European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<h3><strong>Trends</strong></h3>
<p>There has been no obvious trend over the last two months regarding the discounts, although it has widened in some names. Some of the previous (May and June) recommendations have been bang on. Trading opportunities are less obvious, but some still exist.</p>
<h3><strong>Recommended trades</strong></h3>
<ul class="">
<li>
<a href="https://www.smartkarma.com/entities/carlsberg-a-s" target="_blank" rel="noopener">Carlsberg A/S (CARLB DC)</a>: close trade long B/short A shares (B are trading at 4.4% discount from 12% in June).</li>
<li>
<a href="https://www.smartkarma.com/entities/bayerische-motoren-werke-ag" target="_blank" rel="noopener">Bayerische Motoren Werke AG (BMW GR)</a> : the discount has widened to 23% from 18% by mid-August, as a result of recent volatility. I would recommend setting up a trade <strong>long BMW prefs, short ords</strong> with a target of a 15% discount.</li>
<li>
<a href="https://www.smartkarma.com/entities/fuchs-petrolub-se" target="_blank" rel="noopener">Fuchs Petrolub Se (FPE GR)</a> 's premium of preferred shares is a whopping 33.6% currently. Remember that <em>voting rights are valuable</em>. Recommendation: <strong>long ords/short prefs</strong>, with a 10% target.</li>
<li>
<a href="https://www.smartkarma.com/entities/henkel-ag-co-kgaa" target="_blank" rel="noopener">Henkel AG &amp; Co Kgaa (HEN3 GR)</a> The premium of the preferred shares is 15.4%. I would set up a trade <strong>long prefs/short common shares</strong> with a 10% discount target.</li>
<li>Voting rights are valuable in a company like <a href="https://www.smartkarma.com/entities/volkswagen-ag" target="_blank" data-smartkarma-citation="entities:21738:1" rel="noopener">Volkswagen (VOW GR)</a> , so a <strong>5.8% discount of the prefs</strong>. seems about right. If you believe that the higher liquidity of the prefs will, at some point, mean that the discount will close, then a long prefs/short ords may be an option; plus it can be executed in size. The discount tightened since the March selloff and has been moving within a tight range. </li>
<li>
<a href="https://www.smartkarma.com/entities/grifols-sa" target="_blank" rel="noopener">Grifols SA (GRF SM)</a> B shares are trading at a 41.9% discount (vs. 38% in June). The discount in Grifols B shares has averaged 28% since listing of the B shares in February 2016. I recommend setting up the trade <strong>long B shares traded on Nasdaq, short A shares traded in Madrid</strong>. The target is a 27% discount. Please note there is FX risk, which can be hedged.</li>
<li>The discount in the <a href="https://www.smartkarma.com/entities/telefonaktiebolaget-lm-ericsso" target="_blank" data-smartkarma-citation="entities:22354:1" rel="noopener">Telefonaktiebolaget Lm Ericsso (ERICB SS)</a> (Ericsson) B shares has tightened since my July recommendation: from 8.7% to 7.7%. I would keep the trade on with a 3% discount target.</li>
</ul>
<p>Please read on for table and charts.</p>

Trends
There has been no obvious trend over the last two months regarding the discounts, although it has widened in some names. Some of the previous (May and June) recommendations have been bang on. Trading opportunities are less obvious, but some still exist.
Recommended trades


Carlsberg A/S (CARLB DC): close trade long B/short A shares (B are trading at 4.4% discount from 12% in June).

Bayerische Motoren Werke AG (BMW GR) : the discount has widened to 23% from 18% by mid-August, as a result of recent volatility. I would recommend setting up a trade long BMW prefs, short ords with a target of a 15% discount.

Fuchs Petrolub Se (FPE GR) 's premium of preferred shares is a whopping 33.6% currently. Remember that voting rights are valuable. Recommendation: long ords/short prefs, with a 10% target.

Henkel AG &amp; Co Kgaa (HEN3 GR) The premium of the preferred shares is 15.4%. I would set up a trade long prefs/short common shares with a 10% discount target.
Voting rights are valuable in a company like Volkswagen (VOW GR) , so a 5.8% discount of the prefs. seems about right. If you believe that the higher liquidity of the prefs will, at some point, mean that the discount will close, then a long prefs/short ords may be an option; plus it can be executed in size. The discount tightened since the March selloff and has been moving within a tight range. 

Grifols SA (GRF SM) B shares are trading at a 41.9% discount (vs. 38% in June). The discount in Grifols B shares has averaged 28% since listing of the B shares in February 2016. I recommend setting up the trade long B shares traded on Nasdaq, short A shares traded in Madrid. The target is a 27% discount. Please note there is FX risk, which can be hedged.
The discount in the Telefonaktiebolaget Lm Ericsso (ERICB SS) (Ericsson) B shares has tightened since my July recommendation: from 8.7% to 7.7%. I would keep the trade on with a 3% discount target.

Please read on for table and charts.

Liquid Universe of European Ordinary and Preferred Shares: September Report

<h3><strong>Trends</strong></h3>
<p>The general trend of the last month has been a reduction of the premiums and tightening of the discounts. Some of the previous (May and June)recommendations have been bang on. Trading opportunities are less obvious, but some still exist.</p>
<h3><strong>Recommended trades</strong></h3>
<ul>
<li>
<a href="https://www.smartkarma.com/entities/bayerische-motoren-werke-ag" target="_blank" data-smartkarma-citation="entities:21591:1" rel="noopener">Bayerische Motoren Werke AG (BMW GR)</a> exhibited a trend towards a reduction of the discount of preferred shares. Now the discount is 24%, as a result of recent volatility. I would recommend setting up a trade<span class="apple-converted-space"> </span><strong>long BMW prefs, short ords</strong> with a target of a 12% discount.</li>
<li>
<a href="https://www.smartkarma.com/entities/fuchs-petrolub-se" target="_blank" rel="noopener">Fuchs Petrolub Se (FPE GR)</a> 's premium seems to vary within a range, which is probably liquidity related. It is 23.7% currently. Remember that voting rights are valuable. The recommendation is setting up <strong>long ords/short prefs</strong>, with a 10% target.</li>
<li>
<a href="https://www.smartkarma.com/entities/henkel-ag-co-kgaa" target="_blank" rel="noopener">Henkel AG &amp; Co Kgaa (HEN3 GR)</a> shows a long-term trend towards a reduction of the premium of the preferred shares. The premium is 12.9%. I would set up a trade long prefs/short common shares with a 10% discount target.</li>
<li>
<a href="https://www.smartkarma.com/entities/grifols-sa" target="_blank" rel="noopener">Grifols SA (GRF SM)</a>. Grifols B shares are trading at a 37% discount (vs. 38% in the last report), there is a trend towards the tightening of this discount since mid-March. The discount in Grifols B shares has averaged 26.7% over the last four years. I recommend setting up the trade<span class="apple-converted-space"> </span><strong>long B shares traded on Nasdaq, short A shares traded in Madrid</strong>. The target is a 27% discount. Please note there is FX risk, which can be hedged.</li>
<li>There is an 8.7% discount in Ericsson B shares (<a href="https://www.smartkarma.com/entities/telefonaktiebolaget-lm-ericsso" target="_blank" data-smartkarma-citation="entities:22354:1" rel="noopener">Telefonaktiebolaget Lm Ericsso (ERICB SS)</a> ). Setting up long B shares, short A shares seems tempting.</li>
</ul>
<p>Please read on for table and charts.</p>

Trends
The general trend of the last month has been a reduction of the premiums and tightening of the discounts. Some of the previous (May and June)recommendations have been bang on. Trading opportunities are less obvious, but some still exist.
Recommended trades


Bayerische Motoren Werke AG (BMW GR) exhibited a trend towards a reduction of the discount of preferred shares. Now the discount is 24%, as a result of recent volatility. I would recommend setting up a trade long BMW prefs, short ords with a target of a 12% discount.

Fuchs Petrolub Se (FPE GR) 's premium seems to vary within a range, which is probably liquidity related. It is 23.7% currently. Remember that voting rights are valuable. The recommendation is setting up long ords/short prefs, with a 10% target.

Henkel AG &amp; Co Kgaa (HEN3 GR) shows a long-term trend towards a reduction of the premium of the preferred shares. The premium is 12.9%. I would set up a trade long prefs/short common shares with a 10% discount target.

Grifols SA (GRF SM). Grifols B shares are trading at a 37% discount (vs. 38% in the last report), there is a trend towards the tightening of this discount since mid-March. The discount in Grifols B shares has averaged 26.7% over the last four years. I recommend setting up the trade long B shares traded on Nasdaq, short A shares traded in Madrid. The target is a 27% discount. Please note there is FX risk, which can be hedged.
There is an 8.7% discount in Ericsson B shares (Telefonaktiebolaget Lm Ericsso (ERICB SS) ). Setting up long B shares, short A shares seems tempting.

Please read on for table and charts.

Liquid Universe of European Ordinary and Preferred Shares

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a> is set to raise JPY2.65 trillion ($23.5 billion) through the <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a> IPO, Japan's biggest-ever IPO. However, SoftBank Corp's IPO which is set for 19 December is oversubscribed by less than double, according to press reports. This level of oversubscription is well below blockbuster Japanese stock debuts such as <a href="https://www.smartkarma.com/entities/27149" target="_blank" data-smartkarma-citation="entities:27149:1">Mercari Inc (4385 JP)</a> and <a href="https://www.smartkarma.com/entities/15070" target="_blank" data-smartkarma-citation="entities:15070:1">Recruit Holdings (6098 JP)</a>.</p><div class="content-highlight"><p>Based on client discussion on SoftBank Corp’s intrinsic value, we have put together a DCF-based valuation along with scenario analysis. Our conclusion remains the same that SoftBank Corp is overvalued at the proposed IPO price of JPY1,500 per share. </p></div>

Softbank Group (9984 JP) is set to raise JPY2.65 trillion ($23.5 billion) through the Softbank Corp (9434 JP) IPO, Japan's biggest-ever IPO. However, SoftBank Corp's IPO which is set for 19 December is oversubscribed by less than double, according to press reports. This level of oversubscription is well below blockbuster Japanese stock debuts such as Mercari Inc (4385 JP) and Recruit Holdings (6098 JP).Based on client discussion on SoftBank Corp’s intrinsic value, we have put together a DCF-based valuation along with scenario analysis. Our conclusion remains the same that SoftBank Corp is overvalued at the proposed IPO price of JPY1,500 per share. 

SoftBank Corp IPO Valuation: Bull/Bear Case DCF Scenarios

Asiainfo Technologies / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/27475" target="_blank" data-smartkarma-citation="entities:27475:1">Asiainfo Technologies (1119892D CH)</a> is a leading Chinese telecom software and services provider with a 25% market share as measured by revenue in 2017. It announced its IPO price range of HK$10.50-13.50 per share. At the mid-point of the IPO price range, AsiaInfo will raise proceeds of $132 million, resulting in a fully diluted market cap of $1.1 billion. Cornerstone investors which include <a href="https://www.smartkarma.com/entities/179" target="_blank" data-smartkarma-citation="entities:179:1">Baidu Inc (ADR) (BIDU US)</a> and <a href="https://www.smartkarma.com/entities/13359" target="_blank" data-smartkarma-citation="entities:13359:1">Lenovo (992 HK)</a> have together agreed to purchase $60 million worth of shares in the offering.</p><div class="content-highlight"><p>We had previously expressed our concerns about AsiaInfo's fundamentals. Overall, we believe that the proposed IPO price range in unattractive and would not participate in the deal.</p></div>

Asiainfo Technologies (1119892D CH) is a leading Chinese telecom software and services provider with a 25% market share as measured by revenue in 2017. It announced its IPO price range of HK$10.50-13.50 per share. At the mid-point of the IPO price range, AsiaInfo will raise proceeds of $132 million, resulting in a fully diluted market cap of $1.1 billion. Cornerstone investors which include Baidu Inc (ADR) (BIDU US) and Lenovo (992 HK) have together agreed to purchase $60 million worth of shares in the offering.We had previously expressed our concerns about AsiaInfo's fundamentals. Overall, we believe that the proposed IPO price range in unattractive and would not participate in the deal.

AsiaInfo IPO Valuation: Not Enough of a Discount

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

<p style="text-align: justify;">The “Big” rally has now faded less than a week from its start. While many point to a robust economy, strong GDP, and a strengthening U.S. dollar as the bellwether of global currencies, something seems amiss. Higher interest rates have doused the market’s advance, with 10-year yields double what they once were just three years ago. Investors are being jostled about as a determination is made as to whether the Fed has gone too far and too fast. Our concern here is that the Fed is creating a conundrum, indicating that higher rates are still forthcoming despite what we, and the market, are viewing as the possible end of the bull market...</p><p></p><p>In our November Strategy publication, we outline a host of indicators we are watching for signs of the market's health.  In addition we highlight a number of actionable setups within Health care, Consumer Staples and Technology.</p>

The “Big” rally has now faded less than a week from its start. While many point to a robust economy, strong GDP, and a strengthening U.S. dollar as the bellwether of global currencies, something seems amiss. Higher interest rates have doused the market’s advance, with 10-year yields double what they once were just three years ago. Investors are being jostled about as a determination is made as to whether the Fed has gone too far and too fast. Our concern here is that the Fed is creating a conundrum, indicating that higher rates are still forthcoming despite what we, and the market, are viewing as the possible end of the bull market...In our November Strategy publication, we outline a host of indicators we are watching for signs of the market's health.  In addition we highlight a number of actionable setups within Health care, Consumer Staples and Technology.

U.S. Equity Strategy & Sector Commentaries: Defensive Sectors Leading = Unhealthy Market

Sweden

Telefonaktiebolaget LM Ericsson develops and manufactures network equipment and software, as well as services for network and business operations. The Company's portfolio also includes products for the enterprise, cable, mobile platform, and power module markets.

Hexagon AB is a global provider of design, measurement and visualisation technologies. The main business area, Measurement Technologies, includes three application areas: Geosystems, Metrology and Technology, that provide systems to design, measure and position objects, and process and present data.

Mycronic AB is a computer technology company. The Company develops, manufactures, and markets laser writers used for microlithography.  Micronic also manufactures SMT placement machines and stencil-free printers for the electronics industry.

Tobii AB is an eye tracking company. The Company provides eye-tracking solutions as well as eye-tracking integration components. Tobii develops and sells augmentative and alternative solutions to aid peoples mobility and communication.

Fingerprint Cards AB has developed electronic systems that determine personal identity by analyzing fingertip patterns  of individuals.  The Company sells licensed components to companies that make integrated electronic user information products such as cellular phones, access cards, smart cards, and computer security products.  Fingerprint markets the technology international.

Ubiquiti Inc. provides wireless networking products and solutions. The Company offers radios, antennas, and management tools that have been designed to deliver carrier class performance for wireless networking and other applications in the unlicensed radio frequency. Ubiquiti operates in the State of New York.

BYD Electronic International Co., Ltd. researches, develops, manufactures handset components such as handset casings and handset keypads and modules for handset manufacturers.  The Company also provides assembly services comprising assembly service and PCB assembly service to global handset manufacturers.

Accton Technology Corporation researches, develops, manufactures, and markets computer network system products such as adapters, hubs, switches, routers, and bridges. The Company also manufactures network computers and network peripheral equipment.

ZTE Corporation develops and markets switches, access servers, videoconferencing systems, mobile communication systems, data communication devices, and optical communication devices.  The Company also offers networking solutions for setup, refurbishment and optimization of networks.

Zhongji Innolight Co., Ltd. manufactures and distributes industrial machines and machine parts. The Company produces motor stator windings, insulating machines, coil winding equipment, automatic production lines, and more. Zhongji Innolight mainly conducts businesses domestically.

Juniper Networks, Inc. provides Internet infrastructure solutions for Internet service providers and other telecommunications service providers.  The Company offers network infrastructure solutions that includes IP routing, Ethernet switching, security and application acceleration solutions.

F5 Networks, Inc. provides integrated Internet traffic management solutions designed to improve the availability and performance of mission-critical Internet-based servers and applications.  The Company's software-based solutions manage, control and optimize Internet traffic and content.  F5's solutions automatically deliver Internet content for service providers and e-businesses.

Nokia Oyj is a global communications company that operates a network of production facilities for location intelligence and network infrastructure, as well as a network of sales and customer service. The Company also operates research and software development facilities worldwide.

EchoStar Corporation manufactures broadcast satellite receivers and antennas, and offers commercial satellite services.

Hengtong Optic-electric Co., Ltd. manufactures and distributes optical fiber and optical cables.

Telefonaktiebolaget LM Ericsson develops and manufactures network equipment and software, as well as services for network and business operations. The Company's portfolio also includes products for the enterprise, cable, mobile platform and power module markets.

Telefonaktiebolaget Lm Ericsso (ERICB SS)

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Telefonaktiebolaget Lm Ericsso (ERICB SS)

Liquid Universe of European Ordinary and Preferred Shares: September Report

XXXXXXX XXXXXXX

Jesus Rodriguez Aguilar

Liquid Universe of European Ordinary and Preferred Shares

Trends The general trend of the last month has been a reduction of the premiums and tightening of the discounts. Some of the previous (May and...

Jesus Rodriguez Aguilar

SoftBank Corp IPO Valuation: Bull/Bear Case DCF Scenarios

Softbank Group (9984 JP) is set to raise JPY2.65 trillion ($23.5 billion) through the Softbank Corp (9434 JP) IPO, Japan's biggest-ever IPO....

Arun George

AsiaInfo IPO Valuation: Not Enough of a Discount

Asiainfo Technologies (1119892D CH) is a leading Chinese telecom software and services provider with a 25% market share as measured by revenue in...

Arun George

U.S. Equity Strategy & Sector Commentaries: Defensive Sectors Leading = Unhealthy Market

The “Big” rally has now faded less than a week from its start. While many point to a robust economy, strong GDP, and a strengthening U.S. dollar as...

Vermilion Research

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