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Markets are called to open flat this morning. This is what's happening today:
Two opposition parties in Japan said they will endorse Kikuo Iwata for Bank of Japan deputy governor, reducing the risk Prime Minister Shinzo Abe will fail to win confirmation for his nominees. The Democratic Party of Japan yesterday said it would vote against Iwata. Chinese stocks fell on concern policy makers will step up property curbs.
Industrial output in the euro zone shrank in January while U.S. retail sales growth sped up in February.
Oil gained after the American Petroleum Institute said U.S. crude supplies shrank last week for the first time in a month and OPEC boosted production to a three-month high to meet demand. Gasoline rose 0.5 percent after API data showed inventories dropped 3.1 million barrels. That’s more than an expected decline of 1.2 million barrels in an Energy Department report today.
More on the companies reporting results today –
Inditex (Citigroup research) – Buy, Target Price €115, Current Price €106.6 – The combination of accelerated store openings in the higher-growth Asian and Emerging markets, and the roll-out of the group’s online capability should continue to deliver 'GDP-plus' Inditex LFL sales growth, driving c.+10-15% compound EPS growth from here. This view is underpinned by the group’s doubling of the design, sourcing and store feedback management capacity in early 2012. In combination with a c.2.5% dividend yield, this should drive a c.+15% ETR over time. Long-held Buy rating retained. This target is based on 16x January 2015E target EV/EBIT (recent average), equating to 24x P/E and a 4% free cash flow yield, and underpinned by our €119 DCF valuation.
Prudential (Barclays research) – Buy, Target Price GBP1038, Current Price GBP1032 – In 2009, Prudential set itself aggressive long-term targets to achieve by 2013, and it appears on track to do so. Each of Prudential’s main business lines look set to continue to perform strongly, whilst cash generation should also improve significantly as the Asian business matures. We, therefore, remain confident with our Overweight rating.
Enel (Barclays research) – Buy, Target Price €3.5, Current Price €2.78 – We rate Enel Equal Weight. We maintain our cautious stance on the stock due to its debt exposure and subdued outlook in the Italian generation market and in Spain where a full pass through of new operating levies might be delayed due to the still intense competition. The stock is now trading at a dividend yield which is at discount to the sector (5.0% 2013E div. yield vs. DJ Stoxx Utilities at 6.2%), the stock does not currently represent an attractive dividend play, in our view. On our estimates, Enel trades on 8.4x 2013 P/E vs. the sector at 10.9x.
For more information on these three companies or other stocks and bonds we follow, contact our offices on 25688688.
Good day and happy trading!
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