Deutsche Bank Markets Research
Europe Periodical Date 25 October 2012 The Week Ahead
Paul Reynolds (44) 20 754-76539 29th October - 2nd November, 2012 [email protected]
Mairead Smith (44) 20 754-71054 [email protected] Adjustment in Euroland: Progress Report Considerable progress in reducing external and internal imbalances has been made in the crisis-stricken countries of the euro area. Regarding external Table Of Contents adjustment, all countries have been able to reduce their current account Global Highlights of the Week Page 03 deficits substantially. With the exception of Italy and Greece, this has been (22nd - 26th October 2012) achieved by both a reduction of imports and increase in exports. In Italy, Company Diary (29th Oct-2nd Page 04 imports and unit labour costs have continued to increase, suggesting that at Nov 2012) least until recently external adjustment has relied less on a contraction of Company Diary (5th - 9th Page 06 November 2012) domestic demand than in the other countries. In Greece exports have fallen Previews and the decline in unit labour costs has not fully reflected the deterioration in European Valuation by Sector Page 60 the labour market, pointing to continuous problems on the supply side of the and Country economy. Key Economic Forecasts Page 61 Financial Forecasts Page 63 Regarding internal imbalances, countries have also made considerable progress in reducing fiscal deficits. However, with the exception of Italy, countries seem still to be a few years away from the point where public debt ratios are likely to peak before turning down.
While, on balance, adjustment has progressed fairly well, economic growth has disappointed. With the exception of Ireland, the GIIPS countries seem to remain mired in recession. There is some hope, however, that the process of de-leveraging will slow soon in Italy. This could allow a positive credit impulse to support domestic demand. Unfortunately, owing to the delay in the restructuring and recapitalisation of troubled savings banks, Spain may continue to suffer from a negative credit impulse and hence prolonged recession for some more time. Still mostly in recession
Source: Haver Analytics, DB Global Market Research
______Deutsche Bank AG/London All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. 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. MICA(P) 072/04/2012.
25 October 2012
The Week Ahead
Previews Alcatel-Lucent Assa Abloy Bayer AG BBVA BG Group BP BT Group PLC Christian Hansen Clariant Continental Danske Bank ENI Erste Group Bank Fiat Galp Energia GEA GlaxoSmithKline Hugo Boss Imperial Tobacco Linde NEXT Nokian Tyres Novo Nordisk Prosegur Royal Dutch Shell plc Sanoma Swedish Match TDC TomTom Total SA UCB YIT Corporation
Page 2 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Global Highlights of the Week (22nd – 26th October 2012)
Asset Allocation - Binky Chadha Investor Positioning and Flows: Overweight Positions Pared https://ger.db.com/csa/pubdoc/bmzbclve09bqh4b
US Equity Insights – David Bianco Banks bail-out 3Q EPS https://ger.db.com/csa/pubdoc/du0rq80w2fnaem7
US Equity Insights – David Bianco Poor 3Q EPS, but not a disaster: Now is a fair S&P 500 entry point https://ger.db.com/csa/pubdoc/b4f8hj520b03dc3
US Equity Insights – David Bianco US tax affects S&P 500 global growth https://ger.db.com/csa/pubdoc/grwxp8ftctprhvy
Focus Europe - Mark Wall Agreeing to disagree https://ger.db.com/csa/pubdoc/ei27n7mnfgg3ay9
Early Weekend Reid - Jim Reid DB Macro Research Highlights https://ger.db.com/csa/pubdoc/43i1544arzymllq
Rates & Credit Research – Francis Yared Rates & Credit Weekly https://ger.db.com/csa/pubdoc/5a8ycyok68acbbw
Weekly Fund Flows – Lars Slomka US equity funds losing ground during the reporting season https://ger.db.com/csa/pubdoc/1t9tgypbz7ppiew
Made in Germany – Lars Slomka Style-based investing: Tactically o/w "Value" but prefer "Growth" mid-term https://ger.db.com/csa/pubdoc/rbqro827v6kqcu Consensus Earnings Trends – Lars Slomka Q3 reporting to guide earnings downgrade momentum https://ger.db.com/csa/pubdoc/7y6h5rt3uw4v6fm
CROCI Views - October 2012 – Doug Walters Pension Liability Digest - Vol. 1, Issue 3 https://ger.db.com/csa/pubdoc/33ywf6x1zza1les
Global Strategy Flash - Dominic Konstam Weekly Cross Asset Views https://ger.db.com/csa/pubdoc/8v8xwl0m0hnwdve
Deutsche Bank AG/London Page 3
25 October 2012
The Week Ahead
Company Diary (29th October – 2nd November 2012)
Figure 1: 29th October – 2nd November 2012 (Prices as of 24 October 2012) (Cont’d on next Page…) Country Company Results Time Currency Closing Price Rating Ticker Monday 29 October Belgium UCB * Q3 Trading Update 0700CET EUR 44.16 Hold UCB.BR Germany Deutsche Boerse Q3 - EUR 41.24 Buy DB1Gn.DE Germany GEA * Q3 0730CET EUR 24.29 Hold G1AG.DE Germany Linde * Q3 0730CET EUR 126.95 Buy LING.DE Italy CIR Q3 - EUR 0.90 Hold CIRX.MI Italy Intesa SanPaolo EGM 0930CET EUR 1.29 Buy ISP.MI Netherlands TNT Express Q3 0800CET EUR 8.29 NR TNTE.AS Portugal Galp Energia * Q3 0830 CET EUR 12.70 Hold GALP.LS Sweden Assa Abloy * Q3 0800CET SEK 216.30 Hold ASSAb.ST
Tuesday 30 October Austria Erste Group Bank * Q3 0730CET EUR 18.47 Hold ERST.VI Denmark Danske Bank * Q3 0800CET DKK 101.70 Hold DANSKE.CO Finland Nokian Tyres * Q3 0800EET EUR 29.45 Hold NRE1V.HE Finland YIT Corporation * Q3 0800EET EUR 15.09 Hold YTY1V.HE France Steria Q3 Sales 0730CET EUR 10.75 Hold TERI.PA Germany Bayer AG * Q3 0730CET EUR 66.24 Buy BAYGn.DE Germany Hugo Boss * Q3 0730CET 70.94 Buy BOSSn.DE Germany MAN Q3 - EUR 77.95 Buy MANG.DE Germany Metro Group Q3 0715CET EUR 21.30 Hold MEOG.DE Germany Software AG Q3 0700CET EUR 30.85 Buy SOWG.DE Greece National Bank of Greece EGM 1100CET EUR 2.41 NR NBGr.AT Italy ENI * Q3 0745 CET EUR 17.49 Buy ENI.MI Italy Fiat * Q3 - EUR 4.23 Hold FIA.MI Luxembourg Aperam Q3 1740CET EUR 12.20 Buy APAM.AS Netherlands TomTom * Q3 0730CET EUR 3.97 Sell TOM2.AS Spain Banesto Q3 0800CET EUR 2.86 Hold BTO.MC Spain Ferrovial Q3 1700CET EUR 10.68 Buy FER.MC Sweden Swedish Match * Q3 0815CET SEK 260.70 Sell SWMA.ST Switzerland Straumann Q3 0700CET CHF 109.70 Hold STMN.S Switzerland UBS Q3 0700CET CHF 12.35 Hold UBSN.VX UK BP * Q3 0700UK GBp 435.00 Buy BP.L UK Imperial Tobacco * FY 0700UK GBp 2296.00 Buy IMT.L UK Redefine International Prelims 0700UK GBp 31.50 Buy RDI.L UK Stagecoach H1 - GBp 272.70 Buy SGC.L UK Standard Chartered Trading Update 0700UK GBp 1486.50 Hold STAN.L
Wednesday 31 October Belgium Anheuser-Busch InBev Q3 0700CET EUR 67.48 NR ABI.BR Denmark Christian Hansen * FY 0800CET DKK 170.30 Hold CHRH.CO Denmark Novo Nordisk * Q3 0800CET DKK 950.50 Buy NOVOb.CO Finland Cramo Q3 & Analyst Mtg 0800EET EUR 8.07 Sell CRA1V.HE Finland Sanoma * Q3 0830EET EUR 7.16 Hold SAA1V.HE France Air France-KLM Q3 0715CET EUR 5.95 Sell AIRF.PA Source: Deutsche Bank *Preview available for this week
Page 4 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Figure 1: 29th October – 2nd November 2012 (Prices as of 24 October 2012) Country Company Results Time Currency Closing Price Rating Ticker Wednesday 31 October France GDF Suez Q3 0700CET EUR 17.96 Hold GSZ.PA France Rexel Q3 0700CET EUR 15.79 Buy RXL.PA France Total SA * Q3 0800CET EUR 40.00 Buy TOTF.PA Germany Continental * Q3 0830CET EUR 75.81 Hold CONG.DE Germany Deutsche Lufthansa AG Q3 0730CET EUR 11.07 Buy LHAG.DE Germany Fresenius Q3 0700CET EUR 95.44 Hold FREG.DE Germany Fresenius Medical Care Q3 0700CET EUR 58.15 Buy FMEG.DE Germany Vossloh Q3 0900CET EUR 75.81 Hold VOSG.DE Ireland Kerry Group Q3 0800CET EUR 40.15 Hold KYGa.I Italy Fiat Industrial S.p.A. Q3 - EUR 8.04 Hold FI.MI Luxembourg ArcelorMittal Q3 0700CET EUR 12.36 Hold ISPA.AS Spain Antena 3 Q3 1700CET EUR 3.18 Sell A3TV.MC Spain BBVA * Q3 - EUR 6.66 Buy BBVA.MC Spain Grifols Q3 0830CET EUR 25.35 Hold GRLS.MC Spain Prosegur * Q3 - EUR 3.81 Hold PSG.MC Sweden Lundin Petroleum Q3 0700CET SEK 157.80 Hold LUPE.ST Switzerland Clariant * Q3 0700CET CHF 11.10 Hold CLN.VX Switzerland Lonza Q3 0700CET CHF 47.77 Hold LONN.VX UK Aegis Q3 Trading Update 0700UK GBp 235.70 Hold AEGS.L UK Barclays Q3 0700UK GBp 244.40 Buy BARC.L UK Dialog Semiconductor Q3 - EUR 16.33 Hold DLGS.DE UK GlaxoSmithKline * Q3 0700UK GBp 1428.00 Hold GSK.L UK Mondi Interims 0700UK GBp 670.00 Buy MNDI.L UK NEXT * Q3 0700UK GBp 3600.00 Buy NXT.L UK Phoenix Group Holdings Q3 Trading Update 0700UK GBp 510.00 Hold PHNX.L UK St James's Place Q3 Trading Update 0700UK GBp 392.10 Hold SJP.L UK Standard Life Q3 Trading Update 0700UK GBp 294.30 Hold SL.L
Thursday 1 November Denmark TDC * Q3 0800CET DKK 40.12 Hold TDC.CO UK BG Group * Q3 0700UK GBp 1317.50 Buy BG.L UK BSkyB Q1 & AGM 0700UK GBp 719.00 Buy BSY.L UK BT Group PLC * Q2 0700UK GBp 217.30 Hold BT.L UK Legal & General Q3 Interims 0700UK GBp 133.20 Buy LGEN.L UK Lloyds Banking Group Interims 0700UK GBp 40.45 Buy LLOY.L UK Royal Dutch Shell plc * Q3 0700UK GBp 2120.00 Buy RDSa.L UK Smith & Nephew Q3 0700UK GBp 648.00 Hold SN.L
Friday 2 November Finland Ramirent Q3 0900EET EUR 5.63 Hold RMR1V.HE France Alcatel-Lucent * Q3 0700CET EUR 0.81 Hold ALUA.PA Germany Beiersdorf Q3 0800CET EUR 55.87 Buy BEIG.DE Switzerland Panalpina Q3 0700CET CHF 89.80 Sell PWTN.S UK Admiral Q3 Trading Update 0700UK GBp 1105.00 Hold ADML.L UK Meggitt Q3 Trading Update 0700UK GBp 384.50 Buy MGGT.L UK Royal Bank of Scotland Q3 Trading Update 0700UK GBp 279.00 Hold RBS.L Group Source: Deutsche Bank *Preview available for this week
Deutsche Bank AG/London Page 5
25 October 2012
The Week Ahead
Company Diary (5th – 9th November 2012)
Figure 2: 5th – 9th November 2012 (Prices as of 24 October 2012) (Cont’d on next Page…) Country Company Results Time Currency Closing price Rating Ticker Monday 5 November Germany Fresenius Q3 (U.S. GAAP) - EUR 92.00 Buy FREG.DE Germany Fuchs Petrolub AG Q3 0700 CET EUR 52.09 Hold FPEG_p.DE Germany QSC AG Q3 0730 CET EUR 2.07 Buy QSCG.DE Ireland Ryanair Q2 0800 CET EUR 4.47 Buy RYA.I Portugal BCP Q3 - EUR 0.07 NR BCP.LS Switzerland DUFRY Q3 0700 CET CHF 117.00 Buy DUFN.S UK HSBC Holdings Q3 Trading Update 0700 UK GBp 610.00 Hold HSBA.L UK Intnl Airlines Group (IAG) Oct Traffic figs. 1500 UK GBp 157.20 Buy ICAG.L UK TelecityGroup Plc Q3 Trading Update 0700 UK GBp 916.50 Buy TCY.L UK Weir Q3 Trading Update 0700 UK GBp 1696.00 Buy WEIR.L
Tuesday 6 November Austria Andritz Q3 - EUR 44.54 Buy ANDR.VI Austria RHI Q3 0800 CET EUR 21.31 Hold RHIV.VI Denmark Coloplast FY 1200 CET DKK 1247.00 Buy COLOb.CO France Bureau Veritas Q3 Sales 1740 CET EUR 83.36 Hold BVI.PA France Eiffage Q3 Sales 1750 CET EUR 26.53 Buy FOUG.PA France L'Oreal Q3 Sales 1800 CET EUR 97.00 Hold OREP.PA France M6 Q3 Sales 1740 CET EUR 10.51 Hold MMTP.PA Germany Air Berlin Oct Traffic figs. 0700 CET EUR 1.55 Sell AB1.DE Germany alstria office REIT-AG Q3 0800 CET EUR 9.46 Buy AOXG.DE Germany BMW Q3 0830 CET EUR 60.35 Hold BMWG.DE Germany Duerr Q3 & Analyst Mtg. 0830 CET EUR 58.71 Hold DUEG.DE Germany Elmos Q3 0730 CET EUR 6.80 Hold ELGG.DE Germany Fraport AG Q3 0700 CET EUR 44.82 Buy FRAG.DE Germany Hannover Re Q3 0730 CET EUR 54.09 Hold HNRGn.DE Germany Hawesko Q3 - EUR 38.10 Buy HAWG.DE Germany Lanxess Q3 0730 CET EUR 60.91 Buy LXSG.DE Germany Pfeiffer Vacuum Q3 0730 CET EUR 76.20 Sell PV.DE Germany Tipp24 Q3 0800 CET EUR 37.18 Buy TIMGn.DE Germany Volkswagen AG Oct. Sales - EUR 146.50 Buy VOWG_p.DE Italy Safilo Group Q3 - EUR 6.57 Buy SFLG.MI Netherlands DSM NV Q3 0715 CET EUR 38.93 Hold DSMN.AS Netherlands SNS Reaal Q3 Trading Update 0730 CET EUR 1.19 Sell SR.AS Portugal BES Q3 1800 CET EUR 0.76 Hold BES.LS Portugal EDP Renovaveis Q3 0800 CET EUR 3.75 Hold EDPR.LS Portugal Energias de Portugal Q3 1800 CET EUR 2.11 Hold EDP.LS Spain Gas Natural Q3 0800 CET EUR 11.79 Hold GAS.MC Switzerland Adecco Q3 0700 CET CHF 47.32 Buy ADEN.VX UK A B Foods Prelims 0700 UK GBp 1362.00 Hold ABF.L UK Bowleven PLC Prelims 0700 UK GBp 77.25 Hold BLVN.L UK Capital Shopping Q3 Trading Update 0700 UK GBp 334.00 Buy CSCG.L Source: Deutsche Bank
Page 6 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Figure 2: 5th – 9th November 2012 (Prices as of 24 October 2012) (Cont’d on next Page…) Country Company Results Time Currency Closing price Rating Ticker Tuesday 6 November UK easyJet Traffic figs. 0700 UK GBp 608.00 Buy EZJ.L UK G4S Plc Trading Update 0700 UK GBp 262.20 Hold GFS.L UK InterContinental Hotels Q3 0700 UK GBp 1549.00 Hold IHG.L UK Marks & Spencer Group Interims 0700 UK GBp 389.70 Hold MKS.L UK Reed Elsevier (UK) Shareholders Mtg. 0830 UK GBp 600.50 Buy REL.L
Wednesday 7 November Austria Intercell AG Q3 0800 CET EUR 1.92 Hold ICEL.VI Austria OMV Q3 & Analyst Mtg. 0730 CET EUR 27.38 Hold OMVV.VI Austria Voestalpine Q2 0730 CET EUR 24.34 Buy VOES.VI Belgium Ageas Q3 0730 CET EUR 19.20 Hold AGES.BR Belgium Delhaize Q3 0700 CET EUR 28.73 Hold DELB.BR Denmark Carlsberg Q3 0700 CET DKK 509.50 Hold CARLb.CO Denmark Lundbeck Q3 0800 CET DKK 101.00 Buy LUN.CO Denmark William Demant Holding Q3 Trading Update 0800 CET DKK 518.50 Hold WDH.CO France Alstom H1 0800 CET EUR 26.72 Buy ALSO.PA France BNP Paribas Q3 0700 CET EUR 40.29 Buy BNPP.PA France JCDecaux Q3 Sales 1740 CET EUR 16.25 Buy JCDX.PA France Veolia Environnement Q3 0700 CET EUR 8.04 NR VIE.PA Germany Axel Springer Q3 0730 CET EUR 32.09 Hold SPRGn.DE Germany Brenntag Q3 0700 CET EUR 96.76 Buy BNRGn.DE Germany ElringKlinger AG Q3 0730 CET EUR 21.47 Hold ZILGn.DE Germany Freenet AG Q3 - EUR 12.68 Buy FNTGn.DE Germany Fresenius Q3 (IFRS) - EUR 92.00 Buy FREG.DE Germany Heidelberger Druck Q2 0700 CET EUR 1.18 Buy HDDG.DE Germany HOCHTIEF Q3 0700 CET EUR 39.27 NR HOTG.DE Germany Kloeckner & Co. Q3 0700 CET EUR 7.51 Hold KCOGn.DE Germany KUKA AG Q3 0700 CET EUR 22.86 Hold KU2G.DE Germany Loewe AG Q3 0800 CET EUR 4.04 Hold LOEG.DE Germany Morphosys Q3 0700 CET EUR 24.46 Buy MORG.DE Germany Munich Re Q3 0730 CET EUR 124.15 Hold MUVGn.DE Germany Symrise Q3 0730 CET EUR 27.28 Hold SY1G.DE Ireland Smurfit Kappa Q3 0700 UK EUR 8.26 Buy SKG.L Italy Italcementi Q3 1525 CET EUR 4.18 Hold ITAI.MI Italy Lottomatica Q3 - EUR 16.55 Buy LTO.MI Italy Yoox Q3 1745 CET EUR 11.41 Buy YOOX.MI Netherlands ING Q3 - EUR 6.79 Hold ING.AS Netherlands Wolters Kluwer NV Q3 Trading Update 0800 CET EUR 14.74 Hold WLSNc.AS Norway Schibsted Q3 0700 CET NOK 209.00 Hold SBST.OL Spain Melia Hotels International Q3 0800 CET EUR 5.23 Buy MEL.MC Spain Telefonica Q3 0700 CET EUR 10.30 Hold TEF.MC Sweden Securitas Q3 0800 CET SEK 48.40 Hold SECUb.ST Sweden Wallenstam Q3 0800 CET SEK 71.75 Hold WALLb.ST Switzerland Barry Callebaut FY 1000 CET CHF 882.50 Buy BARN.S Source: Deutsche Bank
Deutsche Bank AG/London Page 7
25 October 2012
The Week Ahead
Figure 2: 5th – 9th November 2012 (Prices as of 24 October 2012) (Cont’d on next Page…) Country Company Results Time Currency Closing price Rating Ticker Wednesday 7 November Switzerland Holcim Q3 & Analyst Mtg. 0700 CET CHF 63.50 Hold HOLN.VX UK Burberry Group Interims 0700 UK GBp 1143.00 Hold BRBY.L UK Capital & Counties Trading Update 0700 UK GBp 225.30 Buy CAPCC.L UK FirstGroup Interims 0700 UK GBp 185.80 Sell FGP.L UK Hays AGM 1200 UK GBp 80.40 Hold HAYS.L UK Old Mutual PLC Q3 Trading Update 0700 UK GBp 170.80 Buy OML.L UK Playtech Q3 Trading Update 0800 CET GBp 408.00 Buy PTEC.L UK Randgold Q3 & Analyst Mtg. 1200 UK GBp 7380.00 Buy RRS.L UK Vedanta Resources Interims 0700 UK GBp 1134.00 Buy VED.L
Thursday 8 November Belgium KBC Group Q3 0700 CET EUR 18.32 Hold KBC.BR France Air France-KLM Oct Traffic figs. 0800 CET EUR 5.90 Hold AIRF.PA France Arkema Q3 0700 CET EUR 69.00 Buy AKE.PA France Capgemini Q3 Sales 0730 CET EUR 31.88 Hold CAPP.PA France EADS Q3 0700 CET EUR 26.60 Buy EAD.PA France Eutelsat Communications AGM 1740 CET EUR 24.79 Sell ETL.PA France Hermes Q3 Sales 0730 CET EUR 209.35 Sell HRMS.PA France Legrand Q3 0700 CET EUR 29.67 Hold LEGD.PA France Societe Generale Q3 0700 CET EUR 25.18 Hold SOGN.PA France Sodexo FY 0700 CET EUR 59.33 Hold EXHO.PA Germany Adidas AG Q3 0730 CET EUR 64.73 Buy ADSGn.DE Germany Bijou Brigitte Q3 - EUR 52.41 Hold BIJG.DE Germany CANCOM AG Q3 - EUR 11.02 Hold COKG.DE Germany centrotherm PV Q3 0800 CET EUR 1.44 Hold CTNG.DE Germany CEWE COLOR Q3 0700 CET EUR 33.37 Buy CWCG.DE Germany Commerzbank Q3 0700 CET EUR 1.52 Hold CBKG.DE Germany Delticom AG Q3 0800 CET EUR 39.45 Hold DEXGn.DE Germany Deutsche Post DHL Q3 0730 CET EUR 15.89 Buy DPWGn.DE Germany Deutsche Telekom Q3 0800 CET EUR 8.80 Buy DTEGn.DE Germany Deutz AG Q3 0730 CET EUR 3.51 Hold DEZG.DE Germany Fielmann AG Q3 0800 CET EUR 74.30 Hold FIEG.DE Germany Gigaset AG Q3 - EUR 1.08 Hold GGS.DE Germany HeidelbergCement Q3 0800 CET EUR 40.33 Buy HEIG.DE Germany Jenoptik Q3 0800 CET EUR 6.96 Hold JENG.DE Germany Jungheinrich Q3 0745 CET EUR 25.00 Buy JUNG_p.DE Germany Prime Office REIT-AG Q3 - EUR 3.36 Hold PMOG.DE Germany ProSiebenSat.1 Q3 0800 CET EUR 20.84 Buy PSMG_p.DE Germany Rational AG Q3 1000 CET EUR 193.00 Hold RAAG.DE Germany Rhoen Klinikum Q3 0700 CET EUR 14.98 Hold RHKG.DE Germany SAF Holland SA Q3 Trading Update 0630 CET EUR 4.93 Hold SFQN.DE Germany SGL Group SE Q3 0730 CET EUR 30.58 Hold SGCG.DE Germany Siemens FY 0800 CET EUR 76.85 Hold SIEGn.DE Germany Singulus Technologies Q3 0700 CET EUR 1.41 Hold SNGG.DE Germany SMA Q3 0700 CET EUR 17.75 Sell S92G.DE Germany Stada Arzneimittel AG Q3 0730 CET EUR 22.67 Buy STAGn.DE Source: Deutsche Bank
Page 8 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Figure 2: 5th – 9th November 2012 (Prices as of 24 October 2012) (Cont’d on next Page…) Country Company Results Time Currency Closing price Rating Ticker Thursday 8 November Germany Tom Tailor Q3 0630 CET EUR 15.94 Buy TTIGn.DE Germany Tomorrow Focus Q3 - EUR 3.41 Hold TFAG.DE Germany XING AG Q3 0730 CET EUR 37.22 Hold OBCGn.DE Greece Coca-Cola Hellenic Q3 - EUR 17.00 Buy HLBr.AT Italy Autogrill Q3 - EUR 7.90 Hold AGL.MI Italy Azimut Q3 - EUR 9.51 Buy AZMT.MI Italy Buzzi Unicem Q3 - EUR 9.31 Hold BZU.MI Italy Finmeccanica Q3 - EUR 3.96 Sell SIFI.MI Italy Geox SpA Q3 - EUR 2.21 Hold GEO.MI Italy Mediolanum Q3 1030 CET EUR 3.71 Hold MED.MI Italy Telecom Italia Q3 - EUR 0.73 Buy TLIT.MI Italy Terna S.p.A. Q3 - EUR 2.89 Buy TRN.MI Netherlands Aegon NV Q3 - EUR 4.18 Buy AEGN.AS Netherlands Corio Q3 1740 CET EUR 34.01 Buy COR.AS Netherlands Delta Lloyd Q3 Trading Update 0730 CET EUR 12.68 Hold DLL.AS Portugal Portugal Telecom Q3 - EUR 3.92 Hold PTC.LS Spain ACS Q3 - EUR 16.52 Hold ACS.MC Spain Amadeus Q3 1500 CET EUR 18.20 Buy AMA.MC Spain Repsol Q3 - EUR 15.19 Hold REP.MC Sweden Skanska Q3 0800 CET SEK 100.90 Buy SKAb.ST Switzerland Kuoni Reisen Holding Q3 0700 CET CHF 251.75 Hold KUNN.S Switzerland Nobel Biocare Q3 0630 CET CHF 8.44 Sell NOBN.S Switzerland Swiss Re Q3 - CHF 65.55 Hold SRENH.VX Switzerland Swisscom Q3 0730 CET CHF 382.80 Hold SCMN.VX UK Aviva Plc Q3 Trading Update 0700 UK GBp 330.30 Hold AV.L UK Balfour Beatty Q3 Trading Update 0700 UK GBp 312.10 Hold BALF.L UK BTG plc Interims 0700 UK GBp 346.70 Buy BTG.L UK C&W Communications Interims & Analyst Mtg. 0700 UK GBp 37.25 Buy CWC.L UK Electrocomponents Interims 0700 UK GBp 208.10 Hold ECM.L UK ENRC PLC Trading Update 0700 UK GBp 341.60 Buy ENRC.L UK Experian H1 0700 UK GBp 1077.00 Buy EXPN.L UK Land Securities H1 0700 UK GBp 807.00 Buy LAND.L UK Reed Elsevier (UK) Trading Update 0700 UK GBp 600.50 Buy REL.L UK RSA Insurance Group PLC Q3 Trading Update 0700 UK GBp 113.50 Hold RSA.L UK Spirent Trading Update 0700 UK GBp 150.90 Buy SPT.L UK Tate & Lyle H1 0700 UK GBp 721.50 Buy TATE.L UK Wetherspoon (J.D.) Plc Q1 Trading Update & AGM 0700 UK GBp 495.00 Hold JDW.L UK William Morrison Q3 Trading Update 0700 UK GBp 267.00 Buy MRW.L UK Yule Catto Trading Update 0700 UK GBp 153.10 Hold YULC.L
Friday 9 November Austria Palfinger Q3 EUR 15.75 Hold PALF.VI Denmark A.P. Moller - Maersk Q3 0830 CET DKK 40000.00 Buy MAERSKb.CO Finland Sampo Q3 0800 EET EUR 24.02 Hold SAMAS.HE Finland Stockmann Oct. Sales - EUR 15.14 Hold STCBV.HE Source: Deutsche Bank
Deutsche Bank AG/London Page 9
25 October 2012
The Week Ahead
Figure 2: 5th – 9th November 2012 (Prices as of 24 October 2012) Country Company Results Time Currency Closing price Rating Ticker Friday 9 November France Credit Agricole SA Q3 0700 CET EUR 6.13 Hold CAGR.PA France Lafarge Q3 0700 CET EUR 44.53 Hold LAFP.PA France Pernod-Ricard AGM 1600 CET EUR 84.58 Hold PERP.PA Germany Allianz Q3 0700 CET EUR 93.05 Buy ALVG.DE Germany Rheinmetall Q3 0730 CET EUR 36.30 NR RHMG.DE Greece OTE Q3 - EUR 3.84 Hold OTEr.AT Italy Atlantia Q3 - EUR 12.31 Buy ATL.MI Italy Gemina Q3 - EUR 0.73 Buy GEMI.MI Italy Generali Ass. Q3 - EUR 12.04 Hold GASI.MI Luxembourg SES Q3 Trading Update 0700 CET EUR 21.06 Hold SESFd.PA Portugal Zon Multimedia Q3 - EUR 2.32 Hold ZON.LS Spain Banco Popular EGM 1000 CET EUR 1.28 Hold POP.MC Switzerland Richemont Interims 0700 CET CHF 58.75 Hold CFR.VX UK Hammerson Q3 Trading Update - GBp 472.20 Buy HMSO.L UK Intnl Airlines Group (IAG) Q3 0700 UK GBp 157.20 Buy ICAG.L UK Rentokil Initial Q3 Trading Update 0700 UK GBp 87.10 Hold RTO.L UK Rolls-Royce Group PLC Trading Update 0700 UK GBp 856.00 Hold RR.L Source: Deutsche Bank
Page 10 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Alcatel-Lucent Hold
Reuters: ALUA.PA Exchange: PAR Ticker: ALUA Q3
Price (EUR) 0.84 Price target (EUR) 0.75 52-week range (EUR) 2.05 - 0.72 Market cap (EUR)(m) 1,900.7 Shares outstanding (m) 2,268 Free float (%) 100 DJ (.STOXXE) 250.8
FYE 12/31 2011A 2012E 2013E Revenue 15,696 14,847 14,597 (EURm) DB PBT (EURm) 262 -428 178 Stated PBT 277 -687 -62 (EURm) DB EPS (EUR) 0.09 -0.19 0.07 P/E (DB EPS) (x) 30.2 – 12.0
Originally published on 16 October Kai Korschelt (+44) 20 754-58569 [email protected]
Deutsche Bank AG/London Page 11
25 October 2012
The Week Ahead
Assa Abloy Hold
Reuters: ASSAb.ST Exchange: STO Ticker: ASSAb Q3
Price (SEK) 217.40 Q3 due October 29 – Solid quarter expected, but defensive qualities priced in at a 30- Price target (SEK) 195.00 40% valuation premium to peers 52-week range (SEK) 220.50 - 147.00 . Market cap (SEK)(m) 80,985.4 Q3 expectations: Sales to grow 1.7% organically Assa is due to report Q3 on October YE Shares outstanding 29. We expect organic growth of 1.7%, somewhat below the level of Q2 due to fewer 372,518,000 (m) working days and the end of a large project in Global Tech. While both EMEA and Shares outstanding (m) 373 Entrance is expected to see organic YoY contraction rates (2% and 1% respectively) OMX Stockholm Index 330.0 Americas, AsiaPacific and GT is expected to continued to grow (5%, 7% and 2% respectively). We expect EBIT to improve by 19% YoY to SEK 1,917m supported by cost FYE 12/31 2011A 2012E 2013E saves and M&A, while the EBIT margin is expected to improve by 25bps to 16.4%. In Revenue 41,786 46,707 47,363 terms of outlook, we expect management to highlight a softened demand trend (we (SEKm) DB PBT (SEKm) 5,979 6,744 7,054 also note however that Q4 growth will be supported by a larger number of working Stated PBT days). 4,559 6,744 7,054 (SEKm) Marginal changes to forecasts. Ahead of results we have made only marginal changes DB EPS (SEK) 11.97 13.90 14.53 DPS (SEK) 4.50 5.50 6.50 to forecasts with our EPS being lowered by <0.5% for 2012-2014. P/E (DB EPS) (x) 13.7 15.6 15.0 Resilience priced in at 30-40% premium to peers, Hold. We continue to find the long- term investment case attractive, driven by e.g. volume/margin stability, further cost savings- and M&A-potential. We also believe the defensive qualities can continue to support the shares in the shorter term. However, following the strong share price performance and given the 30-40% valuation premium to peers we feel these qualities are mostly priced in. We therefore retain Hold with a SEK 195 TP.
Originally published on 11 October
Johan Wettergren (+46) 8 4635-518 [email protected]
Page 12 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Bayer AG Buy
Reuters: BAYGn.DE Exchange: GER Ticker: BAYGn Q3
Price (EUR) 68.49 3Q results due 30 October Price target (EUR) 71.00 We expect a solid quarter aided by a sizable currency tailwind (c.6%). However given 52-week range (EUR) 70.36 - 42.84 the guidance upgrades at the 2Q results, we would not expect material changes at Market cap (EUR)(m) 56,637.7 this juncture. For the group we expect sales growth of 7% and underlying EBITDA Shares outstanding (m) 827 Free float (%) 100 growth of 3% versus a tough comparative quarter with Core EPS flat at €1.12/share. DJ (.STOXXE) 250.8 In HC we expect 3Q sales up 6% with 4.5% yearon- year underlying EBITDA growth
reflecting currency tailwinds, but also continued erosion of Betaseron, and Yasmin FYE 12/31 2011A 2012E 2013E sales and normalization of Mirena sales (2Q included a one-off contract gain). In CS Revenue (EUR) 36,528 39,313 41,236 we expect 3Q sales up 10% and underlying EBITDA growth of 13% driven by both DB PBT (EUR) 5,617 6,211 6,806 higher pricing, volumes and share gains. By region we expect good growth in Latam Stated PBT 3,363 3,991 5,086 (EUR) and Asia while Europe and the US should be subdued due to the base effect and DB EPS (EUR) 4.83 5.42 6.00 drought. On outlook we expect a reiteration of guidance and above market growth. DPS (EUR) 1.65 1.77 1.91 In MS we expect 3Q to be broadly flat quarter-on-quarter (marginally down) for both P/E (DB EPS) (x) 10.5 12.6 11.4 sales and EBITDA due to on-going macro weakness impacting volumes (slow summer). This will be in line with guidance given in late July. Bayer is not immune to macro concerns but we expect MS guidance to be reiterated. Key catalysts Ahead of the results we look towards the CHEST conference (20-25 October) for presentation of new Phase III data from pulmonary arterial hypertension drug Riociguat. Data from both the PATENT-1 and CHEST-1 studies in PAH and CTEPH (chronic thrombo-embolic pulmonary hypertension) will be presented, the latter critical to the drug’s differentiation in a competitive environment. Should the data be positive in both studies, blockbuster sales are possible representing >7% to NPV. Given this, we see asymmetric positive risk/reward as many investors appear cognizant of the drug’s development but with few willing to place much emphasis on its success. Risks & Valuation: Buy, PT Euro 71 Our price target is based on SOTP and we back-test against our DCF analysis, (WACC of 8.8%, ERP 5.5%, TGR 2.5%). Within SOTP we use a conglomerate discount of 5%. The divisional valuations are based on 2013E EV/EBITDA versus peers. We see key risks should Xarelto’s launch fail to gain traction, or it suffer a safety set-back. Other Healthcare risks include pipeline set-backs or delays and increased litigation charges. We also see risks to near-term forecasts from macro factors reducing demand in MaterialsScience. In CropScience, we see the environment for soft commodity prices and the weather as key risks. Originally published on 11 October
Tim Race (+44) 207 54-76522 [email protected]
Deutsche Bank AG/London Page 13
25 October 2012
The Week Ahead
Bayer AG
Source: Deutsche Bank
Page 14 Deutsche Bank AG/London
25 October 2012 The Week Ahead
BBVA Buy
Reuters: BBVA.MC Exchange: MCE Ticker: BBVA Q3
Price (EUR) 6.39 BBVA is due to publish its 3Q results on 31 October Price target (EUR) 7.00 BBVA will continue booking some of the RD1+RD2 impairment requirements in 3Q, 52-week range (EUR) 7.30 - 4.43 thereby further dragging the quarter’s net profit (our 3Q estimate is E26m vs. E506m in Market cap (EUR) 36,200 2Q and E1bn in 1Q). NII should not show major changes versus 2Q, although in the Shares outstanding (m) 5,584 DJ (.STOXXE) 250.8 absence of capital gains (E250m booked in trading income line in 2Q), total revenues should trend downwards qoq. Market’s attention is likely to be on the underlying credit FYE 12/31 2011A 2012E 2013E quality trends in Spain. Revenue (EUR) 20,567 22,353 22,951 PBT (EUR) 3,775 1,831 5,606 Main business units’ expected underlying trends Stated Net As was the case in 2Q, we do not expect any major surprises, with Spain still feeling the 3,012 1,346 3,784 Profit (EUR) pain from the compliance of RDs, and NII possibly starting to lose some momentum EPS Adjusted 0.74 0.27 0.67 (EUR) due to the negative impact from the low interest rates environment in which banks are Dividend Yield 5.7 6.6 6.6 operating. Credit quality in Spain should continue deteriorating, driven by SME and (%) developers, the question being if it is showing an acceleration or still deteriorating at a P/E Adjusted (x) 9.0 23.8 9.5 steady pace. It is also relevant to see if BBVA reclassifies more SME loans into real estate category, as it did with E750m in 2Q. We believe Mexico should maintain a healthy topline performance (in local currency terms) and do not expect credit quality/loan loss provisions to show major qoq changes, thus remaining under control. It will also be relevant to see funding evolution following a weak 2Q. Adjusting our 2012-14 earnings forecasts We cut our 2012E EPS by 13% to E0.27, 2013 EPS by 6.6% to E0.67 and 2014 EPS by 3.6% to E0.9, mainly due to an adjustment in the expected dividend income from Telefonica. Following Telefonica’s dividend suspension announcement (see our Alert note “Telefonica dividend suspension: assessing the impact”, dated 26 July 2012), we estimated (assuming no further changes on its dividend policy) a dividend loss of c.E150m in 2012, c.E225m in 2013 and c.E150m from 2013 onwards. Still a Buy on valuation; lowering target price to E7 on lower earnings Acknowledging the uncertainties that Spain is still facing and the recent stock price re- rating, our Buy rating (unchanged) is based on valuation grounds relative to medium- term profitability levels (0.95x 2013E P/TBV – RoTE 14% 2014E). We reduce our target price to E7.0 from E7.2 on lower earnings. We use a SoTP valuation due to the variety of business units and geographies. The main generic risks are linked to Spain’s economic development, while specific downside risks include any delays in the execution of some of the planned capital-enhancing initiatives Originally published on 11 October
Deutsche Bank AG/London Page 15
25 October 2012
The Week Ahead
Carlos Berastain Gonzalez (+34) 913355971 [email protected]
Page 16 Deutsche Bank AG/London
25 October 2012 The Week Ahead
BG Group Buy
Reuters: BG.L Exchange: LSE Ticker: BG Q3
Price (GBP) 1,342.50 Moving in the right direction Price Target(GBP) 1,700.00 We expect quarterly results at BG to show some progress on volumes despite the 1,547.00 - 52-week range (GBP) 1,200.50 drag effect of downtime at Buzzard and Elgin in the UK. In LNG our assumption is Market cap (GBP)(m) 45,322.8 that hedges continue to belie the underlying performance. Perhaps more significant Shares outstanding (m) 3,388 than the results themselves, however, will be any comments made on project Free float (%) 100 progress, not least whether the launch of the second Brazilian FPSO remains on FTSE 100 INDEX 5,882.9 track.
FYE 12/31 2011A 2012E 2013E E&P set to record useful production uplift Revenue (GBP) 12,434 13,314 13,819 DB PBT (GBP) 4,791 5,775 6,266 In its E&P activities we expect this to be a quarter in which BG delivers healthy 7-8% Stated PBT volume growth given the benefit of start-ups in Bolivia, Norway & Thailand and 4,791 5,775 6,266 (GBP) despite the drag effect of North Sea downtime. All told we look towards production DB EPS (GBP) 81.83 85.17 104.02 increasing by 8% y-o-y despite the assumed loss of some 30-35kboe/d of North Sea DPS (GBP) 14.83 16.70 20.23 P/E (DB EPS) (x) 16.8 15.8 12.9 volume. This growth will in our view effectively come through to the bottom line by way of a modest 6% uplift in divisional EBIT. LNG – just follow the guidance. It’s hedged. In LNG our approach to forecasting remains to take the full year guidance (upper end of the $2.6-2.8bn guided range) and divide by four. This suggests income for the quarter of just under $0.7bn – modestly ahead of the result posted in Q2 12E despite weaker pricing in the underlying LNG shipping market. In T&D we look to an uplift as Comgas (which BG is currently in the process of divesting) as a result of the recovery of increased gas costs. Value & Risk With so much of its value tied up in assets that have yet to commence production, we value BG Group on an asset basis. Our NPV 10 asset model suggests a fair value of c2000p to which we apply a 15% discount to allow for potential delays and cost overruns driving a share price target of 1700p. Risks to our Buy stance include cost overruns in Brazil and Australia. Originally published on 19 October
Lucas Herrmann (+44) 20 754-73636 [email protected]
Deutsche Bank AG/London Page 17
25 October 2012
The Week Ahead
BG Group
Source: Deutsche Bank
Page 18 Deutsche Bank AG/London
25 October 2012 The Week Ahead
BP Buy
Reuters: BP.L Exchange: LSE Ticker: BP Q3
Price (GBP) 443.45 Stable quarter Price Target(GBP) 500.00 We expect Q3 12 results to benefit from the partial reversal of certain of the events that 52-week range (GBP) 504.60 - 391.95 undermined Q2 12 albeit offset to some extent at the net level by a c$275m one time Market cap (GBP)(m) 84,328.7 charge for recent changes in UK taxation. Overall, we look to a 13% uptick in sequential Shares outstanding (m) 19,016 Free float (%) 100 net income. It is not however our expectation that these results will afford confidence in FTSE 100 INDEX 5,882.9 a strong turnaround in profit momentum with news flow over the coming weeks on
both Macondo litigation and the future ownership of TNK-BP likely to prove more FYE 12/31 2011A 2012E 2013E important near term share price drivers. Revenue (USD) 291,619 297,451 303,400 DB PBT (USD) 32,788 26,666 28,663 Better performance in the upstream Stated PBT 36,324 26,666 28,663 We expect production at 3266kboe/d to be modestly (c1%) below that of Q2 ‘12 as (USD) guided with the benefit of recent production start ups in the US GoM and Angola offset DB EPS (USD) 1.15 0.90 0.97 DPS (USD) 0.28 0.32 0.36 by the ongoing negative impact of disposals. US results are likely to again be impacted P/E (DB EPS) (x) 6.2 7.9 7.3 by downtime in the US GoM, albeit largely hurricane related, whilst performance in the
international businesses will have suffered from planned maintenance in the higher margin UK operations. Within TNK-BP, which suffered significantly in Q2 12 from the lag effect of export taxes on pricing, Q3 12 should see the restoration of a more normalized level of profits. Our estimates look to an 86% rise in sequential net income. Refining should show very strong improvement Where Q2 12 results suffered to the tune of about $500m from the impact of collapsing ‘stock-losses in pipeline’, no such occurrence is anticipated this quarter. More likely in our view is that this should be a strong quarter for the refining activities given the margin strength seen globally. No doubt faltering chemical profitability will again eat into some of the uplift but in aggregate we see profits rising towards $2.1bn, some 90% ahead sequentially. Valuation & Risk We remain of the view that BP's assets are undervalued. This, our more constructive view on the GoM production and the potential for sentiment enhancing resolution in Russia and the US drive our Buy stance. We target a 10% discount to the 2013 sector multiple of 9x 2013 EPS suggestive of a fair share price of c500p. Key risks include negative outcomes on Russia and DoJ. Originally published on 19 October
Deutsche Bank AG/London Page 19
25 October 2012
The Week Ahead
Lucas Herrmann (+44) 20 754-73636 [email protected]
Page 20 Deutsche Bank AG/London
25 October 2012 The Week Ahead
BT Group PLC Hold
Reuters: BT.L Exchange: LSE Ticker: BT Q2
Price (GBP) 219.40 Our expectations for Q2 12/13 results to be announced at 7am UKT on 1 November Price target (GBP) 235.00 are as shown in the table overleaf. We expect FY 13 guidance (i.e., EBITDA growth 52-week range (GBP) 236.80 - 176.50 and c£2.3bn FCF) to be reiterated but this may prove a rather insipid outcome Market cap (GBP) 17,127.6 against a backdrop of weaker growth of both revenues and EBITDA in Q2 vs Q1 (- Shares outstanding (m) 8,151 Free float (%) 100 6.9% and -0.5% growth respectively). A chief focus for investors at this time is BT’s FTSE 100 INDEX 5,882.9 TV strategy. A last-minute switch of set-top-box suppliers for YouView is hardly
inspiring but it appears that there is significant consumer interest. Recently FYE 3/31 2012A 2013E 2014E announced price increases (from 1 Jan) and Sky’s more recent moves to increase Revenue 19,307 18,412 18,424 monthly line rental charges for existing rather than just new customers further (GBPm) DB PBT (GBPm) 2,421 2,573 2,673 confirms ongoing rationality amongst UK operators. BT’s recent football and rugby Stated PBT content splurge has unsettled investors with regard the extent of the Group’s TV 2,445 2,563 2,703 (GBPm) ambitions and the likelihood for achieving acceptable returns. DB EPS (GBP) 22.52 24.40 25.51 DPS (GBP) 8.30 9.34 10.74 The IAS19 pension deficit should have improved by c£1bn (gross) in Q2 however we P/E (DB EPS) (x) 8.6 9.0 8.6 remain concerned that Gilts are materially lower than the June 2011 actuarial valuation date (10 year UK yield 1.7% vs 3.38%). For IAS 19, we expect a gross deficit at end Q2 of c£1.6bn (£2.5bn at Q1), £0.9bn better due to the combination of lower bond yields (4.4%) compared to end-Mar 12 (4.95% revised up in Q4 to better reflect a better match in liability maturities) offsetting lower inflation expectations (- 30bps) and £0.3bn higher assets (£38.6bn vs. £38.3bn at FY) as a result of Q2 market strength more than offsetting Q1 weakness. Overall we expect BT Group revenue growth to slow to -6.3% in Q2 vs -4.7% in Q1. This deterioration is significantly forex related but we still expect underlying growth (ie ex forex and transit traffic) to deteriorate by 0.9pp to -4.6% (consensus -4.3%) predominantly due to lower growth at Global Services. We expect -0.3% EBITDA growth, c30bps below consensus which itself would be the lowest rate of quarterly EBITDA growth in almost 3 years. Adjusted EPS of 5.8p, +4.3% c2% below consensus. DBe FCF of £296m (pre-specifics of £44m) vs cons.£332m. FCF post the benefit of tax recovery post recent pension top-ups should reach £458m (consensus £490m).
Originally published on 16 October
Robert Grindle (+44) 20 754-51065 [email protected]
Deutsche Bank AG/London Page 21
25 October 2012
The Week Ahead
BT Group PLC
Source: Deutsche Bank
Page 22 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Christian Hansen Buy
Reuters: CHRH.CO Exchange: CPH Ticker: CHRH FY
Price (DKK) 171.60 FY Results due 31st October at 07:00 UK Price target (DKK) 190.00 Chr. Hansen has seen healthy growth across all divisions YTD and this should 52-week range (DKK) 180.00 - 111.70 continue into Q4 and FY13. While one set of trials on probiotics has produced Market cap (DKK)(m) 23,060.6 inconsistent results, the company continues to progress with trials to evidence the Shares outstanding (m) 135 OMX Copenhagen 20 503.3 health benefits of probiotics. Success would drive considerable upside to earnings. Aside, from this, Chr. Hansen's core mid-term EPS growth of 15% and strong cash FYE 8/31 2011A 2012E 2013E generation make this an attractive investment and underpin our PT of DKK190 and Revenue 636 694 761 with TSR of over 10% BUY. (EURm) DB PBT (EURm) 148 175 204 Conference Call: 09:00 UK Stated PBT 148 175 204 (EURm) Q4 results should see continued strength in the Cultures & Enzymes business (DBe DB EPS (EUR) 0.83 0.95 1.13 9% LFL sales growth), reasonable growth in Health & Nutrition (7% LFL) and DPS (EUR) 0.48 0.33 0.40 recovery in the Natural Colours business. We believe the trends for all Hansen’s core P/E (DB EPS) (x) 18.8 24.3 20.4 products remain strong as we head into 2013. Margin improvement from improved production planning and operating leverage should more than offset the rising costs of having to produce at less efficient plants until expansion of Avedore is complete. Probiotic Priorities Chr. Hansen recently announced a €4m write-down following the inconclusive results of a second study into the impact of probiotics on the human immune system. While it is disappointing not to have conclusive evidence, it does not change our view of the company. We still believe CHRH has strong probiotic technologies and trials of the benefits for digestive health and children’s health will continue. It is also important to note that we do not model any sales or margin benefit associated with the company achieving EFSA approval for health claims on any probiotic strain – such success remains a positive risk. Valuation and Risks: DCF driven target price to DKK190 We value Chr. Hansen using DCF, as with all food coverage. We forecast 2.5% pa LT growth (based on dairy industry). We assume WACC of 9.0% (Beta of 1, ERP 4.3%, RF rate 5.0% and CoD 5.0%). Risks include: regulation, particularly from European Food Safety Authority's verification of health claims on probiotics, volatility of commodity costs, the possibility that Novo A/S may sell all or part of its 26% holding and health scares in end markets. Originally published on 16 October Catherine Farrant (+44) 20 754-77654 [email protected]
Deutsche Bank AG/London Page 23
25 October 2012
The Week Ahead
Christian Hansen
Source: Deutsche Bank
Page 24 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Clariant Hold
Reuters: CLN.VX Exchange: VTX Ticker: CLN Q3
Price (CHF) 11.07 Q3 12: EBITDA broadly flat Price target (CHF) 11.00 We forecast Q3 EBITDA broadly flat year-on-year (at CHF 215m) with mixed divisional 52-week range (CHF) 13.35 - 7.74 performances. Overall, we expect modestly lower volumes and cost pressures (raw Market cap (CHF)(m) 3,274.0 materials, labour etc) to offset small positive price effect (1%) and cost cuts. On outlook, Shares outstanding (m) 330.85 Free float (%) 100 we expect mgmt to emphasise macro uncertainty but re-iterate qualitative 2012 SPI Swiss Performance guidance. At 12x 2012E P/E and 6x 2012E EV/EBITDA we do not see enough value so 6,219.4 IX keep a HOLD.
FYE 12/31 2011A 2012E 2013E Revenue 7,370 7,765 7,942 (CHFm) DB PBT (CHFm) 544 425 468 Stated PBT 334 305 378 (CHFm) DB EPS (CHF) 1.19 0.90 0.99 DPS (CHF) 0.30 0.30 0.30 P/E (DB EPS) (x) 11.2 12.3 11.2
Mixed divisional performances We expect mixed divisional performances due to seasonality and cost pressures offsetting better pricing and FX. Masterbatches and Textiles are expected to be up YoY supported by pricing and cost cutting offsetting lower volumes. SC is expected to be strong driven by pricing/volumes in Catalysis & Energy. OMS is expected to down (modestly) on a tough base due to lower volumes. ICS should be broadly flat. Performance Chemicals and Pigments should be down due to weaker demand. We expect mgmt to reiterate 2012 guidance (sales growth in local currencies, sustained profitability). Valuation and risks Our TP is based on DCF (8.2% WACC, 1.5% TGR, ERP 4.5%, beta 1.4). Risks include more/less cost cuts, lower/higher raw materials, higher/lower GDP, FX.
Originally published on 1 October Tim Jones (+44) 20 754-76763 [email protected]
Deutsche Bank AG/London Page 25
25 October 2012
The Week Ahead
Continental Buy
Reuters: CONG.DE Exchange: GER Ticker: CONG Q3
Price (EUR) 75.65 Q3 results due to be released Wednesday 31 Oct at 8.45am CET Price target (EUR) 100.00 CFO will host a conf call the same day at 4.00pm CET. Furthermore, Mgt will host the 52-week range (EUR) 83.81 - 45.24 same day an Investor day in Hanover on their tire division. We expect the group to Market cap (EUR)(m) 15,137.6 report Q3 revenues of Euro 8.1bn (+5% YoY), adj EBIT of Euro 844mn,(+13% YoY driven Shares outstanding (m) 200 DJ (.STOXXE) 250.8 by tires) and a net profit of Euro 401mn (+90%). Buy maintained, underpinned by implied upside. FYE 12/31 2011A 2012E 2013E Revenue Automotive Systems (Revenues of E4,79bn, +4%, adj EBIT E364m, -3%) 30,506 32,820 35,100 (EURm) Based on a weak European production and a still strong outperformance of the group DB PBT (EURm) 2,308 3,050 3,220 (+500bp), Q3 revenues should be up 4% YoY. And like in previous quarter, powertrain Stated PBT 2,308 3,050 3,220 (EURm) should not outperform the two other divisions due to a still weak demand on small DB EPS (EUR) 7.78 10.49 10.71 diesel engines. This limited top line growth coupled with a leftover rare earth headwind DPS (EUR) 1.50 1.70 2.00 (Euro 20m) should translate into a slightly lower YoY adj EBIT. P/E (DB EPS)(x) 7.5 7.2 7.1 Rubber Group (Revenues of E 3.34bn, +7%, adj EBIT E 500m, +26%) (Rubber group=tires+ Contitech).Like during previous quarters, the tire division should be the main earnings driver due to i) a small volume effect (+2%, market share gain) and mostly to ii) a still positive Price & Mix (+4% gross, +2% after pass through) coupled with a small raw mat tailwind (will be stronger in Q4). Therefore, tire operations adj EBIT should increase by a high 40%, growth comparable with previous two quarters. A strong net profit increase of +90%, Q3 EPS of Euro 2.4 Net profit should increase strongly in Q3, +90% YoY, due to i) non recurrence of a negative FX effect (Euro 93m), and ii) a much lower tax rate (28%e) than last year (42%). Thus for first 9M, EPS should reach Euro 8.2, +44% YoY. Valuation/Risks Continental is a combination of auto parts company (which we see trading at 10x 2012E PE, 4x EV/EBITDA) and tire company (12x P/E, 6x EV/EBITDA). Our TP is based on the average of the blended multiples: 11x PE and 5x 2012E EV/EBITDA. The multiples we assign are in line with our sector targets. The group has so far done better than expected in the current crisis and should benefit from superior growth in Automotive and from weaker raw mat in tires. Key risks include a worsening volume environment, especially in Europe given the company’s regional exposure, and higher operational gearing. Key risks include a worsening volume environment, especially in Europe given the company’s regional exposure, and higher operational gearing.
Originally published on 12 October
Gaetan Toulemonde (+33) 1 4495-6668 [email protected]
Page 26 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Danske Bank Hold
Reuters: DANSKE.CO Exchange: CPH Ticker:DANSKE Q3
Price (DKK) 105.70 Downside risk in Danske’s Q3 when new strategy is announced. Take profit ahead of Price target (DKK) 93.00 results. Danske is the 5th best performing EU bank past 3 month and has rerated to 52-week range (DKK) 112.00 - 68.50 0.9x TBV, driven by positive mgmt statements during the quarter and in anticipation Market cap (DKK) 98,485 of a new strategy. We think there’s an NII problem which will become evident Q3/Q4 Shares outstanding (m) 932 OMX Copenhagen 20 503.3 and that investors could be disappointed by a lack structural measures, in the new strategy. FYE 12/31 2011A 2012E 2013E Risk 1: Poor operational performance Q3, and an emerging NII problem. We are 5% Revenue (DKK) 43,373 47,106 47,540 below consensus NII 2013, driven by three factors. First, the majority of repricing is PBT (DKK) 4,200 7,937 16,131 over, post very aggressive margin hikes 2012. Second, lower short-rates take Stated Net 1,720 4,672 11,460 Profit (DKK) DKK250- 300m off NII Q3. Third, we argue Danske must refinance a majority of the EPS Adjusted DKK24bn govt hybrid maturing 2014, which could take DKK0.8-1.0bn off 2013 NII. In 2.53 5.79 12.30 (DKK) Q3 Danske issued DKK6.0bn of T2 capital at a cost of approx. 6.0%, and we see a Dividend Yield 0.0 0.9 1.9 (%) further DKK8- 10bn being issued 2013. If we are right the market looks DKK1.2bn too P/E Adjusted (x) 28.8 18.3 8.6 high on NII, equal to a 9% EPS downgrade 2013. The market already expects lower
LLPs, after positive mgmt statements during the qtr. We see LLPs fall QoQ from 73bp to 65bp, driven by lower Danish losses. A risk is further provisioning from Danish shipping company Torm, where we believe Danske has an exposure. Risk 2: Too high expectations on new strategy announced on 30 October. Investors have priced in a strategic shift, but could be disappointed as we only see incremental improvements. We neither see divestments (of e.g. Danica) nor that Danske may exit any market (like Ireland/Baltics). Instead we expect the following: Focus on operational excellence including (i) increased efficiency (ii) closure of an additional 50-60 branches (above the 30-40 already communicated), and (iii) shift product/client focus to the most profitable segments. Measures to improve the credit rating, such as further issuance of T2 capital. This comes at a cost (to NII), but we think it will take time to improve ratings. New financial targets, and we see a RoE target in the 10-12% range as likely. Mgmt already indicated a 10% RoE is needed to match current CoE.
Originally published on 11 October
Jan Wolter (+46) 8 463-5519 [email protected]
Deutsche Bank AG/London Page 27
25 October 2012
The Week Ahead
ENI Buy
Reuters: ENI.MI Exchange: MIL Ticker: ENI Q3
Price (EUR) 17.57 Uncertain evolution of Gas Marketing result a possible risk Price Target(EUR) 21.00 Forecast Clean Net Income of €1.6bn represents a decline of 12% Y/Y, the volume- 52-week range (EUR) 18.70 - 14.55 led improvement in E&P offset by deterioration in Downstream businesses. We are Market cap (EUR)(m) 63,652.2 concerned that Gas Marketing is a source of possible risk around 3Q reporting given Shares outstanding (m) 3,623 DJ (.STOXXE) 250.8 the specific forecasting challenges this quarter. Nonetheless, Eni remains one of our top picks in the sector as we look to a 2013/14 inflexion in operating momentum, FYE 12/31 2011A 2012E 2013E delivery of further restructuring and the possibility of progressive messaging around Revenue (EUR) 112,934 128,095 133,373 shareholder distributions. DB PBT (EUR) 19,213 20,927 23,206 Stated PBT E&P – Strong support from Libyan recovery 18,528 20,870 23,206 (EUR) Our forecast E&P result of €4,316m is expected to show good progress Y/Y (+10%) in DB EPS (EUR) 1.88 2.17 2.39 large part reflecting the EUR/USD move to 1.25 and the recovery in Libya volumes DPS (EUR) 1.04 1.08 1.11 P/E (DB EPS) (x) 8.5 8.1 7.3 (+180kboed Y/Y) driving an expected 12% rise in production to 1651kboed. However we see little Q/Q momentum stalling with volumes flat and oil price/FX static. We continue to look toward late-4Q/early-1Q to bring a series of project start-ups (MLE/CAFC, Angola LNG, Kashagan) which we expect to drive strong volume growth in 2013/4. Downstream Earnings – Gas Marketing likely to deteriorate further The main concern heading into 3Q reporting is the evolution of Gas Marketing. With volumes under pressure from more cost competitive spot gas/coal and a Q/Q widening of the price spread, we anticipate a deterioration in G&P EBIT to a loss of €410m (2Q €369m). Furthermore, with limited ability to accurately calibrate the quarterly performance of this business and the potential for the recent settlement of a legacy gas purchase contract dispute with Gas Terra to impact on-going profitability, we consider that the bias of risk to our forecast is to the downside. We perceive the uncertainty created by the continuing erosion of downstream earnings as one of the key risks to our positive thesis. Valuation & Risk Enter Text Here Our €21/sh target is based on a blended average of our DCF and SOTP valuations and implies that Eni can trade at 9.6x 2013e PE. Risks include oil price volatility, asset reliability, political volatility & Italian exposure. Originally published on 19 October
Mark Bloomfield (+44) 20 754-57905 [email protected]
Page 28 Deutsche Bank AG/London
25 October 2012 The Week Ahead
ENI
Source: Deutsche Bank
Deutsche Bank AG/London Page 29
25 October 2012
The Week Ahead
Erste Group Bank Hold
Reuters: ERST.VI Exchange: VIE Ticker: ERST Q3
Price (EUR) 18.47 Higher for longer: Loan loss provisions expected to remain elevated Price target (EUR) 17.50 Erste Group's financial performance continues to be challenged by high risk costs, in 52-week range (EUR) 19.78 - 10.64 our view. We forecast charges of 1.8% of RWAs in 2012, 1.4% in 2013 and 1.2% in Market cap (EUR) 7,376 2014, or 37%, 30% and 25% of NII respectively, thereby limiting the group capital Shares outstanding (m) 395 DJ (.STOXXE) 247.1 generation capacity. Our Hold rating for Erste Group Bank reflects both the strong position of the group in selected CEE countries but also ongoing difficulties in parts FYE 12/31 2011A 2012E 2013E of the region. While we see midterm profit growth opportunities we believe the Revenue (EUR) 5,796 6,972 6,837 current macro environment limits near-term share upside. PBT (EUR) -322 1,247 1,523 Stated Net 3Q12 results release 30 Oct pre open: Forecasting EUR252m pre-tax profit -860 642 844 Profit (EUR) Erste Group discloses 3Q12 results on 30 Oct pre open. A conference call is hosted EPS Adjusted 0.21 1.32 2.11 (EUR) the same day, 09:00h CET, dial-ins +44 20 71532027, +1 480 6299726. We forecast Dividend Yield 0.0 2.7 3.2 EUR364m operating profit and EUR160m net profit. Larger expected changes (%) quarter-on-quarter are lower other operating burdens, offset by higher loan loss P/E Adjusted (x) 66.1 14.0 8.7 provisions. We expect loan growth to remain anemic, resulting in further credit quality deterioration. EPS estimates cut by 7% for 2012, 14% for 2013, 10% for 2014 We reduce earnings estimates by EUR0.13 to EUR1.62 for 2012, by EUR0.34 to EUR2.11 for 2013, and by EUR0.30 to EUR2.66 for 2014. The earnings cuts are related to increased loss loan expectations, given ongoing economic weakness and reduced growth forecasts. Return of CEE growth still some time away We value Erste Group based on a sum-of-parts approach, using our 2013E. Forecasting individual business segments' profits and equity consumption, and applying business-specific assumptions on long-term growth potential as well as cost of equity, we compute fair P/B multiples; these are derived directly from a constant growth DDM. We forecast group ROE of c.9% and estimate COE at c.12% (see page 5 for details). Upside risk factors include quick normalization of credit risk cost and early retirement of government support measures; downside risk relates to weakening CEE currencies that impact credit quality of forex loans, and political roadmap changes.
Originally published on 23 October Alexander Hendricks (+49) 69 910-31928 [email protected]
Page 30 Deutsche Bank AG/London
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Source: Deutsche Bank
Deutsche Bank AG/London Page 31
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Fiat Hold
Reuters: FIA.MI Exchange: MIL Ticker: FIA Q3
Price (EUR) 4.27 Q312—Another diverging quarter Price target (EUR) 3.70 Fiat will present its quarterly earnings on 30 October, likely around noon. We believe 52-week range (EUR) 5.10 - 3.31 that trends seen in Q1/Q2 will have likely continued, with Chrysler and the luxury Market cap (EUR)(m) 5,281.5 cars being the only well performing businesses while the rest is suffering. Fiat SPA Shares outstanding (m) 1,237 Free float (%) 100 (ex Chrysler) earnings/cash performance will continue to be the driving force for the DJ (.STOXXE) 250.8 shares throughout the reporting in our view, as Chrysler’s cash flow remains largely
ring fenced. Hold maintained. FYE 12/31 2011A 2012E 2013E Revenue Old FIAT remains highly challenged—we expect a new plan 59,559 84,014 86,050 (EURm) Fiat was again suffering from a strong market contraction in the third quarter in Italy, DB PBT (EURm) 2,185 1,790 2,135 but we note that growing LATAM sales should have provided some support. Stated PBT 2,185 1,790 2,135 (EURm) However, we believe the old FIAT has remained strongly under pressure, impacted DB EPS (EUR) 0.19 0.34 0.64 by adverse pricing in most end markets. FIAT management aims to provide a new DPS (EUR) 0.00 0.10 0.24 outlook for its European business and we expect net exports to outside EU play a P/E (DB EPS)(x) 30.8 12.6 6.7 major role in this new plan (DBe: 200-300k units targeted). This will however in our view remain insufficient to fix the Italian utilization issues. Chrysler likely to be solid but no major change in trends We expect Chrysler to report again a solid quarter with an IFRS trading profit of E716m. We assume US GAAP profitability stood at 4%, above last year’s 3.7%. Chrysler (+11% unit sales in Q3 yoy) will in our view remain to be the only true bright spot inside the FIAT group (outside the luxury assets), but we continue to see this argument as subordinated as cash flow remains shielded from FIAT Spa investors. Valuation and risks We apply 3 valuation methodologies to Fiat SpA to set our target price. First we apply a sum-of-the-parts analysis, where we set values for the respective divisions alongside the profit potential and respective peer group of each business. Furthermore, we value the combined business on an EV/IC based valuation approach which is based on absolute capital returns. Lastly, we compare Fiat SpA to the automotive competitive landscape. Main risks consist of: 1) higher/lower market volumes in Italy and Brazil than anticipated given Fiat's dominant position in the two markets, 2) faster/slower recovery at Chrysler given Fiat's stake and options, and 3) higher/lower proceeds from further asset disposals, which could come in the coming years.
Originally published on 12 October
Jochen Gehrke (+49) 69 910-31949 [email protected]
Page 32 Deutsche Bank AG/London
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Fiat
Source: Deutsche Bank
Deutsche Bank AG/London Page 33
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Galp Energia Hold
Reuters: GALP.LS Exchange: LIS Ticker: GALP Q3
Price (EUR) 13.00 Retain Hold ahead of 3Q reporting Price Target(EUR) 16.25 Continued upstream production growth driven by the 2Q connection of the last well 52-week range (EUR) 15.07 - 8.50 on Lula coupled with gas arbitrage opportunities to Asia, improved refining margins Market cap (EUR)(m) 10,780.2 and lower finance costs should see Galp deliver another quarter of strong earnings Shares outstanding (m) 829 DJ (.STOXXE) 250.8 growth. Our model suggests EPS of €0.11/sh for the quarter. However, after a period of strong performance and with Eni’s remaining stake an overhang, we reiterate our FYE 12/31 2011A 2012E 2013E Hold recommendation. Revenue (EUR) 16,805 23,868 8,194 DB PBT (EUR) 410 575 720 Upstream Momentum Stated PBT With the last Lula well connecting successfully to the FPSO during 2Q upstream 591 598 720 (EUR) volumes will continue to show strong Y/Y momentum in 3Q (+60%), albeit at DB EPS (EUR) 0.30 0.46 0.49 19.5kboed Q/Q progress is slowing (+4%). Hence with crude prices and EUR/USD DPS (EUR) 0.20 0.24 0.29 P/E (DB EPS) (x) 47.3 28.2 26.7 essentially flat we see only modest improvement in Clean EBIT relative to 2Q12, forecasting €65m. Noting intra-quarter oil price volatility and given a production base essentially reliant on a just two assets, we see scope for deviation from forecast dependent upon the timing of liftings. Downstream: Forecasting challenges With benchmark refining margins stronger Q/Q we expect Galp to deliver a positive Downstream operating result, albeit an improvement limited by the lack of progress with utilisation rates which remain at the 71% of 2Q12. However, forecast Clean EBIT of €25m represents a decline from €51m in 2Q with an improved underlying refining result offset by somewhat weaker marketing (direct production sales -11% Y/Y) and the assumed absence of the €29m ‘time-lag’ benefit with 2Q. Valuation & Risk Given the majority of Galp’s valuation is yet to contribute to earnings, we use a SoTP method to value the company. Our SoTP suggests a valuation of €16.25/s. This is supported by our DCF (which assumes LT growth of 4.5%, a beta of 1 and a 8% CoC). Upside/Downside risks to our stance include decreasing/ increasing interest rates in Portugal or an amelioration/ deterioration in the Portuguese economy, upside/downside risk on the Refining upgrade and positive/poor exploration results in Brazil and/or Mozambique. Originally published on 19 October
Mark Bloomfield (+44) 20 754-57905 [email protected]
Page 34 Deutsche Bank AG/London
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Galp Energia
Source: Deutsche Bank
Deutsche Bank AG/London Page 35
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GEA Hold
Reuters: G1AG.DE Exchange: GER Ticker: G1AG Q3
Price (EUR) 25.18 Q3 results due Monday 29th October. We forecast orders of €1,398m (consensus: Price target (EUR) 25.00 €1,439m), sales of €1,504m (c: €1,449m), DB EBIT before PPA and charges of €142m 52-week range (EUR) 26.28 - 18.43 (c: €144.5m) and stated EPS of €0.46 (c: €0.50). Market cap (EUR)(m) 4,878.6 YE Shares outstanding 197,000,000 Logistics. GEA will report Q3 results at 0720 CET. There will be a conference call at (m) 1500 CET. Dial in: +49 69 9897 2623 (Germany), +44 20 7136 2055 (UK), +1 646 254 Shares outstanding (m) 194 DJ (.STOXXE) 250.8 3360 (US), +33 1 70 99 43 00 (France). Confirmation no: 8264690. The call will also be webcast on www.gea.com. FYE 12/31 2011A 2012E 2013E Revenue Heat Exchangers. Our primary disappointment with GEA has been the lack of margin 5,416 5,855 6,140 (EURm) improvement at HX. GEA has been pushing through a major restructuring plan, DB PBT (EURm) 462 480 560 closing 20 factories and taking out €65m of cost but the margin has remained stuck Stated PBT 399 415 532 (EURm) at just over 8%, well below the double-digit aspiration, see Figure 1. GEA says that DB EPS (EUR) 2.04 1.98 2.24 pricing has been negative and that it is reviewing whether to retain all its business DPS (EUR) 0.55 0.65 0.75 units. We would welcome shrinking HX to a higher quality core with less margin P/E (DB EPS) (x) 10.6 12.7 11.2 pressure and brighter prospects. Farm Technologies. FT reported the highest Q2 margin since 2008 but the drought in the US may well be hitting sales of dairy equipment. FT makes about one-third of its sales in the US. Food Solutions. After the discovery of operational and accounting problems in Q1, the Q2 loss was much reduced. We hope for a small profit in Q3 but the target of a FY break-even looks ambitious to us. No forecast changes. We are not making any forecast changes. Our 2012 margin forecast of 9.5% is slightly below the official target of at least 9.7%. The economic outlook is deteriorating and we would not be surprised to see the target slightly reduced. Target price and recommendation unchanged. With no change to forecasts and an unchanged €25 TP which is within 1% of the current price, we are sticking with a Hold recommendation. Upside risks: 1) We think that GEA has unusually attractive end market exposure and it could merit a premium rating over time, 2) GEA's guidance usually errs on the side of caution; there is potentially upside to our 2012 forecasts, 3) If GEA achieves its 12% margin target then our target price is probably too low. Downside risks: 1) About one-third of GEA is facing price competition, mainly in Farm Technologies and Heat Exchangers. Margins could come under greater pressure than we anticipate, 2) GEA does undertake medium sized projects with consequent execution risk, 3) GEA does have macro sensitivity and we think that macro uncertainty is still very high.
Originally published on 17 October
Peter Reilly (+44) 20 754-59835 [email protected]
Page 36 Deutsche Bank AG/London
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GEA
Source: Deutsche Bank
Deutsche Bank AG/London Page 37
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GlaxoSmithKline Hold
Reuters: GSK.L Exchange: LSE Ticker: GSK Q3
Price (GBP) 1,415.00 Unexciting 3Q in prospect, though may end sequence of ‘misses’ Price target (GBP) 1,400.00 GSK will report 3Q results on 31 October. After three consecutive quarterly 1,507.50 - 52-week range (GBP) 1,329.00 ‘misses’, we assume the scope for disappointment is slight given that the Market cap (GBP)(m) 69,507.2 company lowered its FY12 guidance in July. Its revised expectations for "in Shares outstanding (m) 4,973 line" FY sales and margin (where before it predicted growth) imply a broadly FTSE 100 INDEX 5,882.9 flat performance in 2H12 and the company explicitly stated that comparisons would be tougher for 3Q than 4Q (due to the timing of Cervarix FYE 12/31 2011A 2012E 2013E tender sales in Japan and flu vaccine shipments in the prior year). The Revenue (GBP) 27,387 26,726 26,880 DB PBT (GBP) 8,111 7,832 7,839 principal problem the company faces is the maturity of its prescription Stated PBT pharma business (which has shown roughly zero growth in the past nine 7,698 7,850 7,118 (GBP) months, despite exiting its patent cliff). This has been exacerbated by pricing DB EPS (GBP) 113.94 112.27 115.22 pressure (of c.6% pa) in Europe and - at the group level - by the impact of DPS (GBP) 70.00 74.00 78.00 divestments in Consumer health. Overall, with fx slightly adverse (-3%), we P/E (DB EPS) (x) 11.4 12.6 12.3 forecast group sales 6% lower at £6.7bn (£7.1bn) and Core EPS 7% lower, at 28.5p (30.6p). As implied above, the vaccines business (DBe -13%) is likely to be a notable drag in 3Q. More positively, though, we expect EM growth of 8%, continuing the rebound seen in 2Q, and growth in 'core' Consumer health brands of 5-6%. Key catalysts Given its growth struggles, we believe the key catalysts in the coming year are likely to relate to regulatory decisions on new drugs (notably Relvar, dolutegravir and the melanoma agents) and the quarterly progression of GSK’s now-deferred return to sales and margin growth. We expect limited pipeline news in the near future (other than data presentation at medical conferences). However 2013 should see Phase III data on high risk/reward cancer vaccine MAGE-A3 and the potential ‘game changing’ cardiovascular drug darapladib.. Risks & Valuation: Hold, PT 1,400p We value GSK using an average of PE (parity to sector 2013E) and DCF (WACC 9%; beta 1, ERP 5.5%, RFR from local 10yr govt bond yields; TGR 1%). Risks relate to regulatory decisions on new drugs and delivery of a return to growth. Additionally GSK’s “defensive” attractions may diminish if macro fears ease. Originally published on 11 October Mark Clark (+44) 20 754-75875 [email protected]
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GlaxoSmithKline
Source: Deutsche Bank
Deutsche Bank AG/London Page 39
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Hugo Boss Buy
Reuters: BOSSn.DE Exchange: GER Ticker: BOSSn Q3
Price (EUR) 72.29 Q3 results due 30 October Price target (EUR) 90.00 We forecast sales growth of 5% and EBITDA growth of just 2% due to the adverse 52-week range (EUR) 89.35 - 53.54 timing of wholesale shipments. These should reverse in Q4, but Q3 is a large quarter Market cap (EUR)(m) 4,989.2 and we now think it more likely that Hugo Boss will achieve the bottom end of its full Shares outstanding (m) 69 DJ (.STOXXE) 250.8 year guidance range (EBITDA growth of 10-12%) rather than the top. We have lowered our forecasts by 3-5%, also in part due to less favourable currency. However, we feel its FYE 12/31 2011A 2012E 2013E 5% dividend yield and CY13 PE 14.4x (in line with the Luxury sector) should provide a Revenue 2,059 2,299 2,472 support for the stock and we reiterate our Buy. (EURm) DB PBT (EURm) 384 420 466 Q3 expectations: Sales €647m and EBITDA €179.8m Stated PBT 382 419 466 (EURm) We expect Q3 to be the weakest quarter of the year (YoY EBITDA growth: Q1A +12.8%, DB EPS (EUR) 4.14 4.52 5.01 Q2A +22.9%, Q3E +1.5% and Q4E +11.3%). This is in part due to an assumed modest DPS (EUR) 2.89 3.39 3.76 slowdown in trends: we forecast Retail LFL sales growth to slow from +4% in Q2 to P/E (DB EPS) (x) 14.1 16.0 14.4 +2% in Q3. The main reason, however, is the timing of Wholesale deliveries which should mean that Wholesales sales growth (at constant FX) of +10% in Q2 reverses to - 9% in Q3. The introduction of four collections per year makes Q4 a more important quarter for deliveries and in addition much of the Fall collection was already delivered (and reported) in Q2. Full year forecasts lowered 3-5% We have lowered our H2 EBITDA growth forecast from +8% to +5% due to a slightly weaker environment and the recent strengthening of the Euro (c50% of sales are non- Euro). As a result we forecast full year EBITDA growth of 9.6% compared with management’s guidance of 10-12%. We would note our sales forecasts remain ahead of guidance. Valuation and Risks We set our TP based on DCF (WACC 9.3%, 2.2% long-term nominal growth), our preferred valuation methodology. Currently Hugo Boss trades on CY13E PE 14.4x, in line with the Luxury Sector, the most appropriate (though not perfect) benchmark. We estimate the shares are currently pricing in terminal margins of 17.8% (vs 18.8% in 2012E). The key risk is execution of what appears on paper to be an exciting margin expansion opportunity.
Originally published on 10 October Warwick Okines (+44) 20 754-58546 [email protected]
Page 40 Deutsche Bank AG/London
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Imperial Tobacco Buy
Reuters: IMT.L Exchange: LSE Ticker: IMT FY
Price (GBP) 2,310.00 FY results should put things in context Price target (GBP) 3,000.00 Listening to much of the debate around this stock one could be forgiven sometimes 2,595.00 - 52-week range (GBP) 2,209.00 for thinking this is a company that is really struggling. In fact, as revealed in the Market cap (GBP)(m) 22,975.0 trading update, this will be one of Imperial's strongest ever years of organic sales Shares outstanding (m) 998 growth, and in the EU we expect it to have produced better growth than PMI and Free float (%) 100 many other high-quality FCMG peers. It is our strong view that Imperial's business is FTSE 100 INDEX 5,882.9 very much more robust than the valuation gives it credit for - Buy.
FYE 9/30 2011A 2012E 2013E FY results due on Tuesday 30 October, 7am UK time Revenue 7,845 7,902 8,068 Management will host a meeting / webcast at 9:00am that day. In its trading update, (GBPm) DB PBT (GBPm) 2,541 2,673 2,826 the company has already said that cigarette equivalent volumes fell as much as 3% Stated PBT for the year, and that organic tobacco net revenues grew around 4% - close to the 2,153 2,192 2,416 (GBPm) best performance in a decade. We forecast adjusted diluted EPS of 200.2p and a DB EPS (GBP) 187.40 200.15 215.55 final dividend (ex in January, payable in mid-February) of 72.9p. DPS (GBP) 95.10 104.60 115.30 P/E (DB EPS) (x) 10.7 11.5 10.7 Margins should continue to move up Imperial is continuing to place more emphasis on innovation and marketing, but we believe that concerns that group margins are under pressure are overdone. Our forecasts have the tobacco EBIT margin increasing around 90bp over the last year. To the extent that rising revenue growth is allowing Imperial to invest incremental funds we regard that as a positive indicator of quality rather than a worry. Valuation & Risks Our core DCF assumptions are a WACC of 8.1% (leveraged beta of 0.86, net debt / EV ratio of 30%, risk-free rate of 5.3%, 6% cost of debt), ungeared cash flow growth 5% pa years 6-10, terminal growth rate of -1% (due to regulatory and social pressures on tobacco consumption). The key risks to Imperial, in addition to the general sector risks of regulation and taxation, are exchange rate movements (particularly euro/sterling) and competition in key markets. Originally published on 22 October Jonathan Fell (+44) 20 754-50251 [email protected]
Deutsche Bank AG/London Page 41
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Imperial Tobacco
Source: Deutsche Bank
Page 42 Deutsche Bank AG/London
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Linde Buy
Reuters: LING.DE Exchange: GER Ticker: LING Q3
Price (EUR) 130.75 Q3 12: EBITDA growth to continue (+10%) Price target (EUR) 153.00 We forecast Q3 EBITDA up 10% YoY as M&A and HPO offset the impacts of 52-week range (EUR) 136.15 - 102.95 modestly tougher macro and some one-off customer issues. We expect 2012 Market cap (EUR)(m) 23,235.0 guidance to be re-iterated with new guidance on HPO savings (beyond 2012) Shares outstanding (m) 179 Free float (%) 100 expected. Some one-offs around the first-time consolidation of Lincare have led us to modestly lower 2012 EPS (3%) but we make no material changes to forecasts for FYE 12/31 2011A 2012E 2013E 2013 onwards. Stock remains attractive (14x 2013E P/E) given the strong structural Revenue 13,787 15,210 17,313 growth on offer. (EURm) DB PBT (EURm) 1,861 1,981 2,447 Stated PBT 1,619 1,691 2,127 (EURm) DB EPS (EUR) 7.63 8.06 9.50 DPS (EUR) 2.50 2.73 3.20 P/E (DB EPS) (x) 14.6 16.2 13.8
Good growth in Gas (helped by acquisitions), Engineering weak We expect Gas underlying sales up 3% driven by on-site and healthcare. The rate of growth remains subdued by European macro alongside specific customer one-offs. Reported sales growth will be higher (+14%) due to acquisitions (APD Homecare, Lincare) and FX. Gas EBITDA is forecast up 12% although margins are forecast down 40bps YoY due to dilutive impact from M&A and customer one-offs. Engineering EBITDA is forecast down 10% on a tough base. On outlook, we expect mgmt to reiterate 2012 targets (growth in EBITDA and sales) and provide a formal update on HPO beyond 2012. Valuation and risks We set our target using DCF (TGR 3%, WACC 8.2%) and a SOTP model using peer multiples. Risks include weaker GDP, a lack of cost cutting/efficiencies from HPO, FX and aggressive competition for new on-site contracts. Originally published on 2 October Tim Jones (+44) 20 754-76763 [email protected]
Deutsche Bank AG/London Page 43
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NEXT Buy
Reuters: NXT.L Exchange: LSE Ticker: NXT Q3
Price (GBP) 3,601.00 Q3 Brand sales on 31st October, pre-market Price target (GBP) 3,650.00 Next is scheduled to report sales for the 13 weeks to 27th October on 31st October. 3,644.00 - 52-week range (GBP) 2,556.00 We forecast Brand sales for the combined Retail and Directory (online/ catalogue) Market cap (GBP)(m) 5,939.9 divisions will be +2.5% YoY, a significant improvement on the c-3% implied by Shares outstanding (m) 169 management at the Interims for the first 5-6 weeks of the period. Effectively we Free float (%) 100 assume that sales have improved to +5.5% in the more important final 8 weeks of FTSE 100 INDEX 5,882.9 Q2 (start of Autumn-Winter season) due to 1) the end of the consumer distraction of the Olympics, which we believe was a particular drag on Directory and 2) the arrival FYE 1/31 2012A 2013E 2014E Revenue of 'seasonal' cold & wet weather which was not experienced last year. As such we 3,441 3,569 3,741 (GBPm) have seen much stronger clothing data points recently from the BDO Stoy Hayward DB PBT (GBPm) 570 616 672 clothing tracker (averaging +6% in last 5 weeks), catalogue retailer N Brown (LFL Stated PBT 620 616 672 (GBPm) +9.4% in 6 weeks to 3th October), as well as BRC commentary on the category. DB EPS (GBP) 247.71 276.48 317.71 Slowing Directory due to off-price effects DPS (GBP) 90.00 100.45 115.43 P/E (DB EPS) (x) 9.5 13.0 11.3 By division we expect Retail LFL -3%, similar to H1 (-3.5%). However, the biggest change in trend is likely in Directory which we expect to grow at 8%, its slowest quarterly pace since 1Q11. This is largely due to the annualisation of the i) ‘Clearance’ tab launch and, ii) allocation of increased Sale stock to Directory vs Retail YoY. Together these were ‘worth’ 3.4% in H1. Hence, with International online continuing to contribute c3% we anticipate just a modest slowdown in UK full-price sales for the division.
Maintain Buy, pending better visibility on Christmas & 2013 demand We leave our FY forecasts materially unchanged, with PBT towards the top of management’s guided £575-620mn range (from 2H implied Brand sales -0.1% to +4.5%) due to the expectation that achieved gross margins will rise again in 2H. Hence, although we see limited upside until Christmas, we think an improving UK consumer could drive double-digit TSR again in 2013.
Originally published on 22 October Charlie Muir-Sands (+44) 20 754-75749 [email protected]
Page 44 Deutsche Bank AG/London
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Nokian Tyres Hold
Reuters: NRE1V.HE Exchange: HEX Ticker: NRE1V Q3
Price (EUR) 29.25 Q3 results will be released Tuesday 30 Oct Price target (EUR) 35.00 CEO will host a conf call the same day at 9.00am CET. We expect Q3 revenues 52-week range (EUR) 37.88 - 21.16 growth to slowdown from previous quarters, +12% to Euro 389m, EBIT to increase Market cap (EUR)(m) 3,817.1 by +12% too to Euro 107m, or a stable EBIT margin and net profit of Euro 85m, +9%. Shares outstanding (m) 130 Free float (%) – Our estimates are in line with consensus. And the slowdown from previous quarters DJ (.STOXXE) 250.8 should not be a surprise since flagged by CEO last August. Hold maintained on
valuation. FYE 12/31 2011A 2012E 2013E Revenue Q3 revenues of Euro 389m, +12% YoY 1,457 1,730 2,050 (EURm) In H1, the pass tire division revenues increased by a high 35%, driven by strong DB PBT (EURm) 359 445 525 volume growth in Russia (+60% or 3x the growth of the market) and a strong Mix Stated PBT 359 445 525 (EURm) (mostly the most profitable A segment). In Q3, volumes should slowdown (+15%) on DB EPS (EUR) 2.39 2.90 3.41 a high base effect and mix should be more neutral (stronger growth in lower margin DPS (EUR) 1.20 1.50 1.80 B segment). P/E (DB EPS)(x) 11.9 10.1 8.6 Q3 EBIT of Euro 107m, +12% too, or a stable EBIT margin at 27.5% We expect a stable EBIT margin at 27.5% due to i) a lower volume effect and ii) to a lower mix since volume growth should mostly come from less profitable B segment tires in Russia and to Central Europe (lower margin too). Net debt of almost Euro 500m Nokian ended H1 with a net debt of Euro 329m (versus net cash of Euro 8m end of 2011) and should end Q3 with a net debt of almost Euro 500m, before reversing almost in full in Q4. This deterioration is only due to seasonality (receivables) since 50% of winter tires are sold in the first 20 days after it starts snowing. Valuation/Risks Our TP of Euro 35 is based on an average of 2013e P/E of 12x and EV/EBITDA of 6x (tire companies do not have highly volatile volumes as they are mostly involved in the aftermarket, which is not overly cyclical). Key risk is a weaker volume environment after 2 years of strong outperformance while key upside would be a stronger growth rate of the Russian market where the group enjoys competitive advantage and higher margin. Originally published on 12 October Gaetan Toulemonde (+33) 1 4495-6668 [email protected]
Deutsche Bank AG/London Page 45
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Novo Nordisk Sell
Reuters: NOVOb.CO Exchange: CPH Ticker: NOVOb Q3
Price (DKK) 970.00 3Q results due 31 October Price target (DKK) 777.00 We expect Novo to report typically strong 3Q results with sales expanding 20% 52-week range (DKK) 970.50 - 535.50 helped by a relatively light comparative quarter (loss of Walmart contract, EU Prandin Market cap (DKK)(m) 532,018.5 generics) and positive currency effects. This should lead to diluted EPS growth of Shares outstanding (m) 553 Free float (%) 100 28% to DKr9.45. We expect modern insulins to drive growth (+22%) aided by recent OMX Copenhagen 20 503.3 US price increases, with Victoza also significantly contributing (+75%) reflecting its
consistent launch trend since launch. Key sales uncertainties revolve around FYE 12/31 2011A 2012E 2013E NovoSeven’s usage which we expect to normalize at DKr2.2bn (+8%). Across costs, Revenue (DKK) 66,346 77,732 84,217 we see a moderate increase in SG&A (+17%) reflecting Novo’s pre-launch sales force DB PBT (DKK) 21,925 26,763 30,068 build for Tresiba. Further, given guidance than implies a higher rate of R&D in 2H12, Stated PBT 21,925 26,763 30,068 (DKK) we expect a 18% build in this cost, although lower than expected R&D spending s DB EPS (DKK) 29.99 37.27 43.23 remains a source of upside to FY12 EPS given a relative lack of visibility of new high DPS (DKK) 14.00 17.32 20.09 cost projects. All in all, we expect a good quarter and see a moderate chance of a P/E (DB EPS) (x) 20.6 26.0 22.4 positive tightening of the guidance range. Key catalysts The focus for the remainder of 2012 remains the approval of Novo’s new potential blockbuster, long-duration insulin, Tresiba. We expect a European CHMP positive opinion following either the October (19th) or November (16th) committee meetings. More importantly, and a source of greater volatility, the FDA will hold an ad-com on 8 November to discuss the risk/benefit of the drug. Given the FDA’s heightened safety concerns in this area, we expect the discussion to focus on the usual issues of cardiovascular safety, numerical imbalances in pooled data as well data issues such as missing data, lack of blinding. However, given the data released to date, we are yet to see any major concerning data imbalance and further do not see a mechanistic reason for one. As such we expect the most likely decision to be positive. However, given consensus forecasts reflect approval, we see the risk reward as limited into the event from a EPS upgrade perspective. Risks & Valuation: Sell, PT DKK 777 (previously DKr770) We value Novo Nordisk based on an average of 2013E PE (50% premium to our 12x sector target), and DCF (WACC 9%, Beta 1, ERP 5.5%, TGR 2.5%). This yields our price target. Significant upside risks include the failure of GLP-1 competition to impact Victoza sales, and positive results of liraglutide in obesity as well as stronger than already expected insulin market growth. Originally published on 11 October Tim Race (+44) 207 54-76522 [email protected]
Page 46 Deutsche Bank AG/London
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Novo Nordisk
Source: Deutsche Bank
Deutsche Bank AG/London Page 47
25 October 2012
The Week Ahead
Prosegur Hold
Reuters: PSG.MC Exchange: MCE Ticker: PSG Q3 Looking for a progressive normalization of the EBIT margin Price (EUR) 3.86 We think the distorting factors which affected EBIT margin in Latin America in H1, Price target (EUR) 4.15 particularly related to integration of acquisitions, are being progressively diluted and 52-week range (EUR) 4.66 - 2.98 Market cap (EUR)(m) 2,381.3 the company should see margins in H2 quite similar to the full year 2011. The first Shares outstanding (m) 617 synergies from the Nordeste consolidation in Brazil should also help. Regarding DJ (.STOXXE) 250.8 Europe we think results will remain depressed with a very low EBIT. Although we
possibly saw the weakest point in Q2 2012, it’s unclear what could be the timing of FYE 12/31 2011A 2012E 2013E any relevant recovery, especially in Spain-Portugal. Revenue 2,809 3,618 3,800 (EURm) Still major uncertainties ahead DB PBT (EURm) 260 279 334 Stated PBT Although the prospects for Prosegur’s business performance remain encouraging in 254 279 334 (EURm) its Brazilian core market, as well as in the main part of the Latin American markets, DB EPS (EUR) 2.86 0.30 0.35 the risk of a potential devaluation of the currency in Argentina is still high. When DPS (EUR) 1.04 0.11 0.12 considering also the uncertainties regarding the timing of the turnaround of the P/E (DB EPS) (x) 1.3 13.0 10.9 operations in the Iberian Peninsula and Germany, we think it unlikely that there will be any relevant re-rating of the shares in the next months. Hold.
Originally published on 22 October Jose-Francisco Ruiz Solera (+34) 91 335-5948 [email protected]
Page 48 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Royal Dutch Shell plc Buy
Reuters: RDSa.L Exchange: LSE Ticker: RDSa Q3
Price (GBP) 2,149.50 Rather frustrating. Stars just refuse to align. Price Target(GBP) 2,475.00 We expect Q3 12 to prove another somewhat frustrating quarter with results held 2,402.00 - 52-week range (GBP) 1,970.50 back by planned outages in high margin areas not least the North Sea and unplanned Market cap (GBP)(m) 134,869.4 outages across the US GoM and in Qatar (Pearl). In the downstream our impression Shares outstanding (m) 6,274 is that the challenged demand environment will have offset much of the very evident FTSE 100 INDEX 5,882.9 improvement in refining margins globally. All told, the quarter has all the hallmarks of being another in which Shell’s potential to drive cash will be undermined by FYE 12/31 2011A 2012E 2013E previously unforeseen outages. Revenue (USD) 470,171 449,135 439,738 DB PBT (USD) 38,022 35,750 38,435 Not the quarter we had hoped for Stated PBT 46,923 41,782 41,237 (USD) We had expected Q3 ‘12 to represent the first in which the company demonstrated DB EPS (USD) 3.97 4.00 4.30 the full cash and profit potential of the mega-projects brought on stream over the DPS (USD) 1.68 1.72 1.80 past 18 months. In reality, unexpected downtime at certain of these facilities P/E (DB EPS) (x) 8.7 8.6 8.0 combined with the deleterious effect of Hurricane Isaac and the delayed start up of the Motiva expansion suggest this quarter is unlikely to be much different from Q2 12. Production from the ‘Big-3’ at 360kboe/d will be flat on Q2 whilst the loss of c20kboe/d of upstream GoM production will ensure another quarter of essentially poor Americas net income. Downstream =- margins belie the underlying poor demand conditions In the Downstream operations our strong impression is that this will not be a quarter in which Shell register the gains it might from the very strong margins that have been available across all regions of the globe. With plant maintenance scheduled to be above that of the year ago quarter, plant availability looks set to have been limited with the mishaps at Motiva further undermining the outlook for profit and margin capture. In Chemicals, poor demand is likely to have been a feature that impacted negatively on margins – a statement that we suspect will also pertain to the marketing businesses. Valuation & Risk As the business is rebuilt so Shell is moving towards the nirvana of generating sufficient cash from its increasingly long lived upstream activities to fund growth through cycle and pay a sustainable and growing dividend. Assuming long term growth of 1.0% and a 9.5% CoC (beta 0.9,) we see fair value at c2475p implying a 9.0x P/E target. Risks include delays at Pearl GTL. Originally published on 19 October Lucas Herrmann (+44) 20 754-73636 [email protected]
Deutsche Bank AG/London Page 49
25 October 2012
The Week Ahead
Royal Dutch Shell
Source: Deutsche Bank
Page 50 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Sanoma Sell
Reuters: SAA1V.HE Exchange: HEX Ticker: SAA1V Q3
Price (EUR) 6.86 Reports 31-Oct: Ad trends unlikely to be better than Q2 Price target (EUR) 6.00 In the three key ad markets (Neths, Finland, Belgium) Q2 was appreciably worse than 52-week range (EUR) 11.46 - 5.82 Q1. We don’t think that Q3 conditions will have lurched down again (necessitating Market cap (EUR)(m) 1,115.5 another profit warning) but we do think that they will have remained stubbornly poor Shares outstanding (m) 163 DJ (.STOXXE) 250.8 – average consumer confidence scores for Neths were -21 in Q2, -18 in Q3, in Finland were +9 and then +2, and for Belgium were -11 and -14 in Q2 and Q3. We FYE 12/31 2011A 2012E 2013E model Q3 organic revenue declines (incorporating circulation) at 10%, 5% and 6% for Revenue 2,746 2,357 2,363 NL, FI and BE. (EURm) DB PBT (EURm) 245 184 177 Circ trends – VAT impact / consumer confidence? Stated PBT 144 157 172 (EURm) In Finland 10 months have passed since the introduction of 9% VAT (previously zero) DB EPS (EUR) 0.99 0.72 0.69 on mags / newspaper subscriptions and we assume that a clearer picture of impact DPS (EUR) 0.60 0.40 0.40 will have emerged with a lot of the base having now renewed (or not). We also think P/E (DB EPS) (x) 12.4 9.5 9.9 that newsstand circulations in Finland, and Neths / Belgium (and elsewhere) could also be weak as sustained periods of weak consumer confidence impact what are discretionary purchases. Price points on consumer mags have been steadily pushed higher by the industry in order to offset circulation declines and customer resistance will eventually be met. Recasting the model We’ve recast our model for the country-based disclosure of the Media division (Mags+TV) and other restatements. Reviewing our underlying estimates, our adj. op profit forecast for 2012 falls to E247.2m from E236.5m (margin from 10.5% to 10.0%, against guidance of around 10%). EPS declines are minimal on lower interest and minority costs. Q3 forecasts The fig below shows our Q3 revenue and adj. op profit forecasts by division. We model Q3 adj. EPS at 27c against 40c in Q3-11, down on the greater share of profits coming from businesses with Minorities.
Originally published on 15 October Mark Braley (+44) 20 754-59904 [email protected]
Deutsche Bank AG/London Page 51
25 October 2012
The Week Ahead
Swedish Match Sell
Reuters: SWMA.ST Exchange: STO Ticker: SWMA Q3
Price (SEK) 262.80 Remains a bit expensive Price target (SEK) 250.00 Swedish Match continues to generate steady profit growth and is exemplary in its 52-week range (SEK) 291.70 - 210.80 policy of returning all surplus cash flow to shareholders via dividends and buy-backs. Market cap (SEK)(m) 53,205.5 But we are not convinced that, once growth in the US cigar business slows, this Shares outstanding (m) 204 Free float (%) 100 company will be able to generate mid to long-term growth higher than that of its OMX Stockholm Index 330.0 tobacco peers. We therefore consider the stock's premium rating somewhat
expensive, and stick with our Sell recommendation. FYE 12/31 2011A 2012E 2013E Revenue Q3 results to be reported on Tuesday 30 October, 8:15am CET 11,666 12,399 12,674 (SEKm) Management will host a conference call / webcast at 13:00 CET. We expect a good DB PBT (SEKm) 3,237 3,682 3,794 quarter from the company, with results boosted by strong growth at STG (where net Stated PBT 3,180 3,655 3,737 (SEKm) income was depressed by restructuring initiatives in the prior year period). The DB EPS (SEK) 12.33 14.59 15.40 market’s focus is likely to remain on 1) dynamics in the Swedish market – SWMA DPS (SEK) 6.50 7.70 8.10 has been losing share as lower-price brands have gained ground, 2) whether P/E (DB EPS) (x) 17.4 18.0 17.1 momentum in US cigars is continuing, and 3) the roll-out of snus in the US. Please see page 3 for full details of our Q3/9m forecasts. Small cuts to our forecasts We have adjusted our model for the recent strengthening of the SKr against the dollar, and expectations of a somewhat higher tax rate from 2013 – we are now forecasting 23% for the latter, up from around 21.5% this year. Valuation & risks Core assumptions behind our DCF-based price target are a WACC of 7.8% incorporating a levered beta of 0.8, risk-free rate of 5%, equity risk premium of 4.3%, net debt / EV ratio of 15%), medium-term cash flow growth of 5% a year, and a post year-10 terminal growth rate of -1% (in line with the sector average). Key upside risks to our target being achieved include corporate activity, favourable FX movements (Swedish Match generates around one-third of its earnings in US$), and stronger- than-expected trading momentum.
Originally published on 22 October Jonathan Fell (+44) 20 754-50251 [email protected]
Page 52 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Swedish Match
Source: Deutsche Bank
Deutsche Bank AG/London Page 53
25 October 2012
The Week Ahead
TDC Hold
Reuters: TDC.CO Exchange: CPH Ticker: TDC Q3
Price (DKK) 41.15 Group: We forecast Q3 revenues of DKK 6,527m and EBITDA of DKK 2,641m which is Price target (DKK) 50.00 in line with consensus. For the full year, we forecast revenues of DKK 26.55bn 52-week range (DKK) 46.90 - 37.02 (guidance 26.0-26.5bn) and EBITDA of DKK 10.3bn (guidance 10.3- 10.5bn). Overall, we Market cap (DKK) 33,584.1 expect revenue trends to be broadly in line with last quarter but EBITDA trends will be Shares outstanding (m) 816 Free float (%) 45 weaker as the savings from last year’s move to reduce handset subsidies have now OMX Copenhagen 20 503.3 annualised.
Wireless: We forecast a 7.0% revenue decline in consumer wireless (Q2 -7.9%) and a FYE 12/31 2010A 2011E 2012E Revenue 10.0% decline in business wireless (Q2 -12.1%). Absolute revenue trends remain weak 26,167 26,304 26,550 (DKKm) but we expect the market to take some comfort from the fact that trends are unlikely to DB PBT (DKKm) 2,679 3,997 4,375 have deteriorated further despite some aggressive price campaigns from Telenor and 3 Stated PBT 2,586 3,944 4,317 (DKKm) Denmark. DB EPS (DKK) 3.80 3.51 4.34 Fixed: TDC’s fixed line trends remain solid and we expect retail line loss to be similar to DPS (DKK) 0.00 4.35 4.60 P/E (DB EPS) (x) 12.5 11.7 9.5 last quarter at -30k. Additionally, we expect cable revenue growth to be similar to last quarter with 6% revenue growth (Q2 7%). Investor Day: TDC will host its Investor Day on 6 November. As shown in the table below, our revenue and EBITDA forecasts are broadly in line with consensus through to 2015. We believe there is limited risk of a large warning unless TDC believes the scope for opex savings will be materially lower going forward. There is some uncertainty over the dividend as TDC is currently paying out close to 100% of real EFCF. If TDC continues with its policy of paying out 80-85% of pre-restructuring cash flow, this implies a dividend of approximately DKK 4.2 per share and we reduce our forward dividend estimates accordingly.
Originally published on 16 October Keval Khiroya (+44) 20 754-18164 [email protected]
Page 54 Deutsche Bank AG/London
25 October 2012 The Week Ahead
TomTom Sell
Reuters: TOM2.AS Exchange: AEX Ticker: TOM2 Q3
Price (EUR) 3.97 TomTom results on 30th Oct – weak Auto, Apple licensing impact small Price target (EUR) 2.10 TomTom will report Q3/12 results on Tuesday, 30th October at 7:30am CET followed 52-week range (EUR) 4.51 - 2.49 by an analyst call at 2pm. We deem market dynamics in PNDs and especially Market cap (EUR)(m) 880.9 Automotive to remain difficult for TomTom while we do not expect a strong positive Shares outstanding (m) 222 Free float (%) 100 surprise from first Apple licensing revenues. We forecast revenues of E288m (-15% DJ (.STOXXE) 247.1 y/y, +10% q/q, consensus E285m). Adj. EBIT of E25m (8.6% margin) results in E0.13
adj. dil. EPS, broadly in line with consensus (E0.12). FYE 12/31 2011A 2012E 2013E Revenue Expect Q3 revenues to decline 15% y/y, driven by weak Auto & PND demand 1,273 1,100 1,014 (EURm) Consumer: We expect revenues in this division to fall 24% y/y (DBe E171m, +10% DB PBT (EURm) 146 105 78 q/q), similar to the decline in Q2. This is largely driven by weaker PND sales due to Stated PBT -441 47 23 (EURm) smartphone cannibalization and macro softness and we do not expect demand here DB EPS (EUR) 0.54 0.37 0.27 to meaningfully stabilize soon. We forecast PND sales in FY12 to fall substantially DPS (EUR) 0.00 0.00 0.00 with unit shipments -21% and 6% ASP declines. P/E (DB EPS) (x) 8.6 10.8 14.5 Automotive: We model revenues of E60m (+2% y/y, flat q/q) but see downside risk to our estimates as we expect a sustained slowdown in Automotive into H2/12e as inventory & production cuts at European mid-range car OEMs adversely impact TomTom. Renault and Fiat are large customers in this segment (we believe Renault alone accounts for ~1/3 of Auto revenues) and we currently see little signs of improving trends here. We therefore remain cautious on TomTom’s mid-term growth prospects in this segment. Licensing: First licensing payments from Apple could positively impact Q3 but we do not believe Apple licensing income to be sufficient to completely offset declining revenues from Google in this segment over the coming quarters. TomTom’s agreement with Google will likely phase out in 2013 and we deem this to still account for ~E30m of annual licensing income. For Q3, we expect revenues of E35m (-2% y/y, +22% q/q). Business Solutions: We model ongoing solid growth and Q3 revenues of E22m (+27% y/y, +20% q/q). Expect EBIT to decline 30% y/y as revenues continue to fall Gross margins of 52.4% and E126m of OpEx should drive E39m of adj. EBIT (13.7% margin, -30% y/y, +38% q/q) and E0.13 of adj. dil. EPS. This compares to Q3 consensus of: GM 51%, OpEx E124m, E38m adj. EBIT and E0.12 EPS. Challenging long-term outlook not reflected in valuation TomTom’s shares currently trade at 14.5x FY13e EPS and valuation implies ~1.5% terminal FCF growth (based on our reverse DCF) vs. a -33% 2009-12e FCF CAGR. We hence do not deem the declining longer-term revenue outlook of the company to be reflected in valuation and retain our Sell rating. Originally published on 23 October Johannes Schaller (+49) 69 910-31731 [email protected]
Deutsche Bank AG/London Page 55
25 October 2012
The Week Ahead
Total SA Hold
Reuters: TOTF.PA Exchange: PAR Ticker: TOTF Q3
Price (EUR) 39.34 Currency helps Price Target(EUR) 42.00 Q3 ’12 results should reflect a modest benefit from higher margin barrels in start-up 52-week range (EUR) 42.70 - 33.63 projects combined with a much improved result in the downstream given the Market cap (EUR)(m) 89,105.1 considerable strength of refining margins. Most significantly, however, we expect Shares outstanding (m) 2,265 Free float (%) 100 the weakened € to add usefully to headline numbers. Overall, we look to a 12% DJ (.STOXXE) 250.8 improvement in EPS despite relatively flat prices and reduced volumes.
Upstream gains from improved margins FYE 12/31 2011A 2012E 2013E Revenue (EUR) 200,625 248,237 252,674 In its Upstream we expect performance to reflect the continued ramp of production DB PBT (EUR) 25,396 28,015 29,398 in high margin areas not least Angola, Nigeria and the North Sea. Although Stated PBT 26,529 28,015 29,398 production is expected to be essentially flat y-o-y not least as the negative impact of (EUR) the Elgin outage (-2.5%) continues to impact, overall margins per bbl are estimated DB EPS (EUR) 4.98 5.64 5.78 DPS (EUR) 2.28 2.32 2.40 to have improved by c14% in € terms. We would expect the cash impact of this pick P/E (DB EPS) (x) 7.8 7.0 6.8 up to be more marked given the increase in depreciation associated with new
sources of production. Refining income set to quadruple As Europe’s leading refiner Total’s performance in its downstream activities is expected to reflect the very strong improvement in refining margins witnessed across the Q3 12 period. A TRCV marker margin of $51/tonne – or broadly four times the level of a year ago - speaks for a very healthy backdrop which it would appear Total has been able to take advantage of. Although some of the improvement is expected to have been ceded to a poor petrochemical performance we look to a quadrupling of refining profits with divisional income broadly doubled y-o-y. In the Supply businesses profits are seen as essentially flat despite the negative drag of certain Government mandated initiatives in France. Value & Risk As discussed in our 2 April report ‘Total: A work in progress’ we are supportive of many of Total’s more recent strategic moves. Execution risk and capital build suggest to us however that there is no rush to buy the value. Assuming a 9% WACC and sector growth, our DCF model suggests fair value of €42/share or a 10% discount to our 9x sector PE target. Upside risks include exploration success off West Africa; downside Australian project delays. Originally published on 19 October Lucas Herrmann (+44) 20 754-73636 [email protected]
Page 56 Deutsche Bank AG/London
25 October 2012 The Week Ahead
Total SA
Source: Deutsche Bank
Deutsche Bank AG/London Page 57
25 October 2012
The Week Ahead
UCB Hold
Reuters: UCB.BR Exchange: BRU Ticker: UCB Q3 Trading Update
Price (EUR) 44.68 Interim (3Q) update due on 29 October Price target (EUR) 41.00 As usual we expect UCB to simply give an update on sales during the quarter, along 52-week range (EUR) 45.10 - 28.76 with qualifying statements relative to its guidance for the full year. In terms of the Market cap (EUR)(m) 8,001.3 core CVN drivers, IMS data suggests both Vimpat and Cimzia US prescriptions Shares outstanding (m) 179 DJ (.STOXXE) 250.8 continue to grow solidly with total prescriptions for both up 6% QoQ leading to 34% and 26% YoY increases respectively for the quarter. For 3Q12 we forecast CVN sales FYE 12/31 2011A 2012E 2013E of €247m (+57% YoY) benefiting modestly from initial stocking following Neupro’s Revenue (EUR) 3,246 3,285 3,306 US launch in July. Our forecasts assume total 3Q revenue of €804m, with sales of DB PBT (EUR) 229 241 317 Cimzia of €127m (+63% yoy), Vimpat of €85m (+57% yoy) and Neupro of €36m Stated PBT 229 241 317 (EUR) (+44% yoy). We expect Keppra sales to continue to benefit from a modestly slower DB EPS (EUR) 1.89 1.74 1.89 than expected decline in Europe with franchise sales down 10% yoy. We expect DPS (EUR) 1.00 1.02 1.07 company guidance to be reiterated with revenues expected to exceed €3.2bn; P/E (DB EPS) (x) 15.9 25.6 23.6 recurring EBITDA of €630m-€660m and core EPS of c.€1.70. We currently forecast FY revenues of €3.29bn, recurring EBITDA of €635m (-7% YoY) and Core EPS of €1.74 (-8% yoy). We continue to believe the CVN portfolio has the potential to drive a return to double digit EPS growth (CAGR 17% 2012-16E). However, continued exceptional share price performance means these growth prospects are fully valued in our view. Key catalysts The key driver for UCB’s shares is the commercial performance of its core growth drivers Cimzia (rheumatoid arthritis), Vimpat (epilepsy) and Neupro (Parkinson’s; Restless legs). As such UCB’s share price performance is likely to reflect management’s ability to “meet and beat” analyst expectations. Potential approvals of Cimzia in Japan (2013) and in new indications (i.e. psoriatic arthritis, ankylosing spondylitis) should help to improve the addressable market opportunity and could help with efforts to improve formulary coverage. However, these will not benefit sales until late 2013. Of particular focus is likely to be news on the pipeline with detailed clinical data from a Phase II trial of the anti-sclerostin antibody CDP7851 in postmenopausal osteoporosis due at the ASMBR meeting, Oct 12-15. We also expect headline data from PhII trials of CDP7851 in fracture healing around the end of 2012. A potential approval of a generic formulation of Concerta (3Q12) could represent a short-term upside to consensus. Risks & Valuation: Hold, PT Euro 41 Our price target is based on DCF (WACC 9%; beta 1.2; ERP 5.5%; TGR 2%). Risks relate to better/worse commercial execution on Cimzia, Vimpat and Neupro; pipeline failure/success; and clinical data on potential new competitors. Originally published on 11 October Richard Parkes (+44) 20 754-50470 [email protected]
Page 58 Deutsche Bank AG/London
25 October 2012 The Week Ahead
YIT Corporation Hold
Reuters: YTY1V.HE Exchange: HEX Ticker: YTY1V Q3
Price (EUR) 15.38 Uninspiring numbers, still too early to turn positive Price target (EUR) 14.90 We expect Q3 results to be uninspiring with continued weakness in Building Services, 52-week range (EUR) 17.20 - 10.07 where cost cutting will not yet be visible and volumes should have deteriorated. Finnish Market cap (EUR)(m) 1,923.7 Construction should remain stable and Russian operations could surprise positively, but Shares outstanding (m) 125 DJ (.STOXXE) 250.8 not sufficiently to offset the weakness elsewhere, in our view. The shares are trading at almost 8.6x 2013E EBITDA, which, with lack of earnings momentum, leaves little FYE 12/31 2011A 2012E 2013E rerating potential. Revenue 4,526 4,689 4,765 (EURm) Q3 results on Tuesday 30 October at 06.00 UK time DB PBT (EURm) 175 240 269 For Q3, we expect, in line with consensus, 2% yoy sales growth and 17% yoy EBIT Stated PBT 175 240 269 (EURm) growth (for details see page 4). There are two key points to focus on in the results. DB EPS (EUR) 1.06 1.45 1.59 Firstly, for Building Services margins, we expect 20bps yoy deterioration in Northern DPS (EUR) 0.70 0.75 0.77 Europe and see risk for weaker-than-expected margins in Central Europe given the P/E (DB EPS) (x) 15.2 10.6 9.7 weakness in leading indicators (German IFO and so on). Secondly, the International Construction margin (which has been volatile between quarters) could surprise positively due to the percentage of completion-based accounting, as the degree of completion gradually increases. Building Services turnaround needed to turn more positive We see great potential in the Russian operations; management targets to improve the ROI there to 20%, which seems achievable in the long term (as highlighted during the CMD). However, as long as the core Northern European Building Services weakness keeps stealing investor attention, it is unlikely that investors are willing to buy the long- term story and push the shares higher to warrant a more positive stance. Rich valuation limits upside potential; no catalysts in sight We maintain our Hold rating as further re-rating potential seems limited due to the relatively rich valuation (8.6x 2013E EV/EBITDA) and challenging market sentiment. We value YIT using an SOTP valuation, which reflects the different nature of the operations (see page 5). Upside/downside risks: faster-than expected margin recovery in Building Services/price pressure; weak residential prices.
Originally published on 18 October Manu Rimpela (+44) 20 754-55669 [email protected]
Deutsche Bank AG/London Page 59
25 October 2012
The Week Ahead
UK valuations by sector and country
Figure 3: UK valuation by sector and country Index1 EV/OC EV/Sales Yield (%) P/E P/BK ROE (%) 24/10/2012 11E 12E 13E 11E 12E 13E 11E 12E 13E 11E 12E 13E 11E 12E 13E 11E 12E 13E Regions/Countries USA 1408.8 1.8 1.8 1.7 1.7 1.7 1.6 1.2 1.3 1.3 22.2 27.3 22.0 2.6 2.9 2.7 10.7 10.8 13.2 Europe 269.5 1.4 1.4 1.4 1.1 1.0 1.0 3.9 3.8 4.1 11.7 11.9 10.9 1.6 1.7 1.6 14.2 13.3 14.4
Europe Europe ex UK 1.5 1.4 1.4 1.1 1.0 1.0 4.1 3.8 4.1 12.1 12.1 11.1 1.6 1.7 1.6 13.1 12.6 14.0 Benelux 1.3 1.3 1.3 0.7 0.7 0.7 4.5 4.3 4.5 10.7 11.0 10.2 1.8 1.6 1.5 16.4 15.0 15.4 France 3426.5 1.3 1.3 1.3 1.0 0.9 0.9 4.0 4.2 4.4 12.4 12.2 10.8 1.3 1.3 1.4 11.1 10.8 12.4 Germany 7192.9 1.4 1.4 1.3 0.7 0.7 0.7 3.2 3.0 3.2 10.7 10.5 10.0 1.3 1.5 1.4 15.2 12.2 13.3 Italy 15706.6 1.1 1.0 1.0 1.2 1.0 1.0 4.5 4.5 4.9 11.7 9.6 8.8 1.0 1.0 0.9 4.8 10.9 11.0 Nordic Region 1.7 1.6 1.6 1.2 1.2 1.1 3.7 3.8 4.1 13.2 13.8 12.0 2.0 1.9 1.8 16.0 14.4 15.2 Spain 7791.5 1.3 1.2 1.2 1.6 1.4 1.3 6.1 4.0 5.1 11.8 12.3 10.8 1.7 1.5 1.4 14.6 12.6 13.7 Switzerland 6627.4 2.3 2.5 2.4 1.9 1.9 1.8 3.6 3.5 3.8 13.5 13.7 12.5 2.8 2.9 2.6 18.7 19.0 20.4 United Kingdom 5804.8 1.6 1.5 1.4 1.2 1.2 1.2 3.8 3.9 4.1 10.6 11.9 11.1 2.0 1.9 1.7 18.7 16.1 16.5
European sectors Automobiles & Parts 312.0 0.9 0.9 0.8 0.4 0.4 0.3 2.7 2.6 3.1 6.5 7.0 6.5 0.8 0.9 0.8 20.1 13.0 12.4 Basic Resources 441.4 1.5 1.2 1.1 1.5 1.4 1.3 2.6 3.2 3.4 10.4 11.9 10.5 1.4 1.3 1.2 13.8 11.0 12.2 Chemicals 612.2 1.8 1.9 1.8 1.2 1.2 1.1 3.1 3.0 3.3 11.8 12.7 11.6 2.0 2.2 2.0 16.4 12.9 15.9 Construction & Materials 239.7 1.1 1.0 1.0 0.9 0.8 0.8 3.7 4.1 4.4 13.1 14.6 11.7 1.0 1.0 1.0 8.4 6.6 8.3 Financial Services 235.8 1.9 1.6 1.6 5.2 4.8 4.7 6.7 5.8 5.7 10.2 11.2 10.6 1.9 2.0 1.9 23.2 17.2 18.3 Food & Beverage 445.8 2.0 2.2 2.2 1.8 2.0 1.9 3.1 2.8 2.9 15.6 16.8 15.7 3.0 3.2 2.9 18.2 18.3 18.3 Health Care 483.5 2.2 2.5 3.2 2.5 2.8 2.7 4.0 3.6 3.9 10.9 13.1 12.3 3.0 3.2 4.0 21.4 20.2 24.6 Industrial Gds & Services 319.0 1.8 1.8 1.7 1.0 0.9 0.9 3.3 3.3 3.6 14.3 13.3 11.9 1.9 2.0 1.8 13.4 15.6 16.0 Media 178.7 1.7 1.7 1.7 1.7 1.7 1.6 4.5 4.2 4.6 11.8 12.0 11.2 1.8 1.9 1.7 13.7 15.6 16.1 Oil & Gas 336.3 1.2 1.1 1.0 0.7 0.6 0.6 4.2 4.4 4.7 8.6 8.9 8.2 1.4 1.2 1.1 18.9 15.2 14.3 Personal & H'hold Gds 481.0 2.5 2.7 2.6 2.1 2.3 2.1 2.9 2.8 3.0 15.8 16.2 14.6 2.9 3.1 2.8 17.1 19.1 19.3 Real Estate 122.1 1.0 0.9 0.9 10.5 10.5 10.4 4.3 4.4 4.6 18.3 19.2 17.3 0.8 0.9 0.8 8.1 8.7 11.3 Retail 260.0 1.8 1.7 1.7 0.6 0.5 0.5 3.5 3.8 3.9 14.3 13.5 12.9 2.0 2.1 2.0 14.1 14.6 16.1 Technology 206.4 2.6 2.5 2.4 1.2 1.2 1.2 2.3 1.7 1.9 15.0 21.0 16.2 2.3 2.5 2.3 12.8 7.3 11.8 Telecommunications 235.9 1.1 1.1 1.0 1.7 1.6 1.6 7.2 6.5 7.2 10.2 9.4 8.9 1.4 1.3 1.3 8.4 11.2 14.5 Travel & Leisure 134.5 1.4 1.5 1.4 0.8 0.8 0.7 3.4 3.3 3.0 14.5 17.1 13.5 1.3 1.5 1.4 7.6 7.2 10.5 Utilities 268.0 1.2 1.1 1.1 1.5 1.3 1.3 5.5 6.5 6.3 15.2 10.1 10.2 1.1 1.0 1.0 8.4 10.3 9.9
Banks 2 153.8 3.2 3.9 4.6 11.5 8.2 6.8 0.7 0.7 0.6 7.7 10.0 11.1 Insurance 2 164.5 5.4 5.9 6.3 7.9 7.3 6.8
Figures as at 24 Oct 2012
1. Indices are basis for the index level, but the valuation multiples refer to the overall country. Index level for the sectors refer to the Stoxx Supersectors.
2. Certain positions are calculated in a different way than for the other sectors.
3. Banks and Insurance P/E data are referred to Adjusted P/E.
Source: Deutsche Bank estimates
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Figure 4: Key Economic Forecasts Real GDP Consumer Prices Current Account Fiscal Balance % growthb % growthc % of GDPd % of GDP 2012F 2013F 2014F 2012F 2013F 2014F 2012F 2013F 2014F 2012F 2013F 2014F Euroland (top-down) -0.5 0.0 1.0 2.5 1.8 1.7 0.4 0.5 0.7 -3.2 -2.6 -2.0 Germany 0.8 0.8 1.5 1.8 1.6 1.9 6.1 5.3 5.0 0.0 -0.4 0.0 France 0.8 0.8 1.5 2.0 1.7 1.9 6.1 5.3 5.0 0.0 -0.4 0.0 Italy -0.1 -0.2 1.2 2.3 1.7 1.6 -2.5 -2.9 -2.7 -4.8 -3.6 -2.8 Spain -2.4 -0.7 0.5 3.4 2.1 1.7 -0.5 0.3 0.2 -2.6 -2.0 -2.1 Netherlands -1.5 -1.1 0.9 3.4 2.1 1.7 -2.9 -2.1 -1.2 -6.7 -5.3 -4.0 Belgium -0.4 0.4 1.2 2.9 2.5 1.8 8.0 7.0 6.0 -4.4 -3.5 -2.9 Austria -0.3 0.2 1.2 2.6 1.7 1.7 0.0 0.5 1.0 -3.6 -3.5 -2.9 Finland 0.8 0.4 1.2 2.4 1.8 1.8 2.0 1.5 1.0 -2.7 -2.6 -2.5 Greece 0.2 0.3 1.3 3.2 2.5 1.9 -1.5 -1.5 -0.5 -0.5 -0.8 -0.7 Portugal -6.4 -3.0 1.5 1.3 0.5 0.2 -6.0 -4.0 -3.0 -9.2 -8.4 -6.2 Ireland -2.9 -0.6 1.2 2.9 1.1 1.1 -2.0 -1.0 0.0 -5.6 -4.5 -3.3 UK 0.2 0.8 1.9 2.2 1.7 1.5 2.0 2.5 3.0 -8.3 -8.0 -6.1 Sweden 1.0 1.5 2.2 1.4 1.7 2.0 6.2 5.4 5.2 -0.5 0.5 1.0 Denmark -0.3 1.0 1.8 2.8 2.3 1.9 -2.3 -2.1 -1.8 -7.1 -7.2 -5.4 Norway 1.0 1.5 2.2 1.4 1.7 2.0 6.2 5.4 5.2 -0.5 0.5 1.0 Switzerland -0.2 1.2 1.6 2.3 2.0 2.0 5.5 5.0 5.0 -4.5 -3.0 -2.0 US 3.5 2.0 2.5 1.0 2.0 2.0 15.0 14.0 13.0 11.0 10.5 10.0 Japan 1.0 1.5 1.7 -0.6 0.3 0.5 10.5 10.0 9.5 -0.3 -0.4 0.0 World -0.8 1.0 3.4 3.2 2.4 2.1 -1.9 -2.0 -2.4 -3.5 -3.2 -2.7 (a) Euro Area and the Big 4 forecasts are frozen as of 27/09/12. All smaller euro area country forecasts are as of 27/09/12. Bold figures signal upward revisions. Bold, underlined figures signal downward revisions. (b) GDP figures refer to working day adjusted data. (c) HICP figures for euro-zone countries and the UK (d) Current account figures for Euro area countries include intra regional transactions..
Source: National statistics, national central banks, Deutsche Bank forecasts.
Figure 5: Forecasts: Euroland GDP growth by components % qoq 12-Q1 12-Q2 12-Q3F 12-Q4F 13-Q1 13-Q2F 13-Q3F 13-Q4F 2012F 2013F 2014F Private Consumption -0.2 -0.4 -0.2 -0.2 0.0 0.2 0.2 0.2 -0.9 0.0 0.6 Gov. Consumption 0.1 0.0 -0.2 -0.2 -0.2 -0.2 -0.3 -0.3 0.0 -0.9 -0.8 Investment -1.2 -1.5 -0.8 -0.6 -0.2 0.1 0.3 0.4 -3.1 -0.9 2.2 Stocks (contribution) -0.1 -0.2 0.1 0.1 0.0 0.0 0.0 0.0 -0.6 0.1 -0.1 Exports 0.7 1.3 0.0 0.0 0.7 0.8 1.0 0.9 2.5 2.3 4.4 Imports -0.2 0.6 0.1 0.1 0.4 0.6 0.7 0.7 -0.3 1.7 3.5 Net Trade (contrib.) 0.4 0.2 0.0 -0.1 0.1 0.1 0.2 0.1 1.2 0.3 0.6 GDP 0.0 -0.2 -0.3 -0.2 0.0 0.2 0.3 0.2 -0.5 0.0 1.0 HICP inflation, % yoy 2.7 2.4 2.6 2.4 2.0 1.8 1.7 1.7 2.5 1.8 1.7 Core inflation, % yoy 1.9 1.8 1.8 1.5 1.5 1.3 1.3 1.5 1.5 1.4 1.6 Source: National statistics, national central banks, Deutsche Bank forecasts. (1) Forecasts in lower table as of 27/09/12
Figure 6: Central Bank Rates (End of period forecasts) % qoq 12-Q1 12-Q2 12-Q3F 12-Q4F 13-Q1 13-Q2F 13-Q3F 13-Q4F 2012F 2012F 2013F ECB refi rate 1.00 1.00 0.75 0.75 0.50 0.50 US fed funds target rate 0.25 0.17 0.10 0.10 0.10 0.10 BoE bank rate 0.50 0.50 0.50 0.50 0.50 0.50 BoJ O/N call rate 0.10 0.10 0.10 0.10 0.10 0.10 Source: National statistics, national central banks, Deutsche Bank forecasts. (1) Forecasts in lower table as of 27/09/12
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Figure 7: The Euro – Area economy at a glance: Recent developments and near-term forecasts Q4-11 Q1-12 Q2-12 Q3-12 Apr -12 May - 12 Jun - 12 Jul - 12 Aug - 12 Sep - 12 PMI composite 47.2 49.6 46.4 46.3 46.0 46.4 46.5 46.3 46.1 Headline IP (% pop1) -7.4 -1.8 -1.5 4.0 1.0 -0.5 0.6 0.6 Capacity Utilisation 79.7 79.8 79.7 77.8 Ifo 106.9 109.2 107.2 102.3 106.8 105.2 103.2 102.3 101.4 INSEE 96.0 93.7 93.0 89.7 93.0 91.0 89.0 90.0 90.0 Unemployment rate (%) 10.6 10.9 11.3 11.4 11.3 11.4 11.4 11.4 Change in unemployment (k) 654.7 510.0 628.0 287.0 182.0 185.0 86.0 34.0 Harmonised CPI 2.9 2.7 2.5 2.5 2.4 2.4 2.4 2.6 2.6 2.4 Core HICP (Eurostat) 1.6 1.5 1.6 1.6 1.6 1.6 1.7 1.5 1.5 1.5 Harmonised PPI 4.7 3.4 2.1 2.0 2.2 1.7 1.6 2.6 EUR/USD 1.3 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.3 Quarterly data in shaded areas are quarter-to-date. Monthly data in the shaded areas are forecasts.(1) % pop = % change this period over previous period.
Quarter on quarter growth rates are annualised
Source: Deutsche Bank forecasts, Eurostat, Ifo, INSEE, Reuters, European Commission, National statistical offices.
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Figure 8: Financial Forecasts US Jpn Euro UK Swiss* Swe* Den* Nor* 3M Interest Actual 0.32 0.33 0.21 0.53 0.00 1.25 0.20 1.50 Rates1 Dec-12 0.35 0.30 0.25 0.65 0.00 1.25 0.20 1.50 DB forecasts (futures (0.29) (0.32) (0.21) (0.52) ------& Futures, Mar-13 0.35 0.30 0.25 0.65 0.00 1.25 0.20 1.50 *Central Bank (futures (0.31) (0.30) (0.23) (0.52) ------Rates Sep-13 0.35 0.30 0.25 0.65 0.00 1.25 0.30 1.75 (futures) (0.37) (0.27) (0.32) (0.55) ------
10Y Gov’t2 Bond Yields spreads3 Actual 1.82 0.78 1.63 1.91 -1.11 0.02 -0.23 0.44 DB forecasts & Forwards Dec-12 2.00 0.80 1.75 2.20 -0.90 0.05 -0.10 0.75 (futures (1.90) (0.82) (1.71) (2.00) ------Mar-13 2.50 0.90 2.00 2.40 -1.00 0.10 -0.10 0.75 (futures (1.98) (0.86) (1.78) (2.06) ------Sep-13 2.50 1.00 2.50 2.80 -1.10 0.20 0.00 0.80 (futures) (2.14) (0.95) (1.92) (2.21) ------
EUR/ USD/ EUR/ GBP/ EUR/ EUR/ EUR/ EUR/ USD JPY GBP USD CHF SEK DKK NOK Exchange Rates Actual 1.31 79.3 0.81 1.61 1.21 8.58 7.46 7.37 12M 1.24 88.0 0.82 1.52 1.22 8.13 7.46 7.25 (1) Future rates calculated from the, December, March and September 3M contracts. Forecasts are for the same dates. Central bank rates for the CE-4, Scandinavia and Switzerland
(2) Forecasts in this table are produced by the regional economists, and are not obtained from DByield. 10-year forwards estimated from the asset swap curve.
(3) Bond yield spreads are versus Euroland . US 10Y Govt. bond yield forecasts has been taken from US Fixed Income Weekly.
Source: Bloomberg Finance LP, DB Global Markets Research. Revised forecasts in bold type. All current rates taken as at Friday 11:00 GMT.
Euro government bonds: yield and slope UK government bonds: yield and slope
6.0 Euro government bond yields, % 2.5 6.0 UK government bond yields, % 3.5 5.5 5.5 3.0 2.0 5.0 5.0 2.5 4.5 4.5 1.5 2.0 4.0 4.0 1.5 3.5 1.0 3.5 1.0 3.0 3.0 0.5 0.5 2.5 2.5 0.0 2.0 2.0 0.0 10Y 1.5 10Y 1.5 -0.5 2Y/10Y spread (rhs) 2Y/10Y spread (rhs) 1.0 -0.5 1.0 -1.0 1/1/02 1/1/04 1/1/06 1/1/08 1/1/10 1/1/12 1/1/02 1/1/04 1/1/06 1/1/08 1/1/10 1/1/12
Source: Deutsche Bank. Forecasts to right of vertical line. Source: Deutsche Bank. Forecasts to right of vertical line.
Deutsche Bank AG/London Page 63
25 October 2012 The Week Ahead
Appendix 1
Important Disclosures
Additional information available upon request
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
Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Paul Reynolds
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 400 53 % share price from current price to projected target price 350 plus pro-jected dividend yield ) , we recommend that 300 41 % investors buy the stock. 250 Sell: Based on a current 12-month view of total share- 200 holder return, we recommend that investors sell the 150 38 % 30 % stock 100 6 % Hold: We take a neutral view on the stock 12-months 50 37 % out and, based on this time horizon, do not 0 recommend either a Buy or Sell. Buy Hold Sell Notes: 1. Newly issued research recommendations and Companies Covered Cos. w/ Banking Relationship target prices always supersede previously published research. European Universe 2. Ratings definitions prior to 27 January, 2007 were:
Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12- month period Sell: Expected total return (including dividends)
of -10% or worse over a 12-month period
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25 October 2012 The Week Ahead
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