Markets & Finance

Danone Shares Lower


From Standard & Poor's European MarketScope

France

Total fell €0.40 to €222.40 on Wednesday. The company says its Deer Creek project could result in a US$9 billion bill, including the initial US$1.78 billion. The company expects the acquisition will add some 200,000 barrels per day to production. Meanwhile, Citigroup notes Rita was upgraded to a Category 3 Hurricane last night. Adds that the forecast path through the Gulf of Mexico producing areas is the same as Katrina, with the storm then hooking east with forecast landfall in Texas. Says this is significant because Texas has more oil/gas and refining infrastructure.

Danone fell €2.95 to €91.00 after CEO Franck Riboud says the company is very much on its guard after the stocks have tumbled by 2% in the CAC, but categorically denies holding talks with PepsiCo. Riboud says supposed bidders silence and the lack of a clear denial has fueled the market rumors. The company's CEO also says the Elysee response to defend the company against a possible hostile bid was impressive; and responds to criticisms of protectionism by saying every country in the world protects its priority sectors in one way or another.

Sanofi-Aventis was down €1.05 to €65.95 after the European Medicines Agency (EMA) suspended the Hexavax vaccination Tuesday on fears it may not be effective protection against Hepatitis B. Hexavax is jointly marketed by the company and Merck.

Publicis was lower by €0.36 to €26.74. The company is preparing a friendly bid for the UK's Aegis, according to Les Echos. The UK group confirmed on Wednesday morning it has received an approach with an indicative price of £1.40 per share. Les Echos says the board of Aegis will consider the bid Thursday. Meanwhile, the company acquired a 50.01% stake in UK independent PR firm Freud Communications.

Ipsos gained €7.00 to €99.00 after announcing first half attributable net profit of €10.40 million, up 19.6%. The company forecast fiscal year sales of €700 million. Ipsos says that by 2007 it expects to have revenues of at least €1 billion, with operating margin of over 10%. It notes that all things being equal, these targets are between 10% and 15% higher than previous targets that assume parity between the euro and the U.S. dollar. Cheuvreux upgraded the shares to outperform from underperform and keeps €110 target price.

Germany

Volkswagen gained €0.69 to €47.91, adding to Tuesday's 3.10% advance, with traders noting investors are chasing the company's restructuring story. Separately, the company's Audi unit is in talks with the company's Skoda unit to build its A4 range in India, the Business Standard reports.

Deutsche Bank fell €1.65 to €75.24. JP Morgan downgraded the shares to neutral from overweight, arguing that there is a perfect investment banking environment at the moment, but considers it is all already in the price of the stock. The broker downgraded the investment banking sector to neutral from overweight. Its new pecking order in the sector is UBS (overweight), Deutsche Bank, and then CS Group (neutral). JP Morgan says the company's downgrade may be too early, but thinks external conditions are unlikely to improve.

Thiel Logistik fell €0.03 to €2.92 after the company announced a restructuring, abolishing the management board and making the board of directors responsible for oversight and management.

Italy

SNAM Rete Gas was down €0.00 to €4.81. The company will pay an extraordinary dividend of €1 per share. Also, the group will ask its shareholders approval for a €800m share buyback. On Tuesday, the Italian press reported rumors having that the government is planning to privatize the company as soon as 2006. Separately, Deutsche Bank believes Terna's privatization process might be replicated for the company case, ie introduce a limit to ENI's (and other gas operators) rights at 5% and possibly find a neutral operator to park a 30% stake in the company (CDP in Terna's case). DB rates SNAM buy.

Telecom Italia rose €0.03 to €2.60. The company is reportedly launching a US$2.5 billion bond in three tranches earmarked for U.S. investors. Also, the company's chairman, Marco Tronchetti Provera, has bought 2 million ordinary shares at €2.58 each.

Monte Paschi gained €0.04 to €3.33. Milano Finanza reports talk of a possible new management structure at the company by the end of 2005, ahead of new board appointments expected for the next Spring. According to the paper, among candidates for the post of the company's GM are Antonio Vigni and Marco Morelli. An independent external CEO would act along side the two executives, the paper adds. The company's board will meet on Sept. 29.

Netherlands

Fortis fell €0.34 to €23.70.Following news reports that the company is interested in buying Dexia, Fortis says many files are currently being studied in the context of the evolution of the European financial sector. Adds that these files are at an early stage so that there is at present no expectation that a transaction will materialize. The company refrains from making any further comments. Meanwhile, brokers say such a deal is unlikely.

ING Groep fell €0.18 to €24.13. Lehman Brothers lowered its target on the stock to €24.0 from €25.1, bringing the company's embedded value bond yield assumptions into line with its peer group. Lehman kept its equal weight rating on the shares.

ASML was lower by €0.31 to €13.53. Rabobank downgraded the shares to neutral from outperform and cut its target to €14 from €15. SocGen downgraded ASML to hold from buy and trimmed its target to €13.5 from €15.0. Separately, North America's book-to-bill ratio came in at 1.05 in August, vs. 0.93 in July. This represents expansion in the industry and is also above market expectations of a figure below 1.00.

Nordic

Hennes & Mauritz rose SEK3.00 to SEK262.00. Local broker Urquijo ByV reiterated its accumulate rating following the results of peer Inditex of Spain. It says Inditex is trading on a 2006 p-e of 16.9 times, a discount to the company, and therefore considers H&M shares cheap. Separately, Handelsbanken reiterated its accumulate opinion, highlighting the company's strong sales in Germany -- up 5% year-over-year in August.

Teliasonera fell SEK0.30 to SEK37.10. The company ended a hundred-year-old monopoly of rival Elisa when it secured a deal in Helsinki, reports daily Helsingin Sanomat.

Statoil was up NOK1.00 to NOK163.50. The new Norwegian government will continue to permit exploration for oil & gas when they take over power next month, reported NRK television last night. Separately, an article in Dagens Naeringsliv says that the company's management was keen to push through the Snoehvit project and sideline its own advisory group in order to meet sales contracts.

Spain

Inditex gained €1.30 to €24.25. The company announced first half net profit rose 29% to €246 million, well above a forecast range of €218 million to €225 million. The company adds that the autumn/winter collection has been well received at the start of the second half. It sees 400-450 new stores opening in 2005.

Union Fenosa rose €0.47 to €26.26. Portuguese oil and gas group Galp Energia has sounded out Santander about possibly buying its 22% stake in the company, according to Cinco Dias. The paper notes that Galp's interest in the company has come since Gas Natural's bid for Endesa.

Switzerland

UBS fell 1.00 Swiss francs to 109.00 francs. JP Morgan raised its target to 115 francs from 110 francs, saying the bank offers the lowest credit risk, most flexible cost base, and strongest cash flow generation in all divisions at just a 5% valuation premium to its peers. However, the broker is downgrading the investment banking sector to neutral from overweight arguing that perfect market conditions in all segments with no clear curve balls in sight are discounted into prices.

Roche fell 2.40 Swiss francs to 181.10 francs. The company's lung cancer treatment Tarceva has been approved across the European Union for patients with locally advanced or metastatic non small cell lung cancer (NSCLC) after failure of at least one prior chemotherapy regimen.

United Kingdom

Aegis gained £0.25 to £1.46. Les Echos website says France's Publicis will launch a friendly bid on the company. The board of the company is said to be considering the offer. Aegis confirms it has received a bid approach with an indicative price of £1.40 per share. Sources also note talk that Ipsos would buy a part of Aegis if the company is acquired.

Astrazeneca (UK) fell £0.19 to £25.87. Lehman Brothers upgraded its stance on the European pharma industry to positive and forecasts earnings growth at a compounded annual rate of 14.7% to 2009, with a recent analysis suggesting further potential for cost savings. Although pipeline productivity remains an issue, the broker sees a sharp increase in the peak sales potential of new products and there may be early signs that regulatory scrutiny is easing. Lehman notes concerns remain over the company's weak pipeline outlook relative to its peers, and it highlights the impact of Toprol XL generic competition (from 2006) and Symbicort launch costs (from 2007). This leads the broker to reiterate its equal weight rating and £26.0 price target.

Carnival fell £0.66 to £28.99. Citigroup trimmed its target to US$62 from US$66, and reiterates its buy recommendation.

Kelda fell £0.09 to £7.07. Lehman Brothers cut the shares to equal weight from overweight but raised its target to £6.90 from £6.25.


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