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  • Alcatel-Lucent - Mr. Combes, You're Obliged To Beat And Guide Up As Mr. Ben Verwaayen Had The Same Targets In 2012

    We often wrote on Alcatel-Lucent and the potential of the stock price if the company is able to become a "normal" and once again growing company.

    With this in mind we decided to look at what we have been writing in the past few years and came across a Reuters article we made a reference in December 2012.

    This article quotes Mr. Ben Verwaayen (previous CEO of ALU) targets for 2015 - "Alcatel-Lucent also provided a new guidance for 2015 gross margin in the range of 35-37 percent and an adjusted operating margin of 6-9 percent."

    Between December 2012 and now a lot of things happened (notably Mr. Michel Combes replaced Mr. Ben Verwaayden) with the company's deeply restructured and reinvigorated.

    What's interesting although is that if Mr. Combes reach on his targets (12% operating margins on IP and positive cash flow), he would ONLY have made Mr. Ben Verwaayen's initial targets for FY2015, which at that time no one would have bet a single penny on it.

    If Mr. Combes wants to stand out as a truly superior CEO he would need to show to the Street that the targets set-up in 2012 by his predecessor are blown away and that the company is growing once again.

    Once again we reiterate our view that Q4 and Q1-2015 guidance will be surpassed, but this was already forecasted back at the end of 2012.


    In order for Mr. Combes to get the gold medal he would need to show to investors that those old targets are surpassed by a wide margin.

    Feb 02 4:28 PM | Link | 1 Comment


    A decision on the auction of Areva T&D by the French Authorities is expected in the next few days as “lobbying” has intensified lately.

    While a sale of the T&D Unit would not suffice Areva's budgetary needs, the outcome is most likely to impact its future corporate structure.

    We wonder why the French Government has shied away from attempting to list this profitable business in the stock market through an IPO. While suiting most stakeholders, doubts are remote over its potential to gather a price far superior to the bids offered by the three top contenders.

    Through FSI (Fonds Stratégique d'Investissement), the Government could have conveniently exercised control over this stake without colliding with the operative execution of the company.

    We are of the opinion that the most likely beneficiary of this shake-up will be Bouygues. Should a merger occurs between Alstom and Areva after the sale of T&D, a steady flow of infrastructure construction orders may well go to it.

    We favour a win by the French Alstom/Schneider Electric syndicate, which would be a catalyst for renewed investor confidence for Alstom and eventually for Bouygues.

    We would be buyers of Alstom (ALO FP) and Bouygues (EN FP) shares ahead of the much anticipated auction. Given the strong odds of the T&D business being awarded to the French Consortium, we think that the outcome is likely to enhance share performance of the two.

    As Alstom shares lately underperformed peers on Areva's T&D overhang, a win would be immediately accretive to shareholders (although depending on the way it finances this acquisition). Interestingly, losing the bid would also propel the share price in the short-term as markets would anticipate that the excess capital reserve would be returned to shareholders.

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    Nov 30 9:43 AM | Link | Comment!
  • What to expect of the Steel Sector?
    Most Steel Industry names have lately suffered due to poor figures.
    Although Nucor reported better-than-expected numbers yesterday, it remained cautious on Q4 guidance; and while the Finnish maker "Outokumpu" reported poor numbers, the CEO of Austrian group Voestalpine expressed concerns on poor demand and the possibility of oversupply from Chinese steel makers.

    On the other hand, seeing improved demand going forward, the Korean Posco painted a different picture. The data points from iron ore supplier are equally intriguing; they suggest a demand and price strengthening.

    This leaves us wondering “how can we simultaneously have demand improvement in iron ore and reports of weaker demand from steel makers?”

    We think that in such an environment, integrated steel producers such as Mittal and Tyssen enjoy an inherent strength in the business. Particularly in Mittal’s case, it is poised to capitalize on its heavy car and trucks exposure (25% of total sales), demand for which is stabilizing faster than other segments.

    While most funds are short these integrated steel producing names in anticipation of poor Q4 guidance, we are convinced that these have the potential to surprise on the upside when they report their numbers next week.

    Disclosure: No positions
    Oct 23 10:52 AM | Link | Comment!
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