European Equities Outdated Model or Innovation Center? Joachim Schallmayer, Senior Portfolio Manager

Transcription

1 European Equities Outdated Model or Innovation Center? Joachim Schallmayer, Senior Portfolio Manager

2 Agenda Sovereign backdrop Corporate backdrop World Market Leaders Valuation backdrop 2

3 Agenda Sovereign backdrop Corporate backdrop World Market Leaders Valuation backdrop 3

4 Europe: Sovereign backdrop Crisis put into perspective Global Budget Competitiveness Deficits and Index gross financial liabilities as % of GDP Cyclically Gross General Adjusted Budget Government Debt Deficit (% GDP)** (% of GDP)*** Germany* France Italy Spain Netherlands Belgium Austria Greece Finland Ireland Portugal Slovakia EMU-Average (PPP Weighted) UK USA Japan Sovereign funding is an issue globally Other developed economies starting from a similar or worse level Reduction of deficits and austerity measures needed in most parts of the developed world Several European countries announced and implemented a first set of measures 4 Source: Goldman Sachs *Countries listed according to their share of Euroland GDP ** Sources: European Commission, CBO, OECD, HM Treasuries *** Sources: Eurostat, Goldman Sachs Estimates

5 Europe: Sovereign backdrop Crisis put into perspective Global Competitiveness Index CDS Spreads 1,200 1, Intensive market speculation Extreme risk perception Positive: market speculation put pressure on governments to react immediately and in a comprehensive manner /09 01/10 05/10 09/10 01/11 Greece Portugal Spain Egypt Indonesia Philippines 5 Source: Bloomberg

6 Agenda Sovereign backdrop Corporate backdrop World Market Leaders Valuation backdrop 7

7 Europe: Corporate backdrop Excellent balance sheet quality Corporate deleveraging trend expected to continue 3,5 3,0 2,5 2,0 1,5 1,0 0,5 1,0 0,8 0,6 0,4 0,2 Significant debt reduction during the last years with trends set to continue Strong cash generation Flexibility to increase the payback to shareholders through dividend increase or buyback Provides european companies with strategic flexibility 0,0 0, e2012e Net Debt / Ebitda Net Debt / Equity (rhs) 8 Source: Barclays Capital and own calculations

8 Europe: Corporate backdrop Excellent efficiency 16% 14% 12% 10% 8% 6% Profitability safeguarded during the crisis 1,5 1,4 1,3 1,2 1,1 Companies operate on a high level of capital efficiency and profitability Efforts of past restructurings now become very visible Strong signal of managerial capabilities of european management teams 4% 1, Asset Turnover (rhs) EBIT Mgn. 9 Source: Barclays Capital and own calculations

9 Europe: Corporate backdrop Continous productivity enhancement 7% 6% 5% 4% 3% 2% 1% Hourly earnings and Producer Prices Wages remain restrained in the european environment while producer prices are on the rise European companies continue to gain competitiveness 0% Europe hourly earnings % y/y Europe PPI index (rhs) Source: Barclays Capital and own calculations

10 Europe: Corporate backdrop European Products in strong demand Significant part of European company revenues generated in EM 70% 60% 50% 40% 30% 20% 10% 0% Metals & Mining Technology Hardware Beverages Chemicals Luxury Goods Food & HPC Average % of total EPS from China for Daimler & BMW Estimated EM exposure for European Sectors (%) Telecom Services Banks Autos 13 Source: Barclays Capital

11 Agenda Sovereign backdrop Corporate backdrop World Market Leaders Valuation backdrop 14

12 World market leaders out of Europe Luxury Typical Stocks LVMH Pinault Printemps Redoute Luxottica Richemont Swatch 15

13 World market leaders out of Europe Autos Typical Stocks Daimler BMW VW Porsche MAN 16

14 World market leaders out of Europe Industry Typical Stocks Siemens ABB Philips ASML 17 Source: Photo ABB, Philips, Tognum AG

15 World market leaders out of Europe Consumer Typical Stocks Danone Henkel Nestlé Lindt & Sprüngli 18 Sources: Danone, Nestlé, Henkel, Lindt & Sprüngli

16 Agenda Sovereign backdrop Corporate backdrop World Market Leaders Valuation backdrop 19

17 European Equities Valuation backdrop Attractively valued on multiples P/E-Ratio* M-Forward PE 12M-Trailing PE Price / Book* * MSCI Europe Sources: Factset

18 European Equities Valuation backdrop Attractive earnings growth outlook 60% 40% 20% 0% -20% -40% MSCI Europe: Historic EPS Growth with Future Estimates -23% -20% -21% 26% 36% 18% 13% 4% -9% 6%4% -19% -4% 53% 44% 25% 24% 6% -24% -17% bottom-up estimates 39% 15,3% 13% Sources: IBES

19 Wrap up Stable political environment Gearing to world economic growth especially to strong growing BRIC economies Corporates that are in excellent shape Very supporting valuation background No listed alternatives to a lot of these world market leaders 22

20 Thank you for your attention!