHP
TRY
HUF
IDR
TWD
CNY
Daily Return (%) Daily Return (%)
Source: Bloomberg Finance LP
Figure 2: CDS Best/WorstPerformers
-0.14%
-0.11%
-0.09%
-0.07%
0.05%
0.05%
0.17%
0.24%
ID
CO
CN
TH
SV
CR
BR
QA
Daily Return (%)
Source: Bloomberg Finance LP
Real opportunity – Go long BRL (vs. ILS)Given BRL’s high score on ‘defensive’ metrics – real rates, external balances,FX reserves – its recent underperformance stands out as excessive, in our view.Further, expectations for pension reform delivery are now low. We thereforebelieve current levels are attractive to go long BRL, with the currency offeringsignificant retracement potential; as one of the ‘safer’ carry longs, we believe itwill be among the first in EM that investors return to. We recommend fundingBRL longs with ILS, as shekel overvaluation is at extremes and inflation remainssubdued, which increases the possibility of BoI FX intervention. Further, using ILSas a funder for BRL longs eliminates most of the broad dollar risk while preservingthe positive carry. Go long BRLILS; while we were stopped out of our original tradedue to the large EM sell-off last Friday, we believe the fundamental rationale forthis trade remains intact and thus recommend re-initiation. See report for moredetails: EM FX trade idea: long BRL vs. ILS.
Brazil: Government tries to salvage the pension reformFollowing the negative repercussion in financial markets of comments made byPresident Michel Temer earlier this week suggesting that he had thrown in thetowel on the pension reform, several officials today claimed that the governmentremains strongly committed to passing a simpler version of the reform this year.After meeting with Temer and Finance Minister Henrique Meirelles to discussthe reform, Deputy Darcisio Perondi stated that Deputy Arthur Maia, who wasresponsible for the reform bill approved by the Lower House Special Committeein May, will present an amended bill in order to facilitate its approval in the LowerHouse. According to Perondi, a new version could be presented in the next 48hours. As we mentioned yesterday, an alternative would be for the government to
Drausio Giacomelli
Strategist
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Hongtao Jiang
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8 November 2017
EMEA Snap
Emerging EuropePoland
Economics
EMEA SnapDate8 November 2017
Poland: NBP: Steady for now, yet data-contingent path is nighAs expected, NBP left its policy stance unchanged
The Monetary Policy Council (MPC) decided to keep all the NBP rates unchanged.It left the reference rate, Lombard rate, deposit rate and rediscount rate at1.50%, 2.50%, 0.50%, 1.75%, respectively. It also cut reserve requirement ratioon funds with maturity over two years to zero, effective as of March 2018 for themaintenance period starting on April 30, 2018.
The statement and press conference
Figure 1: Positive news on Q3 GDPmay be investment intensive
News Reference Period Impact Q3-2017
Construction July, August 0.43
Imports July -0.07
PMI July, August 0.04
All news 0.40
Old projection 4.1
New projection 4.5
Source: Haver Analytics, CSO, and Deutsche Bank. Note: Someindicators in the model impact GDP on a centered moving averagebasis and/or on a standardized metric.
In the council’s opinion, the external inflationary environment remains moderate,as in previous assessments. It retained an optimistic view that investment maypick up in the short run, led by a rise in construction and manufacturing outputgrowth. Although as in previous press conferences, the individual members'optimistic but still cautious view on investment surfaced again. A slight, butnotable change in the statement was in regards to the acknowledgementthat "core inflation has risen", but remains "moderate" (vs "is still low", thataccompanied the statements since April this year). Overall, in the council’sopinion, the annual growth in prices of consumer goods and services remains ata moderate level.
Larger revisions to growth than inflation
Figure 2: Members of the centre ofthe spectrum to slowly drift into thehawkish side
Source: Source: Deutsche Bank. Note: the chart is derived froma qualitative analysis based on the flow of news from the past 9months, including Q&A MPC press conference contributions. Thismay not reflect their true stance, and may or may not accuratelyrepresent the voting intentions of the members
As we expected, the inflation profile for 2017 was lifted minimally, giving theyearly rate of inflation a 50% probability in the interval between 1.9% and2.0%, versus the 1.6% to 2.3% range seen in the July 2017 projection. Thebank's November projection based on the NECMOD model forecasting now seesinflation to average 1.6% to 2.9% in 2018 with a 50% probability (compared to1.1%-2.9% in the previous round). At the same time, with a 50% probability band,the annual GDP growth is expected in the range of 3.8%-4.6% in 2017 (against3.4-4.7% in the July 2017 projection), and 2.8-4.5% in 2018 (against to 2.5-4.5%,in the July projection).
The impact of interest rates on investment
As in previous conferences, it was clear that doves may continue to use in theirarguments the difficulty in fostering a benign environment for private investment.The hawks remain convinced that other factors other than the level of interestrates are behind the lackluster performance of investment so far. It remains to beseen how the members at the center of the spectrum choose to see the situation,
Kubilay Ozturk
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Carlos Galindo
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8 November 2017
MENA Equity Flows
Periodical
Middle East Strategy
MENA Equity FlowsDate8 November 2017
Qatar fund flows turn positive inOctoberMENA net inflows led by trend reversal in Qatar
Figure 1: MENA Top Picks
Company Country TP Upside (%)
3-m ADTV
($m)
Al Tayyar KSA 45.0 67.3 9.4
DP World UAE 28.0 20.2 4.2
Emaar UAE 10.7 32.9 12.5
Herfy KSA 70.0 55.6 1.2
Natl Bk of Kuwait KWD 850.0 21.4 6.0
NMC Health UAE 3920.0 22.5 11.5
Saudi Telecom KSA 80.0 15.6 4.3
Source: Deutsche Bank, Bloomberg Finance LP
Figure 2: YTD Index Performance(%)
-30
-20
-10
0
10
20
30E
gypt
Kuw
ait
Bah
rain
Du
bai
Abu
Dha
bi
Jo
rdan
KS
A
Om
an
Qata
r
Source:Deutsche Bank, Bloomberg Finance LP
Figure 3: MENA Fund Flows (USDm)
-200
0
200
400
600
800
No
v-1
6
De
c-1
6
Jan-1
7
Feb-1
7
Mar-
17
Apr-
17
Ma
y-1
7
Ju
n-1
7
Ju
l-17
Aug-1
7
Sep-1
7
Oct-
17
Source:Deutsche Bank, Regional Stock Exchanges
Qatar received net inflows of USD85m in October - bucking 5 consecutive monthsand USD625m in outflows on account of the intra-GCC dispute that commencedin June. The MENA region as a whole saw net inflows worth USD184m in October(highest inflows since the Qatar standoff), supported by Abu Dhabi (USD80m)and Dubai (USD57m) but partially offset by Saudi Arabia, which saw an outflowof USD57m. The inflows in UAE were driven by the real estate sector with netinflows of USD65m, while banks were the top contributors in Qatar with inflowsof USD31m. MENA's aggregate YTD net inflow stands at USD2.6bn.
Saudi ArabiaIn Saudi Arabia, Al Rajhi Bank topped the rankings with foreign fund inflows ofUSD25.1m last month, while Almarai lost USD30.9m in the same period. On theother hand, Almarai (USD139.3m) and Saudi Telecom (USD40.1m) were the bestand worst performers over the past three months, respectively.
Abu DhabiIn Abu Dhabi, Aldar Properties was the largest recipient of foreign funds(USD34.7m), while Union National Bank found itself at the bottom, with netoutflows of USD6.2m. Over the past three months, Aldar has attracted thelargest inflows (USD74.8m), while First Abu Dhabi Bank has seen outflows ofUSD39.1m.
DubaiIn Dubai, Emaar Properties attracted the largest inflows (USD21m), whileDubai Investment witnessed the largest outflows (USD8.2m). Over the past threemonths, Emaar Properties has seen the largest inflows (USD40.9m), while DubaiIslamic Bank lost USD13m in outflows.
QatarIn Qatar, Qatar National Bank (QNBK) and Barwa Real Estate had the largestinflows and outflows of USD16.6m and USD 0.8m last month, respectively. QatarElectricity & Water had the highest inflows of USD10.3m, while QNBK had thelargest outflows of USD46.5m over the past three months.
Performance of Deutsche Bank’s MENA portfolioIn the period since the revision on 28 Dec 2016, Deutsche Bank’s MENA portfoliohas increased 66.3% (vs. 32.6% for MSCI EM). NMC Health and DP World havebeen the best performers, posting returns of 91% and 39%, respectively. The
Aleksandar Stojanovski
Research Analyst
+971-4-361-1786
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 22
8 November 2017
COFFEE report
Global Foreign Exchange
COFFEE reportDate8 November 2017
Data from 7-Nov-2017
USD buying against all G10 and selling against KRW
All G10 and EM currencies have been net sold against the dollar over the pastweek, with the exception of KRW. In G10, net selling of CHF has increased furtherand continues to be most net sold currency against the dollar. Net buying of USD/CAD calls also extended from last week, whereas net buying of USD/SEK andUSD/NOK calls was notably reduced. Net buying of downside in AUD and JPYwas broadly unchanged. GBP has seen a shift from net buying to net selling afterthe dovish BoE hike, as did EUR and NZD.
Figure 1: Cumulative returns
-10%
0%
10%
20%
30%
40%
50%
60%
Mar 14 Nov 14 Jul 15 Mar 16 Nov 16 Jul 17
Following investors
Sharpe ratio=1.15
Ann. returns=12.6%
Source: Deutsche Bank. This strategy buys the currency withthe highest DBSVACCY value (net investor buying) and sells thecurrency with the most negative DBSVACCY value. Returns arebased on weekly rebalancing and are net of transaction costs andcarry.
In EM, KRW has been the market’s only net buy against the dollar. At the otherextreme, the market further increased downside exposure in TRY and ZAR andalso added significant MXN downside. There has also been a shift this week fromselling USD/CNH calls to buying, but volumes remain low.
Data covers this week's close as of Tuesday, 7-Nov-17. The cover charts showFX investor buying and selling flows by calculating the difference between callover put volumes transacted in each currency over the last four weeks. A positiveor negative value implies net buying or selling of the underlying currency versusthe USD. The indicators are available on Bloomberg as DBSVACCY Index. Forexample, to access the ticker for EUR (CCY) use DBSVAEUR Index. For more detailon the construction methodology see the Appendix.
Figure 2: G10 FX option market flows Figure 3: EM FX option market flows
-3.0
-2.0
-1.0
0.0
1.0
USD GBP NZD EUR NOK AUD SEK JPY CAD CHF
This week
Last week
Buying
Selling-3.0
-2.0
-1.0
0.0
1.0
KRW SGD CNH PLN ILS RUB MXN TRY ZAR
This week
Last week
Buying
Selling
Source: Deutsche Bank. Data as of Tuesday, shows cumulative 4-week buying/selling Source: Deutsche Bank. Data as of Tuesday, shows cumulative 4-week buying/selling
Robin Winkler
Strategist
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George Saravelos
Strategist
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Rohini Grover
Research Associate
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8 November 2017
Brazil Update
Latin AmericaBrazil
Economics
Brazil UpdateDate8 November 2017
Trying to salvage the pension reform
Highlights:■ The government will try to salvage the pension reform.
■ The IGP-DI inflation index slowed to 0.10% MoM in October.
■ The IPC-S accelerated slightly to 0.36%, as expected.
■ Vehicle production continues to recover.
Jose Carlos Faria
Chief Economist
+55-11-2113-5185
9 November 2017 CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 24
8 November 2017
Macro Bites
Global Economics
Macro BitesDate8 November 2017
A Happy 12 Month Trumpiversary ForMarkets?
Today marks the one year anniversary of President Trump securing victory in the2016 presidential election. Needless to say that the victory was unprecedentedand also a massive shock around the world. Following Trump’s victory, it waswidely expected that we’d see a much higher chance of fiscal spending but alsoa reinforcement of the backlash against globalisation and associated forces ofwhich migration policy and trade were probably first and foremost. In reality whatwe have seen in the last twelve months is plenty of evidence of backlash againstglobalisation, hostility and controversy, but very little in the way of fiscal policy.Indeed we’ve regards to the latter, the debacle around healthcare reform probablybest characterises the difficulties the President has faced in that regard.
So with today marking the one year anniversary, we thought we would take alook at how markets have performed over that time period. For the purpose ofthis we’ve included our usual monthly performance assets, as well as a few otherUS assets. First and foremost after running the numbers what stands out is thesheer number of assets which have seen positive returns. Indeed in USD terms,out of a sample of 41 assets, 38 have seen positive total returns.
As we know US equity market performance has been relentless. The S&P 500 hasreturned +23.5% over the last 12 months and has seen a positive total return inevery month since Trump was elected. Interestingly this hasn’t actually been thebest 12 month performance for the S&P 500 following an election. That awardgoes to the 1944 election victory for Franklin D. Roosevelt which saw the S&P 500rally +36.8% in the year following. The twelve month performance post Trumpranks 7th in the last 23 elections. Meanwhile the Dow has rallied +31.5% andthe smaller-cap Russell 2000 index has returned +25.4%. It hasn’t just been USequity markets that have seen blockbuster returns though. Indeed it’s very muchbeen a global rally. The biggest winner is the FTSE MIB (+47.8%) while also inEurope the DAX has returned +34.1%, Stoxx 600 +27.9%, Greek Athex +38.2%and IBEX +24.9%. The UK’s FTSE 100 has returned +21.4% while in Asia theNikkei is +25.5% and Hang Seng +30.7%.
In bond markets, as we know Treasuries have seen some huge ranges butultimately performance has been benign. Indeed Treasuries have returned -0.1%.In fairness the big move for Treasuries came in the first few weeks of the electionvictory where we saw 10y yields spike nearly 80bps. If we take performance fromthe yield highs of last December then performance is actually more like +3.5%.More significant for bonds though has been the shape of the yield curve. Havingspiked as high as 136bps, the 2s10s curve has now flattened to just 68bps and
Craig Nicol
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9 November 2017
CEEMEA & Latam Daybook
Page 26 Deutsche Bank AG/London
Economic Calendar Country GMT Release DB Expected Actual Consensus Previous
Thursday, 09 November
BR 07:00 FGV CPI IPC-S (Nov) 0.35% 0.33%
BR 07:00 FGV Inflation IGP- DI (Oct) 0.10% 0.62%
TR 07:00 Industrial production (Sep) -5.20%
CL 08:00 CPI (Oct) 0.2% (1.5%) -0.2% (1.5%)
HU 08:00 Merchandise trade balance(prelim) (Sep), EUR, m EUR303.0m
CZ 08:00 Unemployment rate (Oct) 3.8%rate
CZ 09:00 CNB FX reserves (Oct), USD, bn USD146.3bn
EV/EBITDA for Banks has been replaced by ROE The Daily and YTD % Price changes refer to the change in US dollar value of the stock Source: Deutsche Bank, Companies
Discovery DSYJ.J Sell 149 2.0 25.9 125.00 na na 20.6 17.8 na 1.3 6783
Liberty LBHJ.J Buy 112 0.7 -2.4 125.00 na na 11.0 9.8 na 6.4 2207
MMI MMIJ.J Hold 19.45 0.5 -20.0 20.00 na na 9.7 9.1 na 8.1 2207
Old Mutual OMLJ.J Buy 35.74 0.8 0.6 44.00 na na 0.1 0.1 na 355.9 12060
RMI RMIJ.J Hold 39.18 0.7 -4.5 41.00 na na 14.9 12.3 na 3.0 4118
Sanlam SLMJ.J Buy 72.35 1.1 11.5 84.00 na na 15.3 13.3 na 4.1 10471
Santam SNTJ.J Hold 252 2.0 4.3 285.00 na na na na na na na
EV/EBITDA (x) P/E (x)
EV/EBITDA for Banks has been replaced by ROE The Daily and YTD % Price changes refer to the change in US dollar value of the stock Source: Deutsche Bank, Companies
EV/EBITDA for Banks has been replaced by ROE The Daily and YTD % Price changes refer to the change in US dollar value of the stock Source: Deutsche Bank, Companies
EV/EBITDA for Banks has been replaced by ROE The Daily and YTD % Price changes refer to the change in US dollar value of the stock Source: Deutsche Bank, Companies
9 November 2017
CEEMEA & Latam Daybook
Deutsche Bank AG/London Page 37
Appendix1
Important Disclosures *Other information available upon request Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr. Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Pascal Moura/Mairead Smith
Equity rating key Equity rating dispersion and banking relationships
Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock.
Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock
Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell.
Newly issued research recommendations and target prices supersede previously published research.
46 % 47 %
7 %37 % 32 %
17 %0
200
400
600
800
1000
1200
1400
1600
Buy Hold Sell
Global Universe
Companies Covered Cos. w/ Banking Relationship
9 November 2017
CEEMEA & Latam Daybook
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Additional Information
The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness. Hyperlinks to third-party websites in this report are provided for reader convenience only. Deutsche Bank neither endorses the content nor is responsible for the accuracy or security controls of these websites.
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International locations Deutsche Bank AG Deutsche Bank Place Level 16 Corner of Hunter & Phillip Streets Sydney, NSW 2000 Australia Tel: (61) 2 8258 1234
Deutsche Bank AG Mainzer Landstrasse 11-17 60329 Frankfurt am Main Germany Tel: (49) 69 910 00
Deutsche Bank AG Filiale Hongkong International Commerce Centre, 1 Austin Road West,Kowloon, Hong Kong Tel: (852) 2203 8888
Deutsche Securities Inc. 2-11-1 Nagatacho Sanno Park Tower Chiyoda-ku, Tokyo 100-6171 Japan Tel: (81) 3 5156 6770
Deutsche Bank AG London 1 Great Winchester Street London EC2N 2EQ United Kingdom Tel: (44) 20 7545 8000
Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005 United States of America Tel: (1) 212 250 2500