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 Global Consumer Disc / Technical Analysis

<ul>
<li>We are seeing some positive signals that suggest the lows for this bear market may have already been established, or at the very least, that downside is limited from here.</li>
<li>Still, YTD downtrends remain intact on the global MSCI equity indexes, and we need to see reversals of their downtrends in order to get more constructive at the index level.</li>
<li>Cyclical Growth Sectors continue to gain momentum and we are upgrading the MSCI ACWI Technology, Consumer Discretionary, and Communication Services Sectors from underweight to market weight. Add exposure.</li>
</ul>


We are seeing some positive signals that suggest the lows for this bear market may have already been established, or at the very least, that downside is limited from here.
Still, YTD downtrends remain intact on the global MSCI equity indexes, and we need to see reversals of their downtrends in order to get more constructive at the index level.
Cyclical Growth Sectors continue to gain momentum and we are upgrading the MSCI ACWI Technology, Consumer Discretionary, and Communication Services Sectors from underweight to market weight. Add exposure.


Positive Signals; Growth Sectors Gaining Momentum; Buy Ideas Within Global Growth Sectors

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>In this insight, we take a look at the names leading the race to become ADDs/DELs for the DAX, MDAX, and SDAX Indices for the September 2022 Rebalance.</li>
<li>While no names currently satisfy the requirements to move into or out of the DAX Index, there could be some changes for the MDAX and SDAX Index.</li>
<li>Below is a closer look at the recent price and volume performance of these names.</li>
</ul>


In this insight, we take a look at the names leading the race to become ADDs/DELs for the DAX, MDAX, and SDAX Indices for the September 2022 Rebalance.
While no names currently satisfy the requirements to move into or out of the DAX Index, there could be some changes for the MDAX and SDAX Index.
Below is a closer look at the recent price and volume performance of these names.


DAX/​MDAX/​SDAX Quiddity Leaderboard Sep 2022: Some Changes for SDAX and MDAX

<ul>
<li>In this insight, we take a look at the names leading the race to become ADDs/DELs for the DAX, MDAX, and SDAX Indices for the September 2022 Rebalance.</li>
<li>
<a href="https://www.smartkarma.com/entities/aareal-bank-ag" target="_blank" data-smartkarma-citation="entities:21584:1" rel="noopener">Aareal Bank AG (ARL GR)</a> and <a href="https://www.smartkarma.com/entities/deutsche-euroshop-ag" target="_blank" data-smartkarma-citation="entities:21605:1" rel="noopener">Deutsche Euroshop Ag (DEQ GR)</a> are currently involved in takeover situations which might also have index change implications.</li>
<li>Based on current data, <a href="https://www.smartkarma.com/entities/rheinmetall-ag" target="_blank" data-smartkarma-citation="entities:21700:1" rel="noopener">Rheinmetall (RHM GR)</a> is leading the race to become a DAX ADD and <a href="https://www.smartkarma.com/entities/hellofresh-ag" target="_blank" data-smartkarma-citation="entities:26000:1" rel="noopener">HelloFresh (HFG GR)</a> is leading the race to become a DAX DEL.</li>
</ul>


In this insight, we take a look at the names leading the race to become ADDs/DELs for the DAX, MDAX, and SDAX Indices for the September 2022 Rebalance.

Aareal Bank AG (ARL GR) and Deutsche Euroshop Ag (DEQ GR) are currently involved in takeover situations which might also have index change implications.
Based on current data, Rheinmetall (RHM GR) is leading the race to become a DAX ADD and HelloFresh (HFG GR) is leading the race to become a DAX DEL.


DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Rheinmetall, HelloFresh, & Other Potential Changes

<ul>
<li>The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).</li>
<li>Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it's a start.</li>
<li>We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.</li>
</ul>


The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).
Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it's a start.
We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.


Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec's

European Event-Driven Analyst

Jesus Rodriguez Aguilar

On 14 August, <a href="https://www.smartkarma.com/entities/faurecia" target="_blank" data-smartkarma-citation="entities:21451:1" rel="noopener">Faurecia (EO FP)</a> signed an agreement to acquire a 60% stake in <a href="https://www.smartkarma.com/entities/hella-gmbh-co-kgaa" target="_blank" data-smartkarma-citation="entities:21650:1" rel="noopener">Hella GmbH &amp; Co KGaA (HLE GR)</a> from the Hueck family for €60/share. Under the terms, Faurecia will pay €3.4 billion in cash and will issue 13.57 million shares (based on a reference price of €42.06/share, with a floor of €37.85/share), financed through 85% debt / 15% rights issue. The Huecks will retain an up to 9% stake in the listed parent.
Following the agreement with the Huecks, Faurecia has made an offer to acquire the remaining 40% stake in HELLA (in accordance with German takeover law, a mandatory offer had to be made within three months). As per the transaction, Faurecia will offer €60/share; assuming a dividend of €0.96/share, the gross offer price amounts to €60.96/share. This second part will be 70% debt / 30% equity financed (rights issue). There is relatively low dilution and no minimum acceptance threshold.
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Faurecia has fully secured the financing of the acquisition of Hella through a committed bridge facility of €5.5 billion. Except for the €800 million bridge, such facility will be mostly refinanced through bond issuance and bank loans.
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The combined company will have 2021e pro-forma c. €23 bn in turnover, 150,000 employees, a c. 14% EBITDA margin and an EBIT margin of at least 7%. Double-digit EPS accretion starting FY 2023. For Faurecia, EPS accretion will increase approximately 15% by 2022e. The cash generation profile of the pro forma combined company seems attractive. I estimate the announced synergies, taxed and capitalized, minus cost of synergies to have an NPV of €750mn, or €5.5/Faurecia share and €4.25 for the combined company. Faurecia management has a good track record on execution.
</div>
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Industry experts expect the market for LED car lights to double by 2030, while the sensors business is expected to spike as cars add autonomous driving features.
<div>
The offer also represents 1.0x EV/Fwd Revenue, 7.8x EV/Fwd EBITDA and 19.1x Fwd P/E (source Capital IQ consensus), which is a significant premium over its European supplier peer group, which currently trades on 0.5x EV/Fwd Revenue, 5x EV/Fwd EBITDA and 11.8x Fwd PE. The valuation is also significantly higher than the trading multiples of Faurecia.
</div>
I believe the deal has a high probability to close, due to the premium offered and friendly approach, with low interloper risk due to the competitive bidding process that previously took place. Faurecia shares are up 11.5%.
The shares are trading above the gross offer price, therefore I would wait for share price weakness before opening a position.
</div>
Completion is expected in early 2022.
</div>

On 14 August, Faurecia (EO FP) signed an agreement to acquire a 60% stake in Hella GmbH &amp; Co KGaA (HLE GR) from the Hueck family for €60/share. Under the terms, Faurecia will pay €3.4 billion in cash and will issue 13.57 million shares (based on a reference price of €42.06/share, with a floor of €37.85/share), financed through 85% debt / 15% rights issue. The Huecks will retain an up to 9% stake in the listed parent.
Following the agreement with the Huecks, Faurecia has made an offer to acquire the remaining 40% stake in HELLA (in accordance with German takeover law, a mandatory offer had to be made within three months). As per the transaction, Faurecia will offer €60/share; assuming a dividend of €0.96/share, the gross offer price amounts to €60.96/share. This second part will be 70% debt / 30% equity financed (rights issue). There is relatively low dilution and no minimum acceptance threshold.

Faurecia has fully secured the financing of the acquisition of Hella through a committed bridge facility of €5.5 billion. Except for the €800 million bridge, such facility will be mostly refinanced through bond issuance and bank loans.

The combined company will have 2021e pro-forma c. €23 bn in turnover, 150,000 employees, a c. 14% EBITDA margin and an EBIT margin of at least 7%. Double-digit EPS accretion starting FY 2023. For Faurecia, EPS accretion will increase approximately 15% by 2022e. The cash generation profile of the pro forma combined company seems attractive. I estimate the announced synergies, taxed and capitalized, minus cost of synergies to have an NPV of €750mn, or €5.5/Faurecia share and €4.25 for the combined company. Faurecia management has a good track record on execution.


Industry experts expect the market for LED car lights to double by 2030, while the sensors business is expected to spike as cars add autonomous driving features.

The offer also represents 1.0x EV/Fwd Revenue, 7.8x EV/Fwd EBITDA and 19.1x Fwd P/E (source Capital IQ consensus), which is a significant premium over its European supplier peer group, which currently trades on 0.5x EV/Fwd Revenue, 5x EV/Fwd EBITDA and 11.8x Fwd PE. The valuation is also significantly higher than the trading multiples of Faurecia.

I believe the deal has a high probability to close, due to the premium offered and friendly approach, with low interloper risk due to the competitive bidding process that previously took place. Faurecia shares are up 11.5%.
The shares are trading above the gross offer price, therefore I would wait for share price weakness before opening a position.

Completion is expected in early 2022.


Germany

HELLA GmbH & Co. KGaA develops and manufactures lighting, electronic components, and systems. The Company offers spare parts, chassis, side lights, and accessories, as well as vehicle diagnostics, battery installation, and lighting services. HELLA serves customers worldwide.

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Hella GmbH & Co KGaA (HLE GR)

Positive Signals; Growth Sectors Gaining Momentum; Buy Ideas Within Global Growth Sectors

Starting to see positive signals that suggest downside is limited from here. Still, we need to see reversals of YTD downtrends on $ACWI $ACWX $EFA...

Vermilion Research

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Some Changes for SDAX and MDAX

Hochtief AG and Hella GmbH could move from SDAX to MDAX and Grand City Properties and Uniper SE could move from MDAX to SDAX. There could be 2...

Janaghan Jeyakumar, CFA

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Rheinmetall, HelloFresh, & Other Potential Changes

Based on current share prices, DAX, MDAX, and SDAX indices seem likely to experience one or more changes each in the September 2022 Regular Review.

Janaghan Jeyakumar, CFA

Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec's

The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China $MCHI, and...

Vermilion Research

Faurecia/Hella

The deal has a high probability to close, due to the premium offered and friendly approach, after a competitive bidding process. HLA GR trades...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Positive Signals; Growth Sectors Gaining Momentum; Buy Ideas Within Global Growth Sectors

Starting to see positive signals that suggest downside is limited from here. Still, we need to see reversals of YTD downtrends on $ACWI $ACWX $EFA...

Vermilion Research

DAX/​MDAX/​SDAX Quiddity Leaderboard Sep 2022: Some Changes for SDAX and MDAX

Hochtief AG and Hella GmbH could move from SDAX to MDAX and Grand City Properties and Uniper SE could move from MDAX to SDAX. There could be 2...

Janaghan Jeyakumar, CFA

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Rheinmetall, HelloFresh, & Other Potential Changes

Based on current share prices, DAX, MDAX, and SDAX indices seem likely to experience one or more changes each in the September 2022 Regular Review.

Janaghan Jeyakumar, CFA

Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec's

The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China $MCHI, and...

Vermilion Research

Faurecia/Hella

The deal has a high probability to close, due to the premium offered and friendly approach, after a competitive bidding process. HLA GR trades...

Jesus Rodriguez Aguilar

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Some Changes for SDAX and MDAX