European Morning Summary
August 19, 2010
The Goldman Sachs Group, Inc.
This document contains comments
related to the following stocks:
Adecco (ADEN.VX)
Halyk Bank (HSBKq.L)
Hays plc (HAYS.L)
Hochschild Mining Plc (HOCM.L)
Kazkommertsbank (KKGByq.L)
Ladbrokes (LAD.L)
Michael Page International (MPI.L)
NIBE Industrier AB (NIBEb.ST)
Randstad Holdings (RAND.AS)
Robert Walters (RWA.L)
Sage Group (SGE.L)
Schoeller-Bleckmann (SBOE.VI)
SThree (STHR.L)
Tekfen Holding A.S. (TKFEN.IS)
Telekom Austria (TELA.VI)
Tullow Oil Plc (TLW.L)
Vestas Wind Systems (VWS.CO)
Wienerberger (WBSV.VI)
Focus Items
Europe: Business Services: Staffing: Talent show: Staffing structural leaders vs.
laggards
1
Key Data Changes
Investment List Additions
Company
Investment List Additions
Ticker
Pan-Europe Conviction Sell List
Adecco
ADEN.VX
Halyk Bank
HSBKq.L
Pan-Europe Sell List
Hays plc
HAYS.L
Pan-Europe Buy List
Michael Page International
MPI.L
Pan-Europe Buy List
Robert Walters
RWA.L
Pan-Europe Buy List
Pan-Europe Sell List
Investment List Removals
Company
Ticker
Investment List Removals
Michael Page International
MPI.L
Pan-Europe Sell List
Initiations
Company
Ticker
Rating/
Coverage view
Price Target
Current Year
Next Year
Fiscal y/e
Halyk Bank
HSBKq.L
S/N
$8.52
KZT100.91
KZT136.48
Dec
Kazkommertsbank
KKGByq.L
N/N
$6.63
KZT33.84
KZT76.91
Dec
Rating and price target changes
Company
Ticker
Rating/
Coverage view
New
Old
Price Target
New
Old
Adecco
ADEN.VX
Halyk Bank
HSBKq.L
S/N
--
$8.52
--
Hays plc
HAYS.L
↑ B/N
N/N
↓ 115.00p
119.00p
KKGByq.L
N/N
--
$6.63
--
LAD.L
N/N
unch
↓ 160.00p
170.00p
Kazkommertsbank
Ladbrokes
Michael Page International
Randstad Holdings
Robert Walters
SThree
Tekfen Holding A.S.
↓ S/N
N/N
↓ SFr45.00
Estimates
% chg Current Year Next Year Fiscal y/e
SFr58.80 (23.5%)
€2.03
€2.52
Dec
--
KZT100.91
KZT136.48
Dec
(3.4%)
3.35p
6.58p
Jun
--
KZT33.84
KZT76.91
Dec
(5.9%)
13.06p
14.56p
Dec
Dec
MPI.L
↑ B/N
S/N
↑ 495.00p
375.00p
32.0%
16.67p
25.28p
RAND.AS
S/N
unch
↓ €31.00
€33.00
(6.1%)
€1.98
€2.49
Dec
RWA.L
↑ B/N
N/N
↑ 295.00p
264.00p
11.7%
13.42p
21.81p
Dec
STHR.L
N/N
unch
↓ 310.00p
311.90p
(0.6%)
11.79p
19.60p
Nov
TKFEN.IS
B/N
unch
↑ YTL7.00
YTL6.90
1.4%
YTL0.50
YTL0.58
Dec
For further product information,
contact:
London Investment Research
+44(20)7774-1000
Analysts employed by non-US
affiliates are not registered/qualified
as research analysts with FINRA in
the U.S.
Global Investment Research
The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research
reports. As a result, investors should be aware that the firm may have a conflict of interest that could
affect the objectivity of this report. Investors should consider this report as only a single factor in making
their investment decision. For Reg AC certification, see the end of the text. Other important disclosures
follow the Reg AC certification, or go to www.gs.com/research/hedge.html.
Tullow Oil Plc
TLW.L
B/A
unch
Wienerberger
WBSV.VI
N/N
unch
↑ 1,684.00p 1,634.00p
↑ €12.30
€11.90
3.1%
$0.19
$1.15
Dec
3.4%
(€0.27)
€0.38
Dec
Estimate changes
Ticker
Rating/
Coverage
view
New
Old
% chg
New
Old
% chg
Adecco
ADEN.VX
S/N
↑ €2.03
€1.96
3.8%
↓ €2.52
€2.66
(5.3%)
Dec
Halyk Bank
HSBKq.L
S/N
KZT100.91
--
--
KZT136.48
--
--
Dec
Hays plc
HAYS.L
B/N
↓ 3.35p
3.78p
(11.4%)
↓ 6.58p
6.92p
(4.9%)
Jun
Company
Kazkommertsbank
Current Year
Next Year
Fiscal
y/e
KKGByq.L
N/N
KZT33.84
--
--
KZT76.91
--
--
Dec
Ladbrokes
LAD.L
N/N
↑ 13.06p
13.01p
0.4%
↓ 14.56p
15.45p
(5.8%)
Dec
Michael Page
International
MPI.L
B/N
↑ 16.67p
13.53p
23.2%
↑ 25.28p
21.83p
15.8%
Dec
NIBE Industrier AB
NIBEb.ST
S/N
↑ Skr4.79
Skr4.66
2.8%
↓ Skr5.13
Skr5.29
(3.1%)
Dec
Randstad Holdings
RAND.AS
S/N
↓ €1.98
€1.99
(0.4%)
↓ €2.49
€2.63
(5.4%)
Dec
RWA.L
B/N
↑ 13.42p
11.38p
17.9%
↑ 21.81p
19.80p
10.1%
Dec
Robert Walters
Sage Group
SGE.L
N/N
↓ 16.92p
17.15p
(1.3%)
↓ 19.26p
19.38p
(0.6%)
Sep
STHR.L
N/N
↑ 11.79p
11.34p
4.0%
↑ 19.60p
18.90p
3.7%
Nov
TKFEN.IS
B/N
↑ YTL0.50
YTL0.41
21.6%
↑ YTL0.58
YTL0.55
4.2%
Dec
SThree
Tekfen Holding A.S.
Tullow Oil Plc
TLW.L
B/A
$0.19
--
--
$1.15
--
--
Dec
Wienerberger
WBSV.VI
N/N
↓ (€0.27)
(€0.21)
(24.8%)
↓ €0.38
€0.52
(28.0%)
Dec
Other Headlines
Basic Materials
Hochschild Mining Plc (HOCM.L): First Take: Solid quarterly results; focus remains on
exploration
2
Consumer Cyclicals
Ladbrokes (LAD.L): Estimates update following 1H results; retain Neutral
3
Energy
NIBE Industrier AB (NIBEb.ST): Data Update: Minor estimate changes
4
Vestas Wind Systems (VWS.CO): First Take: 2Q weak, guidance reduced (timing), orders strong
5
Schoeller-Bleckmann (SBOE.VI): First Take: Strong 2Q as order recovery continues, margins
expand
6
Tullow Oil Plc (TLW.L): Updating for news flow and ahead of 1H2010 results
7
Financial Services
Kazakhstan: Banks: Struggling to find value in a post-bubble world: Sell Halyk, Neutral KKB
8
Industrials
Wienerberger (WBSV.VI): Remains Neutral after 2Q beat. FY10 consensus still looks tough.
Tekfen Holding A.S. (TKFEN.IS): Tweaking estimates ahead of 2Q10 results
9
10
Technology
Sage Group (SGE.L): Data Update: Adjusting estimates following 3Q10 IMS
11
Telecom Services
Telekom Austria (TELA.VI): First Take: 2010 EBITDA guidance clarification positive
12
European Morning Summary
August 19, 2010
Focus Items
Europe: Business Services: Staffing: Talent show: Staffing structural leaders vs. laggards
1
Charles Wilson (London): charles.wilson@gs.com, +44(20)7774-3023
Goldman Sachs International
Alessandro Vaturi (London): alessandro.vaturi@gs.com, +44(20)7552-9373
Goldman Sachs International
Noirin C. Burke (London): noirin.burke@gs.com, +44(20)7552-5993
Goldman Sachs International
John Woodman (London): john.woodman@gs.com, +44(20)7552-3005
Goldman Sachs International
Considering mid-cycle growth rates
In this report we analyse the potential mid-cycle growth rates for the next cycle, by assessing geographical
exposure, permanent versus temporary exposure, generalist versus specialist staffing, public sector exposure
and relative size. On this basis we conclude that Michael Page will experience mid-cycle top line growth of
22% pa, Hays 18%, SThree 21%, Robert Walters 21%, Adecco 8% and Randstad 7%.
Near-term economic uncertainty
We are still concerned about the near-term economic outlook owing to the loss of momentum and rolling over
of global lead indicators, downgrades to GDP forecasts and the apparent peak in temporary staffing markets.
As a consequence we continue to value staffing companies on mid-cycle multiples using 2011E EBITDA as
opposed to 2012E. Furthermore, we prefer specialist staffing companies over generalists, with the former
less reliant on economic growth and more reliant on candidate confidence. Specialist staffers also have
greater exposure and potential benefits from opportunities in developing markets.
Specialists: Upgrade Michael Page, Hays, Robert Walters to Buy
We have 12-month price targets of 495p for Michael Page, 115p for Hays and 295p for Robert Walters; we
expect these companies to benefit from the late cycle improvement in specialist staffing markets, their
developing market exposure, and their lower reliance on mid-cycle GDP growth. We continue to rate SThree
as Neutral with a 310p 12-month price target.
Randstad still Sell; Adecco down to Sell, onto Conviction List
We believe there is a risk that Adecco and Randstad’s top-line growth will plateau this quarter as suggested
by recent temp numbers in the US and France and by Adecco’s recent 2Q exit rate. Furthermore, 2011
forecasts could come under pressure from lower economic growth. While we recognize that EBITA can
continue to benefit from capacity underutilization and operational gearing, we think the focus will be on topline growth. We rate both Adecco and Randstad as Sell with SFr45 and €31 12-month price targets,
respectively, derived from 8x EV/EBITDA on 2011E EBITDA for both companies. Adecco is also on our
Conviction List.
Goldman Sachs Global Investment Research
European Morning Summary
August 19, 2010
Other Headlines
Basic Materials
Hochschild Mining Plc (HOCM.L): First Take: Solid quarterly results; focus remains on exploration
HOCM.L, 326.40p
Market cap
£1,003 mn
Target price
456.00p
Fiscal y/e Dec
2010E
2011E
0.37
0.65
13.6X
7.8X
0.13
0.08
EPS ($)
P/E
EPS Quarter/Interim
*
Investment Lists
Neutral
Coverage view
Attractive
*Current and a year ago
2
Andrew Byrne (London): andrew.byrne@gs.com, +44(20)7552-9935
Goldman Sachs International
Peter Mallin-Jones (London): peter.mallin-jones@gs.com, +44(20)7774-1695
Goldman Sachs International
Ruth Rodgers (London): ruth.rodgers@gs.com, +44(20)7051-1781
Goldman Sachs International
News
Hochschild reported 1H10 results this morning (August 18), with pre-exceptional EPS of $0.11 vs. our
expectation of $0.13.
Analysis
Operationally, Hochschild 1H10 results were in line with our expectations with EBIT of US$98 mn. Unit costs
remain high at San Jose, but this should come as no surprise to investors given significant wage inflation in
Argentina which has been well flagged by the company. In our view, the company remains on-track to meet
unit cost inflation guidance of 10%pa. It also reported an exceptional write-down of $15 mn relating to the
San Felipe property. We had not expected this to be recognised during the period but believe it will have
limited impact on near-term stock performance given that in our view, the asset is ascribed minimal value by
the majority of investors.
Hochschild announced a dividend of 2c (18% of pre-exceptional EPS), which suggests that it intends to
retain cash in order to finance organic growth projects. Azuca and Crespo continue to progress along
previously announced timetables, and remain the next tangible catalyst for stock performance (outside of
news flow relating to the company’s holdings in Lake Shore Gold and GRC).
Implications
Our earnings estimates and price target are under review pending the 8.30am (London time) conference call.
The conference call dial in is: +44 (0) 207 806 1959.
Consumer Cyclicals
Ladbrokes (LAD.L): Estimates update following 1H results; retain Neutral
LAD.L, 133.70p
Market cap
£1,211 mn
Target price
Fiscal y/e Dec
160.00p
2010E
2011E
EPS (p)
13.06
14.56
P/E
10.2X
9.2X
--
--
EPS Quarter/Interim*
Investment Lists
Neutral
Coverage view
*Current and a year ago
Neutral
3
Nick Edelman (London): nick.edelman@gs.com, +44(20)7552-3625
Goldman Sachs International
What's changed
We update our estimates following Ladbrokes’ 1H results. With this note, Nick Edelman assumes primary
coverage of Ladbrokes, which moves from the Small & Mid Cap coverage group to the Travel & Leisure
coverage group (both Neutral coverage views). We reiterate our Neutral rating within the context of the new
coverage group.
On an underlying EBIT basis, Ladbrokes’ 1H results were 5% ahead of consensus (company compiled). In
addition, the turnaround process is continuing, with the appointments of a new Managing Director of Retail
and John Kelly (founder and ex-CEO of Gala Coral) as a non-executive director. However, eGaming net
revenue growth remained lackluster (+1.2% in 1H, despite the benefit of the World Cup and compared to
+24% at William Hill) and company guidance for corporate and international development costs has been
increased to £24 mn for 2010 (our prior estimate was £15 mn). In addition, net revenue declined 2.2% in July,
excluding the World Cup. More positively, however, a tax settlement with HMRC in respect to tax years up to
2007 led to a £80 mn cash inflow in 1H.
Implications
We reduce our 2010 eGaming net revenue growth assumption from 3% to 2.5%, and from 7% to 1% for
Goldman Sachs Global Investment Research
European Morning Summary
August 19, 2010
2011. We also raise our estimate of corporate and international development costs to £24 mn in both 2010
and 2011. The impact of these changes is offset by a lower forecast interest charge in 2010; our 2011 EPS
estimate falls 6% to 14.56p.
Valuation
Reflecting the estimate reductions, our revised 6-month target price moves to 160p (from 170p) based on
7.5x 2011E EV/EBITDA.
Key risks
Upside risks: Sector M&A; gross win growth exceeding our expectations. Downside risks: Unfavourable
sporting results; adverse tax changes.
Energy
NIBE Industrier AB (NIBEb.ST): Data Update: Minor estimate changes
NIBEb.ST, Skr75.00
Market cap
Skr7,044 mn
Target price
Skr81.00
Fiscal y/e Dec
2010E
EPS (Skr)
P/E
Stephen Benson (London): stephen.benson@gs.com, +44(20)7051-1438
Goldman Sachs International
Jason Channell (London): jason.channell@gs.com, +44(20)7051-5029
Goldman Sachs International
2011E
4.79
5.13
15.6X
14.6X
--
--
EPS Quarter/Interim*
4
Changes and Implications
We have updated our estimates. We do not view these changes as material, and there is no change to our
investment thesis, rating or price target.
For methodology and risks associated with our price target, please see our previously published research.
Investment Lists
Pan-Europe Sell List
Coverage view
Neutral
*Current and a year ago
Vestas Wind Systems (VWS.CO): First Take: 2Q weak, guidance reduced (timing), orders strong
VWS.CO, Dkr314.50
Market cap
Dkr64,065 mn
Target price
Fiscal y/e Dec
Dkr425.00
2010E
2011E
2.47
2.82
17.1X
15.0X
0.32
0.21
EPS (€)
P/E
EPS Quarter/Interim*
Investment Lists
Pan-Europe Buy List
Pan-Europe Conviction Buy List
Coverage view
*Current and a year ago
Neutral
5
Jason Channell (London): jason.channell@gs.com, +44(20)7051-5029
Goldman Sachs International
News
Vestas released 2Q 2010 results this morning (August 18, 2010) showing disappointing numbers vs. our
expectations and consensus, and most importantly downgraded guidance for 2010, but offsetting this
showed a significantly improved order book.
The headline numbers vs. historics and GS and consensus estimates are shown on the following page.
Analysis
The company has cut guidance for 2010 to €6 bn of sales (from €7 bn), and EBIT margin guidance to 5%-6%
(from 10%-11%), based on the belief that orders have been received too late for the revenue to appear in
2010. This new guidance compares to our full-year estimates for sales of €6,390 mn, and EBIT of €720 mn,
implying a margin of 11.3%.
2Q numbers are below expectations reflecting again the late-received nature of orders, meaning that
revenues did not arrive in time to be booked in 2Q. Guidance cuts for this year reflect essentially a timing
difference, with the expected revenue now to be booked in 2011. Strong recent order inflow and the much
improved order book also bode well for future sales.
Accordingly, today’s release reflects two different sentiments, firstly of figures which are below expectations
with a guidance downgrade for 2010, offset by strong order intake which will convert into future sales, as will
the delayed sales for this year as they roll over into 2011.
Implications
Given the changes to guidance, we are placing our estimates and price target under review,.
Goldman Sachs Global Investment Research
European Morning Summary
August 19, 2010
Schoeller-Bleckmann (SBOE.VI): First Take: Strong 2Q as order recovery continues, margins expand
SBOE.VI, €39.00
Market cap
€624.0 mn
Target price
€58.50
Fiscal y/e Dec
2010E
EPS (€)
P/E
EPS Quarter/Interim
1.85
3.00
13.0X
--
--
Investment Lists
Pan-Europe Buy List
Pan-Europe Conviction Buy List
Coverage view
Rudolf Dreyer (London): rudolf.dreyer@gs.com, +44(20)7051-0662
Goldman Sachs International
Priya Hansia (Bangalore): priya.hansia@gs.com, (212) 934-8901
Goldman Sachs India SPL
2011E
21.0X
*
Neutral
*Current and a year ago
News
Schoeller-Bleckmann reported strong 2Q10 results relative to Inquiry Consensus expectations. Revenues
and EBIT of €74 mn and €9.3 mn beat consensus by 14% and 16% respectively. The strong recovery in
orders during 1Q10 (€84 mn vs. €0 mn in 1Q09) continued in 2Q10 with an order intake of €82 mn, up more
than 100% on 2Q09.
Regarding the outlook, management commentary noted increased confidence with the operating
environment (“All in all, the general atmosphere in the oilfield service industry at mid-2010 is encouraging”).
Analysis
The continued recovery in orders and management’s encouraging comments about the end-markets
increase our confidence that the revenue run-rate will continue to increase, with a magnified positive impact
on margins (350 bp sequential improvement in 2Q10 EBIT margin). Note that the order run-rate in 2Q10
remained above the revenues reported in the quarter, with a book-to-bill of 1.1x.
Implications
Our estimates and price target are unchanged at this time. The company will hold a conference call at 10h30
(CET) today – dial-in: +44 207 153 9154 (Pin code - 867786#).
Tullow Oil Plc (TLW.L): Updating for news flow and ahead of 1H2010 results
TLW.L, 1,302.00p
Market cap
£11,510 mn
Target price
1,684.00p
Fiscal y/e Dec
2010E
2011E
0.19
1.15
105.4X
17.6X
--
(3.01)
EPS ($)
P/E
EPS Quarter/Interim*
Investment Lists
Pan-Europe Buy List
Coverage view
6
Attractive
*Current and a year ago
7
Christophor Jost (London): christophor.jost@gs.com, +44(20)7774-0014
Goldman Sachs International
What's changed
We update our numbers to account for Tullow’s success at its Owo well in Ghana and update our 2010
estimates ahead of 1H2010 results.
Implications
The net impact of de-risking as a result of the Owo well and other minor adjustments drives our 12-month
target price to 1684p (from 1634p previously). Increases in our assumptions for exploration expense (noncash) in 2010 and depreciation from 2010 onwards lead us to lower our EPS estimates (down 15% in 2011
and 8% in 2012). We also change our publishing currency to US dollar from sterling.
Valuation
Our 12-month SOTP-based price target uses a blend of our peak oil price forecast and the forward curve
(prices as of our last sub-sector publication on 22 July 2010). 10% of our SOTP represents an M&A valuation
in which we value strategic assets (Ghana and Uganda) at an 8% cost of capital.
Key risks
Worse than expected exploration success in the company’s West African, Ugandan and South American
exploration programme, or a lower than anticipated consideration for the company’s expected farm down of
its assets in Uganda are the key risks to our rating and target price.
Financial Services
Kazakhstan: Banks: Struggling to find value in a post-bubble world: Sell Halyk, Neutral KKB
Dmitry Trembovolsky (Moscow): dmitry.trembovolsky@gs.com, +7(495)645-4241
OOO Goldman Sachs Bank
Alexey Butylin (Moscow): alexey.butylin@gs.com, +7(495)645-4015
Goldman Sachs Global Investment Research
8
European Morning Summary
August 19, 2010
OOO Goldman Sachs Bank
Lending boom has resulted in high NPLs, negative equity and government aid
Kazakhstan’s banking system has relied heavily on external borrowing in the absence of sufficient deposit
supply to meet loan demand spurred by the commodity boom. The drying up of external funds in conjunction
with plummeting commodity prices has resulted in falling GDP growth rates, KZT devaluation and a sharp
decline in real estate prices, leading to system-wide NPLs spiking to 34% and government intervention.
Massive recapitalization and liquidity support measures have been undertaken; however, the aggregate
equity of the banking system remains negative.
Loan growth to remain muted in 2010-12
We expect loan growth to remain muted in
2010-12 as corporate loans/GDP remains high, above levels in both Russia and CEE, and the banks are
significantly exposed to the real estate and trade sectors (55% of total loans vs. 32% in Russia), which have
suffered badly from falling real estate prices and the KZT devaluation and are unlikely to recover near term, in
our view.
NPLs still rising, poor revenue quality
NPLs levels adjusted for outliers are still rising system-wide. Also, high levels of restructured loans will
continue to put pressure on NPL formation. In addition, although both Halyk and KKB show strong preprovision margins, revenue quality remains weak, with cash/accrued NII ratios the lowest in our coverage
universe.
We prefer the Russian smaller banks in our coverage; within Kazakhstan, we prefer KKB
We initiate on KKB as Neutral and Halyk as Sell. In our view, smaller Russian banks Bank Saint Petersburg
(BSPB) and Vozrozhdenie Bank (VZRZ) offer a better risk-reward profile than the Kazakh names, with
superior loan quality and cash earnings and better growth prospects at similar or cheaper valuations.
In Kazakhstan, we prefer KKB to Halyk primarily on valuation grounds. Following its recent underperformance, KKB trades at almost half of Halyk’s multiples (0.7/0.7/0.6x 2010-12E P/BV), a gap which is not
justified by the differential in loans and earnings quality, in our view.
Industrials
Wienerberger (WBSV.VI): Remains Neutral after 2Q beat. FY10 consensus still looks tough.
WBSV.VI, €10.61
Market cap
€1,246 mn
Target price
€12.30
Fiscal y/e Dec
2010E
EPS (€)
(0.27)
0.38
--
28.2X
0.17
0.09
P/E
EPS Quarter/Interim*
2011E
Investment Lists
Neutral
Coverage view
*Current and a year ago
Neutral
9
Eshan Toorabally, CFA (London): eshan.toorabally@gs.com, +44(20)7774-3246
Goldman Sachs International
Laurie Mathers (London): laurie.mathers@gs.com, +44(20)7774-3722
Goldman Sachs International
Samson Edmunds (London): samson.edmunds@gs.com, +44(20)7552-1289
Goldman Sachs International
Shane McKenna (London): shane.mckenna@gs.com, +44(20)7552-2919
Goldman Sachs International
What's changed
Wienerberger (August 17) reported 2Q results that were ahead of our estimates and consensus (Inquiry
Financial) at the operating level. While 2Q sales of €546 mn were in line with our forecast of €545 mn,
EBITDA of €101 mn was ahead of our and consensus estimate on €91 mn and €92 mn respectively. The
EBITDA beat vs. our expectations was driven by the CEE (€43 mn vs. €29 mn), while NW Europe was
behind (€44 mn vs. €48 mn). Clean PTP came in slightly below our forecasts (€40 mn vs. €41 mn) due to
higher than expected financing cost (despite stripping out €5 mn of exceptional finance charges). By way of
outlook, management reiterated its view that FY10 earnings will be above FY09, aided by moderation in brick
price declines which fell 5% yoy in the 1H10.
Implications
Our FY10/11E EBITDA increases by €12 mn to
€224 mn/€298 mn to reflect the 2Q beat. Our FY10/11E EBITDA are still below Reuters current consensus
estimates of €241 mn/€312 mn. In our view, FY10 consensus estimates are challenging, implying €163 mn of
2H10 EBITDA, 51% yoy growth. The increase in our FY10 capex forecast is offset by improved WC, leaving
our expectation of a c.€50 mn reduction in debt largely unchanged.
Goldman Sachs Global Investment Research
European Morning Summary
August 19, 2010
Valuation
Despite yesterday’s 9% share price gain, it has underperformed the sector by 13% in the last 3 months.
There is now 16% upside to our new €12.3 (€11.9) 12-month price target, which is set using an equally
weighted average of 2010-12E EV/EBITDA. We apply a 7.4x multiple having taken a 10% cut to WIE’s 8.2x
2005-08 average multiple, as we believe the stock will generate 4Q CROCI in 2010-13E on average. We
exclude 2009 due to the unusually high multiple. WIE is trading at 6.8x adj. 2011E EV/EBITDA.
Key risks
Downside risks are further pricing erosion in CEE, slower volume growth in Western EU and rising gas costs.
Upside risks are the converse.
Tekfen Holding A.S. (TKFEN.IS): Tweaking estimates ahead of 2Q10 results
TKFEN.IS, YTL5.45
Market cap
YTL2,017 mn
Target price
YTL7.00
Fiscal y/e Dec
2010E
EPS (YTL)
P/E
2011E
0.50
0.58
10.9X
9.5X
0.00
0.00
EPS Quarter/Interim*
Investment Lists
Pan-Europe Buy List
Coverage view
*Current and a year ago
Neutral
10
Artyom Golodnov (Moscow): artyom.golodnov@gs.com, +7(495)645-4264
OOO Goldman Sachs Bank
Anton Farlenkov (Moscow): anton.farlenkov@gs.com, +7(495)645-4019
OOO Goldman Sachs Bank
Nina Dergunova (Moscow): nina.dergunova@gs.com, +7(495)645-4230
OOO Goldman Sachs Bank
Yulia Gerasimova (Moscow): yulia.gerasimova@gs.com, +7(495)645-4297
OOO Goldman Sachs Bank
What's changed
Tekfen will report 2Q10 financial results on Wednesday, August 25.
Implications
We expect 2Q revenues in Tekfen’s agriculture segment to decrease 42% qoq to YTL197 mn on the back of
seasonally low volumes (300k tons) and declining prices (-8% qoq). We expect 2Q EBITDA margin to
decrease 8 pp qoq to 12% due to changes in sales mix. We update our full-year estimates: 2010 agriculture
sales increase 2% to reflect more optimistic assumptions on fertilizer prices in 3Q-4Q. We increase 2010E
EBITDA by 37% on the back of strong results expected by us in 1H (Tekfen should earn YTL92 mn which
should account for 95% of full-year EBITDA guidance for this segment provided by the company).
In construction, we expect revenues to increase 33% qoq to YTL310 mn on easy sequential comparisons
(delay of several construction projects in 1Q10). We look for EBITDA margin to decline 6 pp qoq due to a
one-off margin increase in 1Q10. For the full year, we decrease this segment’s revenues by 14% on weaker
than expected activity in the CIS and MENA regions. In 1H10, the company added only US$450 mn of
backlog vs. US$1.3 bn we were expecting previously for the full year. Our new estimates imply 2010 backlog
add-ins of US$1.1 bn.
Valuation
Our new SOTP-based 12-month price target of YTL7.0 (from YTL6.9) implies 28% upside potential. On
2011E EV/EBITDA the shares trade at 29% and 50% discounts to global construction and European fertilizer
peers.
Key risks
(1) Lower than expected capex of oil and gas infrastructure projects in the CIS and MENA; (2) weakening of
fertilizer prices and inability to pass through an increase in raw materials’ prices to end consumers; (3) higher
than expected increase in construction costs for ongoing projects.
Goldman Sachs Global Investment Research
European Morning Summary
August 19, 2010
Technology
Sage Group (SGE.L): Data Update: Adjusting estimates following 3Q10 IMS
SGE.L, 242.60p
Market cap
£3,195 mn
Target price
285.00p
Fiscal y/e Sep
2010E
2011E
EPS (p)
16.92
19.26
P/E
14.3X
12.6X
8.32
6.98
EPS Quarter/Interim
*
Investment Lists
Neutral
Coverage view
Neutral
11
Mohammed Moawalla (London): mohammed.moawalla@gs.com, +44(20)7774-1726
Goldman Sachs International
Siva Krishna Prasad Borra (London): skprasad.borra@gs.com, +44(20)7552-2927
Goldman Sachs International
Suhasini Varanasi (Bangalore): suhasini.varanasi@gs.com, (212) 934-8376
Goldman Sachs India SPL
Changes and Implications
We are updating our estimates following the 3Q10 IMS on July 28; specifically we are lowering our margin
forecasts marginally due to higher spending by the company. We do not view these changes as material and
there is no change to our investment thesis, rating or price target.
For methodology and risks associated with our price target, please see our previously published research.
*Current and a year ago
Telecom Services
Telekom Austria (TELA.VI): First Take: 2010 EBITDA guidance clarification positive
TELA.VI, €9.70
Market cap
€4,382 mn
Target price
€13.00
Fiscal y/e Dec
2010E
2011E
0.70
0.84
13.9X
11.6X
--
--
EPS (€)
P/E
EPS Quarter/Interim*
Investment Lists
Pan-Europe Buy List
Coverage view
*Current and a year ago
Neutral
12
Hugh I. McCaffrey (London): hugh.mccaffrey@gs.com, +44(20)7552-5781
Goldman Sachs International
Tim Boddy (London): tim.boddy@gs.com, +44(20)7552-1036
Goldman Sachs International
Andrew Lee (London): andrew.j.lee@gs.com, +44(20)7774-1383
Goldman Sachs International
Katherine Ward (London): katherine.ward@gs.com, +44(20)7774-1319
Goldman Sachs International
News
Telekom Austria has reported 2Q numbers that are broadly ahead of company-compiled consensus adjusting
for a €14 mn one-off charge in the quarter and the result was mixed relative to our expectations.
More important, in our view, is the clarified and increased EBITDA guidance.
Analysis
Operating revenues came in at €1,169 mn (company-compiled consensus €1,137 mn; our estimate
€1,125 mn) and EBITDA was €418 mn adjusting for €14 mn of one-off charges in the quarter (companycompiled consensus €414 mn; our estimate €425 mn).
New 2010 EBITDA guidance has be given pointing to €1.6-€1.65 bn of EBITDA including the restructuring
charges relating to the merger of the domestic fixed and mobile businesses (previous guidance was “around”
€1.6 bn of EBITDA). Our current estimates for FY10 is for EBITDA of €1.59 bn including one-off restructuring
charges of €90 mn (€80 mn relating to the integration of the domestic assets) and clean EBITDA of €1.68 bn.
Reuters consensus EBITDA for FY10 is €1.62 bn, it is not clear to what extent this includes the impact of
restructuring but the range of estimates in consensus is large (max €1.71 bn and min €1.54 bn) suggesting
that there was some confusion around previous guidance.
Implications
In our view the stock is likely to react positively to the new EBITDA guidance and the top-line beat. We are
Buy rated on Telekom Austria. Our estimates and price target under review.
Goldman Sachs Global Investment Research
European Morning Summary
August 19, 2010
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Goldman Sachs Global Investment Research
European Morning Summary
August 19, 2010
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European Morning Summary
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