Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

iShares MSCI ACWI ETF / Technical Analysis

<ul>
<li>The pullback in global equities continues with the MSCI ACWI (ACWI-US) testing 1.5-month downtrend resistance while the STOXX Europe 50 tests resistance at 3800-3840.</li>
<li>We expect a rejection at the 1.5-month downtrend and for the stair-step lower to continue, with our targets being $84 (December 2022 low) and potentially $75-77 (the 2022 lows).</li>
<li>If ACWI-US is able to reverse above the 1.5-month downtrend, we still expect $93 to cap upside in 2023. Remain overweight Europe. Also highlighting individual stock buys on pullbacks.</li>
</ul>


The pullback in global equities continues with the MSCI ACWI (ACWI-US) testing 1.5-month downtrend resistance while the STOXX Europe 50 tests resistance at 3800-3840.
We expect a rejection at the 1.5-month downtrend and for the stair-step lower to continue, with our targets being $84 (December 2022 low) and potentially $75-77 (the 2022 lows).
If ACWI-US is able to reverse above the 1.5-month downtrend, we still expect $93 to cap upside in 2023. Remain overweight Europe. Also highlighting individual stock buys on pullbacks.


MSCI ACWI and EAFE Testing 1.5-Month Downtrends; Remain OW EU; Buys in Leading Sectors on Pullbacks

EURO STOXX 50 Price EUR / Technical Analysis

<ul>
<li>It appears the recent pullback is over, and we could see the MSCI ACWI (ACWI-US) test YTD highs at $93. We still expect $93 to cap upside in 2023.</li>
<li>Overweight Europe/UK and non-U.S., we are buyers on pullbacks as long as FTSE 100 is above 7700, STOXX Europe 50 is above 3800, and EURO STOXX 50 is above 4000.</li>
<li>As long as these support levels are holding, we are constructive from a price perspective</li>
</ul>


It appears the recent pullback is over, and we could see the MSCI ACWI (ACWI-US) test YTD highs at $93. We still expect $93 to cap upside in 2023.
Overweight Europe/UK and non-U.S., we are buyers on pullbacks as long as FTSE 100 is above 7700, STOXX Europe 50 is above 3800, and EURO STOXX 50 is above 4000.
As long as these support levels are holding, we are constructive from a price perspective


Remain Overweight Europe/UK & Non-US Equities; Pullback Over?; Buys in Industrials and Financials

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Consideration: 0.3277 VALMT FH x 1 NELES FH plus a €2/share before the merger (record date 24 March). Upon announcement: 11.9x EV/Fwd EBITDA, 19.3x Fwd P/E.</li>
<li>All conditions have been cleared and approvals obtained. Completion is expected to take place on 1 April. Valmet seems to be the big winner in this merger.</li>
<li>Gross spread is currently -0.4%, so I would recommend monitoring the spread in case it turns positive.</li>
</ul>


Consideration: 0.3277 VALMT FH x 1 NELES FH plus a €2/share before the merger (record date 24 March). Upon announcement: 11.9x EV/Fwd EBITDA, 19.3x Fwd P/E.
All conditions have been cleared and approvals obtained. Completion is expected to take place on 1 April. Valmet seems to be the big winner in this merger.
Gross spread is currently -0.4%, so I would recommend monitoring the spread in case it turns positive.


Risk-on signals continue to pile up, which continues to support our constructive outlook. Building off of last week's report, growth Sectors such as Technology and Communications continue to improve and we recommend adding exposure (e.g., Bilibili BILI-US/9626-HK).

Risk-on signals continue to pile up, which continues to support our constructive outlook. Building off of last week's report, growth Sectors such as Technology and Communications continue to improve and we recommend adding exposure (e.g., Bilibili BILI-US/9626-HK).

Global Equity Strategy: Growth Sectors Continue To Improve -- Add Exposure

On 2 November, <a href="https://tenderoffer.alfalaval.com/pdf/Alfa%20Laval%20-%20Preliminary%20Result%20of%20the%20Tender%20Offer%20Release%20-%20ENG.pdf" target="_blank" rel="noopener">Alfa Laval AB published the preliminary result</a> of the offer:
<ul>
<li>It has received acceptances representing approximately 33% of the shares in Neles.</li>
</ul>
Alfa Laval said that it "will confirm and announce the final result of the offer on or about 4 November". If Alfa Laval does not achieve &gt;50% of Neles' shares, which is the most likely case, this could leave Valmet in a better position to pursue its Neles merger ambitions, on its own terms.
Neles shares closed on 3 November at 10.49, c. 9% below Alfa Laval's bid.
Valmet shares have lost €3.54 (c. 15%) since <a href="https://www.valmet.com/media/news/stock-exchange-releases/2020/valmet-acquires-14.9-ownership-in-the-future-neles/" target="_blank" rel="noopener">announcing the acquisition</a> of a 14.9% stake in Neles on 17 June. If Alfa's bid fails this likely leaves Valmet as the only obvious buyer (with a 29.57% stake in Neles, it is unlikely that any other bidder enters the fray).
The implied equity valuation of Neles on a NTM EV/EBITDA median multiple is €13.72 per share and on a NTM EPS median multiple is €13.0 per share. Taking an average of both gives €13.36 per share. Valmet could better by 16% the almost failed bid by Alfa Laval (c. 28% upside to the current level where Neles shares are trading).
Valmet would likely issue shares for an amount of €1,413 mn (a 31% dilution). The Finnish state (11.2% of Valmet) supports Valmet's pursuit of Neles.
I believe that given Valmet's interest on Neles, there is upside to Neles' share price, and recommend LONG NELES. Once Alva Laval retires, further negotiations between Neles and Valmet will likely take place, followed by a bid from Valmet on terms clearer than the initial approach and with a more detailed account of synergies, in my view.

On 2 November, Alfa Laval AB published the preliminary result of the offer:

It has received acceptances representing approximately 33% of the shares in Neles.

Alfa Laval said that it "will confirm and announce the final result of the offer on or about 4 November". If Alfa Laval does not achieve &gt;50% of Neles' shares, which is the most likely case, this could leave Valmet in a better position to pursue its Neles merger ambitions, on its own terms.
Neles shares closed on 3 November at 10.49, c. 9% below Alfa Laval's bid.
Valmet shares have lost €3.54 (c. 15%) since announcing the acquisition of a 14.9% stake in Neles on 17 June. If Alfa's bid fails this likely leaves Valmet as the only obvious buyer (with a 29.57% stake in Neles, it is unlikely that any other bidder enters the fray).
The implied equity valuation of Neles on a NTM EV/EBITDA median multiple is €13.72 per share and on a NTM EPS median multiple is €13.0 per share. Taking an average of both gives €13.36 per share. Valmet could better by 16% the almost failed bid by Alfa Laval (c. 28% upside to the current level where Neles shares are trading).
Valmet would likely issue shares for an amount of €1,413 mn (a 31% dilution). The Finnish state (11.2% of Valmet) supports Valmet's pursuit of Neles.
I believe that given Valmet's interest on Neles, there is upside to Neles' share price, and recommend LONG NELES. Once Alva Laval retires, further negotiations between Neles and Valmet will likely take place, followed by a bid from Valmet on terms clearer than the initial approach and with a more detailed account of synergies, in my view.

Neles - Alfa Laval: Preliminary Results, Valmet

Sweden

Alfa Laval AB provides specialized products and engineering solutions.  The Company's product line includes equipment and systems for heating, cooling, separation, and transportation of products such as oil, water, chemicals, beverages, starch, foodstuffs, and pharmaceuticals.  Alfa Laval sells and markets worldwide.

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Alfa Laval AB (ALFA SS)

MSCI ACWI and EAFE Testing 1.5-Month Downtrends; Remain OW EU; Buys in Leading Sectors on Pullbacks

Pullback in global equities continues with MSCI $ACWI testing 1.5-month downtrend resistance as $STOXX Europe 50 tests 3800-3840 resistance....

Vermilion Research

Remain Overweight Europe/UK & Non-US Equities; Pullback Over?; Buys in Industrials and Financials

Remain overweight Europe/UK and non-US equities; we are buyers on pullbacks as long as the FTSE 100 is above 7700, the STOXX Europe 50 is above...

Vermilion Research

Valmet/Neles: Merger Completion

All conditions have been cleared and approvals obtained. Completion is expected to take place on 1 April. Valmet seems to be the big winner in this...

Jesus Rodriguez Aguilar

Global Equity Strategy: Growth Sectors Continue To Improve -- Add Exposure

Building off of last week's report, growth Sectors such as Technology and Communications continue to improve and we recommend adding exposure...

Vermilion Research

Neles - Alfa Laval: Preliminary Results, Valmet

Once Alva Laval retires, Neles and Valmet will negotiate, and a bid from Valmet should happen, in my view. There is upside to Neles' share price,...

Jesus Rodriguez Aguilar

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