Wednesday , April 26 2017
Home / FT Alphaville / Markets Live: Wednesday, 15th March, 2017

Markets Live: Wednesday, 15th March, 2017

Summary:
This Markets Live session ended at 12:05 on 15 Mar 2017. Participants in this session were: Paul Murphy and Bryce Elder PM11:00amMorning, welcome to Markets Live PM11:01amThere’s quite a lot going on PM11:01amUnfortunately, only some of it is corporate / market-related PM11:01amFirst up…. PM11:01amThe FT scooped a load of awards in last night’s British Press Awards PM11:01amThis is unprecedented PM11:02amThe Press Awards used to be totally corrupt PM11:02amA behind the scenes stitch up between the tabs and the former broadsheets PM11:02amNot any more it seems! PM11:02amHigh quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com

Topics:
Paul Murphy considers the following as important:

This could be interesting, too:

Bryce Elder writes Markets Live: Tuesday, 25th April, 2017

FT Alphaville writes Snap AV: Your Trump Trade reversals, charted

Simon Wren-lewis writes Economic Competence Revisited

Siona Jenkins writes FT Opening Quote: Whitbread brews up sales but misses profits

This Markets Live session ended at 12:05 on 15 Mar 2017. Participants in this session were: Paul Murphy and Bryce Elder

PM11:00am

Morning, welcome to Markets Live

PM11:01am

There’s quite a lot going on

PM11:01am

Unfortunately, only some of it is corporate / market-related

PM11:01am

First up….

PM11:01am

The FT scooped a load of awards in last night’s British Press Awards

PM11:01am

This is unprecedented

PM11:02am

The Press Awards used to be totally corrupt

PM11:02am

A behind the scenes stitch up between the tabs and the former broadsheets

PM11:02am

Not any more it seems!

PM11:02am

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://aboutus.ft….rds/#ixzz4bOKNmVrm

15 March 2017: The Financial Times was honoured in five categories at The Press Awards in London last night, winning ‘Website of the Year’ for the newly relaunched FT.com and ‘Supplement of the Year’ for FT Weekend Magazine.The judges said the FT’s website has “improved user experience with a new design” and “continues to innovate in the way it tells stories online”. FT Weekend was commended for its “long-form investigative pieces that suit its readership perfectly”.FT environment correspondent Pilita Clark was named ‘Environment Journalist of the Year’, Simon Usborne was named ‘Travel Journalist of the Year’, and political correspondent Henry Mance took home the prize for ‘Interviewer of the Year, Broadsheet.’

PM11:02am

http://aboutus.ft….rds/#axzz4bOEPvBsv

PM11:02am

Have some pics

PM11:03am PM11:03am PM11:03am PM11:03am

That’ll do

PM11:03am

Congrats to all concerned

BE11:04am

I dislike the style of each paper reporting its own winners only. It reminds me of when countries only mention Olympic events that their nation wins.

BE11:04am

Here’s the full list: http://www.pressaw…e=winner-citations

PM11:04am

Hmm — fair point

BE11:04am

Congatulations in particular, there, to Oliver Shah of The Sunday Times.

PM11:04am

For the P Green stuff

BE11:04am

Who deservedly won Business Hack of the year — and was also highly commended for News Reporter of the Year

BE11:05am

Which I’ve never seen before for the numbers pages.

BE11:05am

Anyway, that’s enough Inside Baseball for today. Onto markets?

PM11:05am

Guess so

11:05AM PM11:06am

Before we get into the movers

PM11:06am

Quick notification

PM11:06am

This is Fed Hike Day

PM11:06am

So there will be a special ML later today

PM11:06am

Hosted by Cardiff and Co

PM11:07am

They are also doing one of these Facebook Live things — if that’s your thing

11:07AM BE11:07am

Speaking of Fed, I guess we can go straight to the miners.

Rio Tinto PLC (RIO:LSE): Last: 3,386, up 70.5 (+2.13%), High: 3,404, Low: 3,369, Volume: 1.23mAnglo American PLC (AAL:LSE): Last: 1,197, up 16.5 (+1.40%), High: 1,210, Low: 1,192, Volume: 1.75mGlencore PLC (GLEN:LSE): Last: 321.45, up 5.4 (+1.71%), High: 325.15, Low: 320.55, Volume: 14.36m BE11:08am

So, JP Morgan said buy on Monday, Macquarie said sell on Tuesday and Goldman has said buy on Wednesday.

BE11:08am

Here’s their thinking.

PM11:08am

Warning: shares in miners do go up and down

BE11:08am

Valuation argument still holds strong…Miners are attractive on spot – we expect them to generate double digit cash flows (2017/18E) and they are trading 2-3 turns below their mid-cycle multiples. However, confidence in spot remains low. Our view is that even though commodity prices likely fall, the FCF generated in the meantime will lead to lower net debt which means valuations can be higher.

BE11:09am

…but sentiment has turned negativeHowever, sentiment towards commodities and mining has turned negative as: 1) China growth targets – the tone out of the China NPC was a bit more neutral with focus on managing financial risks; 2) US Fed outlook has turned increasingly hawkish.; 3) outlook for oil prices turned slightly bearish after a inventory build-up in US. 4) Element of seasonality – miners typically underperform from March till May.

BE11:09am

I’m open to suggestions as to why “miners typically underperform from March till May” might be true, assuming it is.

BE11:09am

With lack of clear signals – sector to remain choppyThe “around 6.5%” GDP growth target has led to investors believing that the government could look to tighten monetary policy. Our view remains that even though commodity prices will be lower than spot – what’s important is the path they take. If prices taper slowly (which is our view) the significant FCF generation would likely see net debt fall – which means valuations even at lower commodity prices can be higher.

PM11:09am

Yeah, why would that be?

BE11:10am

…. Visibility argument around Chinese new year? Maybe?

PM11:10am

Ah yes

BE11:10am

Or …… I dunno, people don’t like thinking about dark holes in spring?

BE11:10am

No idea. Goldman likes Glencore, FWIW.

BE11:11am

On copper, + a trading business that’s meant to provide stability. Not the most original bit of thinking but there it is.

BE11:11am

We upgrade Glencore to Buy, from Neutral, with a new 12m PT of GBp390. Our positive view is predicated on: 1) commodity exposure: c.50% of 2017/18E EBITDA to come from copper/zinc – two commodities where we see upside from spot; 2) marketing division provides downside protection; and 3) we expect some investors to rotate out of BHP/RIO into Glencore as sentiment around iron-ore continues to turn negative.

BE11:11am

Otherwise, buy most things ………………

BE11:11am

Reiterate Buy on VED (CL), AAL, LUN, Norsk and NyrstarWe reiterate our Buy ratings on Vedanta (on Conviction List), Anglo American, Lundin, Norsk and Nyrstar. Our positive view on these equities is predicated upon: commodity exposure (VED, LUN, NHY), deleveraging (VED, AAL, NYR) potential for returns ramp-up/reinstatement (AAL/LUN/NHY and VED) and valuation for all these names.

Vedanta Resources PLC (VED:LSE): Last: 833.00, up 18.5 (+2.27%), High: 839.50, Low: 821.50, Volume: 163.73k BE11:12am

You get the idea.

PM11:12am

Yep

11:12AM BE11:13am

Also, since we’re on the sector …..

BE11:13am

… may as well take an early bath in the smallcaps.

Lonmin PLC (LMI:LSE): Last: 85.75, up 3.25 (+3.94%), High: 87.25, Low: 83.75, Volume: 909.48k BE11:13am

UBS saying they don’t need another rights issue.

PM11:13am

Oh that’s a relief

BE11:14am

Yep, the numbers might just hold together …. at least based on UBS’s forecasts.

BE11:14am

But it’s worth recapping why the speculation of a Lonmin cash call has been doing the rounds for a month or two.

BE11:15am

I’m going to quote quite comprehensively here from a note from Nedbank’s Arnold van Graan

PM11:15am

Braced

BE11:16am

This is from early in February … It’s not current.

BE11:16am

But it sets out the argument for a Lonmin rights with a rare clarity, so is well worth revisiting.

BE11:16am

The Lonmin site visit and detailed management presentation over the past two days focussed, in our opinion, on the very basic needs of this business. “Produce at full tilt, don’t miss opportunities to enhance volumes and/or margin and don’t, under any circumstance, burn any more cash”.Though these issues sound basic and essentially spell ‘survival’, the story of Lonmin in our opinion is most certainly not that basic. What we are lining up for is a need for more capital and the sooner the Lonmin shareholders put their money behind this asset base and management team, the sooner the current bad story will change from ‘survival’ to ‘investable’ in our view.

BE11:16am

From our perspective, even if Lonmin succeeds, against the odds in breaking even, and even if it succeeds in getting out from under the debt cloud, the end-prize is very much one of a hollow victory. We feel that the company itself will likely be a shadow of its former self and will need so much time and money to be reinvested in it that it will not be in any position to grow or even just to pay dividends for many, many years – even in higher metal price environments.

BE11:16am

So the question is simply this: If the smelter and refinery assets are worth more than the current market cap of Lonmin and if a bit of money can turn the production base into a story of low cost production (bringing on K4) that can expand even in bad times (bringing growth back into the equation), does it not make sense that Lonmin shareholders are facing a very obvious decision? Do another equity issue, do it now and do it with conviction – Lonmin has what it needs to be a real business but its capital structure is slowly killing it in our opinion. There will always be mining hiccups and yes, mining can improve and it will, but what this company needs more than anything is a hope for a real future. We felt that the constant pressure of impending doom was writ large across each of the faces that presented the ‘plans to survive’.

BE11:17am

We believe that Lonmin has within its assets and its people the ability to change the story – from survival to a real investable future. We firmly believe that a $350 million to $400 million equity issue would resolve the current impasse and set the company on a path that would make it worth a lot more than this required re-financing. Of course, the owners can opt not to head the signs and just leave the company on the table, on a silver platter, for someone like Sibanye.

BE11:17am

That’s the argument in favour of Lonmin raising ….

PM11:17am

That is very clear

BE11:18am

Yep, almost Nietzschean.

BE11:18am

UBS is …….. less Nietzschean.

BE11:18am

Which I guess is what some people want from their sellside. W’evs.

BE11:18am

Post a 70% fall in the share price over the past 9m (vs 10% fall in SA PGM Miners), we upgrade Lonmin to Neutral. Whilst we believe that part of this decline was justified; the recent dramatic fall seems to reflect concerns on the sustainability of Lonmin’s balance sheet. In our view, liquidity concerns are overdone, with a low risk of a liquidity issue within the next 36m unless prices fall 30% or Lonmin’s lenders withdraw its facilities (unlikely, unless Lonmin breaks its covenants). Lonmin has a pattern of equity raises (which we have previously covered), and it remains in a challenging position. We would only see further liquidity risk if 1) PGM prices fall significantly, or 2) prices / operational changes triggers the covenant (greater than $1.1bn tangible net worth, $1.6bn at Sep-16).

BE11:18am

Lonmin’s operational response to a weak Q1 FY17 was to pause development and draw down on its immediately available ore reserve; although this will flatter Q2/3 FY17 unit costs, we see this as a risky manoeuvre given the likely need to re-accelerate development spend in 6-9 months’ time. We believe the market has been concerned on the departure of COO Ben Moolman, but would highlight that Lonmin essentially has one asset and CEO Ben Magara also has an operational mining background.

BE11:19am

Longer term, can Lonmin form part of consolidation in Rustenburg?We have previously highlighted that the challenged geology of PGM production in the Rustenburg area means that further consolidation is necessary for this production to sustainably generate shareholder returns in the future. A local press article has suggested that Sibanye was “weeks away” from agreeing a transaction with Lonmin, before Sibanye announced its intention to acquire Stillwater (in Dec-16). We believe that short term Sibanye is preoccupied with Stillwater, but it also clearly stated its intention to execute on another SA PGM purchase which would give it mine to market access. Lonmin fits this description, with spare downstream capacity (greater than 50% UBSe).

BE11:19am

We update our PT; it is now based on 40% 0.8x NPV (unchanged) and 60% 5x 12m fwd EV/EBITDA (from 8x); closer to the EV/EBITDA multiple in late 2015, when there were last significant liquidity concerns. We don’t see further material price downside.

BE11:19am

That “local press article” referenced above was this one: https://www.busine…id-stymied-merger/

11:19AM PM11:20am

Moving from second tier miners to second tier E&P…

PM11:20am

Bowleven

PM11:20am

This coup has happened

PM11:20am

The raiding party has won

PM11:20am

http://www.investe…1703150700094834Z/

PM11:20am

Most of the board has been voted out

PM11:20am

Crown Ocean Capital moving in

PM11:21am

Billy Allan, the surviving chairman (for now) sounds as sore as hell

PM11:21am

Excluding the votes cast in respect of the shares held by COC and its nominees (COC Shares), all resolutions proposed at the General Meeting would have been defeated by a significant margin. Voting excluding the COC Shares is set out in Table 2 in the Appendix.

All major institutional shareholders remaining on the register of members of the Company after posting of the Circular voted against all of the resolutions. The only exception to this was a single institutional shareholder that voted in favour of resolution 8, consistent with the PIRC proxy guidance for the General Meeting.

PM11:22am

And look, they’ve printed two versions of the result

PM11:22am

The correct version, where the management lost

PM11:22am

And then also a fantasy version, excluding the votes against

PM11:22am

Real..

PM11:23am PM11:23am

Unreal…

PM11:23amBowleven PLC (BLVN:LSE): Last: 33.38, down 1.13 (-3.26%), High: 36.00, Low: 30.25, Volume: 5.00m PM11:23am

Shareholders will be getting much of there money back there, i think

PM11:24am

A Shore snap

PM11:24am

BOWLEVEN^ (BLVN, 34.5p, UNDER REVIEW) – Result of general meeting. Following the previously-announced requisition by dissident shareholder Crown Ocean Capital, the results of yesterday’s general meeting have been announced, with Crown Ocean succeeding with all resolutions, apart from the resolution regarding the removal as a director of Billy Allan. Mr Allan will consequently remain as Chairman (alongside COO David Clarkson, whose removal was not sought). Crown Ocean appointees Christopher Ashworth and Eli Chahin will now join the Bowleven board, while existing directors Kevin Hart, Kerry Crawford, John Martin, Tim Sullivan and Philip Tracy will cease office with immediate effect. We look forward to establishing a dialogue with the company under this reconstituted board and, given the significant implications for strategy and the management of Bowleven’s Cameroon portfolio, place our Buy recommendation UNDER REVIEW.

11:24AM BE11:25am

ROTR: on the FTSE’s placid-ness …… Dunno …….. I guess now that sterling’s calmed down it makes sense for the index to as well.

BE11:25am

Volumes have looked okay through the period.

BE11:27am

….. and one can argue that the calm is only relative to the storm … actually, since we’re here ……

BE11:27am

Strategy interlude.

BE11:27am

Sean Darby of Jefferies.

BE11:27am

The British Prime Minister’s announcement that the timetable for triggering Article 50 by the end of March remained on track was usurped by a speech by Scottish First Minister Nicola Sturgeon that she wanted another independence referendum to be held by spring 2019, around the time Britain is set to leave the EU. Meanwhile, the pound remains firmly stuck at 30 year lows. Interestingly, the technical picture of the UK equity markets remains constructive.

BE11:28am

Despite the fact that Brexit seems to be uppermost in investors’ minds, it has not been generating the same media impact (see RHS chart). Mrs May is likely to wait until the end of March to press the switch invoking Article 50. Although the Bank of England has recently raised its central forecast for 2017 UK growth to 2% from 1.2%, the reality is that there is a huge amount of uncertainty over exactly how Brexit will play out. Even if there is goodwill on both sides, there will be costs for Britain and the EU. It is also unclear whether it will be feasible to agree and ratify a new trading deal within the two-year time frame. A lot will depend on who wins the French and German elections this year and whether President Trump wishes to push the US further towards protectionism. It is a step into the ‘unknown’ for UK CEOS and investors alike.

BE11:28am

The majority of people in Scotland voted to remain in the EU last year while the rest of the UK decided to opt out. The SNP leader Mrs Sturgeon is seeking a special deal on Brexit for Scotland. But Scotland would need to apply for membership of the EU and Brussels is committed to not accepting new members until 2020. Moreover, other member countries could block the application. Irrespective of the outcome of another independence vote, on economic grounds it remains difficult to believe that Scotland could go it alone, unless it fundamentally re-invents itself. Latest figures show that even with a geographical share of oil, Scotland was running a budget deficit of 9.5% of GDP in 2015-16. Scotland is tied to the rest of the UK through trade links (exc. oil, trade to the rest of the UK were 31.8% of Scottish GDP).

BE11:29am

As to the money …..

BE11:29am

What should investors do? Firstly, the UK has been experiencing some of the best earnings and sales revisions globally. Material names have strong free cash flow yields (greater than 10%) while experiencing solid upward revisions in EPS and Price Targets during the past three months, such as Glencore (GLEN LN, BUY, PX: GBp316.05). As we noted recently, China’s FAI growth is accelerating again after slowing down in 4Q16. Jan-Feb FAI growth was 9% vs 7% in Dec. helped by stronger-than-expected property investment together with robust infrastructure investment growth. Secondly, capital goods companies screened well on stocks trading well below 1 times EV/sales such as DCC PLC (DCC LN, BUY, PX: GBp6,985)

BE11:31am

Here’s that Brexit media chart referred to above …..

BE11:31am BE11:31am

Um …………………. k.

11:31AM PM11:31am

Teddy Sagi taking plenty of money off the table i see

PM11:31am

At Playtech

PM11:32am

But trying to presented this as tho he was kinda forced to sell

PM11:32am

Responding to an “unsolicited inbound enquiry”

PM11:32am

http://www.investe…1703150700114893Z/

PM11:32am

From Boussard & Gavaudan

PM11:32am

Sold em £113m of stock

PM11:33am

Reluctantly, clearly

PM11:33am

13m shares

PM11:33am

He’s left with 56m tho

Playtech PLC (PTEC:LSE): Last: 896.68, down 11.32 (-1.25%), High: 904.00, Low: 884.00, Volume: 506.40k PM11:34am

Business was done at 872.5p

11:33AM BE11:34am

Right, so this Evening Standard story …..

BE11:34am

http://www.standar…-lse-a3490191.html

BE11:34am

Financial data giant S&P Global is believed to be plotting an audacious $11 billion (£9 billion) takeover of MSCI to create a global index behemoth.

City sources said MSCI, a Morgan Stanley spin-out which compiles some of the biggest market indices used by fund managers, has spurned a $120-per-share approach from the Wall Street giant behind the Dow Jones and S&P 500 indices.

BE11:35am

There’s been a lot of talk around MSCI for more than a month.

BE11:35am

Which we’ve been trying to pin down.

BE11:36am

If I remember correctly, the rumours seemed to appear around or very shortly after the MSCI Q4s on February 2nd.

BE11:37am

And I think it’s fair to say that this story’s been chased quite hard, by us and likely by many other news organisations.

PM11:38am

(Shouldn’t forgot to mention that we are back in the index business — now we are owned by Nikkei. I suspect Nikkei are very keen to extend their family of indices across Asia. But I am not saying they might be interested in MSCI. Have no info on that.)

Nikkei is the parent company of the Financial Times, publisher of FT Alphaville. BE11:38am

(Indeed.)

BE11:40am

Anyway, writing on the fly I’ve nothing to say about the MSCI stuff other than “yes, that’s a rumour that’s been around. We didn’t have the confidence or the guts to report it, from which you should draw no conclusions.”

BE11:40am

Oh, and since we’re here …..

BE11:40am

Brian Gilvary of BP was in seeing Cazenove earlier this week.

BE11:41am

Recent press reports of an XOM mega-merger scenario were downplayed, with BP’s focus firmly on underlying delivery. Our key takeaways were; 1) A reiteration of management’s commitment to sustained capital efficiency. BP outlined a hard ceiling to its $15-17bn capex guidance, but downside flex if oil prices move below $50/bbl; 2) Upstream production and FCF targets to 2021 are risk-adjusted, with FCF the primary metric. Line-of-sight will come through a front-end loaded production profile – seven project start-ups this year building on six delivered in 2016; 3) A progressive cashflow inflection will trigger neutralization of the scrip (reintroduction of buybacks) as a first step, followed by a longer term value-based assessment of enhanced cash return vs. paying down debt.

BE11:41am

Downplayed. So … that.

BP PLC (BP.:LSE): Last: 461.40, up 4.4 (+0.96%), High: 463.75, Low: 460.00, Volume: 8.65m11:41AM PM11:42am

Cheltenham tips requested

PM11:42am

Yes, I have Shrewdette’s pics.

PM11:42am

Which cost me some money yesterday.

PM11:42am

Let see whether she does a bit better today

PM11:42am

Altior’s 6 lengths win, helped by a nice second from Cloudy Dream almost kept me on the right side. Must do better on Day 2! DOUVAN will be everybody’s banker and rightly so.

1:30 Neptune Novice Hurdle. Remember … SkyBet Money Back Free Bet offer on all losers … NEON WOLF 2/1 W, and WILLOUGHBY COURT 12/1 EW was quite keen on him but the drying ground not ideal.

2:10 RSA Novice Chase. Henderson fields three here – I’ve gone for MIGHT BITE 7/2 W a faller when poised to win last time, and coupled him with WHISPER 7/1 EW. If you play the Tricast the third Henderson horse is O O SEVEN 14/1EW, also in with a chance but might find 3 miles too much.

2:50 Coral Cup H’cap Hurdle. Now here’s a good betting race. Paddy & Sky paying 6 places, 365, Victor & Betway pay 5 places. So I’m having fun and taken a few chances … PEREGRINE RUN 9/1 EW 4 wins last year latest at this track, MODUS 16/1 EW won last time out, SCOIR MEAR 20/1 EW a win & 3 seconds this season, well handicapped compared to Irish mark, and a small flutter on HAWK HIGH 33/1 EW a juvenile winner here made promising return last month.

3:30 QM Champion Chase. Can’t see anything beating the imperious DOUVAN 2/7 odds on. I’ve gone for a 9 length win at Evens, and I’ve also got an ante-post going on GODS OWN 20/1 EW – now shortened to 12/1 to pick up the place.

4:10 Cross Country Chase. looks like a JP McManus benefit – any of his three could win this but have to pick one … CANTLOW 3/1W. Also had an each way on USUEL SMURFER 20/1 EW interesting proposition for his new handler Alan Fleming.

4:50 Fred Winter Juvenile H’cap Hurdle. loads of young ones with good chances & most firms paying quarter odds for 4 places. The one with solid form is DIVIN BERE 6/1 W, and two each-ways PROJECT BLUEBOOK 14/1 EW and NIETZSCHE 28/1 EW.

5:30 NH Flat ‘bumper’. Usually leave these alone but can’t ignore CAUSE TOUJOUR’S connections combination – Carl Hinchy/Dan & Harry Skelton – got to be a Gold medal there! CAUSE TOUJOURS 7/1 EW – convincing winner on debut.

PM11:42am

Good luck everyone

11:42AM BE11:43am

What else? Corporate wise, there’s not much of interest.

BE11:43am

Well … there’s Hikma, I guess.

Hikma Pharmaceuticals PLC (HIK:LSE): Last: 2,279, up 153 (+7.20%), High: 2,317, Low: 2,180, Volume: 923.50k BE11:44am

Injectables beats.

BE11:44am

2017 guidance is a light warning, which no-one seems to care about

BE11:45am

And now we wait for generic Advair, on which today’s numbers told us literally nothing.

BE11:45am

Here’s Barclays.

BE11:45am

Hikma reports H2’16 group revenues of $1,068m, slightly ahead of Barclays and company consensus. Group core operating profit came in at $243m, a 24% and 22% beat versus Barclays and consensus respectively. The beat is driven by gross margins of 56% compared to Barclays 48% and consensus 49% and on all opex lines which were significantly behind consensus. The primary source of the gross margin beat is Injectables with gross margins of 64.7%. The gross margin and opex beat flowed down to group core EPS (+$0.70) which was ahead of Barclays and consensus by 30% and 25% respectively.

BE11:45am

Generics revenue of $347m was marginally ahead of Barclays and company consensus with core operating margin of 7.8% versus Barclays’ 7.8% and consensus 7.7%. Injectables revenue of $424m was 2% and 3% ahead of Barclays and consensus with core operating margin of 45.8% versus Barclays’ 37.4% and consensus 37.9%. Branded (MENA) revenue of $292m was 1% and 2% behind Barclays and consensus respectively with core operating margin of 19.5% versus Barclays’ 23.5% and consensus 22.1%.

BE11:45am

Generics: Revenue guidance remains at $800m (consensus $790m) as indicated at Q3’16 trading update. We remind this assumes generic Advair approval (GDUFA goal date 10 May 2017); we estimate ‘17E $100m sales (company guidance for H2 launch). Core operating margin is expected to “significantly improve” vs. consensus 17.2% (FY16 7.8%).

Injectables: Revenue is expected to be in the range of $800m – $825m on a reported basis versus consensus at $835 and core operating margin guidance “in the high 30s” compared to consensus’ 37.3%. Company notes it is still on target to launch a total of 20 Bedford products by end of 2017; we note the guidance for a contribution from Bedford of $150m was not explicitly reiterated.

Branded (MENA): Revenue is expected to grow mid-single digits on a CER basis vs. consensus at 2% on a reported basis with no guidance on core operating margins given.

BE11:47am

GDUFA for Mylan’s generic Advair is next week …..

BE11:47am

Hikma’s is scheduled for May 10th.

BE11:48am

And there’s lots of pressure on Gottlieb, the new head of the FDA, to show willing to approve generics.

BE11:48am

Barclays again to talk through the figures there.

BE11:49am

[Advair] presents a major opportunity for Hikma with potential $300m BCe peak sales ($100m in ‘17E). On our estimates this product is worth 18cents of FY17E core EPS and NPV £2/sh.

In our upside case (where Hikma is the only approved generic until FY19), peak sales could be c$500m and in FY17E specifically this would be an extra c$50m on the top line. Further upside could come from: i) an earlier launch than we assume in our base case (we assume Sept ’17 launch); ii) switching in the ICS/LABA class; and ii) an increase in patients under coverage due to the introduction of a lower priced substitutable product.

11:49AM PM11:49am

Hammond u-turn on the tapes

PM11:50am

Over this self employed NIC thing

PM11:50am

Doesnt really matter to us, does it?

BE11:50am

Good for freelancers, I think.

PM11:50am

True

BE11:50am

So …… doesn’t matter to us until we’re given the elbow and have to string for some bloody penny-stocks website.

PM11:51am

Omg smile

11:51AM PM11:51am

St Modwen

PM11:51am

Top of the 250 fallers currently

St. Modwen Properties PLC (SMP:LSE): Last: 313.50, down 16.3 (-4.94%), High: 332.00, Low: 305.10, Volume: 772.47k PM11:51am

Where was this piece about them struggling to deal with New Covent Garden?

BE11:52am

Yep. Estates Gazette story

PM11:52am

As previously announced by St. Modwen Properties PLC (LSE: SMP), a process regarding the sale of a 10-acre site at New Covent Garden Market is currently being undertaken. St. Modwen can confirm that a period of exclusivity which was recently granted to a prospective purchaser has now expired. The prime riverside site in central London has received high levels of interest and the sale process with other prospective purchasers continues.

PM11:52am

Development frenzy in London had (or has) to peak at some stage

BE11:53am

Remind me, doesn’t Barratt have exposure to Nine Elms?

PM11:53am

Dunno

PM11:53am

Actually, yet it does

Barratt Developments PLC (BDEV:LSE): Last: 528.18, down 6.82 (-1.27%), High: 537.50, Low: 528.18, Volume: 1.96m PM11:54am

https://www.barrat…2NICFVetUQodnEMD9w

PM11:54am

2 bedroom apartments currently availableFrom £850,000 to £999,995

BE11:54am

Just scanning through its last conference call …..

PM11:54am

Nine Elms Point is a Zone 1 development in the heart of London’s most exciting new district.

Conveniently located next to the future Nine Elms underground station and with Vauxhall station just a five minute walk away, arrive at Oxford Circus in around 8 minutes to fulfil all of your shopping needs.

BE11:54am

As in Barratt’s …..

PM11:54am

Sorry, go on

BE11:55am

In terms of the Housing White Paper, the good thing for us is that regards [those to tenure], we tend to find ourselves in a position that we can build, so whether we’re building for affordable housing or private housing, or PRS. Our model is not to build and hold, so we’re not looking to bring PRS onto our balance sheet.But we announced, this morning, that we’d undertaken our build-and-sale agreement for 118 apartments at Nine Elms and that is a PRS deal that we’re undertaking. So we believe it derisks the Nine Elms site for us and it allows us to sell both privately and into the PRS market simultaneously; therefore, increases the overall output, which has to be a positive.

BE11:55am

That’s David Thomas, CEO

BE11:55am

So, sensible bit of dumping in retrospect.

11:56AM PM11:57am

In our last few mins I should again promo Cardiff, Alex and Matt doing a Markets Live Special later

PM11:57am

From New York — in the wake of the Fed hike

PM11:57am

Likely Fed hike

PM11:57am

ML at 2.25 ET

PM11:57am

Ive lost track of the time difference!

PM11:57am

are we on four or five hours difference

PM11:58am

Why can’t the US change their clocks on the same date as us????

PM11:58am

Let me get some Fed grey to preview that

PM11:58am

Chirag Mirani — UBS

PM11:59am

The hawkish Fed shift was very realIn our recent notes, Is the market underestimating the Fed rate risk and Global Rates Landscape, we noted the US yield curve was at a risk of bear-flattening going into the March FOMC meeting. Following improving financial conditions, indeed the Fed has surprised the bond market hawkishly (See Figure 1). Our economics team along with the market is now looking for a Fed hike at the March meeting. In terms of new developments, since the January FOMC meeting, payroll data have been firm, inflation has surprised to the upside, equities have maintained their gains, but Q1 GDP tracking has been soft. However, the upside inflation surprise was concentrated on volatile components, and breakevens – which the Fed considers low – have edged lower (see Figure 2) recently. Said differently, the change in nominal yields since the previous FOMC meeting is entirely led by real yields, which indicates a hawkish Fed shift (see Figure 2). As noted in Lesson Learned: The Fed’s Message is the Medium, a number of cyclical assets have been under pressure on the back of rising real rates. Beyond that, key questions are what’s in price and what can surprise markets?

PM11:59am

Dot risks concentrated around 2018 and 2019, less so for 2017December FOMC meeting highlighted to investors that the Fed dot shift matters quite a bit. For the March FOMC meeting, our base case is that the Fed will not shift its median dots higher. However, there are risks around this view. Relative to Fed dots, we think the bond market is quite fairly priced for 2017 (see Figure 3). For four hikes to show up in the dot plot for 2017, we need about four FOMC participants to move up the median dot by 25bp. Thus, there is a limited upside risk to the 2017 Fed median dot. However, there is upside risk to 2018 and 2019 median dots. 2018 median dot requires only two FOMC participants to shift higher. 2019 median dot can move up by 12.5bp with only one participant shifting higher. Moving the long-run dot higher requires six FOMC members. Recently long-end nominal and real rates have moved up by close to 20bp and are well above the Fed’s terminal rates. This pricing suggests bonds are susceptible to rallying given that the long-run dot is unlikely to be changed. Other notable risks include discussion about ceasing balance sheet reinvestments.

PM11:59am

Market views…Currently, market’s fiscal spending expectations and optimistic survey data do not line up with soft Q1 spending data. Here, based on our fundamental framework (see Big Macro 01), we think long-end real rates are too high and the Fed is unlikely to shift long-run dot higher. Thus, we prefer to receive long-end real rates where one can earn a very high term premium. Cross-market, we like being long US TIPS versus Euro area linkers. On the US yield curve, front-end yields are susceptible to a move higher relative to the long-end, thus flatteners look fundamentally attractive. Following the curve framework defined in Global Rates Landscape, we look to reinitiate nominal/real 5s30s two weeks before the April FOMC meeting. On US breakevens, a hawkish Fed and a sharp shift lower in oil prices make us bearish on short-end breakevens to long-end.

PM11:59am

EURUSD stays on its way up and entry opportunity emerges for growth FXIn FX we continue to expect a grind higher in EUR/USD towards our year-end target of 1.13. The EUR has traded very resilient recently as a lot of risk premium is already in the price and the gap between EUR rates and fundamentals remains very wide. While political event risk may delay the bulk of the move for H2, the direction of travel is unlikely to change, in our view. We are also constructive a basket of growth-currencies (AUD, NZD and CLP), which have been more affected by the latest Fed re-pricing and thus present attractive entry opportunities, vs CAD and NOK, whose inflation profile continues to face headwinds from past currency strength and substantial output gaps.

PM11:59am

That will do

PM12:00pm

As for the likelihood of a Fed hike…

PM12:00pm PM12:00pm

Nailed on

PM12:00pm

So come back at 6.25pm, London time

PM12:01pm

And sometime later Cardiff will be doing a Facebook Live thing

PM12:01pm

But I don’t like going on Facebook, cos their algos think I’m a wingnut

PM12:01pm

And serve me up with bigot content

PM12:01pm

But that’s another subject

12:01PM BE12:02pm

Past noon already. No time to mention this Zodiac thing ….

BE12:02pm

Do take a moment to read this letter from TCI’s Chris Hohn though.

BE12:03pm

http://www.astrong…man_2017_03_15.pdf

BE12:03pm

In light of Zodiac’s catastrophic business update Safran should immediately cancel its proposed takeover of Zodiac. Safran has not yet signed a binding offer for Zodiac so Safran must act responsibly and pull out of the deal now.

BE12:03pm

If you do not cancel the deal it will be clear evidence that you are not competent to continue as chairman of Safran, so we will call on Safran shareholders to remove you from the board at the AGM in June

BE12:03pm

Oof.

PM12:04pm

whoa

BE12:04pm

That’s activism.

BE12:04pm

Anyway, let’s close. Ta. Afternoon all.

PM12:04pm

Yep, cheers Bryce

PM12:04pm

Come back at 6.25 Rabble! 2.25ET

PM12:04pm

Bye

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
0 0
Paul Murphy
Paul Murphy is the founding editor of FT Alphaville and an associate editor of the Financial Times. He joined the FT in London in 2006 as development editor of FT.com, concentrating on the expansion of the online business. Prior to that, he served as the Guardian’s financial editor for seven years. He has also held senior positions in business journalism at the Sunday Business newspaper and the Daily Telegraph. Murphy is a graduate of the London School of Economics.

Leave a Reply

Your email address will not be published. Required fields are marked *