Monday, 9 November 2015

Company announcements today: Apache, Continental AG, Ericsson, Cisco, Hertz

In my opinion, the big news today has been Apache whose Q3 numbers I wrote up late last week (link here) and who has been subject to an unsolicited bid approach (turned down) in the last little while.  My view at present is that you hold onto the shares we should open above US$50 (still another 50% to go until the 52 week high taken out!) as the chances of a second /revised bid must be reasonable.

I also wonder who the bidder is...

Looking at Europe I see that the German tyre/auto parts company Continental AG slightly disappointed the market with margins 'above 11%' and cash flow 'above Euro2bn' potentially above the 2014...but not guaranteed. 

Looking through the numbers if you want to buy the shares on a single digit EV/ebit multiple as is clearly my preference for the company's global peer Goodyear (link here) then look for a sub Euro200 share price level (a nice round number level too). 

Staying in Europe I noted back in July that:

For me a x14 EV/ebit multiple based on the above criteria is closer to an interesting level which would imply the middle of the SEK90-95 range.  

With the shares back to the c. SEK95 they remain opportunistic but at the margin I would still prefer the company's peer Nokia which has the added advantage of self-help via synergies/benefits from the ongoing Alcatel-Lucent merger they are undertaking.  Nevertheless a positive theme and a good stock to be thinking about. 

I observed just the other day how Nokia (link here) had continued to kick on and this still remains my preferred sector play but today's Cisco-Ericsson link up makes huge sense (e.g. accretive in 2016).  Ericsson have a capital markets day running today/tomorrow and I shall revert on Tuesday with some overall thoughts.  Today's share price and deal suggests opportunity. 

Finally Hertz.  On Twitter I noted:

Been >18 mths since looked at but called it a short back then. They reiterated today but x4 ND:ebitda still!

You can read that report here.  Here the share still feels fundamentally richly valued albeit at least pushing down that large debt down via cashflow.  However not enough for me to invest.  I will be reviewing next week's investor day closely though. The share correctly looks pretty dull in the pre-market. 

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