Market View Contents 6

6
Contents
Market View: Equities
cautious ahead of ECB
Aer Lingus: Release traffic
stats and announce positive
union vote on IASS
NOVEMBER 2014
Market View
European equities opened lower, despite a record close in the S&P overnight
A worsening European economy and signs Britain’s recovery has stumbled are hardening the
stance of some Bank of England members, who want to keep the benchmark rate at a
record-low 0.5 percent
German Factory orders were lower this morning at 0.8% (survey 2.3%, prior -5.7%)
Economic data will focus on the Bank of England Rates meeting at 12.00 and ECB Rates
meeting at 12.45.
Aer Lingus – (N/C)
Previous Close
€1.69
Following yesterday’s IMS Aer Lingus released October traffic
stats this morning, showing continued growth in its long haul
offering
Short haul was 2.1% lower YoY, however long haul posted
another strong performance, up 29% YoY
Significantly, following the IMS, Aer Lingus also announced that it
had received trade union support on the longstanding pension
issue
Comment: While load factors remained below low cost competitors at
79.6%, the company continues to improve this metric and total passengers
carried was also up 2.3% YoY. The positive trade union ballot announced
yesterday is an important step forward for the company and a resolution of
the pension issue should remove a substantial overhang for the share
price. The proposal must now receive shareholder approval and be put
forward by the Pension trustee for approval by the Pension Authority.
Should this occur it would be more good news for the flag carrier, which
saw operating profit increase 19% to €112.9m in the last quarter. The
company has sufficient free cash flow and cash on deposit to meet the
proposed €191m pension obligation and any resolution would remove a
significant liability on the balance sheet moving forward. The shares are
trading on 13x FY15e earnings against the industry on 10x, however we
would expect the airline to re-rate closer to peers once the pension issue is
resolved.
Siemens – (N/C)
Previous Close
€89.08
Siemens has released earnings this morning largely in line with
consensus
Revenues were up 1% YoY to €20.6bn but slightly below
consensus of €20.68bn
Q4 total sectors profit was €2.195bn, below consensus of €2.4bn
Comments: Results are largely in line for Siemens with net income up to
€1.44bn and EPS of €1.72 for the quarter. The company also confirmed
the sale of its hearing aid unit for €2.2bn. We removed Siemens from the
core portfolio noting geo-political concerns and the impact on-going
sanctions in Russia would have on performance. The company has again
reiterated this concern while discussing the outlook for 2015. Siemens
sees EPS growth of 15% in 2015, however, given that they expect organic
growth to be flat YoY the increase is likely to come from divestures of noncore businesses, like the sale of the hearing aid unit, announced today.
We continue to like the restructuring story of Siemens but remain cautious
given the potential impact of on-going geo-political tensions could have on
earnings. The shares trade on 11.3x FY15e earnings a discount to peers
on 14x.
Siemens: Earnings in line
IRISH PAPERS TODAY
Ikea, Pepsi amongst 340
companies with secret
Luxembourg tax deals
(The Irish Times)
Glanbia has paid over €1bn
into Luxembourg companies
to cut Irish tax bill
(The Irish Independent)
Tone of Trichet letter made it
clear ECB was calling the
shots for Ireland
(The Irish Times)
TH
INTERNATIONAL
PAPERS TODAY
Republicans push for probusiness reform
(Financial Times)
AstraZeneca profits falls
sharply
(Wall Street Journal)
Cameron loses support from
EU allies
(Financial Times)
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6th JUNE 2012
Buy
Previous Close: €39.84
Price Target: €49.00
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