Europe Today - Overblogdata.over-blog-kiwi.com/0/99/67/47/20140521/ob_196...May 21, 2014 · actions in mid-2012, Anima started to regain momentum, posting a solid +EUR3.4bn inflow

Sector Country

21 May 2014

Europe Today Our Scandinavian research team led by Mikael Jafs is publishing a report on Nordic countries. While the region acted as safe haven during the financial crises, we see clouds gathering on the horizon. Several countries are facing elections which could result in “caretaker” governments rather than drivers of additional structural reforms. We add Cargotec to our European SMID and Nordic Selected Lists today. Johan Eliason believes the new CEO will deliver on cost-cutting targets by 2015 and forecasts an EPS CAGR of 43%, well above Nordic and European peers, while the stock trades at an unjustified discount. Atanasio Pantarrotas

initiates coverage on Anima with a Buy. The end of the deposits war between banks and low interest rates are key growth drivers. Richard Koch is publishing a report on Getinge ahead of the CMD. While management could present bullish long-term targets, visibility remains poor and management could lower shorter-term objectives. On M&A, we produce two reports. We look at the transformation optionalities of Bayer and conclude that the best case is already priced in. In flavour & fragrance, we see more consolidation outside the top four big players. Givaudan remains a Buy due to its attractive growing dividend yield.

Today's top research news

X X

Anima (Buy) Initiating coverage: A different Anima(l)

x x

Bayer (Hold) Beyond OTC: options for animal health

X X

GDF Suez (Buy) Feedback from infrastructure reverse roadshow

x x

Getinge (Reduce) All you need to know ahead of the CMD

X X

Sonova (Buy) Gaining market share across the board

x x

Europe Cargotec enters our SMID Selected List

x x

Nordic New report on the Nordic countries

Rating and target price changes Company Rating Target Price

Anima New Buy EUR4.7

21/05/2014 Old Under Review

AkzoNobel New Reduce EUR46

20/05/2014 Old Reduce EUR44

BASF New Hold EUR86

20/05/2014 Old Buy EUR84

Italcementi New

20/05/2014 Old Hold EUR8.7

Emmi New Hold CHF315

20/05/2014 Old Hold CHF290

Roadshow pipeline

22/05 Brembo - Chicago USA

22/05 Ageas NV - Stockholm/Copenhagen SWEDEN

22/05 STADA Arzneimittel - Paris GERMANY

22/05 Mapfre - Paris FRANCE

23/05 Ericsson - Paris FRANCE

23/05 Goldbach Group AG - Zurich SWITZERLAND

26/05 Philips - Geneva/Zurich SWITZERLAND

26/05 Air Liquide - Stockholm/Copenhagen

SWEDEN

26/05 Sonova - Stockholm SWITZERLAND

26/05 Aperam - Frankfurt NETHERLANDS

Click here for full list of changes xx Click here to attend roadshow

Ratings info Booking online

https://research.keplercheuvreux.com/

https://research.keplercheuvreux.com/bookingOnline/index.aspx

Country Sector Frontp

Today’s research by country Austria

X X

Lenzing (Buy)

Feedback from meeting with CEO and new CCO

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voestalpine (Hold) Q4 2013-14 results preview

France

X X

GDF Suez (Buy)

Feedback from infrastructure reverse roadshow

X X

Thales (Buy) Confident tone prevails during London roadshow

X X

Naturex (Buy)

Acquisition in the US and capital increase

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Rexel (Reduce) New questions on the US business

Germany

x x

Bayer (Hold)

Beyond OTC: options for animal health

X X

TAG Immobilien (Buy) Positive roadshow feedback

Italy

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Anima (Buy)

Initiating coverage: A different Anima(l)

Netherlands

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Reed Elsevier (Reduce)

Acquires Wunelli insurance software

Sweden

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Getinge (Reduce)

All you need to know ahead of the CMD

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Kinnevik (Hold) Kinnevik Rocket CMD

Switzerland

x x

Credit Suisse Group (Hold)

Earnings adjustment after US settlement

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Emmi (Hold) TP up from CHF290 to CHF315

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Lonza (Hold)

New 16% RONOA target very ambitious

X X



Today’s research by sector Aerospace & defence

X X

Thales (Buy)

Confident tone prevails during London roadshow

Banks

x x

Credit Suisse Group (Hold)

Earnings adjustment after US settlement

Capital goods

x x

Rexel (Reduce)

New questions on the US business

Chemicals

X X

Lenzing (Buy)

Feedback from meeting with CEO and new CCO

Financial services

X X

Anima (Buy)

Initiating coverage: A different Anima(l)

Food

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Emmi (Hold)

TP up from CHF290 to CHF315

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Naturex (Buy) Acquisition in the US and capital increase

Holding companies

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Kinnevik (Hold)

Kinnevik Rocket CMD

Media

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Reed Elsevier (Reduce)

Acquires Wunelli insurance software

Medtech & services

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Getinge (Reduce)

All you need to know ahead of the CMD

X X


Metals & mining

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Voestalpine (Hold)

Q4 2013-14 results preview


Pharma & biotech

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Bayer (Hold)

Beyond OTC: options for animal health

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Lonza (Hold) New 16% RONOA target very ambitious

Property

X X

TAG Immobilien (Buy)

Positive roadshow feedback

Utilities

X X

GDF Suez (Buy)

Feedback from infrastructure reverse roadshow

Country Story

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Nordic

New report on the Nordic countries

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Europe Cargotec enters our SMID Selected List

Sector research

x x

Banks

Italian market data for April

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Media Netflix widens European scope

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21 May 2014 Initiation of coverage Positive

Anima

Italy | Financial services

Buy (None) Target price EUR 4.70

Current price EUR 3.70

Atanasio Pantarrotas, CFA [email protected] +39 02 8062 8310

Initiating coverage: A different Anima(l) Reuters ANIM.MI Bloomberg ANIM IM Index DJ Stoxx 600

Market data

Market cap (EURm) 1,109

Free float 60%

No. of shares outstanding (m) 300

Avg. daily trading volume('000) 4,353

YTD abs performance -8.6%

52-week high (EUR) 4.40

52-week low (EUR) 3.70

FY to 31/12 (EUR) 2014E 2015E 2016E

Total revenues (m) 209.2 228.9 238.7

Pre-prov. profit (m) 126.3 145.8 154.3

Pre-tax profit (m) 112.3 136.8 145.3

Net profit adj. (m) 98.8 113.8 120.2

RWAs (bn) na na na

Sh.'s equity (m) 694.1 756.8 817.3

Tangible equity (m) -51.2 29.4 107.0

Tangible BVPS -0.17 0.10 0.35

EPS Adj 0.32 0.37 0.39

Consensus EPS na na na

Dividend per share 0.11 0.14 0.15

FY to 31/12 (EUR) 2014E 2015E 2016E

P/E (x) 11.4 9.9 9.4

P/BV (x) 1.63 1.50 1.38

P/TBV na na na

P/PPI (x) 8.9 7.8 7.3

Dividend yield 3.0% 3.8% 4.1%

ROTE after tax na na na

ROE after tax 15.1% 15.7% 15.3%

RoRWAs na na na

Common Eq Ratio na na na

Cost income ratio na na na

NPL ratio (on loans) na na na

Leading position in underpenetrated Italian AM industry

Accelerating inflows, +EUR7bn net new money in last 16 months

We expect adjusted net profit CAGR of 8% over 2013-16

Appealing multiples: Buy, EUR4.7 TP (+27% upside)

Leading position in underpenetrated Italian AM industry With AUM of EUR50bn, Anima ranks fourth in the Italian AM industry. The fruit of several rounds of M&A, Anima distributes its products mainly through the branches of two large banks, Monte dei Paschi di Siena (BMPS) and Banca Popolare di Milano (BPM), which account for a total of 71% of Anima’s EUR30bn in retail AUM. The two banks also remain major shareholders (12% and 19% respectively) after last April’s IPO.

+EUR7bn net inflows in last 16 months Like much of the industry, Anima suffered significant outflows of EUR5.3bn in 2011, when banks offered attractive deposits and bonds to fund their balance sheets. As borrowing costs and funding eased following the ECB’s actions in mid-2012, Anima started to regain momentum, posting a solid +EUR3.4bn inflow in 2013, and an excellent +EUR3.5bn in 4M 2014. Low penetration of managed products for wealthy Italian households’ portfolios (just 25%, roughly half that of comparable countries), and Italian banks’ current focus on capital-light/low-risk business (such as AM product distribution) are solid tailwinds for Anima in the future, offsetting potential concerns due to its outsourced distribution model. Anima’s above-average performance record and its solid brand in Italy also support a positive inflow performance.

Adjusted net profit CAGR of 8% over 2013-16E Excluding the PPA amortisation and a large one-off, Anima’s adj. net profit came in at EUR94m in 2013. Assuming a +EUR7bn net inflow in 2014-16E (o/w almost 50% already reported in 4M 2014), we estimate adjusted net profit could climb to EUR120m in 2016, corresponding to an 8% CAGR.

Initiating with Buy, EUR4.7 TP Given the banks’ own interest in pushing AM products, and the very low interest rate environment, which is stimulating demand for more managed products, we expect Anima’s inflows to remain solid. A cheap valuation (2015 adj. P/E of 10x), more sustainable pricing, and a solid performance record makes Anima an attractive investment: we initiate with a Buy rating and an EUR4.7 TP (+27% upside).

IMPORTANT. Please refer to keplercheuvreux.com/disclaimer or to the last

page of this report for “Important disclosures” and analyst certification(s) keplercheuvreux.com

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21 May 2014 Company update Neutral

Bayer

Germany | Pharma & biotech

Hold (Hold) Target price EUR 91.00


Fabian Wenner, PhD [email protected] +41 43 333 6624

Beyond OTC: options for animal health Reuters BAYGn.DE Bloomberg BAYN GY Index DJ Stoxx 600

Market data


Free float 100%



YTD abs performance 0.7%



FY to 31/12 (EUR) 2014E 2015E 2016E

Sales (m) 41,543 45,292 47,663

EBITDA adj (m) 9,114 9,929 10,793

EBIT adj (m) 6,426 7,043 7,674

Net profit adj (m) 4,965 5,216 5,803

Net fin. debt (m) 7,971 15,421 12,523

FCF (m) 4,023 3,981 5,009

EPS adj. and fully dil. 6.02 6.32 7.02

Consensus EPS 6.1 6.9 7.8

Net dividend 2.15 2.25 2.46

FY to 31/12 (EUR) 2014E 2015E 2016E

P/E (x) adj and ful. dil. 17.0 16.3 14.6

EV/EBITDA (x) 11.0 11.0 10.0

EV/EBIT (x) 15.6 15.5 14.0

FCF yield 4.9% 4.9% 6.1%


Net debt/EBITDA (x) 1.8 2.6 2.3

Gearing 31.1% 49.7% 33.9%

ROIC 10.0% 8.8% 8.2%

EV/IC (x) 1.9 1.6 1.5

OTC acquisition only first step in the group repositioning

Option 1: Buy Zoetis, sell MatSc: up to +7% NPVps

Option 2: Sell animal health: up to +4% NPVps, 2-3% EPS dilution

Bayer trades in-line with EU pharma for similar growth profile

Option 1: Bayer sells Material Science and buys Zoetis The acquisition of US Merck’s OTC business further improves Bayer’s earnings mix: post closure in 2015, MatSc will contribute only 8% of group EBITA, CropScience 22% and Healthcare 66% (41% by Pharma, 25% by Consumer). Thus, MatSc (apart from failing to sustainably cover its cost of capital and apart from lacking synergies with the rest of the group) is already too small to really contribute to diversification. A replacement with a more defensive lifescience asset is thus merely a matter of time in our view to finalize the group’s transformation. The minimum price Bayer needs to get for MatScience for the deal to be value-neutral is EUR8.9bn. Every incremental EUR1bn would add 1.2% NPVps. Invested capital stands at c. EUR10.37bn (7.95x EV/EBITDA 2015) and while a price below this mark would be justified given returns below WACC, we believe an auction process is likely to secure an amount of at least this level. Buying Zoetis: assuming cost synergies of 8% of Zoetis’ revenues, we calculate Bayer can pay as much as USD21.65bn or USD43.4 per share (40% upside from the current price) and still have a value-neutral deal, though it would have paid away the USD400m synergies. An offer of a 20% premium to the current share price (USD18.5bn) would yield an IRR of 10.6%, supporting a 3.5% net present value accretion and a 5% EPS accretion in years 1 and 2.

Option 2: Bayer sells Animal Health, keeps proceeds and MatSc To strengthen the balance sheet and allow for further opportunistic bolt-ons, Bayer could sell its own subscale animal health business for at least EUR3.48bn (value-neutral price, 2.6x sales). Every incremental EUR1bn would support the shares by 1.2% NPVps. At a EUR5.3bn selling price (4x sales) the respective EPS dilution would be 2.5% and 2.8% in years 1 and 2.

Bayer trades in line with EU pharma for similar growth profile We have adjusted our estimates for the 31 December 2014 closure of the divestiture of the Interventional device business (USD120m sales) for USD415m (3.45x sales) that was announced last Thursday. Our detailed report (24 pages) is out today.



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21 May 2014 Company update Negative

Credit Suisse Group

Switzerland | Banks

Hold (Hold) Target price CHF 28.00

Current price CHF 26.32

Dirk Becker [email protected] +49 69 7569 6119

Earnings adjustment after US settlement Reuters CSGN.VX Bloomberg CSGN VX Index DJ Stoxx 600

Market data

Market cap (CHFm) 42,135

Free float 87%

No. of shares outstanding (m) 1,601



52-week high (CHF) 30.29

52-week low (CHF) 24.46

FY to 31/12 (CHF) 2014E 2015E 2016E

Total revenues (m) 26,315 28,440 29,856

Pre-prov. profit (m) 4,063 7,657 8,561

Pre-tax profit (m) 3,479 6,975 7,863

Net profit adj. (m) 2,398 5,152 5,809

RWAs (bn) 249 256 264

Sh.'s equity (m) 44,426 45,706 49,266

Tangible equity (m) 36,255 37,573 41,170

Tangible BVPS 22.62 23.44 25.69

EPS Adj 1.40 3.04 3.43


Dividend per share 0.70 1.00 1.10

FY to 31/12 (CHF) 2014E 2015E 2016E

P/E (x) 18.8 8.7 7.7

P/BV (x) 0.95 0.92 0.85

P/TBV 1.16 1.12 1.02

P/PPI (x) 10.4 5.5 4.9


ROTE after tax 6.8% 14.0% 14.8%

ROE after tax 5.5% 11.4% 12.2%

RoRWAs 0.92% 2.04% 2.23%

Common Eq Ratio 18.1% 18.9% 19.9%

Cost income ratio 86.2% 74.4% 72.6%

NPL ratio (on loans) 0.9% 0.9% 0.9%

Earnings adjustments after USD2.8bn settlement

One-off hit will drag down Q2 results, 2014 earnings cut

Capital ratio only 9.3%, pressure to build this up quickly

Hold rating confirmed

CHF1.6bn additional legal provisions after US settlement After Credit Suisse’s announcement about the US settlement on Monday night we now adjust our forecasts. The group indicated that Q2 results would be hit by CHF1.618bn in legal provisions with an after-tax impact of CHF1.598bn. This will probably lead to a bottom-line loss in that quarter. For the full-year 2014, our EPS falls to CHF1.40. All other numbers remain unchanged.

Uncomfortable capital situation The pro-forma core tier 1 ratio including this charge comes down to 9.3%. This compares unfavourably with its peer UBS, where the ratio exceeded 13% in March. Even Deutsche Bank will, after its upcoming rights issue, have a ratio above 11%, including upcoming regulatory adjustments. We know that the Swiss regulator is nervous about its banks’ capital situation. The pressure is now on Credit Suisse to quickly improve this ratio.

Hold rating confirmed We regard this settlement as the last big hit for Credit Suisse to work out its crisis legacy. It was more severe than we would have thought, but the group is not involved in all other industry scandals such as LIBOR or FX spot rate fixing. We recently downgraded the stock to Hold and confirm this rating now.



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21 May 2014 Target price change Neutral

Emmi

Switzerland | Food



Jon Cox [email protected] +41 43 333 6607

TP up from CHF290 to CHF315 Reuters EMMN.S Bloomberg EMMN SW Index DJ Stoxx 600

Market data


Free float 37%


Avg. daily trading volume('000) 3




FY to 31/12 (CHF) 2014E 2015E 2016E

Sales (m) 3,407.0 3,502.4 3,572.5

EBITDA adj (m) 279.4 288.9 294.7

EBIT adj (m) 172.4 181.9 187.7

Net profit adj (m) 106.7 113.4 117.0

Net fin. debt (m) 265.5 179.0 125.5

FCF (m) 102.0 107.9 129.5


Consensus EPS 20.63 22.52 23.14


FY to 31/12 (CHF) 2014E 2015E 2016E


EV/EBITDA (x) 8.2 7.9 7.5

EV/EBIT (x) 13.3 12.5 11.8

FCF yield 5.9% 6.2% 7.5%



Gearing 19.7% 12.4% 8.5%

ROIC 9.0% 9.8% 10.0%

EV/IC (x) 1.6 1.5 1.5

Hold, TP up from CHF290 to CHF315 amid change of coverage

On track with internationalization strategy

But international sales may be at lower end of 6-8% target

Re-rating may have gone too far, Hold

Reiterate Hold rating amid change of coverage We reiterate our Hold rating on Swiss dairy producer Emmi after a change in analyst coverage. We believe the company remains on track to generate 50% of its sales outside of Switzerland in the next few years (via M&A and organic growth), which will improve its growth profile amid its exposure to the largely stagnant Swiss market.

International sales may be at lower end of 6-8% target However, we believe international sales may come in at the lower end of the 6-8% targeted range in 2014 amid some difficult contract negotiations with retailers in Germany and a tough market situation in Italy. As a result, we see top line growth of 3.3% compared with the guidance of 3-4% although we believe the company can come in at or above the top end of its CHF155-170m EBIT guidance given the exit from business with weak profitability (and management of expectations). We note that the narrowing milk price differential between Europe and Switzerland should help alleviate pressure from imports, while we believe the worst of the so-called shopping tourism (Swiss shoppers buying groceries in neighbouring countries) is probably over.

Re-rating may have gone too far, Hold While its organic sales growth has accelerated as it gains more exposure to markets outside of Switzerland, we suspect the re-rating of the stock (amid strength of food stocks generally) may have gone too far given its weaker organic earnings growth profile (low to mid-single digit) compared to some international peers, weak key return profile, more commoditized offering (in milk, butter, cream) and lower dividend yield. We raise our TP from CHF290 to CHF315. At our new CHF315 target price, the stock would trade at 15x PE and 8x EV/EBITDA 2015E. H1 results are due on 27 August.



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21 May 2014 Company update Positive

GDF Suez

France | Utilities

Buy (Buy) Target price EUR 22.00


Xavier Caroen [email protected] +33 1 5365 3676

Feedback from infrastructure reverse roadshow Reuters GSZ.PA Bloomberg GSZ FP Index DJ Stoxx 600

Market data


Free float 53%

No. of shares outstanding (m) 2,357





FY to 31/12 (EUR) 2013 2014E 2015E

Sales (m) 81,278 84,649 84,478

EBITDA adj (m) 13,046 12,792 13,011

EBIT adj (m) 7,663 7,731 7,806

Net profit adj (m) 3,169 3,518 3,514

Net fin. debt (m) 31,223 33,471 34,565

FCF (m) 3,520 1,637 1,725




FY to 31/12 (EUR) 2013 2014E 2015E


EV/EBITDA (x) 4.9 6.8 6.7

EV/EBIT (x) 8.4 11.2 11.2

FCF yield 9.1% 3.5% 3.7%



Gearing 58.4% 63.1% 64.4%

ROIC 4.9% 5.4% 5.4%

EV/IC (x) 0.7 0.9 0.9

Infrastructure business: 25.5% of group’s EBITDA

A regulated business accounting for 86% of Infra EBITDA

Gas storage remains weakest link for now

We stick to our Buy rating and EUR22TP

Infrastructures business: 25.5% of group EBITDA Thanks to its strong presence in the gas infrastructure business in Europe, GDF Suez enjoys a leading position that guarantees stable and recurring revenues and cash flow, as most of the activities are regulated. The infrastructures business represents 12% of the group’s headcount and 25.5% of its EBITDA (2014 estimates, o/w 50% comes from the Distribution France business) and comprises four specialised subsidiaries in transmission, storage, LNG terminals and distribution.

A regulated business accounting for 86% of Infra EBITDA The transmission, LNG terminals and distribution activities are all regulated businesses in France, with return and tariffs being set by the regulator (CRE). These businesses are capital-intensive and generate sound and predictable cash flows with low risks for the group. The CFO does not see any major regulation changes ahead hurting Infrastructure’s business model, and clearly highlighted the company’s ambitious plans to develop outside of France and Europe.

Gas storage remains weakest link for now Gas storage is the company’s only unregulated infrastructure business (14% of Infrastructures’s 2013 EBITDA). The business model suffered from the decline in gas demand in Europe, which negatively affected spreads between winter and summer gas prices. GDF Suez through Storengy has been proactive in asking for more requirements in this business and has actively contributed to discussions with public authority. 2014 is expected to be a low point for this business; implying more upside than downside.

We stick to our Buy rating and EUR22 TP The group’s exposure to these regulated businesses offers a reliable buffer due to the strong visibility on future cash flows. However, Infrastructure’s EBITDA in 2014 could suffer slightly from a negative weather effect (Q1 2014 was affected by weather) if no favourable impacts help the group in Q4. Our long-term view on the investment case remains unchanged: GDF Suez still has one of the safest risk profiles in European utilities (energy generation). We reiterate our Buy rating and TP of EUR22.



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21 May 2014 Company update Negative

Getinge

Sweden | Medtech & services

Reduce (Reduce) Target price SEK 175.00

Current price SEK 191.50

Richard Koch [email protected] +46 8 723 5172

All you need to know ahead of the CMD Reuters GETIb.ST Bloomberg GETIB SS Index DJ Stoxx 600

Market data

Market cap (SEKm) 45,639

Free float 82%




52-week high (SEK) 244.00

52-week low (SEK) 172.90

FY to 31/12 (SEK) 2014E 2015E 2016E

Sales (bn) 26.2 27.6 28.9

EBITDA adj (m) 6,368.4 6,879.8 7,358.5

EBIT adj (m) 4,408.4 4,820.6 5,200.3

Net profit adj (m) 2,077.0 3,063.5 3,320.9

Net fin. debt (m) 16,683.6 14,212.7 11,450.9

FCF (m) 1,717.8 2,474.9 2,810.6


Consensus EPS 10.99 13.77 15.97


FY to 31/12 (SEK) 2014E 2015E 2016E


EV/EBITDA (x) 9.8 8.7 7.8

EV/EBIT (x) 14.1 12.4 11.0

FCF yield 3.8% 5.4% 6.2%



Gearing 94.8% 72.6% 52.7%

ROIC 18.9% 20.3% 21.4%

EV/IC (x) 2.1 2.0 1.8

New report out

Expect revised targets at CMD on 27 May

Poor visibility today – probably worse five years out

No reason to step in yet: Reduce, TP SEK175 (c. 9% downside)

Expect revised targets at CMD on 27 May We still think it’s too soon to revisit Getinge’s shares. The upcoming CMD is clearly an opportunity for management to present bullish long-term targets (and we expect them to do so), but the question is whether these will be realistic. We note that targets have been over-optimistic in the past and recommend scrutinising them. We expect management to lower or drop its 2015 target and think visibility on any 2018 target would be low. Price pressure and FDA issues are imminent obstacles for profit growth generation. Reduce reiterated. At the upcoming CMD, we expect management to present a thorough revision of its current targets. We note consensus is already anticipating a significant margin expansion (from the 2014E 19% EBITA margin), and we see downside risk. We think the current 2015 target (22% EBITA margin) is likely to be lowered or dropped, and a new target set for 2018 (consensus 22%). We would recommend scrutinising any new targets, as they have been over-optimistic in the past.

Poor visibility today – probably worse five years out Getinge’s five profit warnings over the past two years reflect the low visibility on its business. Stretching targets further into the future is obviously also linked to higher uncertainty. Although in the long term there should be some room for trimming administrative costs, price pressure and FDA issues are imminent obstacles to profit growth. We estimate that FDA-related costs will not only wipe out 20% of the 2014E net result but will also reduce EBITA margin by c. 100bps going forward.

No reason to step in yet: Reduce, TP SEK175 (c.9% downside) Getinge is not yet lying on the operating table, but it may be booked in for surgery. Its extensive acquisition strategy (indirectly causing the FDA issues) is probably under review, so the market is unlikely to pay a premium for this driver, and its confidence in management is probably at an all-time low. Even so, the shares are trading at 19x P/E 12M forward, well above the 15x historical average. We maintain our Reduce rating and believe it is still too early to step back in.



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20 May 2014 Target price change Neutral

Kinnevik

Sweden | Holding companies

Hold (Hold) Target price SEK 250.00

Current price SEK 255.30

Bjorn Gustafsson [email protected] +46 8 723 51 76

Kinnevik Rocket CMD Reuters KINVb.ST Bloomberg KINVB SS Index DJ Stoxx 600

Market data

Market cap (SEKm) 70,786

Free float 70%




52-week high (SEK) 310.60

52-week low (SEK) 166.70

FY to 31/12 (SEK) 2013 2014E 2015E

Sales (bn) 0.0 0.0 0.0

EBITDA adj (m) 0 0 0

EBIT adj (m) 0 0 0

Net profit adj (m) 0 0 0

Net fin. debt (m) 0 0 0

FCF (m) 0 0 0




FY to 31/12 (SEK) 2013 2014E 2015E

P/E (x) adj and ful. dil. na na na

EV/EBITDA (x) na na na

EV/EBIT (x) na na na

FCF yield 0.0% 0.0% 0.0%


Net debt/EBITDA (x) na na na

Gearing na na na

ROIC na na na

EV/IC (x) na na na

CMD in Berlin 22-23 May

22 May: full day with Rocket Internet/Zalando presentations

23 May: Zalando warehouse visit in Erfurt

The Kinnevik Rocket Day in Berlin 22-23 May Kinnevik will host a CMD in Berlin on 22-23 May with a focus on Rocket Internet, its portfolio companies and Zalando. This is exactly what the market has been asking for: an opportunity to dig further into the online assets, the most important part of Kinnevik’s portfolio.

22 May: full day with Rocket Internet/Zalando presentations On 22 May there will be presentations by Rocket Internet, starting with one of the founders, Oliver Samwer, giving an overview of the company, followed by a CEO presentation on Rocket Internet’s operations. There will then be presentations on the Global Fashion eCommerce Footprint (Lamoda, Dafiti, Zalora, Jabong, Namshi), followed by lunch meetings with the Rocket Internet companies. During the afternoon the founders of Lazada, Linio and Jumia will present the companies. Presentations will also by given the founders of the home and living companies (Home24 and Westwing). Zalando’s management will also present the company.

23 May: Zalando Warehouse visit in Erfurt During the second day of the CMD, 23 May, we will visit Zalando’s warehouse in Erfurt, a tour conducted by Christoph Stark, VP Logistics.



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Lenzing

Austria | Chemicals



Stephan Trubrich [email protected] +43 1 537 12 4149

Feedback from meeting with CEO and new CCO Reuters LNZ.VI Bloomberg LNZ AV Index DJ Stoxx 600

Market data


Free float 35%


Avg. daily trading volume('000)

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FY to 31/12 (EUR)

2014E

2015E

2016E

Sales (m) 1,786.2

1,910.6

1,965.0

EBITDA adj (m) 161.7 266.7 325.3

EBIT adj (m) 45.0 147.0 209.1

Net profit adj (m)

20.4 95.8 141.8

Net fin. debt (m) 521.8 514.8 506.8

FCF (m) 37.5 40.1 47.8

EPS adj. and fully dil.

0.77 3.61 5.34



FY to 31/12 (EUR)

2014E

2015E

2016E

P/E (x) adj and ful. dil.

59.2 12.6 8.5

EV/EBITDA (x) 10.8 6.6 5.4

EV/EBIT (x) 39.0 11.9 8.4

FCF yield 3.1% 3.3% 4.0%


Net debt/EBITDA (x)

3.8 2.3 1.9

Gearing 49.1%

45.7% 41.3%

ROIC 2.0% 6.4% 8.7%

EV/IC (x) 1.0 1.0 0.9

CCO brings valuable application know-how and contact network

Boosting sales activities in NA and China is currently top priority

Viscose prices seem to have bottomed, further support looming

Attractive risk/reward profile: Buy reiterated

We hosted an investor’s lunch with CEO Untersperger and new CCO van de Kerkhof (on board since 1 May). We would highlight the following.

CCO brings valuable application know-how and contact network After completing his aeronautical engineering studies (specialising in composites), van de Kerkhof moved into the fibre industry and gained 25 years’ experience in Kevlar, Nomex, nylon and polyester fibres at DuPont and Koch Industries (Invista). His main expertise is in nonwovens, including industrial (e.g. airbags/seatbelts) and hygiene applications (e.g. diapers), but also in apparel/textiles through his exposure to spandex/elastane (Lycra brand) at Invista. In addition to extensive application know-how, he brings valuable contacts in the value chain (both in NA and China), which should help to leverage Lenzing‘s market position, in our view.

Boosting sales activities in NA and China is currently a top priority While he seems to have many ideas, particularly in technical applications (wants to build up development pipeline similar to Pharma industry), his top priority is currently to strengthen the sales network in the US (focus on nonwovens, e.g. flushable wipes) and China (focus on textiles) in order to revive the group’s top-line growth. As he is only several weeks into the job, he will give further details with H1 results on 21 August 2014.

Viscose prices seem to have bottomed, further support coming We note that Chinese viscose (VSF) prices reached a low of RMB11,580/t on 31 March and have meanwhile recovered to RMB12,000/t (30% below LT average of RMB16,580/t). In addition, we could imagine that the recently imposed anti-dumping regulation on dissolving wood pulp imports from the US, Canada and Brazil to China (1.8m tonnes annually), as well as price-fixing agreements by main Chinese VSF producers (next meeting in June), are likely to support a further recovery in VSF prices.

Attractive risk/reward profile, Buy and EUR52 TP reiterated We admit it might be a bit early to be fully convinced of the sustainability of the recent VSF price inflection. However, we believe that at current price levels the stock’s upside outweighs its downside and any signs of bottoming VSF prices are likely to trigger a share price rally. In addition: 1) earnings are likely to trough in 2014; 2) gearing is not an issue; and 3) valuation looks undemanding on normalised earnings.



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Lonza

Switzerland | Pharma & biotech



Fabian Wenner, PhD [email protected] +41 43 333 6624

New 16% RONOA target very ambitious Reuters LONN.VX Bloomberg LONN VX Index DJ Stoxx 600

Market data


Free float 75%






FY to 31/12 (CHF) 2014E 2015E 2016E

Sales (m) 3,723.0 3,860.6 3,985.6

EBITDA adj (m) 724.0 764.2 793.9

EBIT adj (m) 482.4 505.9 534.9

Net profit adj (m) 305.3 328.8 357.0

Net fin. debt (m) 1,970.0 1,773.5 1,501.5

FCF (m) 279.7 308.0 383.7




FY to 31/12 (CHF) 2014E 2015E 2016E


EV/EBITDA (x) 9.8 9.0 8.3

EV/EBIT (x) 14.6 13.6 12.3

FCF yield 5.7% 6.3% 7.8%



Gearing 77.8% 65.3% 51.2%

ROIC 7.6% 8.0% 8.5%

EV/IC (x) 1.3 1.3 1.3

Return on net capital invested stood at 5.9% at end-2013

Target largely driven by reduction in manufacturing footprint

Lonza never achieved more than 14.1% RONOA in past 10 years

Spin-off of wood protection business next catalyst

Lonza – RONOA 2004-13

CHFm 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sales 2,182 2,521 2,914 2,870 2,937 2,690 2,680 2,692 3,925 3,584 EBIT 212 297 344 408 441 239 374 261 340 253 NCI 2,574 2,786 2,608 3,277 3,768 3,900 3,688 5,667 5,437 4,958 RONOA 8.4% 11.0% 12.4% 14.1% 13.8% 6.7% 10.8% 6.9% 7.5% 5.9%

NCI = Net capital invested, RONOA = return on net operative assets; Source: Kepler Cheuvreux

16% RONOA to be driven by reduction in production base At its ongoing capital markets day, Lonza announced a new financial target for 2016, i.e. CORE RONOA to achieve 16%. All other guidance remains unchanged. In addition, net debt reduction is going according to plan (annual CHF200m reduction) with ND/Equity set to achieve 68% by 2015 and ND/EBITDA to be <2.5 by end-2014. According to the bridge in Lonza’s presentation, the achievement of the 16% RONOA target will be a function of 3 ~equally sized components: reduction of net operating assets, higher sales growth and better product mix when compensating for cost reductions by wage inflation. In our view, the largest part of the 16% return target will have to be driven by the reduction of the net operating asset base since Lonza – even in peak years like 2007 – never achieved more than 14.1% RONOA (see table above).

Reiterate Hold, TP CHF88 We believe yesterday’s +4% share price move is overdone on the back of this announcement. While Lonza seems right on track with regards to the deleveraging story, it still lacks visibility on recovery in the Pharma/Biotech business.



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21 May 2014 Corporate action Positive

Naturex

France | Food



Claire Deray [email protected] +33 1 5365 3538

Acquisition in the US and capital increase Reuters NATU.PA Bloomberg NRX FP Index DJ Stoxx 600

Market data

Market cap (EURm) 510

Free float 63%



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FY to 31/12 (EUR)

2013 2014E

2015E

Sales (m) 320.8 341.4 368.8

EBITDA adj (m) 52.2 62.0 72.8

EBIT adj (m) 34.5 42.2 51.4

Net profit adj (m)

16.9 22.5 29.8

Net fin. debt (m) 150.7 131.6 105.3

FCF (m) -24.4 19.8 27.7


2.14 2.84 3.73



FY to 31/12 (EUR)

2013 2014E

2015E


27.3 23.0 17.4

EV/EBITDA (x) 11.7 10.4 8.4

EV/EBIT (x) 17.7 15.2 12.0

FCF yield -5.3%

3.9% 5.4%


Net debt/EBITDA (x)

3.0 2.2 1.5

Gearing 55.1%

44.6% 32.6%

ROIC 5.7% 6.6% 8.0%

EV/IC (x) 1.5 1.5 1.5

Acquisition in the food ingredient segment in the US

Significant potential cross selling

Deal financed by future capital increase of EUR65m

In line with the development strategy announced

Acquisition of Vegetable Food Naturex announced the acquisition of Vegetable Food, a family owned company created in 1934, based in Chicago and specialized in vegetal natural based ingredients (technical and customized ingredients) for the food sector. The company generated USD42m in sales in 2013 with margin slightly above Naturex level, and operated in a buoyant segment.

Interesting deal in our view This operation offers a good complementarity in terms of products (juice for Vegetable and powder for Naturex) and geographical positioning (US for Vegetable, Europe for Naturex). Synergies could therefore be significant: Naturex will benefit from a Vegetable food referencing (it is hard to penetrate food segment for a French company), sourcing and manufacturing site in the US. Moreover the deal is significant for Naturex as it will add +10% in sales and have positive effect on operating margin.

Financial aspect Price paid was not communicated, estimated at around 2-2.5x sales. Naturex announced EUR65m in capital increase to finance the deal (with pre-emptive subscription rights). If we assume a 20% discount compared with the current share price (pending details on the capital increase conditions), it will add around 1.2m shares (+16%). Neutral impact (or slightly dilutive impact depending on profitability and price paid) on EPS without synergies, accretive impact expected after synergies.

Good deal, Buy reiterated Management had announced its intention to resume external growth and that in the event of a major deal it could raise cash on the market. This operation is therefore in line with its strategy. In light of the activity (similar to Naturex positioning in Europe) and size of the prey we judge integration risk as limited. Cross selling could significantly accelerate growth in the food & beverage segment for Naturex and it could accelerate margin improvement. Globally a good deal for the company. Buy reiterated (not yet into our scenario pending details on capital increase).



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Reed Elsevier

Netherlands | Media

Reduce (Reduce) Target price EUR 14.20


Andrea Beneventi [email protected] +33 1 70 81 57 52

Acquires Wunelli insurance software Reuters ELSN.AS Bloomberg REN NA Index DJ Stoxx 600

Market data


Free float 100%






FY to 31/12 (EUR) 2014E 2015E 2016E

Sales (m) 7,058 7,227 7,454

EBITDA adj (m) 2,413 2,488 2,579

EBIT adj (m) 2,111 2,178 2,260

Net profit adj (m) 1,461 1,540 1,627

Net fin. debt (m) 2,592 1,817 992

FCF (m) 1,514 1,573 1,665




FY to 31/12 (EUR) 2014E 2015E 2016E


EV/EBITDA (x) 5.9 5.4 4.9

EV/EBIT (x) 12.2 11.1 10.0

FCF yield 13.3% 13.8% 14.6%



Gearing 73.8% 45.6% 22.0%

ROIC 21.8% 23.4% 25.3%

EV/IC (x) 2.0 2.0 1.9

Embarked telematics for UK motor insurance

Small bolt-on acquisition, strategically coherent

UK market leadership worth c. 3% of Reed’s enterprise value

Stock a safe haven, but expensive

Embarked telematics for UK motor insurance Reed Elsevier announced yesterday the acquisition of the British insurance solutions software company Wunelli, which offers telematics data services for motor insurance. More specifically, it tracks drivers’ behaviour through data such as speed, behaviour, location and car and associates a score to each driver. The system works on an opt-in basis: drivers embarking the device can obtain lower insurance fares from insurers offering “usage-based” insurance contracts. While only 4% of UK drivers currently have telematics fitted to their vehicles, almost 20% would consider telematics at the time of their next renewal, according to Reed Elsevier.

Small bolt-on acquisition, strategically coherent Details were not disclosed, although an article in the FT points to c. GBP25m for Wunelli. Reed has been pursuing the UK insurance opportunity consistently over the last five years through bolt-on acquisitions and organic investments in tools that can be integrated into the Lexis Nexis data warehouse. Reed has not quantified yet the size of its UK insurance revenues.

UK market leadership worth c.3% of Reed’s enterprise value The UK P&C market is around one-tenth the size of the US one, where Reed Elsevier’s Lexis Nexis solutions are market leader. At first sight, a similar market share in the UK could result in a c. GBP100m a year incremental revenue opportunity for Reed Elsevier or an EBITA of GBP44m, based on the average profitability of the division. Based on comparables’ current multiples in data solutions (c. 16x), that would represent an incremental GBP700m or c. 3% of the company’s enterprise value.

Stock a safe haven, but expensive At a time of retrenchment for many European early-cyclical stocks, Reed Elsevier’s defensive profile and buyback policy become relatively more appealing. We continue to find the stock’s historical-high multiples not justified by organic growth of only 3% in 2014E (vs. 5%+ pre-2008).



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21 May 2014 Corporate action Negative²²²²²²²²²²²²²²

Rexel

France | Capital goods

Reduce (Reduce) Target price EUR 19.00


Pierre Boucheny [email protected] +33 1 5365 3506

New questions on the US business Reuters RXL.PA Bloomberg RXL FP Index DJ Stoxx 600

Market data


Free float 91%






FY to 31/12 (EUR) 2014E 2015E 2016E

Sales (m) 12,926.3 13,506.4 14,221.3

EBITDA adj (m) 772.7 852.1 952.8

EBIT adj (m) 694.7 772.1 869.6

Net profit adj (m) 355.5 418.5 493.8

Net fin. debt (m) 2,027.0 1,872.0 1,669.1

FCF (m) 358.3 356.7 418.5




FY to 31/12 (EUR) 2014E 2015E 2016E


EV/EBITDA (x) 8.9 7.9 6.8

EV/EBIT (x) 9.9 8.7 7.5

FCF yield 7.3% 7.3% 8.5%



Gearing 46.5% 40.9% 34.3%

ROIC 8.4% 9.4% 10.5%

EV/IC (x) 1.2 1.2 1.1

Yesterday, Rexel announced the departure of its US CEO

His resignation will be effective by year-end

This move will raise investors’ concerns about the US situation

Still lacks momentum, but limited downside risk now

Yesterday, Rexel announced the departure of its US CEO Rexel’s US CEO, Chris Hartmann, will resign after six years with the company. Prior to this, he was a manager at Thomas & Bets. According to the press release issued by Rexel, his decision was taken for personal reasons and is not tied to the group’s performance in North America.

His resignation will be effective by year-end Chris Hartmann will remain Rexel’s US CEO until his successor is recruited, and his resignation will become effective by the end of the year at the latest. In the meantime, he remains in charge of the daily business, but this announcement will probably not be a booster for the group’s commercial performance in North America in H2.

This move will raise investors’ concerns about the US situation Rexel’s performance in North America has been a concern for investors for a few months, as the group has not been able to benefit from the market recovery observed over the past few months. In the US, the group is not really exposed to the residential market, the segment that has performed the best for the last 18 months, which weighs for only 5% of its revenues in this zone, while the commercial (55% of the US sales) and the industrial (40% of the US sales) segments have not yet benefitted from a real recovery.

Still lacks momentum, but limited downside risk now The stock is starting to trade now on low multiples (EV/EBITA 2015E below 9.0x), and the discount versus manufacturing peers has been restored. Nevertheless, Rexel’s investment case is still based on its US exposure and the timing of the recovery of the commercial market in the US. In this field, there are still uncertainties, and yesterday’s announcement might reinforce bear investors’ concerns about the stock.



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21 May 2014 Earnings review Positive

Sonova

Switzerland | Medtech & services

Buy (Buy) Target price CHF 150.00


Maja Pataki [email protected] +41 43 333 6623

Gaining market share across the board Reuters SOON.S Bloomberg SOON VX Index DJ Stoxx 600

Market data


Free float 75%



116




FY to 31/03 (CHF)

2013 2014E

2015E

Sales (m) 1,951 2,075 2,229

EBITDA adj (m) 474 525 584

EBIT adj (m) 404 458 517

Net profit adj (m)

347 397 456

Net fin. debt (m) -316 -444 -631

FCF (m) 281 258 335


5.26 6.01 6.90



FY to 31/03 (CHF)

2013 2014E

2015E


25.6 22.4 19.5

EV/EBITDA (x) 18.2 16.1 14.2

EV/EBIT (x) 21.3 18.5 16.0

FCF yield 3.2% 2.9% 3.8%


Net debt/EBITDA (x)

-0.6 -0.8 -1.0

Gearing -17.8

%

-21.6%

-26.6%

ROIC 24.6%

26.3% 26.9%

EV/IC (x) 6.1 5.4 4.9

Stronger-than-expected results

Stronger guidance

Expect sentiment to improve

Buy, TP CHF150

Stronger than expected results Sonova delivered stronger-than-expected fiscal-year 2013/14E results, beating KECH and consensus estimates on organic top-line growth and local currency EBITA growth. With 10% organic hearing aid growth, Sonova is back on track with its market share gains. The reported 36% growth in cochlear implants proves that the recently completed product portfolio is able to gain share from competition. LC EBITA growth of 16.7% was helped by AB’s breakeven in H1 and margin improvement to 6.6%. Nevertheless, the hearing instruments division improved underlying margins (ex-FX) by 90bps to 24.2% (reported 23.8%).

Stronger guidance Sonova guides for local currency growth of 7-9% on at the top line with acquisitions accounting for 1%. LC EBITA growth is guided for at 11-15%. This is stronger than we expected and shows management’s confidence in both its product portfolio and the organisational setup. Guidance is also above consensus local currency growth estimates; Vara Research collected consensus pre-FY results for 6.8% organic growth, local currency sales growth of 7.9%, and 11.5% local currency EBITA growth. KECH estimates 7% organic growth and 8% LC growth on sales and 15% on EBITA.

Expect sentiment to improve While we expect consensus to include a 2-3% negative FX impact, we expect sales & EBITA LC growth to rise to the upper end of guidance, resulting in a low single-digit EPS increase. More importantly, however, we expect sentiment to shift and the stock to start trading up towards it historic one-year forward P/E ratio.

Buy, TP CHF150 We reiterate our Buy rating and our CHF150 target price. At our TP, Sonova trades at 23x P/E 2015E.



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TAG Immobilien

Germany | Property



Thomas Neuhold, CFA [email protected] +43 1 537 12 4147

Positive roadshow feedback Reuters TEGG.DE Bloomberg TEG GR Index DJ Stoxx 600

Market data


Free float 96%






FY to 31/12 (EUR) 2014E 2015E 2016E

Net rent 199.2 208.3 214.0

EBITDA 175.3 178.5 183.1

DPS 0.50 0.55 0.60

FFO (recurring) 88.5 97.3 103.8

FFO (incl. trading) 93.5 100.8 103.8

Net profit 114.5 119.6 125.0

FFOps (recurring) 0.68 0.74 0.79

FFOps (incl. trading) 0.72 0.77 0.79

NAVps 9.98 10.39 10.80

NNNAVps 8.84 9.26 9.66

FY to 31/12 (EUR) 2014E 2015E 2016E

P/FFO 13.2 12.0 11.3

P/FFO (incl. trading) 12.5 11.6 11.3

P/NAV -1 -10.3% -13.9% -17.1%

P/NNNAV -1 1.2% -3.4% -7.4%


LTV 60.2% 58.7% 57.3%

Interest coverage -2.2 -2.4 -2.5

FFO/NNAV 7.5% 7.9% 8.1%

EBITDA/Asset value 5.1% 5.1% 5.2%

Asset turnover most likely to increase

Many positive FFO drivers in place

FFO I and DPS could grow by at least 5-10% in next few years

Attractive valuation with good downside protection (high yield)

Asset turnover most likely to increase We hosted a roadshow with CEO Elgeti and new CFO Thiel in Paris yesterday. Key highlights: the strong underlying development of the German residential market has created good opportunities to sell mature assets (limited potential for further significant rent increases, low vacancies) at very attractive exit yields (down to 3.5% in excellent locations in Hamburg, Düsseldorf and Berlin). On the other hand, the company still sees good opportunities to acquire underperforming assets at attractive prices in its core markets. Therefore, TAG is ready to opportunistically increase the asset turnover in its portfolio, which could further increase its already high profitability (FFO I /NAV). In terms of leverage management regards a LTV of around 60% as reasonable (rising rents, low interest rates and high interest coverage).

FFO I poised to grow at least 5-10% annually Management sees significant potential to further increase FFO/share and thus DPS in the next years. Key drivers could be further increases in LFL rents by 2-3% a year, vacancy reductions and lower refinancing costs, as debt due in 2014-16 carries interest costs which are 150-200bps higher than current refinancing rates.

Attractive valuation and strong dividend yield TAG currently trades at the lowest P/FFO multiples in the sector and offers the best dividend yield (around 6% for 2015). While the cheap valuation and strong growth outlook creates high upside in the shares, the high dividend yield could protect the shares well on the downside. Based on a very attractive reward/risk profile, we reiterate our Buy rating and EUR11 TP.



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Thales

France | Aerospace & defence



Christophe Menard [email protected] +33 1 5365 3616

Confident tone prevails during London roadshow Reuters TCFP.PA Bloomberg HO FP Index DJ Stoxx 600

Market data


Free float 48%






FY to 31/12 (EUR) 2013 2014E 2015E

Sales (m) 14,194 12,859 13,144

EBITDA adj (m) 1,461 1,535 1,612

EBIT adj (m) 1,003 1,073 1,155

Net profit adj (m) 644 696 752

Net fin. debt (m) -1,028 -951 -1,187

FCF (m) 381 478 514




FY to 31/12 (EUR) 2013 2014E 2015E


EV/EBITDA (x) 5.1 6.1 5.7

EV/EBIT (x) 7.4 8.8 7.9

FCF yield 6.2% 6.0% 6.4%



Gearing -26.1% -21.9% -24.8%

ROIC 28.1% 26.0% 23.7%

EV/IC (x) 3.0 3.0 2.6

Consistent message on revenue and EBIT growth by 2017-18

French defence under scrutiny, as compliance with LPM vowed

M&A continues to focus on bolt-ons

We confirm our Buy rating

Consistent message on revenue and EBIT growth by 2017-18 Thales reiterated its “bullet-proof” guidance of a 9.5-10% EBIT margin by 2017-18. It also made it clear that it was targeting organic growth, as defence remains stable and civil grows mid-single digit. Divisional drivers for growth are aerospace (avionics and IFE), and security and transportation. Defence in developed markets is guided to be slightly negative, offset by some growth in emerging market defence. Margin improvements by 2017-18 will result from a focus on project delivery, purchasing costs, but also on engineering and structural costs reduction.

French defence scrutinised, as compliance with LPM vowed Thales is carefully monitoring talks on additional defence cuts in France, beyond the voted LPM. It reminded that these talks are recurrent every year, as the government traditionally discusses budget issues mid-year. The fact that Prime Minister Valls reiterated compliance with the LPM last Sunday is an indication that cuts, if any, could be limited, in our view. In addition, current company guidance of defence sales slightly down in developed countries (i.e. essentially Europe) means to us that some contingencies are in place to ward off the risk of limited additional cuts.

M&A continues to focus on bolt-ons Thales remains focused on potential deals in civil activities, with a focus on non-European markets and in businesses where it is already active. The LiveTV bolt-on acquisition is a case in point that could be replicated. Any acquisition worth more than EUR150m requires approvals of Dassault Aviation and the French government. It may consider deals in signalling, if the opportunity arises, but this has not been the case so far. It has no interest in branching out in rolling stock and is not involved in any Alstom discussion. As for disposals, there is no clear candidate in Thales’s portfolio at the moment. If some small activities were sold, the impact should not be significant

We confirm our Buy rating The 2017-18 guidance confirmed during the roadshow is consistent with our current valuation and our TP of EUR58. Thales remains the cheapest stock in its universe, with a solid and credible restructuring plan ahead.



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21 May 2014 Earnings preview Neutral

voestalpine

Austria | Metals & mining

Hold (Hold) Target price EUR 35.00


Rochus Brauneiser [email protected] +49 69 7569 6279

Q4 2013-14 results preview Reuters VOES.VI Bloomberg VOE AV Index DJ Stoxx 600

Market data


Free float 63%



248




FY to 31/03 (EUR)

2014E

2015E

2016E

Sales (m) 11,306.6

11,740.4

12,127.9

EBITDA adj (m) 1,378.7

1,504.4

1,625.7

EBIT adj (m) 799.8 919.4 1,030.7

Net profit adj (m)

483.4 557.0 636.1

Net fin. debt (m) 3,028.5

3,006.9

2,997.0

FCF (m) -123.3

228.7 233.7


2.81 3.23 3.69



FY to 31/03 (EUR)

2014E

2015E

2016E


11.8 10.2 8.9

EV/EBITDA (x) 7.0 6.4 5.9

EV/EBIT (x) 12.0 10.5 9.3

FCF yield -2.2%

4.0% 4.1%


Net debt/EBITDA (x)

2.9 2.6 2.4

Gearing 58.0%

53.8% 49.9%

ROIC 7.3% -2.3% -13.8%

EV/IC (x) 1.1 1.1 1.0

Q4 due on 4 June at 7:30am CET

FY 2013-14 EBIT of EUR0.8bn guided

Inline results expected by market

Hold, EUR35 TP

Voestalpine Q4 2013-14 results preview

EURm Q4-13/14E

Q4-12/13A

% YOY Cons. FY 2013-14E

FY 2012-13A

% YOY

Crude steel prod. 2.15 2.01 7.1% 8.1 7.6 6.9% Total sales 2,876 2,872 0.1% 2,850 11,307 11,524 -1.9% EBITDA 372 390 -4.7% 375 1,379 1,442 -4.4% Steel 52 51 2.0% 165 218 -24.2% Special Steel 63 57 10.4% 217 224 -2.9% Metal Engineering 84 94 -11.1% 329 320 3.0% Metal Forming 49 54 -7.9% 176 168 5.1% Consolidation -21 -17 23.5% -88 -76 16.8% Total EBIT 227 239 -4.9% 225 800 854 -6.3% EPS - fully diluted 0.70 0.78 -10.2% 0.70 2.41 2.61 -7.6% Dividend per share 1.20 0.90 33.6% Net financial debt 2,568 2,259 13.7% 2,568 2,259 13.7%

Source: Kepler Cheuvreux

Guidance In Q3 VOE lowered its full-year EBIT guidance from around EUR850m to c. EUR800m due to continued market weakness in large parts of the conventional energy sector (oil and natural gas transport, power plant construction). Back then VOE expected a QOQ earnings improvement in Q4 to some EUR230-240m.

Expectations We expect sales to increase 8.1% QOQ to EUR2.9bn (+0.1% YOY) due to higher sequential contributions from Steel and Special Steel and EBIT to rebound from EUR172.4m in Q3 to EUR227m. A full-year EBIT of EUR800m is in line with guidance range.

What to look for? We are watching out for the initial 2014-15 EBIT guidance, an update on steel demand and margin outlook and any change in tone regarding the plate business. We are also curious about any update regarding 2020 growth strategy (eg, a potential slowing of investment speed).

Hold, EUR35 TP We continue to view VOE as the overall top quality pick in European steel, and the most defensive name in the carbon steel space. Hold, TP EUR35.



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21 May 2014 Negative

Media

Conor O’Shea, CFA [email protected] +33 1 5365 3609

Netflix widens European scope

Sector weighting by E&S

Preferred stocks

Company Rating Target

Lagardère Buy EUR32.00

ProSiebenSat.1 Buy EUR37.00

Télévision Française 1

Buy EUR16.00

WPP Buy GBPp1450

Least-preferred stocks

Company Rating Target

Atresmedia Reduce EUR12.58

Reed Elsevier Reduce EUR14.20

Solocal Group Reduce EUR0.50

Netflix confirms launch in France, Germany before year-end

Initial threat more to Canal+ in French market

German OTT market already crowded and loss-making

Netflix has around 2m UK subs 30 months after launch

Netflix confirms launch in France, Germany before year-end Netflix confirmed yesterday that it intends to launch in Germany, France, Austria, Switzerland, Belgium and Luxembourg by year-end (broadly confirming the September launch expectation). After difficult negotiations with the French government over local production quotas, it remains unclear whether Netflix will have a base in France or offer its service from Luxembourg. Netflix has nearly 12m subscribers outside the US (and around 3x that level within the US) due to its presence in markets like the UK and the Netherlands (out of 40 international markets in total), the latter which has been “a tremendous success” since launch six months ago.

Initial threat more to canal + in French market The impact that Netflix will have in France remains unclear, but initially it should increase the pressure on Canal Plus, which is already at risk of a margin squeeze as domestic pay-TV revenues decline while the costs of its sports rights renewals in particular are rising significantly. Much will depend on who owns which rights for France. For example, the rights to the second series of Netflix’s most popular original series production, House of Cards, are owned by Canal Plus, but presumably this will revert to Netflix for the third series. Further out, a high take-up of such a lower-priced pay-TV offering would increase further penetration significantly, to the detriment of viewing on free-to-air (FTA) TV, particularly given the unusually high reliance of leading FTA operators in France on dubbed US series content. Indeed whether Netflix is ready to incur the extra cost of dubbing the series rather than subtitling them may have a large bearing on its potential appeal to mass-market French audiences.

German OTT market already crowded and loss-making In Germany, Netflix will join an already-crowded, loss-making OTT sector, where Amazon, Sky Deutschland (Snap), Vivendi (through Watchever, which may shortly be closed) and ProSiebenSat1 (through MaxDome, the market leader). Having launched at the start of 2012, Netflix is thought to have nearly 2m subscribers in the UK market, a similar-sized market to France, but that number is growing by around 500,000 a year. IMPORTANT. Please refer to keplercheuvreux.com\disclaimer or to the last

page of this report for “Important disclosures” and analyst certification(s). keplercheuvreux.com

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21 May 2014 Neutral

Nordic

Mikael Jafs [email protected] +46 8 723 51 71

New report on the Nordic countries

Clouds gathering on the horizon

Safe-haven status during the financial crises

Decision-making hampered by upcoming elections

Nordic Selected List – Cargotec added

Clouds gathering on the horizon We are publishing a Nordic country report in which we describe the Nordic market and focus on how it climbed out of the abyss in the early 1990s to achieve the relatively strong position it now enjoys versus many other European countries. Additionally, we take a look at the near future in terms of political and macroeconomic developments. We are somewhat puzzled by recent developments and see clouds gathering on the horizon. We also propose a selection of our highest-conviction stocks.

Safe-haven status during the financial crises As a result of the region having experiencing a debt crisis in the early 1990s, substantial structural reforms were carried out, which gave the region a strong financial position, evident in its sold public finances and the robust earnings of several listed Nordic companies. Consequently, the region was seen as a safe harbour during recent financial crises.

Decision-making hampered by upcoming elections Several countries are facing general elections, and we expect that since the crises of the early 1990s have largely been forgotten, the outcome will result in “caretaker” governments rather than drivers of additional structural reforms.

Nordic Selected List – Cargotec added Our Nordic Selected List now has five names, all Buy rated. We have added Cargotec, (Buy, TP EUR39, 28% upside) and raised our target price for UPM from EUR14 to EUR15, implying 18% upside. We also keep the following stocks on our list, being very positive on all of them: Danske Bank (TP DKK200, 34% upside), Ericsson (TP SEK100, 22% upside), and Subsea 7 (TP NOK150, 29% upside).

IMPORTANT. Please refer to keplercheuvreux.com\disclaimer or to the last


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21 May 2014 Neutral

Europe

Nabil Ahmed [email protected] +33 1 70 81 57 50

Cargotec enters our SMID Selected List

We add Cargotec to our European SMID Selected List

One of the last restructuring stories in Nordic countries

Our Selected List has outperformed the MSCI SMID by 160bps

Our 18 convictions provide 29% average upside

We add Cargotec to our European SMID Selected List We add Cargotec to our European SMID Selected List. We expect the new CEO to deliver on cost-cutting ambitions by 2015 and now see an EPS CAGR of +43%, while the stock trades at an unjustified discount. Our TP of EUR39 implies potential upside of over 30%. We do not make any other changes to our SMID Selected List.

29% average upside potential on our 18 SMID convictions Since inception, our ideas have outperformed the MSCI Europe SMID by 170bps. Our 18 convictions provide 29% median upside.

Table 1: SMID Selected List since inception (10 December 2013)

Open ideas Entry date

Exit date

Entry price

Price

Total return

Relative return

TP % upside

Basilea 18-Mar - 108.1 102.2 -5.5% -5.4% 160 57% BinckBank 8-May - 8.16 8.495 4.1% 5.0% 10.3 21% Cargotec 21-May - - - - - 39 31% Clariant 10-Dec - 15.73 17.8 15.4% 7.5% 24.5 38% Dialog Semi. 10-Dec - 14.361 21.119 47.1% 37.0% 24 14% Finmeccanica 10-Dec - 5.195 5.83 12.2% 4.5% 7.5 29% Gameloft 10-Dec - 7.63 7.04 -7.7% -14.1% 9.5 35% Groupe Eurotunnel 10-Dec - 7.13 9.759 36.9% 27.5% 11 13% GTECH 5-Feb - 22.27 19.39 -12.9% -16.4% 26.5 37% Immofinanz 10-Dec - 3.38 2.521 -5.5% -12.0% 3.3 31% Oerlikon 10-Dec - 12.85 13.3 5.6% -1.6% 18 35% Salzgitter 10-Dec - 29.6 31.325 5.8% -1.4% 35 12% Subsea 7 10-Dec - 117 116 -0.9% -7.7% 150 29% Técnicas Reunidas 10-Dec - 37.97 43.685 16.8% 8.8% 52 19% Teleperformance 10-Dec - 41.67 44.285 8.2% 0.8% 50 13% TF1 10-Dec - 13.35 12.5 -2.2% -9.0% 16 28% TUI 10-Dec - 11.2 11.92 7.8% 0.4% 15.1 27% USG People 10-Dec - 9.23 10.4 12.7% 4.9% 16 54%

Closed ideas Entry date

Exit date

Entry price

Exit price

Total return

Relative return

TP % upside

Astaldi 10-Dec 5-Feb 7.35 6.89 -6.3% -9.0% Boskalis 10-Dec 12-May 36.78 42.34 15.1% 5.5% Chr. Hansen 10-Dec 11-Apr 201 231.3 16.6% 7.9%

Average idea perf. 1.7% 29%

Source: Kepler Cheuvreux



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21 May 2014 Neutral

Banks

Anna Maria Benassi [email protected] +39 02 8550 7215

Italian market data for April

Customer loans down 3.1% YOY, gross NPLs up 27% YOY

Customer funding down 1% YOY

Interest spread at 2.12%

Some encouraging trends, except for credit quality

Customer loans down 3.1% YOY, gross NPLs up 27% YOY Yesterday, the Italian banking association (ABI) released Italian banking market data for April. Loans to private customers declined by 3.1% YOY (vs. -3.7% YOY in February) and -0.15% YTD to EUR1.58trn, of which loans to households and non-financial companies fell by 2.2% YOY (+0.7% YTD) above EUR1.42bn. Gross NPLs increased by 27% YOY in March (+5.6% QOQ after +24.7% YOY in 2013) to EUR164.6bn, accounting for 8.6% of total loans (6.6% in March 2013), of which 14.6% are from small businesses (12.3%), 14% from corporates (10.3%) and 6.4% from households (5.8%). Net NPLs reached EUR78.2bn, or 4.12% of loans (3.37% in March 2013) after an increased coverage at 54%.

Customer funding down 1% YOY Total funding from residents declined by 1.06% YOY in April (-0.13% YTD after -1.86% YOY in 2013) above EUR1.72bn, of which deposits increased by 1.05% YOY (+0.75% YTD) to EUR1.22bn, while bonds declined by 5.85% YOY (-2.2% YTD) to EUR502bn.

Interest spread at 2.12% The interest spread reached 2.12% in April versus 2.08% in March, 1.94% in December 2013 and 1.76% in April 2013 (3M Euribor rate was up 2bps MOM, 5bps YTD and 12bps YOY to 0.33%). The average interest rate applied to loans to private customers was 3.90% (3.88% in March, 3.78% in April 2013), of which 5.49% was on current accounts (5.45%, 5.54%) and 3.39% on new retail mortgages (3.45%, 3.72%). Interest rates on total funding from residents was at 1.78% (1.80%, 2.02%), of which 0.38% was on current accounts (0.39%, 0.49%) and 3.33% on bonds (3.37%, 3.43%).

Some encouraging trends, except for credit quality This data shows some encouraging trends for Italian banks: customer loans and funding broadly stabilising (-0.15% and -0.13% YTD respectively); and interest spread improving 18bps YTD and 36bps YOY; only credit quality continued to worsen (gross NPLs +5.6% YTD). We expect a 0.3% YOY loan growth in 2014, and +10.5% YOY gross NPLs. The decline in funding was related to banks pushing asset management products to gain more fees, now that liquidity tensions are softening.



Sector research


Research ratings and important disclosures

Key:

Kepler Capital Markets SA (KCM) holds or owns or controls 100% of the issued shares of Crédit Agricole Cheuvreux SA(CA Cheuvreux), collectively hereafter KEPLER CHEUVREUX .

1. KEPLER CHEUVREUX holds or owns or controls 5% or more of the issued share capital of this company; 2. The company holds or owns or controls 5% or more of the issued share capital of Kepler Capital Markets SA; 3. KEPLER CHEUVREUX is or may be regularly carrying out proprietary trading in equity securities of this company; 4. KEPLER CHEUVREUX has been lead manager or co-lead manager in a public offering of the issuer’s financial instruments during the last twelve months; 5. KEPLER CHEUVREUX is a market maker in the issuer’s financial instruments; 6. KEPLER CHEUVREUX is a liquidity provider in relation to price stabilisation activities for the issuer to provide liquidity in such instruments; 7. KEPLER CHEUVREUX acts as a corporate broker or a sponsor or a sponsor specialist (in accordance with the local regulations) to this company; 8. KEPLER CHEUVREUX and the issuer have agreed that KEPLER CHEUVREUX will produce and disseminate investment research on the said issuer as a service to the issuer; 9. KEPLER CHEUVREUX has received compensation from this company for the provision of investment banking or financial advisory services within the previous twelve months; 10. KEPLER CHEUVREUX may expect to receive or intend to seek compensation for investment banking services from this company in the next three months; 11. The author of, or an individual who assisted in the preparation of, this report (or a member of his/her household), or a person who although not involved in the preparation of the report had or could reasonably be expected to have access to the substance of the report prior to its dissemination has a direct ownership position in securities issued by this company; 12. An employee of KEPLER CHEUVREUX serves on the board of directors of this c ompany; 13. As at the end of the month immediately preceding the date of publication of the research report Kepler Capital Markets, Inc. beneficially owned 1% or more of a class of common equity securities of the subject company; 14. KEPLER CHEUVREUX and UniCredit Bank AG have entered into a Co-operation Agreement to form a strategic alliance in connection with certain services including services connected to investment banking transactions. UniCredit Bank AG provides investment banking services to this issuer in return for which UniCredit Bank AG received consideration or a promise of consideration. Separately, through the Co-operation Agreement with UniCredit Bank AG for services provided by KEPLER CHEUVREUX in connection with such activities, KEPLER CHEUVREUX also received consideration or a promise of a consideration in accordance with the general terms of the Co-operation Agreement; 15. KEPLER CHEUVREUX and Crédit Agricole Corporate & Investment Bank (“CACIB”) have entered into a Co-operation Agreement to form a strategic alliance in connection with certain services including services connected to investment banking transactions. CACIB provides investment banking services to this issuer in return for which CACIB received consideration or a promise of consideration. Separately, through the Co-operation Agreement with CACIB for services provided by KEPLER CHEUVREUX in connection with such activities, KEPLER CHEUVREUX also received consideration or a promise of a consideration in accordance with the general terms of the Co-operation Agreement; 16. UniCredit Bank AG holds or owns or controls 5% or more of the issued share capital of KEPLER CAPITAL MARKETS SA. UniCredit Bank AG provides investment banking services to this issuer in return for which UniCredit Bank AG received consideration or a promise of consideration; 17. CACIB holds or owns or controls 15% of more of the issued share capital of KEPLER CAPITAL MARKETS SA. CACIB provides investment banking services to this issuer in return for which CACIB received consideration or a promise of consideration; 18. An employee of UniCredit Bank AG serves on the board of directors of KEPLER CAPITAL MARKETS SA; 19. Two employees of CACIB serve on the board of directors of KEPLER CAPITAL MARKETS SA. CACIB provides investment banking services to this issuer in return for which CACIB received consideration or a promise of consideration; 20. The services provided by KEPLER CHEUVREUX are provided by Kepler Equities S.A.S., a wholly-owned subsidiary of KEPLER CAPITAL MARKETS SA.

Rating ratio Kepler Cheuvreux Q1 2014 Rating breakdown A B Buy 43.0% 0.0% Hold 32.0% 0.0% Reduce 21.0% 0.0% Not Rated/Under Review/Accept Offer 4.0% 0.0% Total 100.0% 0.0% Source: Kepler Cheuvreux A: % of all research recommendations B: % of issuers to which Investment Banking Services are supplied

From 9 May 2006, KEPLER CHEUVREUX’s rating system consists of three ratings: Buy, Hold and Reduce. For a Buy rating, the minimum expected upside is 10% in absolute terms over 12 months. For a Hold rating the expected upside is below 10% in absolute terms. A Reduce rating is applied when there is expected downside on the stock. Target prices are set on all stocks under coverage, based on a 12-month view. Equity ratings and valuations are issued in absolute terms, not relative to any given benchmark.

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Each Equity Research Analyst certifies that he is acting independently and impartially from KEPLER CHEUVREUX shareholders, directors and is not affected by any current or potential conflict of interest that may arise from any KEPLER CHEUVREUX activities.

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Please refer to www.keplercheuvreux.com for further information relating to research and conflict of interest management.

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Kepler Capital Markets, London branch Financial Conduct Authority FCA

Kepler Capital Markets, Vienna branch Austrian Financial Services Authority FMA

Crédit Agricole Cheuvreux, SA - France Autorité des Marchés Financiers AMF

Crédit Agricole Cheuvreux España S.V Comisión Nacional del Mercado de Valores CNMV

Crédit Agricole Cheuvreux Niederlassung Deutschland Bundesanstalt für Finanzdienstleistungsaufsicht BaFin

Crédit Agricole Cheuvreux S.A., branch di Milano Commissione Nazionale per le Società e la Borsa CONSOB

Crédit Agricole Cheuvreux Amsterdam Autoriteit Financiële Markten AFM

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Crédit Agricole Cheuvreux Nordic AB Finansinspektionen FI

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For further information relating to research recommendations and conflict of interest management please refer to www.keplercheuvreux.com..

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The information contained in this publication was obtained from various publicly available sources believed to be reliable, but has not been independently verified by KEPLER CHEUVREUX. KEPLER CHEUVREUX does not warrant the completeness or accuracy of such information and does not accept any liability with respect to the accuracy or completeness of such information, except to the extent required by applicable law.

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Germany: This report must not be distributed to persons who are retail clients in the meaning of Sec. 31a para. 3 of the German Securities Trading Act (Wertpapierhandelsgesetz – “WpHG”). This report may be amended, supplemented or updated in such manner and as frequently as the author deems.

Italy: This document is issued by Kepler Capital Markets, Milan branch and Crédit Agricole Cheuvreux S.A., branch di Milano, authorised in France by the Autorité des Marchés Financiers (AMF) and the Autorité de Contrôle Prudentiel (ACP) and registered in Italy by the Commissione Nazionale per le Società e la Borsa (CONSOB) and is distributed by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.), authorised in France by the AMF and the ACP and registered in Italy by CONSOB. This document is for Eligible Counterparties or Professional Clients only as defined by the CONSOB Regulation 16190/2007 (art. 26 and art. 58).Other classes of persons should not rely on this document. Reports on issuers of financial instruments listed by Article 180, paragraph 1, letter a) of the Italian Consolidated Act on Financial Services (Legislative Decree No. 58 of 24/2/1998, as amended from time to time) must comply with the requirements envisaged by articles 69 to 69-novies of CONSOB Regulation 11971/1999. According to these provisions Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)warns on the significant interests of Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)indicated in Annex 1 hereof, confirms that there are not significant financial interests of Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)in relation to the securities object of this report as well as other circumstance or relationship with the issuer of the securities object of this report (including but not limited to conflict of interest, significant shareholdings held in or by the issuer and other significant interests held by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)or other entities controlling or subject to control by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.)in relation to the issuer which may affect the impartiality of this document]. Equities discussed herein are covered on a continuous basis with regular reports at results release. Reports are released on the date shown on cover and distributed via print and email. Kepler Capital Markets, Milan branch and Crédit Agricole Cheuvreux S.A., branch di Milano analysts are not affiliated with any professional groups or organisations. All estimates are by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.) unless otherwise stated.

Spain: This document is only intended for persons who are Eligible Counterparties or Professional Clients within the meaning of Article 78bis and Article 78ter of the Spanish Securities Market Act. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. This report has been issued by Kepler Capital Markets, Sucursal en España and Crédit Agricole Cheuvreux España S.V, registered in Spain by the Comisión Nacional del Mercado de Valores (CNMV) in the foreign investments firms registry and it has been distributed in Spain by it or by Kepler Capital Markets S.A and Crédit Agricole Cheuvreux, Société Anonyme (S.A.) authorised and regulated by both Autorité de Contrôle Prudentiel and Autorité des Marchés Financiers. There is no obligation to either register or file any report or any supplemental documentation or information with the CNMV. In accordance with the Spanish Securities Market Law (Ley del Mercado de Valores), there is no need for the CNMV to verify, authorise or carry out a compliance review of this document or related documentation, and no information needs to be provided.

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Europe Today - Overblogdata.over-blog-kiwi.com/0/99/67/47/20140521/ob_196...May 21, 2014 · actions in mid-2012, Anima started to regain momentum, posting a solid +EUR3.4bn inflow

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