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The perfect match?

26 Sep 16
Companies: AMUNDI SA

Pioneer investments, Unicredit’s subsidiary, is for sale and some asset managers have already been bidding for it. No surprise that together with Generali and Poste Italiane, Amundi is among the potential bidders with a very good chance of winning. Since its IPO last year, management has kept saying that Amundi has some cash to deploy on acquisitions (estimated at €1.5bn).


Pain still the 2016 order of the day TARGET CHANGE CHANGE IN TARGET PRICE€ 0.62 vs 1.23 -49.6% The sharp drop in target price combines the hard reality of 2015 which recorded another major loss and the 2016 own set of problems, including the dilutive costs of equity financing rounds. The H2 performance of the core project - waste to power - is pointing to a "worst behind" status. CHANGE IN EPS2016 : € -0.06 vs 0.05 ns 2017 : € 0.02 vs 0.09 -73.5% 2016 was not expected to be a great year but hopes of a bottom line breakeven have been dashed by a 2-month stop in the asbestos processing unit leading to group net loss expectations. 2017 and 2018 figures are extremely fragile as they are built on an "old" business model that may be rethought in the next few quarters. CHANGE IN NAV€ 0.66 vs 1.40 -53.1% Our NAV tries to recognise the value of the 4-year old efforts in putting together a waste to power prototype unit that will spin five sister projects and more. It obviously depends on continuing financing which has been achieved to date. This is at a great dilution cost. CHANGE IN DCF€ 0.89 vs 1.93 -54.0% A DCF primarily embarks on the long-term cash flows of power generation. It is a fragile computation as it is a distant proposition, dependent on the business model and suffers from the full dilution costs.

Companies: H LUNDBECK A S

One of Lundbeck’s key pipeline drugs, Idalopirdine, for the treatment of Alzheimer’s disease (being developed in collaboration with Otsuka) flunked in a phase III study called STARSHINE. The drug failed to meet both primary and secondary end-points in either of the two doses, sending the shares down by c.15% on last Friday (23 September 2016). This was the first of the three phase III trials (data from the remaining trials is expected in Q1 17). The news had a ripple effect on Axovant Sciences (stock price down c.12%), which is developing a similar type (5-HT6 receptor antagonist) of Alzheimer’s drug.

Companies: ARYZTA AG

Aryzta reported its FY results. Sales grew organically by +0.5% (+0.8% in Q4, 3.4% for FY if we exclude the contract renewals in North America) and +1.5% on reported figures. Underlying growth by region: Europe 4.0%, North America -3.1%, ROW +6.1%. The EBITA margin contracted 100bp to 12.5% (margins were weaker in all divisions, half of the group’s margin decline relates to increased investment in brand marketing). The JV contributed positively to the results (Picard improved margins). For FY17, the group expects that the negative impact of contract renewals in the US and loss volumes in Switzerland will weigh on the results. Top-line growth is expected to be in the 1-2% range whereas the EBITA margin should be in the 11.5-12.5% range (potential decline linked to contract renewals). The underlying fully-diluted EPS is expected to achieve 358 cents (vs. 350.3cents in FY16, up. c. 2%). Free cash should be in a range of €225-275m. The proposed dividend is CHF0.5731.


ACS has asked China’s CNTY for a downpayment of €150m in the next 10 days for sale of its refuse collection business, Urbaser, El Confidencial reported at the end of last week citing unnamed sources. Urbaser’s sale could be valued at ~€2.3bn and could be finalised in the coming days. If the deal take place this could be done at an EV/EBITDA higher than 7x, in our opinion, which underlines our investment thesis that ACS deserves a rerating since it is worth more broken apart than together. From the 2015 AR: ”In the Environment area, the ACS Group focuses on its Environmental Services mainly through Urbaser, its Facility Management through Clece, and its Logistics Services through Sintax. The Environment Services activity implemented by Urbaser is in turn divided into two differentiated areas, Urban Services and Waste Treatment.”

Companies: SAMPO OYJ-A SHS

Sampo has increased its stake in the Danish insurer Topdanmark to 33.34%. However, the Finnish company, which has owned more than a 21% stake in Topdanmark for years, offered no premium in making its mandatory offer, preferring to reinforce its ownership only at the right price. This was good news after the modest H1 16 figures with a profit before tax of €893m, down 12% yoy (€477m in Q2 16, -10% relative to Q1 15). THe ROE stood at 10.9% vs. 20.9% a year before. P&C (the Non-Life arm of the group) posted a pre-tax profit decrease of 15% to €436m with a combined ratio of 83.7%. Net premiums reached €2,558m in H1 16, down 3% yoy (-2% for Q2 16 at €1,040m) and net income from investments dropped by 54% to €80m (€44m in Q2 16, -53% yoy). Claims decreased 14% to €1,312m (-17% in Q2 16 to €699m) but staff costs jumped (+136% to €250m). The contribution of Topdanmark’s net profit amounted to €19m. Mandatum Life (the Life arm of the group) reported a H1 16 pre-tax profit of €103m vs. €81m a year before. The ROE stood at 6.5% vs. 21.8% last year. Premium income decreased 27% to €492m. Sampo’s share of Nordea’s H1 16 net profit amounted to €364m, -13% relative to June 2015 (€205m in the Q2 16, +5% year-on-year). Nordea’s ROE stood at 10.9% and its Core Tier 1 ratio strengthened to 16.8%. The group’s solvency II ratio reached 145% in June 2016. Mandatum Life benefited from the use of transitional measures to reach a stronger capital ratio of 154% (estimated own funds at €1,913m). Without transitional measures on technical reserves, the estimated own funds would have stood at €1,237m, leading to a capital ratio of 98%. Concerning If P&C, the economic capital requirement was €2,099m.


Dixons Carphone released Q1 FY16/17 results ahead of our estimates as well as market consensus. The lfl revenue increased by 4% (vs Q4: +5%, Q3: +5%; our estimate: +2.9%) on the back of strong performance across all geographies. The UK & Ireland retail business was up 4% (vs Q4: +4%, Q3: +5%, our estimate: +3%; the adverse impact due to store refurbishment was offset by sales transferred from store closure program), largely driven by robust demand of white goods (majorly built-in appliances), TVs (mega-site and 4K TVs) and mobile phones. The strong demand of air-conditioners in Greece propelled the lfl revenue growth to +13% in Southern Europe (vs Q4: 0%, Q3: 9%; our estimate: +2%). In Nordics, the lfl revenue was up +2% (vs Q4: 9%, Q3: 3%; our estimate: +3%) on the back of positive momentum in the kitchen business (extended product ranges). The FX tailwinds (+5%; largely due to depreciation of GBP vs Euro and Norwegian Krone) pushed up the total revenue growth to +9% (vs Q4: +5%, Q3: +5%; our estimate: +1.1%). The CWS business continued strong momentum (+42% at CER vs FY 15/16: +26%, FY14/15: +67%). The roll-out of sprint stores has progressed well (currently 31 stores; 130 planned by Christmas), complemented with the ‘honeyBee’ software implementation undergoing across the stores. Also, the management signed an additional distribution agreement with TalkTalk to manage direct channels (indirect channels only previously). The company also updated about the launch of a new e-commerce platform for Carphone Warehouse and the 3-in-1 property program across the UK (completed 278 stores out of total planned 323 SWAS stores by end of FY16/17) Lastly, management has shrugged off any detectable impact of the Brexit vote on consumer behavior in the UK and is optimistic about the future performance.

Stripping out last year’s radio spectrum licence sale, the group continued to grow in the first half against a difficult market backdrop. The results illustrate the benefits of diversification, with asset management continuing to expand and underlying progress evident in Capital Markets with the signing of new retained clients: both areas reported increased revenues in the first half. Investment is being made in additional staff to strengthen the research franchise and support growth in asset management.


The appointment of Mr Piers Morgan as CFO brings valuable experience to Verona Pharma as the group continues development of RPL554. He joins at an exciting time for the group following the recent £44.7m equity capital raise enabling the group to progress its development of RPL554 through to a Phase III ready stage. Preparations have started for Phase IIb trials with clinical dosing expected to commence in Q2 2017. If development goes according to plan, RPL554 could be in a position to commence Phase III trials by the end of 2018. We remain upbeat and look forward to the commencement of Phase IIb trials.


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