The Dawn Patrol – 23.11.12 – On RIMM, ALU, ILD, SAP, Greece and more…

Bonjour

Futures indicated slightly up. Asia was up this morning and the FinMin of Taiwan says it’s a good entry point in the stock market and govt funds will support the market! Gold ar 1,731.18, EURUSD at 1.2892.
Today, we’ll watch the German Q3 GDP (which is already out actually and in line at 0.2%) and the German IFO at 9:00.

Could RIMM be the next Apple? I mean… remember 1983!

Also, please have a look at our wonderful French Banks… Barclays and Citi are more and more positive on them. A very old and wise ex colleague of mine highlighted some real interesting numbers on SG… Call for more..

On Iliad, see below, Saroop’s note after the TMT conference. I used to love them too… I’m more cautious.

The Week End is upon us, so for those who can’t go surfing this weeke end (I assume we’re all surfers), here is a nice video: Shane Dorian’s Epic Paddle Session at Jaws – Reef Hawaiian Pro 2012 http://bit.ly/WmR2bz. Otherwise, continue to work on those legs of yours as skiing is approaching and you don’t want your kids to laugh at you!

RIMM up 17.60% yesterday, the momentum is building. There are risks of course… Call for more.
ARM Trying to Muscle into PCs – Digits – WSJ http://on.wsj.com/U1k9RP
ALCATEL-LUCENT is in talks with Goldman Sachs about obtaining a loan to strengthen the unprofitable network equipment vendor’s balance sheet. (BE CAREFUL ON THIS ONE!)

VW to invest EUR 14bn in China over next four years

German gvt will buy EADS shares from France – Handelsblatt

ANGLO AMERICAN shareholders want asset sales, cost cuts – FT

DB, BARCLAYS. BBG article writes the big players in FX say foreign-exchange revenue is sliding as central-bank policies stifle volatility and cut volumes by $300 billion a day. Daily turnover as measured by CLS Bank, operator of the largest currency-transaction settlement system, slid 6% to $4.72 trillion in the third quarter from the year-earlier period.

AMADEUS : FT claims HSBC was left holding a more than €410m block of AMADEUS shares after it failed to attract investors for stock in the Spanish IT group sold on behalf of DEUTSCHE LUFTHANSA and AIR FRANCE-KLM. In a filing to the Spanish ?market regulator this week, HSBC disclosed it had a 5.4 per cent stake in AMADEUS at the market close on November 14

RYANAIR’S bid for AER LINGUS draws wider EC concerns

TELEFONICA : ORANGE bets Spanish bargains will beat cash-saving TELEFONICA as they ramp up competition pressure in Tefs home market (ORANGE continue to offer subsidised handsets).

TULLOW OIL. Daily Mail suggests the company could be the target of a bid from Thailand’s PTT for 2000p . Unsubstantiated

BG : The same article once again claimed Petrobas could bid for the company.

UPS & DOWNS

Ahold Raised To Buy VS Neutral at Nomura
Banco Popolare PT Cut to Eu1.15 VS Eu1.3 at SocGen
BNP Paribas PT Raised to Eu50 VS Eu36 at Barclays
Buy SocGen, Citi Says After Management Roadshow
Credit Agricole PT Raised to Eu5.5 From Eu3 at Barclays
Danone Cut To Sell From Hold at Berenberg
Faurecia Cut To Neutral VS Buy at Goldman
Heineken PT Raised to Eu58.50 From Eu49.20 at ING
Iliad Raised To Overweight VS Equalweight at Morgan Stanley
ING PT Raised to Eu7 From Eu6 at Barclays
KBC PT Raised to Eu27 From Eu22 at Barclays
KPN PT Cut to Eu5.5 From Eu8 at Morgan Stanley
Metro Cut To Neutral VS Buy at Nomura
SABMiller PT Raised to 3,100p VS 2,950p at Credit Suisse
SABMiller Raised to Neutral VS Reduce at Nomura
SocGen PT Raised to Eu28 From Eu18 at Barclays
Talktalk PT Raised to 265p From 180p at Berenberg
Talktalk Raised To Buy From Hold at Berenberg
Telecom Italia Raised To Neutral From Underweight at HSBC
Valeo Raised To Buy VS Neutral at Goldman

Iliad (MS, Purewal) Assurance post Barcelona

EW to OW, PT €152 to €165

Post our TMT conference, we feel more confident that a) regulatory / political headwinds can do little harm in 2013, b) peers’ 4G roll outs shouldn’t impede Iliad’s growth prospects in the next 12-18 months and c) synergistic benefits for fixed will continue. We raise our PT to €165 and move to OW.

SAP (JPM –Pollard €59.11, PT €65.00)
Price Target raised to €65 from €53, reflecting a c.25% P/E premium for superior growth prospects
Following Q3’12 results and SAP SAPPHIRE Madrid last week, we have updated our estimates to reflect SAP’s slightly higher revenue outlook, but slightly lower margin outlook for 2012e, owing to faster than expected growth in the Cloud coupled with increased investment in sales and services to accelerate growth in innovations. These changes have led to a 2.9% reduction in our 2012e Adjusted EPS estimate. We are also updating our price target to €65 from €53 previously, reflecting a ~25% premium to SAP’s global software sector peers on a 2013e P/E basis. We believe that this premium is appropriate given SAP’s superior medium-term earnings growth prospects, driven by its leadership in the core and in fast growing innovations like HANA, mobile and cloud, as well as in above-market growth segments like banking.

CURRENT STUFF

On Europe
Discussions are not only about Greece and the crisis, Europe is a long term project… Progress made on EU budget deadlock: “Herman Van Rompuy, the EU president on Thursday night sought to break deadlocked negotiations over the bloc’s long-term budget by restoring €19bn in funding for agriculture and poor regions in a calculated appeal to France and Italy. Mr Van Rompuy’s shift left unchanged the overall size of his proposed budget – the biggest sensitivity for the UK and other spending hawks he is also seeking to appease in a high-stakes balancing act involving the bloc’s 27 member states.” (Financial Times)

On Greece
Greece and Troika edge towards compromise on debt. Greek fin Min Stournaras suggests that only Eur 10 bln stands in the way of a deal, and the IMF has accepted that Greece’s debt will not meet its 120%of GDP, allowing a change to 124%. http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_22/11/2012_471260

The Phoenix and the living dead.

 

Are we faceing the return of the living dead? RIMM continues to soar as people get excited about the BB10 phones. We highlighted this name here last week and we have a short term target of $12.60 for the US one, but it’s rising very rapidly. This company has cash, clients, a new management, a great new OS and possibly some great phones too… This is the Phoenix in the bunch.
ALCATEL rose yesterday on the news that GS may be kind enough to finance the company. WATCH OUT. The Cash burn is still huge and the company’s prospects aren’t good.
I’ll come back on these two names and the other ones too (NOK, ERICB, AMD…).

STRATEGY

GS (O’Neill) The Outlook for 2013 and 2014
Our updated 2013 global growth forecast is 3.6% which is just slightly above consensus, at 3.5%. We would be further above consensus were it not for our view on China’s growth where we remain relatively cautious on the cyclical rebound. We are more optimistic than consensus in the developed world, primarily in the US, as well as BRICs excluding China, particularly India and Russia. In other Growth Markets, we are more upbeat on growth prospects in Mexico and Turkey.
The continued risk themes around the Euro area and the US that have dominated our thinking and discussions this year are likely to remain on our radars. The probability of an extreme outcome in the Euro area has been reduced, mainly by the ECB policy action, as well as some progress on structural reforms in the periphery. As long as the ECB commitment remains credible, the main source of risks in Europe for next year will revolve around reform implementation. We believe that Italy could become an upside growth surprise for the year, especially given the low starting base and the negative sentiment surrounding it.
In the US, fears about a policy gridlock related to the fiscal cliff and associated growth implications are now at the forefront of most immediate US-related concerns. If a credible fiscal deal is reached in the next couple of months, which is our base case, 2013 could start on an encouraging note. We still believe that the US can grow at 2.3% in 2013, which is above consensus. However, a prolonged period of negotiations and/or a less “growth-friendly” fiscal deal would be the main sources of downside growth surprises and market volatility.
Among other risks for next year, we also highlight policy and growth surprises in Japan. The country’s difficult macroeconomic situation consisting of sluggish growth, deflation, a weakening current account driven by declining export competitiveness and a seemingly unsustainable fiscal situation, suggests to us that decisive policy action is needed. A meaningfully weaker Yen and a credible fiscal sustainability package should prevent the economy from going into another deep recession and the debt markets from unravelling. Without these policies, we see considerable downside risks to our growth forecast. In terms of asset market implications, the moderate global cyclical rebound that we are forecasting should be mildly supportive for risk assets in 2013, particularly in those areas where valuations remain suppressed. Risk assets should be further helped by the continuing monetary accommodation by major central banks. We believe the Chinese equity market could finally rally, and equities in Russia, Brazil and Italy, could also perform well, particularly if growth surprises on the upside. In fixed income, developed market yields should generally remain low, particularly at the front end. In currencies, we think the USD will remain rangebound against most currencies, except the USD/JPY, where we expect a meaningful rally.

Max Kamir

Louis Capital Markets UK,LLP

Authorised and regulated by the FSA and Banque de France

39-41 rue Cambon

75001 Paris

T +33 (0)1 53 45 10 74

E mkamir
I http://www.louiscapital.com

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