Markets & Finance

Renault Falls on Price Cut


From Standard & Poor's European MarketScope

France

Advertising outfit Havas was down €0.11 to €4.68, after shareholder Vincent Bollore won four seats on the company's board after today's annual general meeting. Meanwhile, chief executive Alain de Pouzilhac said he will not resign. Bollore said earlier today that his 20% stake in the company is an investment for the long term.

Renault was down €1.25 to €70.30 after the company has quietly dropped the €5,000 price tag for its Romanian-made model the Dacia Logan, aimed primarily at emerging markets, the Financial Times reported. The article noted that the company launches the car today in France and later this month in Spain and Germany, at €7,500. Separately, Dredsner Kleinwort Wasserstein initiated coverage with a reduce rating and €64 target price. The broker said that the company could be hit by lower volumes from its core models Megane and Scenic as well as by the ramp-up of Dacia Logan, which could lead to margin dilution.

Supermarket retailer Carrefour was down €0.28 to €40.03, after the French Prime Minister Dominique de Villepin said yesterday the reform of legislation known as the Loi Galland will go through. The law in its present form stipulates big retailers cannot pass discounts from bulk buys onto consumers. The reform is designed to offer cut prices to consumers, which reduces current margins at retailers like the company. Cheuvreux said it is difficult to project the magnitude of the reform, but warns about the low visibility of the sector in a tough market. Separately, the company bought 10 hypermarkets from Sonae in Sao Paulo, Brazil, for €90 million.

Tire maker Michelin was down €0.60 to €51.65 after Boeing announced that the company will be the second source for tires for its Boeing 787 Dreamliner.

Liquor maker Remy Cointreau was €0.70 to €35.20 as brokers weighed in on yesterday's fiscal-year results. The broker Cheuvreux increased its target to €37.50 from €31.50 and kept its outperform rating. Lehman Brothers raised its target to €37 from €33 and kept its overweight rating. The broker thinks that the company has further fundamental upside after its results confirmed organic profit growth expectations. Societe Generale lifted its fair value target to €29 from €27, but kept a sell rating, noting that the results did not satisfy its questions.

Germany

Carmaker Porsche was down €6.01 to €602.24, after the bank Societe Generale increased its fair value to €675 from €620 with a buy rating on the back of a very cautious discounted cash flow analysis. The bank said its analysis yields a valuation of €750, to which it applies a 10% discount, for the sake of caution. The bank said that the market is likely to be positively surprised when the company provides indications on 10-month revenues later this month.

Deutsche Bank was up €0.63 to €64.50, after JP Morgan cut its fair value target for the company to €80 from €83, with an overweight rating.

Chemical company BASF was down €0.09 to €55.76 after the Swiss newspaper Basler Zeitung reported that Ciba Specialty Chemicals may be in talks with the company about a possible tie up. Both companies deny the report.

Hypovereinsbank was down €0.21 to €20.19, as the bank's supervisory board may vote no to the Unicredito merger, unless guarantees are made that no changes will occur in the German business.

Britain

The bank HSBC was up £0.05 to £8.74 after its North American retail services business agreed to buy the private label credit card accounts and related assets of Neiman Marcus and its subsidiary Bergdorf Goodman, as well as the outstanding balances associated with such accounts, for $640 million. The transaction is expected to close by the end of July.

Supermarket group William Morrison was down £0.05 to £1.78, after several brokers cut their estimates. Goldman Sachs reduced its 2006 pre-tax profit estimate by 60% to £107 million. Lehman Brothers lowered its discounted cash flow analysis valuation to£1.70 from £2.05. Citigroup cut its forecasts and reduced its target price to £1.90 from £2.0. Societe Generale cut its pre-tax profit forecast to £105 million, compared to £315 million for the current year.

Mining group BHP Billiton was down £0.06 to £6.70, after the Financial Times reported that the company is on track to increase sales to China more than fivefold for the four years since 2001.

Exploration company Cairn Energy was up £0.12 to £12.88, after Credit Suisse First Boston raised its target by 13% to £13.25 and kept its neutral rating.


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