The Dawn Patrol – 12.12.12 – GS likes GDF, JPM on agencies, Nomura on Luxury. Inditex(+), Publicis(-), Ups & Downs.


European futures indicated flat to slightly up this morning. Asia up for the tenth day in a row despite the North Korean launch of a long range missile. ASX reaches a 17 months high on commodity prices with iron leading the rebound. US soft after Europe closed as Harry Reid (dem) suggested that a deal on the cliff before christmas will be difficult.

EURUSD at 1.3005, Gold worth $1712.83, Silver 33.10 (up 33% in 3 months). The Italian and Spanish 10y bonds lower at 4.72% and 5.46% respectively.
Today, we’ll watch the German and French CPIs, the EZ IP and in the US, the FOMC rate decision, the MBA mortgage applications. Italy is to sell some bills.

Christmas tip… Get a premium account on Amazon and buy everything online. They’re the best (at least in France).
And the best tech accessories of 2012 are (according to BI and positive for PARROT):


INDITEX small beat, current trading better. Q3 sales growth +17.5%, implying Q3 lfl 8-8.5% vs. cons 7-8%. Q3 GM in line +50bps, EBIT €948m vs. cons €941m, NI €712m vs. €709m (interest charge a touch higher, tax rate a touch lower). Q3 EPS €1.15 vs. cons €1.13. Current trading better +15% in cc for 7 weeks 1 Aug–9 Dec implies a lfl of 7.5% (cons more like mid-single digit on Q4), inventories fine -80bps as % sales.

PUBLICIS: Arthur Sadoun in Les Echos saying it’s tough.

BARRY CALLEBAUT Buys Petra Foods Cocoa Unit for $950m

GREECE Meets Debt Buyback Goal as Nation Seeks to Unlock Aid

DEUTSCHE BANK Said to Cut Power, Gas Trading Jobs in U.S.

PEUGEOT to Cut Additional 1,500 Jobs as Europe Sales Drop and to cut 11,200 jobs May 2012-mid 2014. Le Figaro

EU May Set April 2014 Deadline for ECB Bank Oversight Role

SNB’S Franc Respite Fades as 2013 Inflow Threat Seen

ACCOR Says French Court Ruling to Force EU149.7m Tax Payment

JPMORGAN Pressed by SEC on Prop Trading Before London Whale Loss

DOLLAR Remains Lower vs EURO as Fed Concludes Policy Meeting

SWISS Feel Jobless Chill as LONZA Cuts Ripple Through Alpine Town of Visp

NOVARTIS PT Raised 5% to Chf60 at Barclays, Stays Equalweight

ATLASCOPCO Chairman Plans to Step Down, Dagens Industri Reports

CREDIT SUISSE Closes FX Trading Desk in Tokyo: WSJ

LIBERTY Acquires Diller’s TRIPADVISOR Stake, Gaining Control.

Saudis cut oil output to lowest in a year.

WSJ says secret talks occur regularly between the worlds central bank leaders


GDF SUEZ (GS, Andrew Mead)
Buy: 10% dividend yield with added clarity; add to Conviction Buy List

We add GDF SUEZ to the Conviction Buy List given added clarity on the company’s outlook after its investor day and given a 10% dividend yield. We believe that under most scenarios the dividend is covered by ongoing cash flow.

Norilsk Nickel (JPM – Yuriy A Vlasov)
Upgrading to N, PT of $17.0/sh on potential increase in cash returns. Switching to MNOD LI on liquidity basis.

European Advertising Agencies & Market Research (JPM – Filippo Pietro Lo Franco)
The future looks better than the past, in particular for Publicis/WPP

Ad Agencies & Market Research companies (“AdHoldings”) have trailed World GDP but have outperformed global adspend (’05-’11 3.0% vs 2.0%) on organic revenue growth. EU AdHoldings sector FCF yield has been higher than MSCI EU excl. M&A (7-10% vs 5-7%). We identify Publicis as the EU agency with the best metrics, recently reflected by its record share price level (12-year high on Dec. 7). We retain our positive stance on PUB & WPP (2 of our 4 top picks in the media sector with REED and VIV). This is based on: i) more revenues from outside mature markets and from digital should sustain mid-term growth (c+3% organic CAGR ‘11-14E) in spite of the uncertain macro outlook; ii) EPS growth (11.8%/8.3% CAGR 11-14E respectively) should be also underpinned by operating margin growth (potential 11-14E growth of 100-200bps); iii) valuations look undemanding (PE and EV/EBITDA ’13E of 13.1x/7.8x for PUB and 11.2x/7.5x for WPP).

European Luxury’s Mid-Term Outlook Is More Positive, Nomura Says
Investors have become more positive on the medium-term outlook for European luxury as some economic data show signs of improvement, Nomura says in client note.
• Nomura says it shares that view
• 4Q trends in European luxury may be similar to 3Q, sales may moderate due to wholesale pressures, S-T weakness in Asia-Pacific, tough Y/y comparatives
• Est. 8% organic growth in FY13 for luxury stocks under coverage
• LVMH, PPR (both buy) key focus stocks in 2013
NOTE: German ZEW rose more than expected yday, IFO unexpectedly rose last month, its first gain in 8 months

AB INBEV Rated New Reduce at Mirabaud, PT Eu59

ALLIANZ PT Raised 12% to Eu125 at Exane; Kept at Outperform

Buy MEDIASET, May Outperform Peers in 2013, Berenberg Says

Buy PRYSMIAN, Valuation is Compelling, Berenberg Says

COOKSON GROUP Cut To Neutral VS Buy at Citi

E.ON Cut to Underperform VS Neutral at Credit Suisse

HELLENIC PETROLEUM Raised To Neutral VS Sell at Goldman

IPSEN Cut to Hold from Buy at Jefferies

KBC Raised to Outperform From Neutral at Exane

MEGAFON Rated New Overweight At JPMorgan; PT $29

NORILSK NICKEL Raised To Neutral From Underweight at JPMorgan

NOVARTIS PT Raised 5% to Chf60 at Barclays, Stays Equalweight

PRADA Rated New Overweight at JPMorgan; PT HK$80

ROCHE Added To Credit Suisse European Focus List

RWE Cut to Underperform VS Neutral at Credit Suisse

THYSSENKRUPP PT Raised to Eu18.8 VS Eu16 at SocGen, Stays Hold

THYSSENKRUPP PT Raised to Eu18.8 VS Eu16 at SocGen, Stays Hold

THYSSENKRUPP Raised to Buy from Hold at Jefferies

TULLOW OIL Cut To Neutral VS Outperform at Credit Suisse

URALKALI Raised To Buy at Goldman


On the Fiscal Cliff
Corporate tax on the fiscal cliff table: “White House has told Republicans it would include an overhaul of the corporate-tax code as part of any deal to reduce the deficit, people familiar with the talks said, a move to court business groups as budget negotiations intensify.” (Wall Street Journal)

On Greece
Greek bond sale succeeds, payment coming: “According to people briefed on the transaction, Greece on Tuesday night had received offers from private investors to sell €32bn in bonds back to Athens for an average of 33.5 cents on the euro, in essence agreeing to a 66.5 per cent voluntary loss on their holdings.” (Financial Times)

On the Banking Union
EU banking union. Sueddeutsche reports France and Germany reach compromise ahead of this weeks Leaders Summit. The breakthrough arrived just before finance ministers of the 27 EU countries gather in Brussels on Wednesday for a special meeting, the newspaper said.


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