The Daily Call

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Morning Summary

Jayme Casey, Pat O'Donohue (203) 861-7650 | 3.27.2017

News

The global equity complex has started the week in the red. The fall out is being blamed on the lack of push through of the healthcare reform bill in the US on Friday. It wasn't so much the bill itself, but the perception that the Trump agenda will be much harder and will take longer for any fiscal impact to work its way into the economy. This sentiment has been felt across the entire landscape, with declines in all regions this morning. Overnight in Asia, the Nikkei was the first to react to the Trump fall out, with the yen rising to its highest level against the dollar in over 5-months, taking its toll on stocks. As such, exporters were among the downside leaders with Toyota and Honda both dropping 1.5%. Chinese markets closed little changed, with Mainland markets having a limited response to the turmoil in markets from the weekend. Across the pond, European indices have set the same tone, trading off 0.5-1% across the board. That said, strength in the materials sector has helped a bit with a pop in gold prices, reacting to the decline in the dollar. On the data front, the German business sentiment Ifo number climbed to the strongest level since July 2011 in a sign that the economy is sustaining its momentum. S&P futures are following suit, trading off approximately 80bps and suggesting stocks would retreat for the seventh time in eight days. The economic calendar is very light, with only Dallas Fed Manf at 10:30est on tap. Additionally, the Fed’s Evans and Kaplan  are scheduled to speak. Crude futures slipped nearly 1%, erasing an earlier gain as producers pledged to consider extending their pact limiting supply. As mentioned above the dollar is getting hammered, falling against all of its Group of 10 peers. Stock specific news is a bit light with only a handful of headlines to highlight. In M&A news, DD and DOW announce that the EC has granted conditional regulatory clearance in Europe of the companies' proposed merger of equals. China Southern says it is negotiating “possible major strategic cooperation” with AAL. MGI enters into confidentiality agreement with EEFT to further consider Euronet's unsolicited proposal for $15.20 per share. In other news, CALM misses by $0.08, misses on revs. GIII misses by $0.04, misses on revs, guides Q1 EPS and revs below consensus. GOOG plans to start Android pay in S. Korea in May. GS is in preliminary talks for an equities license in Saudi Arabia as the U.S. lender seeks to take advantage of the country’s economic reforms. KO will add fruit juice to Fanta and Sprite in India. LMT’s $29bn helicopter program is poised to win Pentagon approval. Leon Capital disclosed 9.5% active stake in RT.

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TMT

Jared Mancuso, Sean Greeley (203) 861-7650 | 3.27.2017

News

CAMT  Camtek files $50M mixed shelf; also registers 6M share for holders

 

ELTK  Eltek reports Q4 EPS ($0.16) ex-items vs year-ago $0.02

  • Reports Q4:

Revenue $8.1M vs year-ago $10.4M

 

SYX  Systemax sells its European Technology Products Group business for nominal proceeds

  • The company has executed a definitive agreement with a management team backed by Hilco Capital to sell all of its unprofitable European Technology Products Group businesses. Systemax will retain its highly profitable operations in France. This action focuses the company's ongoing operations on its profitable Industrial Products Group and France businesses. The sale transaction closed on 24-Mar.

With the completion of this transaction, Systemax operates two highly successful, growing and profitable businesses: IPG, its North American MRO business operating primarily under the Global Industrial brand, and its France technology Value Added Reseller business operating primarily under the Inmac Wstore brand. During 2016 these ongoing businesses, inclusive of corporate charges, generated revenue of $1.1B and over $38M in operating income. In 2016, IPG generated revenue of $715.6M and operating income of $34.3M, and the France business generated revenue of $417.2M and operating income of $19.2M.

 

MGI  MoneyGram enters into confidentiality agreement with Euronet Worldwide (EEFT) to further consider Euronet's unsolicited proposal

MoneyGram announces that it has entered into an Acceptable Confidentiality agreement with Euronet Worldwide so that it can further consider Euronet's unsolicited proposal made on 14-Mar-17 to acquire all of the outstanding shares of MoneyGram common stock and Preferred Stock for $15.20 per share in cash on an as-converted basis .

 

Upgrades/ Downgrades

CAMT  Camtek files $50M mixed shelf; also registers 6M share for holders

 

ELTK  Eltek reports Q4 EPS ($0.16) ex-items vs year-ago $0.02

  • Reports Q4:

Revenue $8.1M vs year-ago $10.4M

 

SYX  Systemax sells its European Technology Products Group business for nominal proceeds

  • The company has executed a definitive agreement with a management team backed by Hilco Capital to sell all of its unprofitable European Technology Products Group businesses. Systemax will retain its highly profitable operations in France. This action focuses the company's ongoing operations on its profitable Industrial Products Group and France businesses. The sale transaction closed on 24-Mar.

With the completion of this transaction, Systemax operates two highly successful, growing and profitable businesses: IPG, its North American MRO business operating primarily under the Global Industrial brand, and its France technology Value Added Reseller business operating primarily under the Inmac Wstore brand. During 2016 these ongoing businesses, inclusive of corporate charges, generated revenue of $1.1B and over $38M in operating income. In 2016, IPG generated revenue of $715.6M and operating income of $34.3M, and the France business generated revenue of $417.2M and operating income of $19.2M.

 

MGI  MoneyGram enters into confidentiality agreement with Euronet Worldwide (EEFT) to further consider Euronet's unsolicited proposal

MoneyGram announces that it has entered into an Acceptable Confidentiality agreement with Euronet Worldwide so that it can further consider Euronet's unsolicited proposal made on 14-Mar-17 to acquire all of the outstanding shares of MoneyGram common stock and Preferred Stock for $15.20 per share in cash on an as-converted basis .

 

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Energy News

 (203) 861-7650 | 3.27.2017

News

(EQT) EQT Corp guides 2017 sales volume 835-855 Bcfe v. prior guidance 810-830 -- slides ($57.30)

 

(SN) Sanchez Energy guides FY17 total production (Boe/d) 78K-82K vs FactSet 81.1K -- slides ($9.07) 

  • FY18 Guidance:
    • Total production (Boe/d) 100K-105K vs FactSet 102.7K

(FSLR) First Solar reaches financial close for 48.5MW Manildra Solar Farm in New South Wales, Australia ($28.31) 

  • Construction is scheduled to commence in H1 of 2017.

(TPLM) Triangle Petroleum emerges from Chapter 11 as Nine Point Energy --8-K ($0.27) 

  • On 24-Mar-17, the Plan became effective, the company’s equity interest in TUSA was extinguished, and the TUSA Debtors emerged from Chapter 11 as Nine Point Energy.
  • StreetAccount notes Triangle Petroleum Corporation filed for chapter 11 bankruptcy on 30-Jun-16.

(WFT) Weatherford and Schlumberger to form OneStim JV ($5.89) 

  • Weatherford and Schlumberger today announces an agreement to create OneStim, a joint venture to deliver completions products and services for the development of unconventional resource plays in the United States and Canada land markets.
    • The joint venture will offer a broad multistage completions portfolios in the market combined with one of the largest hydraulic fracturing fleets in the industry.
  • Schlumberger and Weatherford will have 70/30 ownership of the joint venture, respectively.
    • The transaction is expected to close in the second half of 2017, and is subject to regulatory approvals and other customary closing conditions. Under the terms of the formation agreement, Schlumberger and Weatherford will contribute all their respective North America land hydraulic fracturing pressure pumping assets, multistage completions, and pump-down perforating businesses.
    • Weatherford will also receive a one-time $535 million cash payment from Schlumberger.
  • Schlumberger will manage the joint venture and consolidate it for financial reporting purposes.

(HESM) Hess Midstream Partners files amended S-1; to offer 12.5M shares in range $19-21/sh through Goldman Sachs and Morgan Stanley 

  • New information is the number of shares and expected pricing.
  • The company filed its IPO on 24-Sep-14.

Upgrades/ Downgrades

(EQT) EQT Corp guides 2017 sales volume 835-855 Bcfe v. prior guidance 810-830 -- slides ($57.30)

 

(SN) Sanchez Energy guides FY17 total production (Boe/d) 78K-82K vs FactSet 81.1K -- slides ($9.07) 

  • FY18 Guidance:
    • Total production (Boe/d) 100K-105K vs FactSet 102.7K

(FSLR) First Solar reaches financial close for 48.5MW Manildra Solar Farm in New South Wales, Australia ($28.31) 

  • Construction is scheduled to commence in H1 of 2017.

(TPLM) Triangle Petroleum emerges from Chapter 11 as Nine Point Energy --8-K ($0.27) 

  • On 24-Mar-17, the Plan became effective, the company’s equity interest in TUSA was extinguished, and the TUSA Debtors emerged from Chapter 11 as Nine Point Energy.
  • StreetAccount notes Triangle Petroleum Corporation filed for chapter 11 bankruptcy on 30-Jun-16.

(WFT) Weatherford and Schlumberger to form OneStim JV ($5.89) 

  • Weatherford and Schlumberger today announces an agreement to create OneStim, a joint venture to deliver completions products and services for the development of unconventional resource plays in the United States and Canada land markets.
    • The joint venture will offer a broad multistage completions portfolios in the market combined with one of the largest hydraulic fracturing fleets in the industry.
  • Schlumberger and Weatherford will have 70/30 ownership of the joint venture, respectively.
    • The transaction is expected to close in the second half of 2017, and is subject to regulatory approvals and other customary closing conditions. Under the terms of the formation agreement, Schlumberger and Weatherford will contribute all their respective North America land hydraulic fracturing pressure pumping assets, multistage completions, and pump-down perforating businesses.
    • Weatherford will also receive a one-time $535 million cash payment from Schlumberger.
  • Schlumberger will manage the joint venture and consolidate it for financial reporting purposes.

(HESM) Hess Midstream Partners files amended S-1; to offer 12.5M shares in range $19-21/sh through Goldman Sachs and Morgan Stanley 

  • New information is the number of shares and expected pricing.
  • The company filed its IPO on 24-Sep-14.
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Healthcare News

Patrick O'Donohue, CFA, Jared Mancuso (203) 861-7650 | 3.27.2017

News

APOP Cellect announces successful first cancer patient stem cell transplant ($6.26) 

  • APOP announced that the first stem cell transplant procedure has been successfully performed using its ApoGraft technology in the company’s Phase I/II clinical trial in a blood cancer patient.
  • Based on the successful transplantation results, the independent Data and Safety Monitoring board (DSMB) approved the enrollment of 2 additional patients for ApoGraft treatment to complete the first study cohort as planned. 

ONTX Onconova Therapeutics reports FY EPS ($4.44) vs FactSet ($5.91) -- 1 estimate ($3.02) 

  • Reports FY:
    • Revenue $5.5M vs FactSet $6.4M -- 1 estimate
    • Cash and cash equivalents as of December 31, 2016, totaled $21.4 million, compared to $19.8 million as of December 31, 2015.
  • Cash Guidance:
    • Onconova believes that its current cash and cash equivalents will be sufficient to fund its ongoing trials and operations into the fourth quarter of 2017.

ARQL ArQule reports JET-HCC phase 3 trial of tivantinib in hepatocellular carcinoma in Japan does not meet primary endpoint ($1.15) 

  • ArQule reported that its partner, Kyowa Hakko Kirin, announced top-line results of the JET-HCC Phase 3 trial of tivantinib in Japan, and that the trial did not meet its primary endpoint of progression free survival (PFS).
    • JET-HCC is a randomized, double-blind placebo-controlled study that enrolled ~190 Japanese patients with c-Met diagnostic-high inoperable hepatocellular carcinoma (HCC) with a history of prior sorafenib therapy, to evaluate the efficacy and safety of tivantinib

AKCA Akcea Therapeutics files $100M IPO through Cowen, Stifel, and Wells Fargo 

  • Akcea Therapeutics is a late-stage biopharmaceutical company focused on developing and commercializing drugs to treat patients with serious cardiometabolic diseases caused by lipid disorders.
    • Through 2016, the company has not generated any revenue. In January 2017, we initiated a strategic collaboration with Novartis and we received $75.0M in an upfront option payment, of which we will retain $60.0M and will pay Ionis $15.0M as a sublicense fee under our license agreement with Ionis.
    • Beginning in 2017, we will recognize revenue from our strategic collaboration with Novartis. In conjunction with this collaboration, Novartis purchased $100.0M of Ionis' common stock at a premium.
    • In addition to the $75.0M upfront payment that we received, we may also recognize revenue associated with this premium over our period of performance and may record the full amount of the offsetting expense associated with this premium in 2017. 

ZYNE Zynerba Pharmaceuticals reports Q4 EPS ($0.71) vs FactSet ($0.72) ($19.65) 

  • Reports Q4:
    • As of 31-Dec-16, cash and cash equivalents totaled $31.0M vs $31.8M at 30-Sep-16
  • Outlook:
    • Based on its cash position of $31.0M at year-end 2016, and including proceeds from the recent follow-on offering, the company estimates this balance is sufficient to develop five Phase 3 ready programs and, assuming feedback from the FDA supports a decision to move forward, initiate at least one Phase 3 program and fund operations and capital requirements into 2019. 

NBRV Nabriva Therapeutics reports FY EPS ($25.56) vs. ($44.37) y/y ($10.67) 

  • Research and development expense $48.0M vs. $23.6M y/y
  • G&A expense $13.5M vs. $7.9M y/y
  • As of December 31, 2016, Nabriva had $83.9 million in cash, cash equivalents and short-term investments compared to $73.9M in cash, cash equivalents and marketable securities and term deposits as of 30-Sep-16

EHTH eHealth, Inc. announces completion of strategic alternatives review ($11.04) 

  • eHealth received indications of interest to both acquire and invest in the company during the process.
    • After careful consideration, the board has determined that the interests of the company’s stockholders are best served by focusing on execution of the company’s strategic business plan.
    • The company does from time-to-time receive indications of interest and have discussions regarding possible strategic alternatives and intends to consider proposals it receives in the future that it believes could result in the creation of stockholder value. 

PRTK Allergan (AGN) and Paratek report two phase 3 trials of sarecycline in moderate to severe acne both meet primary endpoints ($15.85) 

  • Allergan and Paratek Pharmaceuticals announced that two Phase 3 trials of sarecycline for the treatment of moderate to severe acne met their 12 week primary efficacy endpoints
    • Both SC1401 & SC1402 were designed to be replicative phase 3 randomized, multicenter, double-blind, placebo-controlled studies to evaluate the efficacy and safety of 1.5 mg/kg per day of sarecycline compared to placebo in the treatment of moderate to severe acne
  • Sarecycline was statistically significantly (p < 0.004) superior to placebo with respect to primary efficacy endpoints.
  • The most common adverse events (>2%) reported in the sarecycline group were nausea (3.2%), nasopharyngitis (2.8%), and headache (2.8%). 

VBLT Vascular Biogenics reports FY EPS ($0.64) vs FactSet ($0.65) ($5.65) 

  • Reports FY:
    • Total expenses $16.3M v. year-ago $14.9M
    • At 31-Dec-16, the company had cash, cash equivalents and short-term bank deposits of $45.3M and working capital of $41.8M.
  • Cash guidance:
    • The company expects that its cash and cash equivalents and short-term bank deposits will enable it to fund operating expenses and capital expenditure requirements into 2019.
    • It is expected to be sufficient to enable completion of the on-going GLOBE Phase 3 clinical trial of VB-111 in rGBM, to support the Phase 3 clinical trial for VB-111 in ovarian cancer and an exploratory clinical study of VB-111 in combination with a checkpoint inhibitor as well as to support the investment in the new Modiin facility

Upgrades/ Downgrades

APOP Cellect announces successful first cancer patient stem cell transplant ($6.26) 

  • APOP announced that the first stem cell transplant procedure has been successfully performed using its ApoGraft technology in the company’s Phase I/II clinical trial in a blood cancer patient.
  • Based on the successful transplantation results, the independent Data and Safety Monitoring board (DSMB) approved the enrollment of 2 additional patients for ApoGraft treatment to complete the first study cohort as planned. 

ONTX Onconova Therapeutics reports FY EPS ($4.44) vs FactSet ($5.91) -- 1 estimate ($3.02) 

  • Reports FY:
    • Revenue $5.5M vs FactSet $6.4M -- 1 estimate
    • Cash and cash equivalents as of December 31, 2016, totaled $21.4 million, compared to $19.8 million as of December 31, 2015.
  • Cash Guidance:
    • Onconova believes that its current cash and cash equivalents will be sufficient to fund its ongoing trials and operations into the fourth quarter of 2017.

ARQL ArQule reports JET-HCC phase 3 trial of tivantinib in hepatocellular carcinoma in Japan does not meet primary endpoint ($1.15) 

  • ArQule reported that its partner, Kyowa Hakko Kirin, announced top-line results of the JET-HCC Phase 3 trial of tivantinib in Japan, and that the trial did not meet its primary endpoint of progression free survival (PFS).
    • JET-HCC is a randomized, double-blind placebo-controlled study that enrolled ~190 Japanese patients with c-Met diagnostic-high inoperable hepatocellular carcinoma (HCC) with a history of prior sorafenib therapy, to evaluate the efficacy and safety of tivantinib

AKCA Akcea Therapeutics files $100M IPO through Cowen, Stifel, and Wells Fargo 

  • Akcea Therapeutics is a late-stage biopharmaceutical company focused on developing and commercializing drugs to treat patients with serious cardiometabolic diseases caused by lipid disorders.
    • Through 2016, the company has not generated any revenue. In January 2017, we initiated a strategic collaboration with Novartis and we received $75.0M in an upfront option payment, of which we will retain $60.0M and will pay Ionis $15.0M as a sublicense fee under our license agreement with Ionis.
    • Beginning in 2017, we will recognize revenue from our strategic collaboration with Novartis. In conjunction with this collaboration, Novartis purchased $100.0M of Ionis' common stock at a premium.
    • In addition to the $75.0M upfront payment that we received, we may also recognize revenue associated with this premium over our period of performance and may record the full amount of the offsetting expense associated with this premium in 2017. 

ZYNE Zynerba Pharmaceuticals reports Q4 EPS ($0.71) vs FactSet ($0.72) ($19.65) 

  • Reports Q4:
    • As of 31-Dec-16, cash and cash equivalents totaled $31.0M vs $31.8M at 30-Sep-16
  • Outlook:
    • Based on its cash position of $31.0M at year-end 2016, and including proceeds from the recent follow-on offering, the company estimates this balance is sufficient to develop five Phase 3 ready programs and, assuming feedback from the FDA supports a decision to move forward, initiate at least one Phase 3 program and fund operations and capital requirements into 2019. 

NBRV Nabriva Therapeutics reports FY EPS ($25.56) vs. ($44.37) y/y ($10.67) 

  • Research and development expense $48.0M vs. $23.6M y/y
  • G&A expense $13.5M vs. $7.9M y/y
  • As of December 31, 2016, Nabriva had $83.9 million in cash, cash equivalents and short-term investments compared to $73.9M in cash, cash equivalents and marketable securities and term deposits as of 30-Sep-16

EHTH eHealth, Inc. announces completion of strategic alternatives review ($11.04) 

  • eHealth received indications of interest to both acquire and invest in the company during the process.
    • After careful consideration, the board has determined that the interests of the company’s stockholders are best served by focusing on execution of the company’s strategic business plan.
    • The company does from time-to-time receive indications of interest and have discussions regarding possible strategic alternatives and intends to consider proposals it receives in the future that it believes could result in the creation of stockholder value. 

PRTK Allergan (AGN) and Paratek report two phase 3 trials of sarecycline in moderate to severe acne both meet primary endpoints ($15.85) 

  • Allergan and Paratek Pharmaceuticals announced that two Phase 3 trials of sarecycline for the treatment of moderate to severe acne met their 12 week primary efficacy endpoints
    • Both SC1401 & SC1402 were designed to be replicative phase 3 randomized, multicenter, double-blind, placebo-controlled studies to evaluate the efficacy and safety of 1.5 mg/kg per day of sarecycline compared to placebo in the treatment of moderate to severe acne
  • Sarecycline was statistically significantly (p < 0.004) superior to placebo with respect to primary efficacy endpoints.
  • The most common adverse events (>2%) reported in the sarecycline group were nausea (3.2%), nasopharyngitis (2.8%), and headache (2.8%). 

VBLT Vascular Biogenics reports FY EPS ($0.64) vs FactSet ($0.65) ($5.65) 

  • Reports FY:
    • Total expenses $16.3M v. year-ago $14.9M
    • At 31-Dec-16, the company had cash, cash equivalents and short-term bank deposits of $45.3M and working capital of $41.8M.
  • Cash guidance:
    • The company expects that its cash and cash equivalents and short-term bank deposits will enable it to fund operating expenses and capital expenditure requirements into 2019.
    • It is expected to be sufficient to enable completion of the on-going GLOBE Phase 3 clinical trial of VB-111 in rGBM, to support the Phase 3 clinical trial for VB-111 in ovarian cancer and an exploratory clinical study of VB-111 in combination with a checkpoint inhibitor as well as to support the investment in the new Modiin facility
Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Consumer News

Josh DiMarzo, Mark Waltos (203) 861-7650 | 3.27.2017

News

QSR Restaurant Brands completes tender offer to purchase shares of Popeyes Louisiana Kitchen, Inc. (PLKI) 
  • Expects to complete the acquisition of Popeyes Louisiana Kitchen, Inc. (PLKI) today, following the successful completion of its tender offer to purchase all of the outstanding shares of common stock of Popeyes at $79.00 per share, net to the holder in cash, without interest, less any applicable withholding taxes. The tender offer was effected by RBI's indirect subsidiary, Orange, Inc. .
  • The depositary for the tender offer has advised Purchaser that, as of the expiration of the tender offer at one minute following 11:59 p.m. (12:00 midnight), Eastern time, on 24-Mar-17, 17,020,182 shares of Popeyes common stock (excluding shares with respect to which notices of guaranteed delivery were delivered but which shares were not yet delivered) had been validly tendered and not validly withdrawn, representing approximately 83% of Popeyes' outstanding shares of common stock. All conditions to the tender offer were satisfied, and the tender offer was not extended.

AMZN Amazon.com exploring expanding physical store push into furniture, home appliances -- NY Times 

  • Citing a person with knowledge of the matter, The NY Times reports that Amazon is exploring the idea of creating physical stores to sell furniture and home appliances.
  • The stores would serve as showcases for the kinds of products that consumers are reluctant to buy online sight unseen. Orders would be delivered to shoppers' homes.
  • The source also said that Amazon has considered incorporating augmented or virtual reality into the shopping experience, allowing people to see how appliances and furniture will look in their homes.
  • Sources also said that Amazon has discussed an electronics-store concept similar to Apple’s retail outlets.

AMZN Amazon.com wins $1.5B tax dispute with IRS over Luxembourg unit -- NY Post

  • The NY Post reports that Amazon on Thursday won a $1.5B+ tax dispute with the IRS over transactions at its Luxembourg unit that took place more than a decade ago.
  • A US Tax Court judge found that the IRS ahd abused its discretion, or acted arbitrarily or capriciously regarding the 2005 and 2006 transactions. The IRS case involved "transfer pricing," which arises when units of multinational companies transact with each other.
  • Amazon successfully argued that the IRS overvalued intangible assets, including software and trademarks, it had transferred to a Luxembourg unit, Amazon Europe Holding Technologies SCS.

AMZN Emmar Malls bids for Souq.com to challenge Amazon -- Bloomberg 

  • Emaar Malls (EMRMLS.AE) has bid for online retailer Souq.com in a challenge to an offer made by Amazon.com, sources say.
  • The retail division of Emaar Properties (EMRMLS.AE) offered about $800M for the company last week, which includes a convertible deposit of $500M, according to one source.

Viacom (VIAB): Barron's is positive on Viacom, shares of which have declined 39% in the last two years as the well-documented dramas involving the Redstone family, former CEO Philippe Dauman, and the attempted merger with CBS unfolded. Now, new CEO Bob Bakish has things looking up: he's started cleaning house at Paramount, redirected spending to cross-marketing opportunities, and focused the cable business on a handful of its flagship networks. Bakish has also cut the dividend in half and ceased share buybacks, freeing up cash for reinvestment in content. Viacom trades at just 10 times expected 2018 earnings, compared to a five-year average of 13. Shares could rise 40% over the next year

Barron's Trader Extra: Mall REITs have fallen 20% in the past seven months as competition from online shopping has continued to pain brick-and-mortar retailers, causing some to close stores at an alarming rate; Negative mentions for Tanger Factory Outlet Centers (SKT), CBL & Associates Properties (CBL), and especially Seritage Growth Properties (SRG)

CPRT Copart announces two-for-one stock split 

  • The stock split will be effected as a stock dividend entitling each stockholder of record to receive one additional share of common stock for every one share owned. Additional shares issued as a result of the stock dividend will be distributed after close of trading on 10-Apr-17, to stockholders of record on 3-Apr-17.
  • A. Jayson Adair, Copart’s CEO, stated that the board authorized the stock split principally to obtain wider distribution and greater liquidity for the common stock.

RT Leon Capital Partners discloses 9.5% stake in Ruby Tuesday -- 13D 

  • From item 4 of the filing:
    • Subject at all times to the holder' continuing review of the business and operations of the company, overall market conditions and other investment opportunities available to the holder, the holder may seek to participate in strategic transactions that the company may evaluate or undertake in connection with its recently announced exploration of strategic alternatives, and the holder intend to take additional steps in furtherance thereof, including, without limitation, engaging in communications with management and the board of the company, stockholders and other third parties and making proposals to the company concerning potential strategic transactions.

DG Dollar General files automatic mixed shelf of indeterminate amount 

ROST Insider transaction: Ross Stores CEO Barbara Rentler discloses sale of 50.5K shares - Form 4 

  • Rentler beneficially owns 546.6K shares of common stock following the transaction

GIII G-III Apparel reports Q4 non-GAAP EPS ($0.16) vs FactSet ($0.10) 

  • Reports Q4:
    • Revenue $603.3M vs FactSet $622.8M
    • Included in non-GAAP EPS is losses of $9.2M and additional interest expense of $7.5M related to the operation and ownership of DKI, equal to an aggregate of $0.21 per share
  • Q1 Guidance:
    • Non-GAAP EPS ($0.45)-($0.35) vs FactSet ($0.09)
      • non-GAAP results for Q1 of fiscal 2018 reflect expected operational losses of $26M and additional interest expense of $9M, or an aggregate of $0.45 per share, associated with the Donna Karan business.
      • The forecast also includes the full impact of the issuance of approximately 2.6M shares of new G-III common stock to the seller of DKI.
    • Revenue $500M vs FactSet $555.5M
  • FY Guidance (Jan 2018):
    • Non-GAAP EPS $0.99-1.09 vs FactSet $1.34
      • non-GAAP results reflect expected operational losses of $31M and additional interest expense of $36M, or an aggregate of $0.85 per diluted share, associated with the Donna Karan business.
      • The forecast also includes the full year impact of the issuance of approximately 2.6M shares of new G-III common stock to the seller of DKI.
    • Revenue $2.73B vs FactSet $2.89B
    • EBITDA $162-171M vs FactSet $173.0M
      • includes a full-year loss of approximately $20M associated with the Donna Karan business
    • The company anticipates that it will incur losses from the Donna Karan operations during H1 of fiscal 2018 that will be partially offset by growth in operating profitability beginning in Q3 as the company begins shipments and re-launches DKNY and Donna Karan products. The company anticipates the impact of operational losses and additional interest in Q2 of fiscal 2018 will approximate Q1 impact.

Hollywood plans to get movies into your home as soon as ten days after they open in cinemas - WSJ

Executive upheaval at movie studios due to changing world - LA Times 

  • A prominent producer tells the LA Times that whenever the movie industry faces huge changes due to technological advances, management changes ensue.
  • The article notes that Paramount (VIA), Sony (6758.JP), Fox (FOXA) , Warner Bros (TWX), Disney (DIS), and Lionsgate (LGF.A) have all made high-level changes over the past year, and while some of the job shuffles result from internal struggles, others are a function of an industry that's trying to deal with changing consumer behavior as streaming subscriptions rise and cable subscriptions decline.
  • The LA Times reports that tent pole movies -- which are expensive, visually stunning, sequel-generating, and intended to appeal to audiences around the world -- are increasingly important in Hollywood, and green lighting a tent pole that fails can get executives fired.
  • The article reminds readers that the movie industry is apprehensive about potential encroachment onto its domain by Google (GOOG) and Apple (AAPL).

CALM Cal-Maine Foods reports Q3 EPS $0.09 vs FactSet $0.19 

  • Reports Q3:
    • Revenue $306.5M vs FactSet $324.7M
  • Management comments:
    • “Our results for Q3 of fiscal 2017 reflect the volatile market conditions the egg industry has experienced throughout this fiscal year. Our results were affected by lower market prices and weaker demand trends compared with Q3 last year. Market prices moved significantly higher after Thanksgiving, but dropped back down after Christmas, and our average customer selling prices for Q3 of fiscal 2017 were down 27.9% from the same period a year ago."
    • Over the past month, there have been reported outbreaks of AI in certain poultry operations located in southeastern states. None of these outbreaks has affected the commercial table egg layer flock, and there have been no positive tests for AI at any Cal-Maine Foods locations. Since the spring 2015 AI outbreaks, Cal-Maine Foods significantly enhanced its biosecurity measures at all of its locations, and its flocks are being monitored and tested according to state and federal guidelines. The company continues to work closely with state and federal agencies and other interested parties to monitor developments and seek to prevent the occurrence of the disease at Cal-Maine Foods’ facilities

ELF e.l.f. Beauty files amended S-1; to offer 7M shares for holders through JPMorgan and Morgan Stanley 

  • The new information is the amount of shares.
  • on 15-Mar e.l.f. Beauty filed a $175M secondary (all for holders) through JPMorgan and Morgan Stanley.

 

Events

QSR Restaurant Brands completes tender offer to purchase shares of Popeyes Louisiana Kitchen, Inc. (PLKI) 
  • Expects to complete the acquisition of Popeyes Louisiana Kitchen, Inc. (PLKI) today, following the successful completion of its tender offer to purchase all of the outstanding shares of common stock of Popeyes at $79.00 per share, net to the holder in cash, without interest, less any applicable withholding taxes. The tender offer was effected by RBI's indirect subsidiary, Orange, Inc. .
  • The depositary for the tender offer has advised Purchaser that, as of the expiration of the tender offer at one minute following 11:59 p.m. (12:00 midnight), Eastern time, on 24-Mar-17, 17,020,182 shares of Popeyes common stock (excluding shares with respect to which notices of guaranteed delivery were delivered but which shares were not yet delivered) had been validly tendered and not validly withdrawn, representing approximately 83% of Popeyes' outstanding shares of common stock. All conditions to the tender offer were satisfied, and the tender offer was not extended.

AMZN Amazon.com exploring expanding physical store push into furniture, home appliances -- NY Times 

  • Citing a person with knowledge of the matter, The NY Times reports that Amazon is exploring the idea of creating physical stores to sell furniture and home appliances.
  • The stores would serve as showcases for the kinds of products that consumers are reluctant to buy online sight unseen. Orders would be delivered to shoppers' homes.
  • The source also said that Amazon has considered incorporating augmented or virtual reality into the shopping experience, allowing people to see how appliances and furniture will look in their homes.
  • Sources also said that Amazon has discussed an electronics-store concept similar to Apple’s retail outlets.

AMZN Amazon.com wins $1.5B tax dispute with IRS over Luxembourg unit -- NY Post

  • The NY Post reports that Amazon on Thursday won a $1.5B+ tax dispute with the IRS over transactions at its Luxembourg unit that took place more than a decade ago.
  • A US Tax Court judge found that the IRS ahd abused its discretion, or acted arbitrarily or capriciously regarding the 2005 and 2006 transactions. The IRS case involved "transfer pricing," which arises when units of multinational companies transact with each other.
  • Amazon successfully argued that the IRS overvalued intangible assets, including software and trademarks, it had transferred to a Luxembourg unit, Amazon Europe Holding Technologies SCS.

AMZN Emmar Malls bids for Souq.com to challenge Amazon -- Bloomberg 

  • Emaar Malls (EMRMLS.AE) has bid for online retailer Souq.com in a challenge to an offer made by Amazon.com, sources say.
  • The retail division of Emaar Properties (EMRMLS.AE) offered about $800M for the company last week, which includes a convertible deposit of $500M, according to one source.

Viacom (VIAB): Barron's is positive on Viacom, shares of which have declined 39% in the last two years as the well-documented dramas involving the Redstone family, former CEO Philippe Dauman, and the attempted merger with CBS unfolded. Now, new CEO Bob Bakish has things looking up: he's started cleaning house at Paramount, redirected spending to cross-marketing opportunities, and focused the cable business on a handful of its flagship networks. Bakish has also cut the dividend in half and ceased share buybacks, freeing up cash for reinvestment in content. Viacom trades at just 10 times expected 2018 earnings, compared to a five-year average of 13. Shares could rise 40% over the next year

Barron's Trader Extra: Mall REITs have fallen 20% in the past seven months as competition from online shopping has continued to pain brick-and-mortar retailers, causing some to close stores at an alarming rate; Negative mentions for Tanger Factory Outlet Centers (SKT), CBL & Associates Properties (CBL), and especially Seritage Growth Properties (SRG)

CPRT Copart announces two-for-one stock split 

  • The stock split will be effected as a stock dividend entitling each stockholder of record to receive one additional share of common stock for every one share owned. Additional shares issued as a result of the stock dividend will be distributed after close of trading on 10-Apr-17, to stockholders of record on 3-Apr-17.
  • A. Jayson Adair, Copart’s CEO, stated that the board authorized the stock split principally to obtain wider distribution and greater liquidity for the common stock.

RT Leon Capital Partners discloses 9.5% stake in Ruby Tuesday -- 13D 

  • From item 4 of the filing:
    • Subject at all times to the holder' continuing review of the business and operations of the company, overall market conditions and other investment opportunities available to the holder, the holder may seek to participate in strategic transactions that the company may evaluate or undertake in connection with its recently announced exploration of strategic alternatives, and the holder intend to take additional steps in furtherance thereof, including, without limitation, engaging in communications with management and the board of the company, stockholders and other third parties and making proposals to the company concerning potential strategic transactions.

DG Dollar General files automatic mixed shelf of indeterminate amount 

ROST Insider transaction: Ross Stores CEO Barbara Rentler discloses sale of 50.5K shares - Form 4 

  • Rentler beneficially owns 546.6K shares of common stock following the transaction

GIII G-III Apparel reports Q4 non-GAAP EPS ($0.16) vs FactSet ($0.10) 

  • Reports Q4:
    • Revenue $603.3M vs FactSet $622.8M
    • Included in non-GAAP EPS is losses of $9.2M and additional interest expense of $7.5M related to the operation and ownership of DKI, equal to an aggregate of $0.21 per share
  • Q1 Guidance:
    • Non-GAAP EPS ($0.45)-($0.35) vs FactSet ($0.09)
      • non-GAAP results for Q1 of fiscal 2018 reflect expected operational losses of $26M and additional interest expense of $9M, or an aggregate of $0.45 per share, associated with the Donna Karan business.
      • The forecast also includes the full impact of the issuance of approximately 2.6M shares of new G-III common stock to the seller of DKI.
    • Revenue $500M vs FactSet $555.5M
  • FY Guidance (Jan 2018):
    • Non-GAAP EPS $0.99-1.09 vs FactSet $1.34
      • non-GAAP results reflect expected operational losses of $31M and additional interest expense of $36M, or an aggregate of $0.85 per diluted share, associated with the Donna Karan business.
      • The forecast also includes the full year impact of the issuance of approximately 2.6M shares of new G-III common stock to the seller of DKI.
    • Revenue $2.73B vs FactSet $2.89B
    • EBITDA $162-171M vs FactSet $173.0M
      • includes a full-year loss of approximately $20M associated with the Donna Karan business
    • The company anticipates that it will incur losses from the Donna Karan operations during H1 of fiscal 2018 that will be partially offset by growth in operating profitability beginning in Q3 as the company begins shipments and re-launches DKNY and Donna Karan products. The company anticipates the impact of operational losses and additional interest in Q2 of fiscal 2018 will approximate Q1 impact.

Hollywood plans to get movies into your home as soon as ten days after they open in cinemas - WSJ

Executive upheaval at movie studios due to changing world - LA Times 

  • A prominent producer tells the LA Times that whenever the movie industry faces huge changes due to technological advances, management changes ensue.
  • The article notes that Paramount (VIA), Sony (6758.JP), Fox (FOXA) , Warner Bros (TWX), Disney (DIS), and Lionsgate (LGF.A) have all made high-level changes over the past year, and while some of the job shuffles result from internal struggles, others are a function of an industry that's trying to deal with changing consumer behavior as streaming subscriptions rise and cable subscriptions decline.
  • The LA Times reports that tent pole movies -- which are expensive, visually stunning, sequel-generating, and intended to appeal to audiences around the world -- are increasingly important in Hollywood, and green lighting a tent pole that fails can get executives fired.
  • The article reminds readers that the movie industry is apprehensive about potential encroachment onto its domain by Google (GOOG) and Apple (AAPL).

CALM Cal-Maine Foods reports Q3 EPS $0.09 vs FactSet $0.19 

  • Reports Q3:
    • Revenue $306.5M vs FactSet $324.7M
  • Management comments:
    • “Our results for Q3 of fiscal 2017 reflect the volatile market conditions the egg industry has experienced throughout this fiscal year. Our results were affected by lower market prices and weaker demand trends compared with Q3 last year. Market prices moved significantly higher after Thanksgiving, but dropped back down after Christmas, and our average customer selling prices for Q3 of fiscal 2017 were down 27.9% from the same period a year ago."
    • Over the past month, there have been reported outbreaks of AI in certain poultry operations located in southeastern states. None of these outbreaks has affected the commercial table egg layer flock, and there have been no positive tests for AI at any Cal-Maine Foods locations. Since the spring 2015 AI outbreaks, Cal-Maine Foods significantly enhanced its biosecurity measures at all of its locations, and its flocks are being monitored and tested according to state and federal guidelines. The company continues to work closely with state and federal agencies and other interested parties to monitor developments and seek to prevent the occurrence of the disease at Cal-Maine Foods’ facilities

ELF e.l.f. Beauty files amended S-1; to offer 7M shares for holders through JPMorgan and Morgan Stanley 

  • The new information is the amount of shares.
  • on 15-Mar e.l.f. Beauty filed a $175M secondary (all for holders) through JPMorgan and Morgan Stanley.

 

Upgrades/ Downgrades

QSR Restaurant Brands completes tender offer to purchase shares of Popeyes Louisiana Kitchen, Inc. (PLKI) 
  • Expects to complete the acquisition of Popeyes Louisiana Kitchen, Inc. (PLKI) today, following the successful completion of its tender offer to purchase all of the outstanding shares of common stock of Popeyes at $79.00 per share, net to the holder in cash, without interest, less any applicable withholding taxes. The tender offer was effected by RBI's indirect subsidiary, Orange, Inc. .
  • The depositary for the tender offer has advised Purchaser that, as of the expiration of the tender offer at one minute following 11:59 p.m. (12:00 midnight), Eastern time, on 24-Mar-17, 17,020,182 shares of Popeyes common stock (excluding shares with respect to which notices of guaranteed delivery were delivered but which shares were not yet delivered) had been validly tendered and not validly withdrawn, representing approximately 83% of Popeyes' outstanding shares of common stock. All conditions to the tender offer were satisfied, and the tender offer was not extended.

AMZN Amazon.com exploring expanding physical store push into furniture, home appliances -- NY Times 

  • Citing a person with knowledge of the matter, The NY Times reports that Amazon is exploring the idea of creating physical stores to sell furniture and home appliances.
  • The stores would serve as showcases for the kinds of products that consumers are reluctant to buy online sight unseen. Orders would be delivered to shoppers' homes.
  • The source also said that Amazon has considered incorporating augmented or virtual reality into the shopping experience, allowing people to see how appliances and furniture will look in their homes.
  • Sources also said that Amazon has discussed an electronics-store concept similar to Apple’s retail outlets.

AMZN Amazon.com wins $1.5B tax dispute with IRS over Luxembourg unit -- NY Post

  • The NY Post reports that Amazon on Thursday won a $1.5B+ tax dispute with the IRS over transactions at its Luxembourg unit that took place more than a decade ago.
  • A US Tax Court judge found that the IRS ahd abused its discretion, or acted arbitrarily or capriciously regarding the 2005 and 2006 transactions. The IRS case involved "transfer pricing," which arises when units of multinational companies transact with each other.
  • Amazon successfully argued that the IRS overvalued intangible assets, including software and trademarks, it had transferred to a Luxembourg unit, Amazon Europe Holding Technologies SCS.

AMZN Emmar Malls bids for Souq.com to challenge Amazon -- Bloomberg 

  • Emaar Malls (EMRMLS.AE) has bid for online retailer Souq.com in a challenge to an offer made by Amazon.com, sources say.
  • The retail division of Emaar Properties (EMRMLS.AE) offered about $800M for the company last week, which includes a convertible deposit of $500M, according to one source.

Viacom (VIAB): Barron's is positive on Viacom, shares of which have declined 39% in the last two years as the well-documented dramas involving the Redstone family, former CEO Philippe Dauman, and the attempted merger with CBS unfolded. Now, new CEO Bob Bakish has things looking up: he's started cleaning house at Paramount, redirected spending to cross-marketing opportunities, and focused the cable business on a handful of its flagship networks. Bakish has also cut the dividend in half and ceased share buybacks, freeing up cash for reinvestment in content. Viacom trades at just 10 times expected 2018 earnings, compared to a five-year average of 13. Shares could rise 40% over the next year

Barron's Trader Extra: Mall REITs have fallen 20% in the past seven months as competition from online shopping has continued to pain brick-and-mortar retailers, causing some to close stores at an alarming rate; Negative mentions for Tanger Factory Outlet Centers (SKT), CBL & Associates Properties (CBL), and especially Seritage Growth Properties (SRG)

CPRT Copart announces two-for-one stock split 

  • The stock split will be effected as a stock dividend entitling each stockholder of record to receive one additional share of common stock for every one share owned. Additional shares issued as a result of the stock dividend will be distributed after close of trading on 10-Apr-17, to stockholders of record on 3-Apr-17.
  • A. Jayson Adair, Copart’s CEO, stated that the board authorized the stock split principally to obtain wider distribution and greater liquidity for the common stock.

RT Leon Capital Partners discloses 9.5% stake in Ruby Tuesday -- 13D 

  • From item 4 of the filing:
    • Subject at all times to the holder' continuing review of the business and operations of the company, overall market conditions and other investment opportunities available to the holder, the holder may seek to participate in strategic transactions that the company may evaluate or undertake in connection with its recently announced exploration of strategic alternatives, and the holder intend to take additional steps in furtherance thereof, including, without limitation, engaging in communications with management and the board of the company, stockholders and other third parties and making proposals to the company concerning potential strategic transactions.

DG Dollar General files automatic mixed shelf of indeterminate amount 

ROST Insider transaction: Ross Stores CEO Barbara Rentler discloses sale of 50.5K shares - Form 4 

  • Rentler beneficially owns 546.6K shares of common stock following the transaction

GIII G-III Apparel reports Q4 non-GAAP EPS ($0.16) vs FactSet ($0.10) 

  • Reports Q4:
    • Revenue $603.3M vs FactSet $622.8M
    • Included in non-GAAP EPS is losses of $9.2M and additional interest expense of $7.5M related to the operation and ownership of DKI, equal to an aggregate of $0.21 per share
  • Q1 Guidance:
    • Non-GAAP EPS ($0.45)-($0.35) vs FactSet ($0.09)
      • non-GAAP results for Q1 of fiscal 2018 reflect expected operational losses of $26M and additional interest expense of $9M, or an aggregate of $0.45 per share, associated with the Donna Karan business.
      • The forecast also includes the full impact of the issuance of approximately 2.6M shares of new G-III common stock to the seller of DKI.
    • Revenue $500M vs FactSet $555.5M
  • FY Guidance (Jan 2018):
    • Non-GAAP EPS $0.99-1.09 vs FactSet $1.34
      • non-GAAP results reflect expected operational losses of $31M and additional interest expense of $36M, or an aggregate of $0.85 per diluted share, associated with the Donna Karan business.
      • The forecast also includes the full year impact of the issuance of approximately 2.6M shares of new G-III common stock to the seller of DKI.
    • Revenue $2.73B vs FactSet $2.89B
    • EBITDA $162-171M vs FactSet $173.0M
      • includes a full-year loss of approximately $20M associated with the Donna Karan business
    • The company anticipates that it will incur losses from the Donna Karan operations during H1 of fiscal 2018 that will be partially offset by growth in operating profitability beginning in Q3 as the company begins shipments and re-launches DKNY and Donna Karan products. The company anticipates the impact of operational losses and additional interest in Q2 of fiscal 2018 will approximate Q1 impact.

Hollywood plans to get movies into your home as soon as ten days after they open in cinemas - WSJ

Executive upheaval at movie studios due to changing world - LA Times 

  • A prominent producer tells the LA Times that whenever the movie industry faces huge changes due to technological advances, management changes ensue.
  • The article notes that Paramount (VIA), Sony (6758.JP), Fox (FOXA) , Warner Bros (TWX), Disney (DIS), and Lionsgate (LGF.A) have all made high-level changes over the past year, and while some of the job shuffles result from internal struggles, others are a function of an industry that's trying to deal with changing consumer behavior as streaming subscriptions rise and cable subscriptions decline.
  • The LA Times reports that tent pole movies -- which are expensive, visually stunning, sequel-generating, and intended to appeal to audiences around the world -- are increasingly important in Hollywood, and green lighting a tent pole that fails can get executives fired.
  • The article reminds readers that the movie industry is apprehensive about potential encroachment onto its domain by Google (GOOG) and Apple (AAPL).

CALM Cal-Maine Foods reports Q3 EPS $0.09 vs FactSet $0.19 

  • Reports Q3:
    • Revenue $306.5M vs FactSet $324.7M
  • Management comments:
    • “Our results for Q3 of fiscal 2017 reflect the volatile market conditions the egg industry has experienced throughout this fiscal year. Our results were affected by lower market prices and weaker demand trends compared with Q3 last year. Market prices moved significantly higher after Thanksgiving, but dropped back down after Christmas, and our average customer selling prices for Q3 of fiscal 2017 were down 27.9% from the same period a year ago."
    • Over the past month, there have been reported outbreaks of AI in certain poultry operations located in southeastern states. None of these outbreaks has affected the commercial table egg layer flock, and there have been no positive tests for AI at any Cal-Maine Foods locations. Since the spring 2015 AI outbreaks, Cal-Maine Foods significantly enhanced its biosecurity measures at all of its locations, and its flocks are being monitored and tested according to state and federal guidelines. The company continues to work closely with state and federal agencies and other interested parties to monitor developments and seek to prevent the occurrence of the disease at Cal-Maine Foods’ facilities

ELF e.l.f. Beauty files amended S-1; to offer 7M shares for holders through JPMorgan and Morgan Stanley 

  • The new information is the amount of shares.
  • on 15-Mar e.l.f. Beauty filed a $175M secondary (all for holders) through JPMorgan and Morgan Stanley.

 

Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Financial News

John Fay, Brad Berger (203) 861-7650 | 3.27.2017

News

S&P changes: TCBI and MIK to join MidCap 400; DSW and WETF to join SmallCap 600 S&P Dow Jones Indices will make the following changes to the S&P MidCap 400 and S&P SmallCap 600 indices effective prior to the open of trading on Wednesday, March 29: S&P SmallCap 600 constituent Texas Capital Bancshares Inc. (TCBI) will replace Endurance Specialty Holdings Ltd. (ENH) in the S&P MidCap 400, and DSW Inc. (DSW) will replace Texas Capital Bancshares in the S&P SmallCap 600. SOMPO Holdings Inc. is acquiring Endurance Specialty Holdings in a deal expected to be completed soon pending final conditions.S&P MidCap 400 constituent WisdomTree Investments Inc. (WETF) will replace Surgical Care Affiliates Inc. (SCAI) in the S&P SmallCap 600, and The Michaels Companies Inc. (MIK) will replace WisdomTree Investments in the S&P MidCap 400.  S&P 100 & 500 constituent UnitedHealth Group Inc. (UNH) acquired Surgical Care Affiliates in a deal completed today.

MGI-MoneyGram enters into confidentiality agreement with Euronet Worldwide (EEFT) to further consider Euronet's unsolicited proposal MoneyGram announces that it has entered into an Acceptable Confidentiality agreement with Euronet Worldwide so that it can further consider Euronet's unsolicited proposal made on 14-Mar-17 to acquire all of the outstanding shares of MoneyGram common stock and Preferred Stock for $15.20 per share in cash on an as-converted basis . As previously announced on 20-Mar-17, MoneyGram's board, after consultation with its outside legal and financial advisors, determined that the unsolicited Euronet proposal could reasonably be expected to result in a "Company Superior Proposal" as defined in MoneyGram's merger agreement with Ant Financial Services Group . MoneyGram noted at that time that the determination by its board allows MoneyGram to take certain actions, in accordance with the procedures set forth in the merger agreement with Ant Financial, to further consider the Euronet Proposal, including engaging in discussions with Euronet subject to entry into an Acceptable Confidentiality agreement with Euronet pursuant to such merger agreement.  As previously announced on 26-Jan-17, MoneyGram entered into a definitive agreement with Ant Financial Services Group under which MoneyGram will merge with Ant Financial, with stockholders of MoneyGram being offered $13.25 per share in cash.  BofA Merrill Lynch is serving as financial advisor to MoneyGram and Vinson & Elkins LLP is serving as its legal advisor.

BoE publishes bank stress test scenarios: cites Brexit, China debt and UK household debt as risks The BoE publishes the key elements of the 2017 bank stress test, which includes the annual cyclical scenario, and for the first time will run an additional exploratory scenario. It says: The annual cyclical scenario incorporates a severe and synchronised UK and global macroeconomic and financial market stress, as well as an independent stress of misconduct costs.  The stressed outcome for UK activity and unemployment is the same as in the 2016 scenario. For the global economy, the stressed outcome is worse than in 2016, largely reflecting continued rapid growth of credit in China.  It also incorporates a rise in Bank Rate, differentiating it from the 2016 exercise, in which Bank Rate was cut to zero. The higher path for Bank Rate is not designed to change the overall severity of the stress.  This aspect complements the exploratory scenario, in which interest rates persist at very low levels. Together the two scenarios will allow the impact on banks of both rising and persistently low Bank Rate to be assessed.

Barrons
SVB Financial Group (SIVB): Barron's is positive on SVB, the parent of Silicon Valley Bank. The bank is unique, having used its location to build lasting relationships with VC and PE specialists. It lends to such borrowers, sometimes taking small equity stakes, and provides money-management services to clients. It also has a nonbank unit, SVB Capital, which invests in VC and PE funds. Investors have already taken notice of the bank's unique model, with shares having risen 78% in the last year compared to a 40% gain for the regional bank group. But SVB is poised for several years of rapid earnings growth, expectations that far exceed those of most banks. Higher interest rates, a lower corporate tax rate, and a stronger environment for VC investment and exits are all also positive catalysts. Shares could climb by 25% or more over the next year

Barrons Trader Extra: Mall REITs have fallen 20% in the past seven months as competition from online shopping has continued to pain brick-and-mortar retailers, causing some to close stores at an alarming rate; Negative mentions for Tanger Factory Outlet Centers (SKT), CBL & Associates Properties (CBL), and especially Seritage Growth Properties (SRG).

Stocks mentioned on CNBC's Mad Money with Jim Cramer -- TheStreet CEO Interview: Cramer talked to Apple Hospitality REIT (APLE) CEO Justin Knight. Knight talked up the age and condition of the hotel portfolio and said the company remains open to M&A. He said the company prefers to under-promise and over-deliver on guidance

ENV-Envestnet discloses material weakness in internal control over financial reporting -- 10-KIn the filing, ENV says the following: ...our management identified material weaknesses in our internal control over financial reporting as of December 31, 2016...Management concluded there were material weaknesses in the design and operating effectiveness of controls over non-routine transactions, financial statement disclosures, fair value measurement of intangible assets, information technology general controls (ITGC’s) over two information systems and non-income tax compliance in 2016. These material weaknesses were caused by an ineffective controls activities process that failed to appropriately identify new employee resource needs and necessary internal controls over non-routine transactions and financial statement disclosures, fair value measurement of intangible assets and tax compliance and lacked sufficient internal controls intended to ensure that access to these IT systems were adequately restricted to appropriate personnel.  If the remedial measures we have begun implementing that are designed to address these material weaknesses are insufficient to address these material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results."

GEO-The GEO Group announces 3:2 stock split Shareholders of record on 10-Apr will receive one additional share for every two shares held, to be payable on 24-Apr GEO expects its common stock to begin trading at the split-adjusted price on 25-Apr
Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Industrial News

 (203) 861-7650 | 3.27.2017

News

(DD) DuPont and Dow note EU Commission has granted conditional regulatory clearance of the companies' proposed merger ($79.60) 

  • Specifically, DuPont will divest its:
    • Cereal Broadleaf Herbicides and Chewing Insecticides portfolios
    • Crop Protection research and development pipeline and organization, excluding seed treatment, nematicides, and late-stage R&D programs, which DuPont will continue to develop and bring to market, and excluding personnel needed to support marketed products and R&D programs that will remain with DuPont.
  • DuPont is currently in negotiations to divest the crop protection assets.
  • This regulatory milestone is a significant step toward closing the merger transaction, with the intention to subsequently spin into three independent publicly traded companies
  • The transaction is still expected to create significant cost synergies of $3B with $1B in growth synergies
  • Longer term, the intended three-way split is expected to unlock even greater value for shareholders and customers
  • The companies continue to work constructively with regulators in the remaining relevant jurisdictions to obtain clearance for the merger, which they are confident will be achieved
  • StreetAccount notes on 2-Feb, Dow announces proposed divestiture of ethylene acrylic acid copolymers business to SK Global Chemical Co. 

(DD) EU conditionally clears Dow Chemical and Dupont merger ($79.60) 

  • The approval is conditional in particular on the divestiture of major parts of DuPont's global pesticide business, including its global R&D organisation

(CHMT) Chemtura increases prices for petroleum additives products ($33.20) 

  • Chemtura announced that effective 1-Apr-17 or as contracts allow, as a result of the continued escalation of costs it will increase prices globally for the following Petroleum Additives products
    • Detergents: Calcinate , Hybase , Lobase , Calcium Sulfonate Greases, Esters
    • Phosphate Esters: Durad , Reolube

(SLGN) Silgan amends senior secured credit facility ($59.64) 

  • Silgan completed an amendment and restatement of its existing senior secured credit facility which extends the maturity dates for its senior secured credit facility, provides additional borrowing capacity for the company and provides the company with greater flexibility with regard to its strategic initiatives.
  • The amended and restated credit facility provides the company with a $1.2B multicurrency revolving loan facility and C$45.5M of Canadian A term loans.
  • Additionally, the amended and restated credit facility provides the company with a delayed draw US A term loan of $800M.

(AL) Air Lease Corporation announces lease placement of two new Boeing 787-9 Dreamliners with Air Canada (AC.CN) ($37.76) 

  • Announced long term lease agreements with Air Canada for two new Boeing 787-9 aircraft with General Electric engines.
  • "We are pleased to continue to develop our long relationship with Air Canada with the lease of two new Boeing 787-9 aircraft. The first was allocated to Blackbird Capital and acquired in January 2017. The second was delivered on 24-Mar-17 and leased from ALC.

(HA) Hawaiian Airlines and the ALPA announce that pilots ratified 63-month contract ($48.45) 

  • Hawaiian Airlines and the Air Line Pilots Association (ALPA) announced that the union's membership ratified a 63-month contract amendment that provides significant compensation increases for the airline's 670 pilots.
  • Pilots approved the contract amendment outlined in a tentative agreement reached last month between Hawaiian and ALPA.
  • The amendment takes effect 1-Apr and its term extends through 1-Jul-22.

Upgrades/ Downgrades

(DD) DuPont and Dow note EU Commission has granted conditional regulatory clearance of the companies' proposed merger ($79.60) 

  • Specifically, DuPont will divest its:
    • Cereal Broadleaf Herbicides and Chewing Insecticides portfolios
    • Crop Protection research and development pipeline and organization, excluding seed treatment, nematicides, and late-stage R&D programs, which DuPont will continue to develop and bring to market, and excluding personnel needed to support marketed products and R&D programs that will remain with DuPont.
  • DuPont is currently in negotiations to divest the crop protection assets.
  • This regulatory milestone is a significant step toward closing the merger transaction, with the intention to subsequently spin into three independent publicly traded companies
  • The transaction is still expected to create significant cost synergies of $3B with $1B in growth synergies
  • Longer term, the intended three-way split is expected to unlock even greater value for shareholders and customers
  • The companies continue to work constructively with regulators in the remaining relevant jurisdictions to obtain clearance for the merger, which they are confident will be achieved
  • StreetAccount notes on 2-Feb, Dow announces proposed divestiture of ethylene acrylic acid copolymers business to SK Global Chemical Co. 

(DD) EU conditionally clears Dow Chemical and Dupont merger ($79.60) 

  • The approval is conditional in particular on the divestiture of major parts of DuPont's global pesticide business, including its global R&D organisation

(CHMT) Chemtura increases prices for petroleum additives products ($33.20) 

  • Chemtura announced that effective 1-Apr-17 or as contracts allow, as a result of the continued escalation of costs it will increase prices globally for the following Petroleum Additives products
    • Detergents: Calcinate , Hybase , Lobase , Calcium Sulfonate Greases, Esters
    • Phosphate Esters: Durad , Reolube

(SLGN) Silgan amends senior secured credit facility ($59.64) 

  • Silgan completed an amendment and restatement of its existing senior secured credit facility which extends the maturity dates for its senior secured credit facility, provides additional borrowing capacity for the company and provides the company with greater flexibility with regard to its strategic initiatives.
  • The amended and restated credit facility provides the company with a $1.2B multicurrency revolving loan facility and C$45.5M of Canadian A term loans.
  • Additionally, the amended and restated credit facility provides the company with a delayed draw US A term loan of $800M.

(AL) Air Lease Corporation announces lease placement of two new Boeing 787-9 Dreamliners with Air Canada (AC.CN) ($37.76) 

  • Announced long term lease agreements with Air Canada for two new Boeing 787-9 aircraft with General Electric engines.
  • "We are pleased to continue to develop our long relationship with Air Canada with the lease of two new Boeing 787-9 aircraft. The first was allocated to Blackbird Capital and acquired in January 2017. The second was delivered on 24-Mar-17 and leased from ALC.

(HA) Hawaiian Airlines and the ALPA announce that pilots ratified 63-month contract ($48.45) 

  • Hawaiian Airlines and the Air Line Pilots Association (ALPA) announced that the union's membership ratified a 63-month contract amendment that provides significant compensation increases for the airline's 670 pilots.
  • Pilots approved the contract amendment outlined in a tentative agreement reached last month between Hawaiian and ALPA.
  • The amendment takes effect 1-Apr and its term extends through 1-Jul-22.
Morning Summary | TMT | Energy  | Healthcare  | Consumer  | Financial  | Industrial  | Global Trading Summary

Global Trading Summary

Chris Baggio, Ralph Mak, Mark Huttmann (203) 861-7650 | 3.27.2017

News

Asia

Last

Actual

%change

Mtd

Ytd

Nikkei 225

18,985.59

(276.94)

-1.44%

-0.70%

-0.67%

Shanghai

3,266.96

(2.49)

-0.08%

0.78%

5.26%

Hang Seng

24,193.70

(164.57)

-0.68%

1.91%

9.97%

Australia

5,746.70

(6.85)

-0.12%

0.60%

1.43%

Europe

Last

Actual

%change

Mtd

Ytd

EuroStoxx 50

3,429.88

(14.27)

-0.41%

3.32%

4.24%

Germany

11,971.03

(93.23)

-0.77%

1.15%

4.27%

UK

7,281.78

(54.72)

-0.75%

0.26%

1.95%

France

5,006.30

(14.53)

-0.29%

3.04%

2.96%

 

Market Holidays:

 

Market commentary:

Australia’s ASX index fell 0.1% as stocks pared early losses, finishing well off session lows with gains in power and energy producers and real estate offsetting steep declines in materials.   Mining heavyweights BHP Billiton and Rio Tinto fell 1.8% to 2.9% while major ore player Fortescue Metals tumbled 3% as Chinese steel and iron ore futures fell for a fourth consecutive session.  Spot gold rallied 1%, boosting shares of gold miners including Evolution Mining +5.4% and Newcrest Mining +1.3%. Energy producers bucked the trend as shares of Woodside Petro and Santos Ltd gained 0.7% and 1.4% respectively. Banks reversed higher in the PM session, led by Nat’l Aust. Bank +0.4% while ANZ Bank and Westpac Banking each gained 0.3%.  Commonwealth Bank finished little changed.  Shares of Stockland rallied 2%, pacing the advance among REITs after it reaffirmed its guidance of FY’17 6-7% FFO growth and a 25.5 cent/share distribution.  Peers including Westfield Corp and Scentre Group gained 0.9% and 1.2% respectively while Dexus Property slipped 0.4% following a downgrade @ Shaw & Partners.   Market participation was little changed vs the 20 day avg.    

 

Taiwan’s Taiex index fell 0.3% as stocks tracked regional weakness amid the defeat of President Trump’s healthcare reform package on Friday and as concerns mount over the approval of his tax reform policies.  Declines in consumer goods and services outweighed gains in telecommunications while technology and materials ended little changed. Technology shares were mixed as TSMC added 0.3% amid local news it will produce 50mm A11 processors for the new iPhone 8 by July. Rival chipmaker Formosa Sumco fell 3.8%. LED maker Optotech notched a 10% limit-up gain after announcing a record dividend. Consumers fell as shares of Uni President Enterprises declined 1.7% while apparel co Pou Chen tumbled 1.2%. Shares of textile manufacturer Ruentex Industries was limit down, falling 10% as it proposes canceling its 2016 dividend.  Financials weakened as shares of Fubon Financial tumbled 1.7% following downgrades @ MSCO and Yuanta Securities.  Telecommunications outperformed after shares of Taiwan Mobile and Chunghwa Telecom gained 0.5% to 1.3%. Shares of Nan Ya Plastics rallied 1.2% after its board proposed a NT$4.5 per share cash dividend. Market turnover was light, falling 14% vs the 20 day avg.

 

Japan’s NKY index fell 1.4% amid concerns over President Trump’s ability to pass legislative reforms after failing to repeal and replace Obamacare.  Among the biggest sectors weighing on the measure was real estate, energy, consumer discretionary and financials while defensive groups including utilities, healthcare and consumer staples outperformed on a relative basis. Technology finished lower as shares of Japan Display, Casio Computer and TDK Corp lost more than 2% apiece while chipmaker Japan Material lost 1.5%.  Shares of Toshiba tumbled 2.1% after local media reports that the co’s U.S. subsidiary Westinghouse may file Chapter 11 on Tuesday and seek support from Korea Electric Power. Real estate shares weighed the most on the gauge with Sumitomo Realty -3% while Mitsui Fudosan and Mitsubishi Estate tumbled 2.6% - 2.8%.  Exporters suffered losses amid the yen’s gains vs the USD, climbing more than 1% to the 110.20 level.  Automakers including Toyota, Honda, Mitsubishi and Isuzu Motors fell 1.1% to 1.8% while commodity trading cos were dragged lower by shares of Itochu Corp -1.3% and Sumitomo Corp -1.7%.  The big 3 marine shipping cos including Mitsui OSK, Nippon Yusen and Kawasaki Kisen fell 1.3% to 2.5% and while airline cos. ANA Holdings and Japan Airlines fell 0.4% and 0.9% respectively.  Insurers tumbled as shares of T&D Holdings, Tokio Marine and Sompo Holdings declined more than 2% each while brokerages Nomura Holdings and Daiwa Securities lost 3.6% and 3.8% respectively.  Megabanks including MUFG, SMFG and Mizuho Financial fell 0.8% to 1.7% while shares of consumer lender Acom Co. Ltd stumbled 2.2%.  Market volumes were little changed vs the 20 day avg., -5% from Friday.

 

So Korea’s Kospi index finished lower by 0.6% as U.S. futures tumbled following the failed attempt by President Trump to pass his healthcare reform policy.  Resources were among the biggest laggards as chemicals including LG Chem, Lotte Chem and Kumho Petrochem fell 1.4% to 2% while steel maker Posco and Hyundai Steel tumbled 2.7% - 3.1%. Energy producers fell as crude oil prices broke below $48/bbl in Asia. S-Oil Corp suffered a 1.4% drop while SK Innovation slipped 0.9%.  Shares of Hyundai Motor lost 1.2% after halting operations at one of its plants in China. Affiliate Kia Motors and Hyundai Mobis slipped 1.1% and 1.8% respectively.  Technology ended mixed as share of index heavyweight Samsung Electronics lost 0.7% while chip rival SK Hynix rallied 2.4%.  Rival phone maker LG Electronics sank 1.3% while internet services provider Naver Corp jumped 1.5%.  Banks were tracked regional peers lower with shares of Hana Financial -2.7% while KB Financial and Shinhan Financial lost 2% apiece. Telecommunications also ended mixed with SK Telecom lower by 0.2% despite an upgrade to Outperform @ MACQ. Shares LG Uplus rose 0.7% while diversified operator KT Corp fell 0.5%.  Market turnover was moderate, climbing 13% vs the 20 day avg.

 

Hong Kong’s Hang Seng Index dropped 0.70% as markets across Asia posted declines following the Trump Administrations failed attempt at initiating health care reforms.  Discretionary, real estate, financials and industrials led decliners with only utilities managing to post very slight gains.  AIA Group tumbled 1.6% leading insurers lower and posting the largest negative impact to the gauge.  China Construction Bank fell 0.90%.  The Bank of China declined 1.25% and HSBC fell 0.40% as banks fell across the board.   Durables led the discretionary space lower as footwear maker Belle International dropped more than 2%.  Energy lost as a group though individual performance was mixed as PetroChina fell 0.50% while China Petroleum added 0.20%.  Volumes on the gauge ended at 93% of the 20 day average. 

 

European markets have recovered from some post opening lows though continue to trade in broadly negative territory. The UK and Germany are each off 0.75% while France is now down 0.30%.  Greece is outperforming up nearly 2% while Sweden is off 1% leading to the downside.   Limited data releases were headlined by German March IFO business climate data which reported a 112.3 beating the 111.1 consensus.  Shares of Exova group EXO.LN are higher by 14% after the company confirmed a possible cash offer. Bond yields mostly moved lower led by Germany, though the periphery underperformed with a mixed performance. Chancellor Merkel’s CDU party victory in the Saarland state election over the weekend and better than expected Ifo data are the main focus, along with a flurry of Brexit headlines.  Currently all sectors trade lower with materials, industrials and financials leading to the downside.  The GBP is up 1%, the EUR is up 0.60% and volumes are running at 89% of the 20 day average.   


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Sources:
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