Good morning,

Markets are called to open higher this morning. This is what's happening today.

• MBIA said to pay $350m to settle SocGen lawsuit

• Telecom Italia to start in-depth review of Hutchison linkup

• EU warns of huge shocks without bank depositor preference rule

• EU said to plan import duties up to 67.9% on China solar panels

• UBS hires Newkirk from Barclays for emerging-markets trading

• BMW says it’s under India inspection after report of tax probe

• Merkel says revenue outlook shows need to avoid tax increases

Companies in Europe reporting results today:

• Mediobanca (MB IM) TBD, 3Q net loss EU92.5m

• Amadeus IT Holding (AMS SM) 8am, 1Q adj. EPS EU0.37

• Repsol (REP SM) 9am, 1Q adj. EPS EU0.42

• EDP (EDP PL) Aftmkt, 1Q adj. EPS EU0.08

• Prysmian (PRY IM) TBD, 1Q adj. EPS EU0.23

• Experian (EXPN LN) 8am, FY adj. EPS $0.84

• United Drug (UDG LN) 8am, 1H

• IMI (IMI LN) 8am, 1Q sales, IMS

• Barratt Developments (BDEV LN) 8am, 3Q sales, IMS

• WM Morrison (MRW LN) 8am, 1Q sales, IMS

• Old Mutual (OML LN) 8am, 1Q sales, IMS

• Eurasian Natural Resources (ENRC LN) 8am, 1Q sales, IMS

• Tullett Prebon (TLPR LN) 8am, 1Q sales, IMS

• SuperGroup (SGP LN) 8am, 1Q sales, IMS

• Hammerson (HMSO LN) 8am, 1Q sales, IMS

• Provident Financial (PFG LN) 8am, 1Q sales, IMS

• Beazley (BEZ LN) 8am, 1Q sales, IMS

Asian stocks outside Japan climbed for a fifth day as the Bank of Korea cut interest rates and job markets improved in Australia and New Zealand. Japan’s Topix

Index erased gains as the yen strengthened and metals declined.

Yesterday Brenntag reported results and the shares were down 6%. This is what Deutsche Bank had to say post results.

Q1 conference call feedback – April gross profit per day at -2%

We think that the key point from the conference call is that in April, gross profit per working day on an FX adjusted basis and excluding acquisitions was at -2.0% YoY, following on from March -0.5%, February at +3.9% and January +2.0%. This is consistent with a slightly worsening outlook. Other key points:

1) CEO stated that some of the larger customers that had been ordering directly from manufacturers had now been ordering from Brenntag in smaller quantity size given the lack of visibility. Volumes in the quarter grew by 2.5%.

2) CFO stated that the working day adjusted conversion ratio would have been broadly flat YoY (Q1 2012E at 36.1%).

3) Slightly more cautious outlook as a result of gross profit per working day trends softening in March and April and guidance that the group’s operating EBITDA is expected to grow less than previous years (typically organic growth is 6-9%) makes sense given that the current run rate is negative

4) Q1 cost base of EUR313.2m is a reasonable proxy for the annualised runrate for FY 2013, as there are no one-offs in Q1.

5) LatAm gross profit was up 7.9% but EBITDA was down 3.1% due to an over-estimate in costs in countries such as Uruguay, where growth did not fully materialize. Actions have been taken to address the cost base.

Revising forecasts – 2013E and 2014E EPS cut by 4% and 2.5%

On the back of a slightly weaker outlook, we have cut our 2013E EBITDA by 3.3% from EUR784.1m to EUR758.4m and for 2014E by 2.1% from EUR834.0m to EUR816.6m. In big picture terms, the EBITDA bridge from 2012A to 2013E is as follows: FY 2012A EBITDA of EUR717.8m, plus EUR32m of known additional acquisition impact, -cEUR6m headwind from FX (we are forecasting EUR/US$ for FY 2013E at 1.31 vs. 1.28 last year) and cEUR14m from underlying organic growth, which is around 2% organic growth. Our forecasts do not include future acquisitions.

Business model intact but at a low point in growth

We think that Brenntag can make acquisitions of EUR400m p.a. (management’s target of EUR200-250m p.a.) on average over the next 3 years to keep the balance sheet at c2x net debt/EBITDA. On our new numbers, Brenntag is trading on 14.3x 2014 PE and 9.5x EV/EBITDA, a slight discount vs. nearest peer Bunzl (HOLD, 1274p) trading on 15.2x and 10.5x respectively. We expect Brenntag to grow profitability at a faster rate than Bunzl, driven by the potential ability to improve its conversion ratio. The current softness is driven by cyclical timing issues and not any structural issues. Re-iterate Buy with EUR135 (down from EUR139) target price.

For more information on Brenntag and other stocks and bonds we offer, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli