A valuation in line with the 10-year low historic valuation of 10.0x implies a share price of EUR 56.71 at year-end 2012E and time-discounted (yield of 10-year Bund) a target price of EUR 53.72 at year-end 2010E, which is 23.3% above the current share price. See our latest company report on Daimler of July 26th.
Category Archives: Sector
Global Industrial Manufacturing: Flat Cycle in 2010
Disappointing order trends in 2010 indicate a flat recovery.
BMW 1Q10E preview and tables
Our view: Following a sharp 32% increase from a 2010-low of EUR 28.75 (on February 15th) the BMW share price hit a two-year high of almost EUR 38 on April 26th. The current BMW share price of EUR 36.69 values BMW shares at 11.8x 2011E earnings, which is at a 21% premium to the 5-year average pre-crisis historic valuation of 9.8x. This is inconsistent with the implication that our 2011E EPS (EUR 3.11) are 35% below 2007’s EUR 4.78 and 17% below the pre-crisis 5-year average of EUR 3.74. (See pp.10-11 for details.)
BMW Valuation
Even a valuation in line with the 5-year average pre-crisis historic valuation of 9.8x implies a share price of EUR 30.36 at year-end 2011E and time-discounted (yield of 10-year Bund), a target price of EUR 29.46 at year-end 2010E, which is 19.7% below the current share price and 10% above the previous target price of EUR 26.77. See our latest company report on BMW of April 29th.
Daimler prel 1Q10 results & upgrade estimates and tables
Daimler’s preliminary 1Q10 results: stellar performance at M-B Cars and Daimler Trucks busting FY10 guidance. Management doubled their FY10 outlook for M-B Cars to EUR 2.5-3.0bn and trebled that for Trucks to EUR 0.5-0.7bn. We raised our EPS estimates by 64% to EUR 2.74 in FY10E and by 20% to EUR 3.75 in FY11E. (Final 1Q10 results are due Tuesday, April 27th.)
2Q10 US Equities Strategy
Included in this report is our 2010 Macro Outlook and Beyond, GDP Commodity Price Forecasts, Equities Indices Targets covering Currency Forecasts, Global Equities Sector Outlook, Global Equities Outlook per Country and Global Equities Indices Targets.
VW Capital Increase
VW announced that it plans to offer up to 65m new preferred non-voting shares, with the sale price, subscription ratio and the offer volume to be decided by March 26. VW intends to raise ‘around EUR 4bn’ in order to fund the Porsche takeover and preserve its credit rating of A- (S&P) and A3 (Moody’s). The issuance of 65m preferred shares would raise around EUR 4.5bn (based on the share price of EUR 68.65 at close March 23rd) and increase the existing number of shares (295m ordinary and 105.24m preferred) by 16%.
Morning Market Commentary
Market Commentary covering US Economic Concerns, US unemployment, European Economic Concerns, Currencies Commentary and Outlook.
Veolia Environnment FY09 results
We are reiterating our “Buy” recommendation on Veolia Environnement at a current price of EUR 24.38. Our 3 – 6 months VE price target is EUR 30 per share.
BMW 4Q/FY09E preview and tables
FY09E earnings at EUR 151m/EUR 0.24 per share. We expect that in FY09E, an already announced 4.7% decline in group revenue to EUR 50.68bn resulted in declines of 26% in pre-tax profit to EUR 259m/0.5% and of 53% in net profit to EUR 151m/0.3% or EUR 0.24 per share. We estimate that this was the result of an EBIT of EUR 393m/0.8% and a net financial charge of EUR -134m. (See pp.2, 4-6 for details.)
VW 4Q09/FY09 results comment and 2010E-11E estimates
Our view: The current VW preferred share price of EUR 59.93 is in line with the YE09 price and values VW preferred shares at 8x prospective 2011E earnings which is at a 15% discount to the 5-year average historic valuation of 9.4x. This is inconsistent with the implication that our 2011 EPS (EUR 7.52) estimates are 15% above the 5-year average of EUR 6.55. (See pp.6-7 for details.)
Global Markets Technical Outlook
We see the current EURO weakness, and implicit US$ strength as a tremendous opportunity to add towards EU quality assets, and inversely, to reducing US assets, as we expect the US$ weakness to resume later in 2010. Please read our in-depth report on the US Economy , Chinese Economy, Japan’s Economy, European Economies, Emerging Economies, Currencies, Global Equity Markets and Commodities.
Daimler Earning Update 2010E-11E
Daimler’s 4Q/FY09 results: M-B Cars and Vans surprised on the upside. We confirm our view of an EPS recovery to EUR 1.67 in FY10E and EUR 3.38 in FY11E.
Daimler 4Q/FY09 provisional results comment & tables
Daimler 4Q/FY09 provisional results comment: Group EBIT slightly down qoq despite greater than expected margin improvement at M-B Cars and M-B Vans. Decision to pay no dividend for 2009 does not reflect on FY10 outlook and is actually shareholder friendly, according to management. M-B Cars generated a 4Q09 EBIT of EUR 608m and a 5.3% margin. Management guidance for FY10 is a group EBIT in excess of EUR 2.3bn driven by M-B cars and Trucks. Conservative assumptions regarding market developments, in particular at trucks, point towards the guidance being a floor, in our view.
Daimler 4Q/FY09E preview
We expect that Daimler which turned profitable again in 3Q09, will report further improvements in group profits at all levels in 4Q09E; a 18.5% qoq improvement in EBIT to EUR 557m/2.5% (from EUR 470m/2.4% in 3Q09), a 37% qoq increase in pre-tax profit to EUR 393m/1.8% and a net income of EUR 350m.
BMW 4Q/FY09 preliminary results
The current BMW share price of EUR 32.19 is 11% down from its 2009 peak of EUR 36.14 (October 23rd) and up 12% from a 2010-low of EUR 28.75 (on February 15th). This values BMW shares at 11.4x 2011E earnings, which is at a 17% premium to the 5-year average pre-crisis historic valuation of 9.8x. This is inconsistent with the implication that our 2011E EPS (EUR 2.85) are 40.5% below 2007’s EUR 4.78 and 23.9% below the pre-crisis 5-year average of EUR 3.74.
Renault 2H/FY09 results tables and guidance
Renault – 2H/FY09 results highlight competitive weakness and excellence in cost-cutting: Group net loss narrowed in 2H09, but worse than consensus. Auto division close to break-even in 2H09, as stringent cost cuts and efficiency gains accompany a recovery in sales. Mix and price remain a worry. Efficiency gains in WC management were crucial for increasing FCF in 2H09. No earnings guidance for 2010, but commitment to positive FCF.
Peugeot 2H09/FY09E preview & results table and guidance
PSA – 2H09/FY09 results uninspiring: Auto division reported a reduced EUR 353m operating loss in 2H09, worse than our expectation. Positives factors, higher volumes (production and sales) and cost cuts were outdone by negative pricing, mix and currency. Group net loss/share is EUR 5.12 for FY09, vs. our estimate of EUR 4.71. Management declined to give an earning guidance for FY10, and committed only to a positive group recurring operating result for 1H10.
ArcelorMittal 2009 results commentary
ArcelorMittal swung to a fourth-quarter profit from a year-earlier loss on 16% lower sales. ArcelorMittal said it earned $1.07 billion after losing $2.63 billion in the prior-year quarter, when it took a $4.4 billion hit from writing down inventory and raw-material- supply contracts as well as provisions for workforce-reduction litigation.
Greek Myth(s)ology?
Mr. Trichet has an opportunity to help Greece to join the Modern Era. As we have been warning investors since November 2009 about the “Sovereign Risks” that would impact currencies, bonds and equities in 2010, we believe that now the risks seem to be fully taken into valuation accounts for the three asset classes.
Toyota Motor Commentary
We do believe that the problems for Toyota will continue to get worse, and in fact are deeper than what has surfaced to date. We are reiterating our Sell Recommendation on Toyota Motors Corp.
BMW FY09 & Management Update
Management expect a positive pre-tax result for 2009. Decline in group revenue led by the Auto division. We confirm our FY10E- FY11E estimates: recovery in sales and earnings.
Daimler strong car sales in 4Q09 are just the beginning of an earnings recovery
The Daimler share price doubled from a LT low a year ago, to EUR 36.24 currently, valuing Daimler shares at 11.1x 2011E earnings, which is at a 31% discount to the 5-year average historic valuation. Our estimates imply that 2011E EPS (EUR 3.28) are 14.7% below 2007’s pre-crisis 2007’s EUR 3.83 and 6.2% above the 5-year average of EUR 3.08
BMW set for sales recovery, after 10.4% decline in FY09
We confirm our FY09E estimates of a group EBIT of EUR 393m/0.8% and earnings of EUR 0.24 per share. The Auto division is set to exit a dismal 2009 with a strong EUR 140m/1.1% in 4Q09E, leading to a negative EBIT of EUR -218m in FY09E. Higher sales, a further ramp-up in production and improving model momentum should drive the EUR 216m qoq earnings improvement in 4Q09E.
CGI 2010 Global Markets Strategy & Equities Outlook and 50 Recommended Portfolio
The Year of Capital Preservation?
BMW praying for a weaker euro
BMW group remains at the mercy of currency, the US dollar in particular.
Porsche-VW Merger Progresses
VW’s extraordinary general meeting (Dec. 3rd) prepared the ground for two important steps in the two-year multi-stage merger with Porsche SE: VW’s acquisition of 49.9% of Porsche AG for EUR 3.9bn cash (that took place on Dec. 7th) and a EUR 4bn capital increase in VW preferred share capital in 1H10.
BMW 3Q09E preview & results table, comment and guidance
BMW – 3Q09 comment. Auto division incurred deeper 3Q09 EBIT loss as de- stocking continued. Underlying FCF remained positive. Financial Services: financial risk marginally receded in 3Q09. Management confirmed its FY09 guidance of a group profit and a sales decline by 10-15%.
Diamler 3Q09 final results
Our estimates imply that 2011E EPS (EUR 3.01) are 21.5% below 2007’s EUR 3.83, whereas the prospective multiple 2011E of 12.2x is 8% below the historic 2007 average valuation of 13.3x.
Albeit not cheap for a stock in a sector with many more troubles ahead, Daimler is in our opinion the best car stock in Europe, and we advise to add to positions at current prices, and particularly on a pullback in the markets…
BMW 2Q/1H09E preview & results table and guidance
Our view: 2010E outlook: BMW should remain unaffected from a post-incentive hang- over in 2010 and be able to benefit from any recovery in demand globally and the US specifically. We expect that this, together with an improving model momentum (introduction of the 5-Series in 2Q10E) should lead to an EBIT of EUR 1.2bn/2.9%. However, as the dependence on FS is expected to continue to grow, BMW is becoming potentially more vulnerable to any future shocks to the global financial system.
VW 2Q/1H09E preview & results table and guidance
We expect a EUR 365m group operating profit/1.3% margin, considerably better than 1Q09’s EUR 313m, that included EUR 600m capital gains.
Renault 1H09E preview & results table and guidance
The group failed to increase market share in Europe and even lost share in France, despite an accelerating model momentum and the roll-out of several new versions of the C segment Mégane. We also detect deterioration in mix as the discount brand Dacia benefited most from government incentive schemes and saw its European sales triple in 2Q09.
Daimler – 2Q/1H09E preview & results tables and guidance
After an expected EUR 2.48 loss/share in FY09E, we expect Daimler to return to profit in 2010E (EUR 0.84 EPS): MBC’s return to profitability should not be affected by the expiry of incentive programmes and trucks should benefit from restructuring as demand stabilises at low level. At price revenue of 0.39x (2009E) Daimler shares are valued at a 20% discount to the average 10-year high (0.44x) and a 55% premium to the average 10-year low (0.25x). (See pp.5-7.)
Fiat – Earnings 2Q/1H09E preview & results tables
Management update on Chrysler and FY09 guidance. Our 2009E estimate is more cautious: a EUR 734m group trading profit
implies a net loss of EUR 644m or EUR 0.52 per share, a negative EUR 0.4bn industrial FCF and a net debt of EUR 6.65bn by YE09E.
Peugeot – 1H09E preview
We have upgraded our FY09 estimate to a EUR 1.59bn group operating loss (vs. EUR 1.71bn previously) following the new guidance for Faurecia. We confirm our estimate that the auto division will incur a EUR 1.75bn operating loss on a 11.5% decline in sales (fully cons. comps.). At price revenue of 0.10x (2009E), Peugeot shares are valued at a 27% discount to the avg. 10-year low. (See pp 4-5.)
Renault– 1H09: no cash burn despite 16.5% sales slump
Renault announced a ‘significantly positive FCF’ for 1H09, despite an expected loss. European performance remains greatly disappointing. 1H09 sales decline -16.5%; rate of decline halved qoq to 11.0% in 2Q09.
Western Europe passenger car market– July 2009 update
Car market is set for an extended V-shaped recession. Our baseline scenario of an 11.7% correction to 11.68m in 2010 is based on the assumption that the schemes in Italy and France will be extended into part of 2010, the German scheme will expire at year-end as planned, and that car manufacturers will continue to aggressively discount.
Peugeot and Fiat-Chrysler possible Merger
Peugeot – looking for a suitable partner. Industrial logic of three-way merger Fiat-Chrysler-PSA has more negatives than positives.
BMW 4Q08E preview & results table and guidance
Group headline results worse than expected: BMW incurred a EUR 1.2bn pre-tax loss in 4Q08 and reported a EUR 351m profit (0.7% margin) in FY08.
Daimler 4Q08E preview & results table and guidance
Chrysler losses depress group EBIT and earnings. Mercedes-Benz Cars incurs 4Q08 loss from operations.