Bryan, Garnier & Co · For instance, Scor, the lowest beta in Insurance has been removed and...

r r

0+

INDEPENDENT RESEARCH Top Picks 17th January 2013 Top Picks Q1 2013

Top Picks

ACCOR BUY EUR32 Last Price EUR27.11 Market Cap. EUR6,161m ADIDAS BUY EUR82 Last Price EUR69.97 Market Cap. EUR14,639m ALLIANZ BUY EUR118 Last Price EUR103.55 Market Cap. EUR47,214m ALTRAN TECHNOLOGIES BUY EUR7.5 Last Price EUR5.6 Market Cap. EUR810m ASTRAZENECA BUY 3440p Last Price 3037p Market Cap. GBP37,865m

AXA BUY EUR16.5 Last Price EUR13.47 Market Cap. EUR32,175m CAPGEMINI BUY EUR45 Last Price EUR34.275 Market Cap. EUR5,545m FRESENIUS MED.CARE BUY EUR65.5 Last Price EUR49.975 Market Cap. EUR15,302m GROUPE SEB BUY EUR70 Last Price EUR60.82 Market Cap. EUR3,051m HEINEKEN BUY EUR60 Last Price EUR50.59 Market Cap. EUR29,140m HOLCIM BUY CHF75 Last Price CHF67.65 Market Cap. CHF22,127m LUXOTTICA BUY EUR35 Last Price EUR33.11 Market Cap. EUR15,626m PENNON GROUP BUY 810p Last Price 654.5p Market Cap. GBP2,387m RANDSTAD BUY EUR33 Last Price EUR29.26 Market Cap. EUR5,035m REMY COINTREAU BUY EUR109 Last Price EUR88.41 Market Cap. EUR4,501m SANOFI BUY EUR84 Last Price EUR72.6 Market Cap. EUR96,292m VEOLIA ENVIRONNEMENT BUY EUR13 Last Price EUR8.606 Market Cap. EUR4,493m VINCI BUY EUR45 Last Price EUR37.31 Market Cap. EUR21,541m

This is the first volume of our ‘Top Picks’ for 2013. As with the ones we published previously, this list is not intended to be a model portfolio, simply stock-picking in our coverage universe. However, it reflects a bias towards more beta and value over our previous list we suggested a quarter ago.

For instance, Scor, the lowest beta in Insurance has been removed and replaced by Axa. Another example is the Healthcare sector, everything but beta, where we have very recently upgraded AZN now in the list. In 4Q12 we only had CapGemini as representing the Tech universe. We now have Altran alongside Cap.The addition of Randstad to our list is another illustration of that beta/value bias.

All these moves are certainly the implicit consequence of a lower risk aversion across asset classes and within equities (our risk-premium assumption has been revised down from 6.3% to 6.1%). Systemic risks are fading away and although the economic environment in Europe remains foggy, increasingly encouraging signs from the USA and EMs are coming through.

The financial recovery is on track and macro volatility could fall through 2013.

Perf Q1

Perf Q2

Perf H1

Perf Q3

Perf 9M

Perf Q4

Perf 12M

Top Picks 2012 (EUR) 20.7% -4.3% 15.6% 6.9% 23.5% 2.90% 27.1%

STOXX EUROPE 600 E 7.7% -4.6% 2.7% 8.2% 11.1% 2.70% 14.4%

STOXX EUROPE 50 3.8% -3.2% 0.5% 7.2% 7.7% 0.95% 8.8%

95.0

96.0

97.0

98.0

99.0

100.0

101.0

102.0

103.0

104.0

TOP Picks Q4 : +2.9%

STOXX 600 : +2.7%

STOXX 50 : +1%

Bryan, Garnier & Co. Team 33(0) 1 56 68 75 00 www.bryangarnier.com

Top Picks

2

Back to Table of contents

Table of contents

Our top picks for 1Q 2013 are .................................................................................................................... 3

Bryan Garnier’s economic growth assumptions and WACC calculations .......................................... 4

Top picks for 4Q 2012 performances ........................................................................................................ 4

Healthcare : Top Picks Q1 2013 Sanofi stays in, AZN with Fair Value upped to 3,440p jumps in with FMC 5

Luxury & Consumer Goods : More optimism for 2013, Top Picks adidas, Groupe SEB, Luxottica ................................................. 7

Beverages Top Picks Q1 2013 : Heineken, Remy Cointreau .................................................................................... 9

IT Software & Services : 2012 review, 2013 prospects, and Top Picks .......................................................................................... 10

Business Services : Top Picks anticipation of inflexion point in the negative trend for Staffing .................................... 12

Hotels : Top pick We are maintaining Accor ........................................................................................................ 14

Environmental Services : 2012 review, 2013 prospects, and Top Picks .......................................................................................... 15

Construction & Materials : TOP Picks Q1 2013 : Holcim and Vinci: some catalysts in Q1… ..................................................... 17

Insurance : Top picks Q1 2013 - Allianz and AXA .............................................................................. 19

Bryan Garnier stock rating system .............................................................................................. 23

Top Picks

3

Our top picks for 1Q 2013 are

Fig. 1: Valuation ratios: 1Q 2013 Top Picks

Market Cap.

EV/EBIT(x) PER (x) RDT (%)

(EUR) 2013e 2014e 2013e 2014e 2012e 2013e

Accor 6 227 11.3 10.3 19.6 18.4 2.5% 2.5%

adidas 14 852 10.0 8.1 15.4 12.7 1.8% 2.3%

Altran 815 6.0 4.7 10.1 8.5 0.0% 0.0%

Astrazeneca 45 765 7.6 6.7 8.0 7.7 5.7% 5.7%

CapGemini 5 590 5.6 4.6 12.7 10.9 2.9% 2.9%

Fresenius MC 15 226 10.8 9.9 16.6 15.3 1.6% 1.6%

Groupe Seb 3 092 8.6 7.7 12.4 11.1 2.1% 2.4%

Heineken 29 180 13.3 11.3 15.5 13.8 1.4% 1.5%

Holcim 18 232 12.5 10.1 15.7 12.0 1.4% 1.7%

Luxottica 15 753 15.8 14.0 23.9 21.1 1.8% 2.1%

Pennon 2 868 17.9 17.2 14.8 13.5 4.4% 4.6%

Randstad 5 025 17.5 20.6 14.9 16.9 4.3% 2.7%

Rémy cointreau 4 673 13.3 11.3 19.5 16.5 1.6% 1.6%

Sanofi 96 903 8.6 7.3 11.7 10.4 3.8% 4.0%

Veolia Env. 4 637 12.6 10.8 16.4 12.9 7.9% 7.9%

Vinci 21 821 9.7 9.0 11.6 10.7 4.8% 4.8%

Allianz 47 373 NM NM 8.7 8.4 4.3% 4.6%

AXA 32 736 NM NM 7.0 6.6 5.5% 5.7%

Source: Company Data; Bryan, Garnier & Co ests.

Fig. 2: Dividend payments: 1Q 2013 Top Picks Top Picks Ex-Dividend date Amount

PENNON 30/01/13 8.76p

ASTRAZENECA 13/02/13 USD1.9 (BG est.) final

Source: Company Data; Bryan, Garnier & Co ests.

Our Top Picks are updated and published every quarter.

Changes : +Holcim +Groupe Seb +Astrazeneca +Fresenius MC +Holcim +Randstad +Altran

-Zealand -Prada

Top Picks

4


Bryan Garnier’s economic growth assumptions and WACC calculations

• The financial environment has significantly improved in the euro zone with risk aversion steadily fading away implying lower bond yields outside the core euro-zone and higher prices for risk assets. However the macroeconomic environment remains pretty foggy although encouraging signs both from the USA and Ems, notably from China are coming through.

• In that context, we think it appropriate to reassess the key assumptions in our valuation methodology and thus the implied calculation of Fair Values in our coverage universe.

• With regard to the risk-free rate, we continue use the average 10-year rate over 7 years, which logically evolves slowly. However, we made a year shift, which helps to slightly lower the average rate. As a reminder, we include the five main European countries, Germany, France, the United Kingdom, Italy and Switzerland because of their weight in our universe. This gives an average of 3.3% over 7 years as we roll over into 2013, which would have been 2.0% based on 2012 data and a similar level with current spot rates. Across the entire eurozone, the rate would be 3.6% over 7 years and 2.5% at the current spot rate. Consistent with our methodology, we therefore adopt a risk-free rate of 3.3% (vs. 3.4% previously).

• Regarding the equity risk premium, we observe a continuing decline of the premium across major indexes since last time we made an update i.e. in July 2012, of around 9 to 11% for CAC40, Stoxx50, Stoxx600 and FTSE100. Nevertheless, for the sake of stability, we employ much less volatile five year data, which could mean we miss turning points in the market although we introduce less volatility. Our former equity risk premium of 6.3% was obtained by using average three years rates for CAC40, Stoxx 50 and Stoxx600. Whilst we maintain our method of calculation which gives priority to the medium-term we increase our bias and switch from a 3-year to a 5-year horizon to reduce even further the volatility and to match with most of our models for the calculation of FVs that factor in long-term financial data (DCF, EVA). As a result, our ERP as we enter 2013 is reduced from 6.3% to 6.1%.

• All future research publications will reflect these new assumptions, valid for the entire first half of 2013 - barring any major event.

Top picks for 4Q 2012 performances

4Q 2012 perf.

Euro Local Ccy Dividends Paid

ACCOR -1.1 -1.1 - ADIDAS 3.0 3.0 - ALLIANZ 12.0 12.0 - CAP GEMINI -1.3 -1.3 - DIAGEO -0.7 0.9 - HEINEKEN 7.1 7.1 - LUXOTTICA 9.9 9.9 - PENNON GROUP -16.2 -14.9 - PRADA 25.1 27.7 - SANOFI 4.1 4.1 - SCOR SE 0.6 0.6 - VEOLIA ENVIRONNEMENT 8.4 8.4 - VINCI 6.2 6.2 - ZEALAND PHARMA -15.6 -15.6 -

Average 3.0 3.4 STOXX EUROPE 600 2.7

STOXX EUROPE 50 1.0

Top Picks

5

Healthcare : Top Picks Q1 2013 Sanofi stays in, AZN with Fair Value upped to 3,440p jumps in with FMC

1 M 3 M 6 M 31/12/11 Healthcare 1.5% 0.8% 5.7% 2.4% DJ Stoxx 600 2.4% 4.2% 11.4% 2.3%

*Stoxx Sector Indices

Companies covered ACTELION* BUY CHF56 vs. 51

Last Price CHF46.79 Market Cap. CHF5,932m ASTRAZENECA BUY vs NEUTRAL 3440p vs.2860

Last Price 3037p Market Cap. GBP37,865m

BAYER BUY EUR75 Last Price EUR72.68 Market Cap. EUR60,103m

BIOMERIEUX NEUTRAL EUR66 vs 64

Last Price EUR70.8 Market Cap. EUR2,793m DIASORIN BUY EUR31 vs. 30

Last Price EUR28.64 Market Cap. EUR1,600m

FRESENIUS MED.CARE BUY EUR65.5 vs.64 Last Price EUR49.975 Market Cap. EUR15,302m

FRESENIUS SE BUY EUR96 vs.93

Last Price EUR85.9 Market Cap. EUR15,301m GALAPAGOS BUY EUR21.5 vs.20

Last Price EUR19.65 Market Cap. EUR526m

GLAXOSMITHKLINE NEUTRAL 1630p vs.1530 Last Price 1366.5p Market Cap. GBP66,995m

GRIFOLS BUY EUR29.5 vs. 28

Last Price EUR24.34 Market Cap. EUR7,588m IPSEN BUY EUR29 vs. 28


MERCK KGaA NEUTRAL EUR100 vs.96 Last Price EUR101.15 Market Cap. EUR21,991m

NICOX BUY EUR3.2 vs. 3

Last Price EUR2.678 Market Cap. EUR195m NOBEL BIOCARE HOLDING SELL CHF8.9 vs. 8.2

Last Price CHF8.69 Market Cap. CHF1,076m

NOVARTIS BUY CHF68 vs. 62 Last Price CHF60.8 Market Cap. CHF164,536m

NOVO NORDISK NEUTRAL DKK1000 vs.920

Last Price DKK990.5 Market Cap. DKK448,214m ORPEA BUY EUR38 vs. 36


QIAGEN BUY EUR17 vs. 16.4 Last Price EUR14.42 Market Cap. EUR3,408m

ROCHE HOLDING BUY CHF202 vs. 188

Last Price CHF196.8 Market Cap. CHF138,264m SANOFI BUY EUR84 vs. 80


SHIRE PLC BUY 2250p vs.2200 Last Price 2082p Market Cap. GBP11,621m

STRATEC BIOMEDICAL BUY EUR40

Last Price EUR34.65 Market Cap. EUR407m TRANSGENE Corp. EUR2


UCB NEUTRAL EUR42 Last Price EUR42.695 Market Cap. EUR7,829m

ZEALAND BUY DKK152

Last Price DKK94.5 Market Cap. DKK2,192m

*Actelion FV changed 18th January Price as close of 16th January

WHAT HAPPENED IN 2012

2012 was another good year for healthcare stocks and in our view was confirmatory of 2011 which was a turning point for the sector. During the year it reinstalled a premium in P/E against the general indices which probably reflects more convincing strategies and positioning in a somewhat stabilised environment, i.e. higher visibility towards top-line growth and FCF returns. The industry has been working for years now to adapt : (i) its activities to broaden their scope, increase synergies and reduce their volatility and dependence upon R&D delivery; (ii) the structures in order to increase productivity and further reduce costs as the industry is still fat, with all activities participating to the regime; (iii) the way to carry out R&D which means to adapt capabilities but also the philosophy of introducing new metrics to more accurately measure the efficacy and the returns on investment; (iv) the geography of the business to allocate more resources where it is deserved and where future growth is (still the US, more and more emerging markets, less Europe).

A global picture about what is going on in healthcare would simply be to say it benefits from two elements:

• on one hand the removal of most of the patent cliff risk as we are now going through it and it is no longer a big wall coming closer with a lot of unknowns but just reality and a one-time hit. And most companies are facing this with less pain than may have been expected as they are well prepared for it. Sanofi lost several historical blockbusters in 2012 but in the end made a strong performance. And Novartis in 2013 with Diovan could well be in a similar situation. Moreover as they have a better understanding themselves about what is going to happen, companies are more eager to share with investors and analysts a medium-term view that increases confidence into the future;

• on the other hand and for the second year in a row FDA statistics said that 2012 was a record year for approvals in a decade. Although big pharma companies represent only a small part of the output, this reflects resumed capacity to innovate and to boost revenue growth for the whole industry. Specialty drug and biotech companies are the main participants to this renewal but this also means that it is an opportunity for big pharma to partner, at least for marketing in ex-US territories. As a reminder the FDA approved 35 new drugs in fiscal year 2012, one more than in 2011 (39 in calendar year 2012).

Now all segments did not equally participate in the party in 2012 and Biotech and Big Pharma were the undisputed winners. In the first category Galapagos and Thrombogenics did very well. Within the Big Pharma space, players in the eurozone performed the best with Bayer, Merck and Sanofi leading the race whereas the UK lagged well behind.

WHAT WE SEE FOR 2013

As we enter 2013 the key question is obviously whether the rationale is strong enough to expect a continuum in the positive trend. Based on the first trading days, the answer would be ‘yes. But even if we adopt a more comprehensive and global view about the full year, we would argue in the same direction: companies benefit from an easier comparison basis, have rich regulatory/clinical news flow, are more comfortable with medium-term guidance and thus are offering better visibility towards cash-flow generation and profit growth.

However it is also fair to say that a lot of the healthcare stocks under our coverage will face individual events, sometimes binary ones that could have a significant impact on the investment case. Usually this has to do with either clinical data or regulatory outcomes. Some examples: in the first category fall the phase III clinical trials of liraglutide in obesity (Novo-Nordisk), of MAGE-3 in lung cancer (GSK), of GA101 in CLL (Roche), of CDP7851 in fracture healing (UCB), of TASQ in prostate cancer (Ipsen), of Vyvanse in MDD (Shire); in the second category fall the expected approvals of Tresiba in the US (Novo-Nordisk), of Opsumit in PAH (Actelion), of Lyxumia in diabetes (Zealand).

In a generally good performing sector, we are expecting individual stories to be of a higher prevalence and importance this year than in the previous one thus generating an even larger spread among the names. Selection will be key.

Top Picks

6


RATING CHANGES New Old

ASTRAZENECA (p) BUY NEUTRAL

FV CHANGES New Old

ASTRAZENECA (p) 3440 2860

BIOMERIEUX (EUR) 66 64

DIASORIN (EUR) 31 30

FRESENIUS MED.CARE (EUR) 65.5 64

FRESENIUS SE (EUR) 96 93

GALAPAGOS (EUR) 21.5 20

GLAXOSMITHKLINE (p) 1630 1530

GRIFOLS (EUR) 29.5 28

IPSEN (EUR) 29 28

MERCK KGaA (EUR) 100 96

NICOX (EUR) 3.2 3.0 NOBEL BIOCARE (CHF) HOLDING

8.9 8.2

NOVARTIS (CHF) 68 62

NOVO NORDISK (DKK) 1000 920

ORPEA (EUR) 38 36

QIAGEN (EUR) 17 16.4

ROCHE HOLDING (CHF) 202 188

SANOFI (EUR) 84 80

SHIRE PLC (p) 2250 2200

TOP PICKS FOR Q1 2013

As a consequence of what we’ve just written above, it is increasingly difficult to make a selection that has to prove efficient on a quarterly basis. Depending on what Novartis will say (or not) on 23 January and Pascal Soriot at AstraZeneca on 31 January, the respective stocks could be (or not) good performers in Q1 2013. In general terms there are two options for us as we enter 2013: opt for secure stories that are likely to perform but not sure to outperform if speculative bets work, or introduce more speculative calls with higher risk premiums. Within the entire scope of healthcare stocks, we first opt for more weight in big market caps as the risk-reward looks more balanced. Out of the three names we are selecting for the quarter, two are big pharma players. So Sanofi remains on the list while Zealand is removed. AstraZeneca and FMC are added.

Sanofi (BUY ; FV: EUR 84): Why is Sanofi still in? Obviously the story is now well understood and the train is well into its journey already. However we still consider that consensus is under-appreciating the potential of some growth platforms at Sanofi (which may include Diabetes, Genzyme, emerging markets) and as a consequence is not backing Sanofi’s guidance of top-line growth of over 5% p.a. by 2015. For this reason we are slightly above consensus for 2014/2015 EPS and thus consider there is further upside to current estimates. Rolling over our models into 2013 and using the new hypothesis (free-risk premium and ERP), our new FV of EUR 84 derives a potential upside of 16%.

AstraZeneca (BUY vs. NEUTRAL; FV: 3440p vs. 2860p): Why is AstraZeneca introduced? We admit it is an early call that is targeting a progressive status change that is likely to take time. But we also note that consensus has dramatically adjusted downwards its expectations over the last year and is no longer demanding on any front. To some extent it has even probably - voluntarily or not - neglected some news while waiting for the formal first presentation from the new CEO, who started in his new position on 1 October 2012. Actually Pascal Soriot, who came from Roche where he head up the Pharmaceutical division, will make his first speech on 31 January 2013, in connection with the full-year results presentation. Although we are not expecting any miracles, we think there is room for a first-step into a new journey for the group that is probably at the bottom part of its patent cliff (which unfortunately will last until 2016). If we approach AstraZeneca with a risk-reward perspective, we believe that the downside is now limited – with a FCF yield over 12% and dividend yield over 6%, not at risk – whereas upside is significant should Pascal Soriot convince that a new chapter for the company is opening and provides well-argued new medium-term guidance. Our new FV stands at 3,440p and offers a 14% upside vs current price that is easily achievable in a short period of time if things go right on 31 January 2013 whereas stability would prevail if it turns bad thus describing an interesting risk-reward profile.

Fresenius MC (BUY; FV: EUR65.5 vs. EUR64): Why do we opt for FMC in the MedTech space? FMC has been under pressure since H2 12 due to a potential rebasing of the Bundle. With the American Tax Relief Act, we now have a clearer picture of the cuts that Medicare wants to implement to reflect lower use of EPO. We believe that current share price is almost fully reflecting the downside risks whereas it does capture potential upside risks. The US congress is requesting Medicare to save USD4.9bn over 2014-2022. As an example for 2014, this would represent USD70m for FMC or 2.6% of EBIT 2014. We modelled a worst case scenario taking into account all the costs reductions without any remedies from FMC. We would then derive a EUR53.3 DCF valuation. But we believe that there are several opportunities to lower its costs/increase its revenues: 1/FMC is currently running a phase IV clinical trial with Omontys (Affymax) on 10k patients. Results are expected in Q1 13. Omontys is an FDA-approved product that could provide a cheaper alternative to current EPO from Amgen. As a reminder, EPO accounts for 15-20% of the Bundle. 2/ Integrated Care is still on the table and we should hear from Medicare in 2013 (H1 ?) to request the launch of a pilot study on more than 10k patients where dialysis providers will take care of ESRD patients from A to Z. It is a mid-term opportunity (2016-2017) but could well participate in the effort to cut Medicare costs should FMC be able to replicate its 2005-2010 (c.10% of costs reductions). 3/ An extension of MSP (Medicare Secondary Payer) has been the holy grail for dialysis providers in the last couple of years and we do not put the emphasis on that topic. Nevertheless, an extension of the 30 months period could transfer some burden from Medicare to commercial payers. FMC is facing challenges that are weighing on the stock given the valuation (15x 2014) but we see upside risks at this level given FMC’s leading positioning (vertically integrated leading player), strong dialysis market fundamentals (6-7% growth), 2013-2016 EPS CAGR of 9.4%.

Top Picks

7

Luxury & Consumer Goods : More optimism for 2013, Top Picks adidas, Groupe SEB, Luxottica 1 M 3 M 6 M 31/12/11 Pers& H/H Gds 1.1% 7.5% 8.9% 2.0% DJ Stoxx 600 2.4% 5.6% 11.6% 2.3%


Companies covered ADIDAS BUY EUR82 vs. 67


BEIERSDORF SELL EUR63 vs. 60


BIC NEUTRAL EUR94 vs. 90


BURBERRY NEUTRAL 1550p vs 1400p


CHRISTIAN DIOR BUY EUR145 vs. 142


ESSILOR BUY EUR80 vs. 78


GEOX SELL EUR1.6 vs. 1.5


GROUPE SEB BUY EUR70


H & M SELL SEK225 vs.210


HERMES Intl NEUTRAL EUR194 vs. 186


HUGO BOSS BUY EUR95 vs. 90


INDITEX SELL EUR100 vs. 95


L'OREAL BUY EUR112 vs. 104

Last Price EUR106 Market Cap. EUR64,431m

LUXOTTICA BUY EUR35 vs. 34


LVMH BUY EUR160 vs. 155

Last Price EUR139 Market Cap. EUR70,635m

PANDORA NEUTRAL DKK83 vs.75


PPR NEUTRAL EUR150 vs. 145


PRADA* BUY HKD 82 vs. 72

Last Price HKD72.9 Market Cap. HKD186,538m

PUMA NEUTRAL EUR238 vs. 230


RICHEMONT BUY CHF82 vs.78


SALVATORE FERRAGAMO NEUTRAL EUR18.6 vs.17.7


THE SWATCH GROUP NEUTRAL CHF490


TOD'S GROUP SELL EUR80 vs. 75


*Prada : FV changed 18th January Prices as close of 15th Januaryf

LOOKING BACK ON Q4 2012

Over the past three months Luxury stocks have recovered.Our luxury sample has gained 12% in Q4 2012, implying +9% versus Stoxx 600. The main winners have been the watch makers (Richemont:+24% and The Swatch Group: +19%) as they are the most exposed to Greater China, followed by LVMH (+15%). The worst European luxury stock performers have been Mulberry (-2%) and Ferragamo (stable). Even, on last month, our luxury sample has gained 6.5% (+4% vs the Stoxx 600), again Richemont and Swatch were among the best performers.

Luxury groups benefited from better macro-economic figures coming out of China. For instance, the December Chinese PMI reached 51.5, the highest level in 19 months and the Chinese confidence index also recovered at 106 in November followed by 105 in December. The uncertainties in the transition period due to the appointment of the new Chinese President and its new Prime Minister are behind us. Nevertheless, luxury groups’ sales growth in Q3 has been negatively impacted by a significant slowdown in Asia-Pacific. Sales growth in A-P was limited to 8% after +29% in Q1 and +22% in Q2.

We do not anticipate a strong rebound in sales momentum in Q4 2012, as we think that the better trend will be felt mainly in Q1 2013 or even in Q2 when the comparison basis willbecome easier and when the new Chinese government will likely launch measures to sustain local consumption through wages increases.

• Cautiously, we expect in Q4 a stabilisation of the trend seen in Q3 2012: only slightly better in Asia-Pacific but, due to the Hurricane Sandy impact and the fiscal cliff uncertainties in December, we are more cautious for the US even if Department stores sales growth in December (+4.2% on average) was above expectations including +8.6% for Nordstrom and +4.1% for Macy’s.

• Nevertheless, Burberry and Tiffany have already released sales growth for calendar Q4 which showed better trends than in Q3. The American group recorded a rebound of its sales in Asia-Pacific in November and December. During these two months, same store sales grew 7% versus -4% in Q3 (July-October). Nevertheless, the situation was less buoyant in North America during these two months. Burberry has reported, for its Q3 (October-December), 6% same store sales growth vs. +1% in Q2 (July-September), driven by double-digit growth in Greater China according to the company.

NEW FAIR VALUES

We take this opportunity to adjust our Fair Values given our 2013 rollover and new BG valuation criteria (risk-free rate at 3.3% versus 3.4% previously and equity risk premium at 6.1% vs. 6.3% previously). On the following page, there is a table with our new FVs. We do not change any recommendations on our sample following these new Fair Values.


• As we have already written, we are more optimistic for 2013 as we anticipate a rebound for the Luxury sector in China after several months of slowdown. What should be the drivers of this rebound? i/ a better economic environment as 2013 China GDP growth should reach, according to the IMF, 8.2% after +7.8% in 2012; ii/the end of the transition period at the helm of the government with the new President (Wi Jinping) and the new Prime Minister (Li Kequiang) after the 18th Congress of the Chinese Communist Party which will be followed in the coming months by the appointment of the Provinces’ governors and many officials; iii/the recovery of the “gifting market” which accounts for around 25% of the luxury market - this will be achieved thanks to the better economic environment and also thanks to more “corruption gifts” as Chinese know now to whom they have to make these gifts. We think that this “gifting market” trend is clearly in the DNA of the Chinese even if there is tighter control from Chinese officials in order to avoid excessive corruption.

• As a consequence, we anticipate 9% organic sales growth for 2013 (in line with 2012) for our luxury goods sample but with a much more positive momentum this year compared to 2012 thanks to an easier comparison base from Q2 and even more from Q3 (+18% in Q1 2012, +13% in Q2 2012 and +8% in Q3 2012). On the other hand, we do not anticipate a positive forex impact, which was the case in 2012.

Top Picks

8


FV changes EUR NEW OLD

ADIDAS 82 67

BEIERSDORF 63 60

BIC 94 90

BURBERRY (p) 1550 1400

CHRISTIAN DIOR 145 142

ESSILOR 80 78

GEOX 1.6 1.5

GROUPE SEB 70 70

H & M (SEK) 225 210

HERMES Intl 194 186

HUGO BOSS 95 90

INDITEX 100 95

L'OREAL 112 104

LUXOTTICA 35 34

LVMH 160 155

PANDORA (DKK) 83 75

PPR 150 145

PUMA 238 230

RICHEMONT (CHF) 82 78

SALVATORE FERRAGAMO 18.6 17.7

THE SWATCH GROUP (CHF) 490 490

TOD'S GROUP 80 75

• Furthermore, some Consumer groups (i.e. adidas, Groupe SEB) will benefit from the decline in commodity prices such as cotton and some metals (nickel, aluminum, copper, etc.). This easing in the raw material price should be positively translated into the gross margin of these groups in 2013.

TOP PICKS

• Adidas Group (BUY – FV: EUR82 vs. EUR67): In our view, adidas offers a very attractive growth/valuation profile. We expect a 2012-15e EPS CAGR of 20% thanks to mid-single digit sales growth and 100bp EBIT margin improvement p.a. to reach management’s 11% target by 2015. adidas is winning market share in its core growth markets (China, Russia and the US) and we expect continued growth in 2013 thanks to innovative product launches. adidas is trading at 12.1x PE14e vs. a 5-year average of 12.8x, and we believe earnings momentum could push multiples toward the 16x cycle highs.

• Groupe SEB (BUY – FV: EUR70): After suffering from the sharp slowdown in emerging markets in 2012 (around 47% of sales), SEB should see these markets pick up again in 2013, driven by stimulus plans such as those in China (around 15% of sales) and Brazil (around 8% of sales), and thereby naturally boosting the group's top line. We are forecasting a rerating in the share price in 2013 on the back of: (i) an improved economic backdrop in emerging markets, ii) an ensuing recovery in organic growth at SEB (+3%e in 2013 vs. -0.5% in 2012) and (iii) over-proportionate EBIT growth (+9.4%e in 2013), driven by the positive impact from volumes, commodities and currencies. In our view, the share's valuation could therefore return to the 2011-2012 average of 9.4x this year vs. the current valuation at 8.4x 2013e EV/EBIT.

• Luxottica (BUY – FV: EUR35 vs. EUR34): Following a magnificent performance in 2012 (share up 43%), we still think that the stock offers some upside despite a tough comparison base in Q4 12 (Q4 11: +11.2% LFL) and in Q1 13 (Q1 12: +11.1%), all the more since LUX will only benefit from the new Giorgio Armani licence from Q2 12 as the launch is planned at end-February/early March. However, the Italian group will take advantage of numerous catalysts for 2013: (i) the launch of Giorgio Armani, (ii) Tecnol in Brazil (with the local production of Vogue, Ray-Ban and Oakley collections), (iii) integration of Alain Mikli and (iv) the ongoing success of the luxury portfolio (Prada, D&G, Coach, etc.). In view of these catalysts, management has stated its confidence, indicating it expects “2013 to be a continuity of 2012” (BG est: +8.4% LFL). The share is trading at 2013e EV/EBIT of 15.4x, globally in line with the 2004-2012 historical average of 15.5x (vs. +18% premium for Essilor in terms of 2013e EV/EBIT) but a premium could be deserved given the earnings momentum (i.e. 2012-15 CAGR of 15.8%).

NEXT CATALYSTS (JANUARY 2013):

• Richemont (Q3 trading statement) on January 21, Groupe SEB (FY12 sales) on January 22, Tod’s Group (FY12 sales) on January 23 and Beiersdorf (FY12 preliminary sales)

• Luxottica (FY12 sales) on January 29, LVMH (FY12 sales & results) and Salvatore Ferragamo (FY12 sales) on January 31.

Top Picks

9

Beverages Top Picks Q1 2013 : Heineken, Remy Cointreau

1 M 3 M 6 M 31/12/12 Food & Bev. -0.4% 0.9% 5.0% 0.6% DJ Stoxx 600 2.4% 5.6% 11.6% 2.3%


Companies covered AB INBEV BUY EUR75


CARLSBERG NEUTRAL DKK650


DIAGEO BUY 1900p


HEINEKEN BUY EUR60


PERNOD RICARD BUY EUR91


REMY COINTREAU BUY EUR100


SABMILLER NEUTRAL 2633p


Prices as close of 15th January

LOOKING BACK ON 4Q 2012

In the fourth quarter, after outperforming in the first three quarters of 2012, the Beverages sector performed closer in line with the wider market, delivering a price appreciation of 2.6% while the Stoxx600 increased by 1.0%. It was mainly the brewers which are regarded as being more risk-on that outperformed with an average 4% share price appreciation: Heineken (+7%), Carlsberg (+6%), SABMiller (+2%), all delivered good price appreciation whereas AB InBev (-2%) declined. The Distillers’ subsector lost 4%, with the only positive performance coming from Diageo (+1%), whereas the share prices of Pernod Ricard (-1%), Rémy Cointreau (-8%) and Campari (-7%) fell.


For 2013, we expect the more defensive Beverages sector to underperform the general index, especially when valuations are at the higher end of the historic range. Within the sector, we expect the brewers to outperform the distillers because of their perceived higher risk: brewers have a higher operational gearing (higher fixed costs) and higher emerging market exposure. Furthermore their premium to historic valuations of 5% is less than the 12% premium we calculate for the distillers.

CONCLUSIONS AND TOP PICKS

After the strong performance of Diageo (Buy FV: 1900p) over the past quarters (+28% in 2012 vs. +21% for Pernod Ricard), we believe that it is time to take some profits, the upside to fair value is limited (+5%). The distiller that we prefer is Rémy Cointreau. The stock has suffered recently because of a perceived slowdown in cognac consumption in China (estimated 30% of EBIT). However, we believe these fears are overdone. In the last quarter of the year, cognac shipments to China have been flat but we believe this is largely a reflection of the later Chinese New Year (10 February 2013 compared to 23 January), which pushes back shipments into the first quarter of 2013. We are expecting Chinese volume growth to return 15% which is the growth rate for cognac in China over the past five years. Indeed, Chinese consumers for premium spirits products are around 70m and this number is expected to triple by 2020. In the short term, the recent quality problems for Baijiu (after excess levels of plastifiers had been found in most baijiu) and which account for 98% of all Chinese spirits consumption, could be positive for cognac and whisky sales in China which account for the other 2% of the spirits market. The demand from China for cognac will put further upward pressure on global cognac prices, given the already tight demand/supply balance. As a result, we are expecting 15% organic cognac sales growth for many years to come (5% volume, 5% price and 5% mix).

In the first half ending 30 September 2012, Rémy Cointreau increased revenues by 25.5% of which 13.3% organic. Operating profit in the first half increased by 33.2% of which 18% organic. For the full year 2012/13 we are expecting reported operating profit growth of 24% of which 18% organic.

For the second quarter in a row, Heineken was the best performing beverages stock (BUY FV: EUR60 ). During the last six months Heineken managed to gets its hands on Asia Pacific Breweries which will increase its exposure to emerging markets to 60% (from 40% two years ago) and decrease its exposure to Western Europe to 29%. This transformation got the Heineken shares well on track for a rerating closure to the 17x PE that AB InBev and the 18x SABMiller are trading at. We believe that with its valuation at 15.5x 2013 earnings and a free cash flow yield of 7%, the tough European environment is largely integrated but the upside of its emerging market exposure is not yet. Furthermore about 30% of the company’s EBIT comes from the Heineken brand which is placed in the International Premium beer segment – a segment that continues to show growth rates well ahead of the global beer market. Excluding the overlap between IPS and emerging market exposure, 80% of EBIT comes from growth areas. Added to this, the company continues to restructure its Western European operations. TCM2 is to set to save EUR0.5bn in 2012-14. As a consequence we keep Heineken as our top pick for Q1 2013.

NEXT CATALYSTS Rémy Cointreau will publish Q3 revenue on 17 January and Q4 revenue on 18 April. Heineken is due to publish 2012 results on 13 February 2013.

Top Picks

10


IT Software & Services : 2012 review, 2013 prospects, and Top Picks

1 M 3 M 6 M 31/12/12 Softw.& Comp.

1.1% 11.7% 25.7% 2.0%

DJ Stoxx 600 2.3% 6.0% 12.3% 2.6%


Companies covered ALTEN BUY EUR33 vs 29


ALTRAN TECHNOLOGIES BUY EUR7.5 vs. 7.3


ATOS NEUTRAL EUR60 vs. 56


CAPGEMINI BUY EUR45 vs. 44


DASSAULT SYSTEMES NEUTRAL EUR91 vs. 83


GROUPE STERIA BUY EUR16 vs.14


INDRA SISTEMAS SELL EUR9.5 vs. 8.2


SAGE GROUP NEUTRAL 340p vs. 320

Last Price 313.6p Market Cap. GBP3,766m

SAP BUY EUR72 vs. 69


SOFTWARE AG SELL EUR32


SOPRA GROUP BUY EUR56 vs. 48


SWORD GROUP CORPORATE EUR19 vs.17


TEMENOS GROUP SELL CHF16 vs. 12


Price s a s close of 11th January

LOOKING BACK ON 2012

In 2012 the Software & IT Services sector performed very well as a whole (+43% for the DJ EuroSTOXX Software & Computer Services index, or a 25% outperformance relative to the DJ EuroSTOXX 600 index), with risks of a decline in IT spending that globally didn’t materialise - although some pockets of weakness have existed (Banking, Southern Europe…).

We can split the 2012 performance into three periods: 1). January-March, with a 25% rise, as a follow-up of the technical rebound that started in October 2011 after the sell-off which occurred in the summer of 2011; 2). March-June, with a 15% drop as a direct consequence of concerns on Greece and Spain; 3). June-December, with a sustained recovery (+34%) driven by the stabilisation of the crisis.

Our 2012 Top Pick, Capgemini, performed pretty well (+36%) but slightly below the sector average. The sector’s champion was Altran (+106%), which continued to benefit from a change of status from an investor standpoint, followed by Atos (+56%, cost synergies story ahead of schedule), SAP (+49%, solid execution and two significant acquisitions in cloud-based applications), and Alten (+44%). The clear underperformers were Sage (flat), Indra (+2%), and Temenos (+4%).

NEW FAIR VALUES

We take the opportunity to update our DCF-derived fair values, as the result of three factors: 1). The roll-out of our model to 2013 from 2012 (except for Sage, Altran, SAP and Capgemini, for which the work was already done); 2). New BG valuation criteria (risk-free rate of 3.3% vs. 3.4% previously, equity risk premium of 6.1% vs. 6.3% previously); and 3). Marginal adjustments to our fx assumptions.

With these changes, the Top 3 stocks above EUR1bn market cap with the largest upside potential are the following: 1). Capgemini; 2). SAP; and 3). Atos.

Stock Rating Currency Fair value Change (%) Upside potential (%) New Old Alten Buy EUR 33 29 14% 22% Altran Technologies Buy EUR 7.5 7.3 3% 34% Atos Neutral EUR 60 56 7% 12% Capgemini Buy EUR 45 44 2% 31% Dassault Systèmes Neutral EUR 91 83 10% 7% Groupe Steria Buy EUR 16 14 14% 3% Indra Sistemas Sell EUR 9.5 8.2 16% -8% Sage Group Neutral GBP/p 340 320 6% 8% SAP Buy EUR 72 69 4% 17% Software AG Sell EUR 32 28 14% -2% Sopra Group Buy EUR 56 48 17% 19% Sword Group Corporate EUR 19 17 12% 44% Temenos Group Sell CHF 16 12 33% -14%

Source : Company Data; Bryan Garnier & Co. ests.


For 2013, amidst the sentiment that much of the uncertainties regarding an upturn in global economic growth are nearing resolution, industry analysts (Gartner, Forrester, IDC…) expect an acceleration in global IT spending growth, with Software up 6-7% (vs. up 3-4% for 2012) and IT Services up 3-4% (vs. up 1-2% for 2012). However, while Asia-Pacific and the Americas are likely to perform well, the situation in Europe will be subdued – particularly in Spain, France and the Netherlands. As such, we anticipate both Software and IT Services companies will increase margins as a whole, while the situation is likely to be more contrasted on the top line between these segments:

1). In Software, we estimate sales growth will be at least similar to that of 2012, although Europe may perform below average. For the largest Software vendors (SAP, Dassault Systèmes, Sage), we see no trend change while solid sales execution in 2012 helped these companies to outperform the sector. We expect the change will be more significant for smaller vendors (Temenos, Software AG). Obviously, by nature, margins and free cash flow conversion rates will remain high as usual in Software.

Top Picks

11

2). In IT Services, we estimate growth momentum will improve slightly vs. 2012, but not in Europe - where we expect a mild deterioration of that momentum, with the French market which should experience a slight decline (Syntec forecast: -0.9% vs. 0% in 2012). On the other hand, the main players in High-tech Consulting are likely to grow mid-single digit thanks to significant market share gains. Volumes are likely to continue to grow, but prices should continue to erode - partly due to offshoring. In our view, all the players in our coverage can improve margins thanks to productivity gains, offshoring, improvement in the salary pyramid, and restructurings made in 2012.


In 2012, as the sales momentum was unattractive short term, we advised to play on “valuation calls” – especially when early in the year multiples in IT Services reflected gloomy scenarios like the ones we saw in 2008-09. For 2013, we advise to buy selective recovery plays which should benefit from strong margin recovery potential for the coming years. Conversely, we estimate defensive stocks (Atos, Dassault Systèmes, Sage) are likely to see a modestly positive share price performance as most of their positive prospects are almost priced in. Finally, for brave investors, we cannot rule out that some “Sell” stories like Temenos or Software AG may become trump cards in the year if confidence regarding the economic environment improves.

In this context, our two top picks would be:

Capgemini. 1). Cyclical profile becoming very questionable: an improvement in op. margin to 10% is set to stem from structural factors like industrialisation (offshoring, “up-or-out" pyramid system…) and high-margin proprietary offerings are set to gain momentum; 2). Under-estimated cash generation ability, as Capgemini was long one of the best pupils in this field and we believe that it can restore free cash flow yield to 5%; and 3). Attractive valuation: est. 5.5x 2013 and 4.5x 2014 EV/EBIT multiples.

Altran Technologies. 1). Engaged in reaching 2015 ambitions: with the acquisition of IndustrieHansa, Altran is in line for reaching EUR2bn sales, a top-cycle EBITA margin of 11-12% and a free cash flow yield of 4% of sales by 2015; 2). Market concerns are overdone: the High-tech Consulting market is not seeing any deep worsening business conditions, with industry order-makers still short of engineers, and prices flat or slightly growing; and 3). Reasonably valued at last, at est. 6x 2013 and 4.7x 2014 EV/EBIT multiples.

NEXT CATALYSTS

• TCS’ results on 14th January after markets close.

• IBM’s FY12 results on 22nd January after markets close.

• SAP’s FY12 results on 23rd January before markets open.

• Sage IMS on 23rd January before markets open.

• Software AG’s FY12 results on 29th January before markets open.

Top Picks

12


Business Services : Top Picks anticipation of inflexion point in the negative trend for Staffing

1 M 3 M 6 M 31/12/12 Travel&Leisure 2.2% 9.9% 16.3% 1.6% DJ Stoxx 600 2.4% 6.2% 11.6% 2.3%


Companies covered ADECCO NEUTRAL CHF52 vs. 47


BUREAU VERITAS BUY EUR100 vs. 95


COMPASS GROUP NEUTRAL 730p vs. 670

Last Price 745.5p Market Cap. GBP13,704m

EDENRED NEUTRAL EUR24.5 vs. 24


RANDSTAD BUY vs.NEUTRAL EUR33 vs. 25


SODEXO BUY EUR72 vs. 67




In a gloomy economic environment, the Q4 2012 performance of all the companies in our Business services universe has been positive again, confirming the resilience of their business model (Food services or TIC businesses). On Staffing, despite higher negative revenue in Q3 vs. Q2 and Q1, all stocks recently outperformed due to positive signs from the US and the anticipation of less deterioration in Europe in 2013 especially compared to Q3 and Q4 2012.

On food services, Sodexo reported the best performance with a total increase of 8.8% and 4.4% relative to DJ Stoxx compared to respectively 6.1% and 1.8% for Compass Group and 6.6% and 2.3% for Edenred. For the whole year, the best performance was from Edenred (+22.5% in absolute terms and 7.1% vs. DJ Stoxx) followed by Compass Group (+18.7% and +3.8%) and Sodexo (+14.9% and +0.4%). Between Compass Group and Sodexo there is little difference despite Compass Group’s strategy of cash returns to shareholders.

On Staffing, similar performances from both Adecco and Randstad in Q4 and for the whole year. In Q4, Adecco’s share price was up 7.3% vs. 7.5% for Randstad (+3% and 3.2% relative to DJ Stoxx). For the whole year Adecco was up 22.1% and Randstad up 21.6%, and respectively +6.7% and 6.4 % compared to DJ Stoxx.

The Q4 performance was disappointing compared to the whole year for the TIC sector. Indeed, for Bureau Veritas, the first company in this sector in which we initiated coverage in mid-December, after a strong outperformance in the first three quarters, the stock price consolidated in Q4 and was up only 5.9% and 1.7% compared to DJ Stoxx. Nevertheless, over 2012 it showed a strong performance of 50.4% and 31.5% compared to DJ Stoxx.

NEW FAIR VALUES

We take the opportunity to update our DCF-derived fair values as the result of two factors: 1) the roll-out of our model to 2013 from 2012 (except for Sodexo and Compass Group for which the work was already done with their fiscal years ending respectively in August and September), and 2) the new BG valuation criteria using now a risk-free rate of 3.3% vs. 3.4% previously and an equity risk premium of 6.1% vs. 6.3%. Regarding Staffing, we have also increased our 2013 forecasts especially for the US to take into account the more favourable economic environment there.

Stock Rating Currency Fair Value Change (%) Theoretical New Old potential Sodexo Buy EUR 72 67 7% 13% Compass Group (p) Neutral GBP (p) 730 670 9% -2% Edenred Neutral EUR 24.5 24 2% 7% Adecco Neutral CHF 52 47 16% 3% Randstad Buy vs. Neutral EUR 33 25 32% 14% Bureau Veritas Buy EUR 100 95 5% 18%


WHAT WE SEE FOR Q1 2013

The macro-economic environment remains gloomy in Europe but, compared to 2012, European financial uncertainties seem under control. Due to this situation, the risk appetite has increased since mid 2012. Note that the industrial business confidence in the Eurozone has consolidated since October.

A better trend is expected for the US economy with GDP growth estimated at around 2% in 2013 (Consensus Economics Inc.) and a decrease in the unemployment level estimated at 7.7% (Consensus Economics Inc.) vs. 8.1% forecasted in 2012.

In emerging countries, the 2013 economics metrics are better than in 2012 in LatAm (especially Brazil) and in Asia/Pacific (China).

In this context and for the first part of the year, we decide to come back on the Staffing sector which should benefit from their high Beta (around 1.5) and also favourable comps.

The Food and TIC sectors could continue to consolidate early this year. Sodexo and Compass Group have engaged in cost reduction programmes to face the still difficult economic environment especially in Southern European countries but no positive effects are anticipated at best before the second part of the year. For Edenred, issue volume could suffer from the unemployment situation in Europe (48% total issue volume) and particularly in France (17% total issue volume), and lower interest rates will weigh.

Top Picks

13

CONCLUSION AND TOP PICK

For Q1 2013, our top pick is Randstad (Buy vs. Neutral, FV EUR33 vs. EUR25) recognising that our downgrade after the analysts’ day on 22nd November was not appropriate. Our move was linked to persistent diverging trends with no visibility and new measures to protect cash flow generation in case of further deterioration in the market during 2013.

• First of all by geography, Randstad will benefit from its US exposure. Indeed, the US still has today the more favourable economic metrics (GDP forecast, business confidence index, unemployment trend). Compared to the sector, Randstad is currently the most exposed to the US which represents the first geographic area for the group after the SFN acquisition in 2011 with a total revenue contribution of 23% (vs.18% for Adecco). Note that in Q3, US revenue was up 3% lfl compared to -5% for the whole group. We also highlight that in Europe, the group is less exposed to France (18% of total revenue) on which focused most uncertainties compared to Adecco (26% of total revenue).

• Like other companies, Randstad will benefit in 2013 from better comps. Remember that lfl revenue started to decline in Europe in the first quarter of 2012 with for example in France, which is the second area for the group after the US, -3%, -5% and -12% respectively in Q1, Q2 and Q3 or in the Netherlands (3rd area) -1%, -3% and -4%.

• Finally, due to high earnings volatility linked to fixed costs and a strong correlation with GDP, staffing stocks have a high Beta (adjusted 2-year historical Beta relative to Stoxx50 of 1.36 for Randstad or 1.42 for Adecco) should benefit from higher risk appetite from investors.

Main changes on Randstad earnings

EURm 2012e 2013e Old New % Old New % SALES 16 895 16 895 - 16 856 17 401.0 3.2% EBITDA 594 594 - 551 611.2 10.9% 3.5% 3.5% - 3.3% 3.5% 24 bp EBIT 335 335 - 293 345 17.7% 2.0% 2.0% - 1.7% 2.0% 24 bp EPS (EUR) 1.75 1.75 - 1.58 1.81 14.9%

Source : Bryan Garnier & Co. ests.

Regarding our forecasts, we are now 2% higher than the consensus on the top line.

At the current share price, the stock is trading at 16x P/E (adjusted EPS) 2013e vs. the median historical of 16.9x.

NEXT CATALYSTS

• Randstad: FY results on 14th February 2013.

• Adecco: FY results on 13th March 2013.

• Edenred: FY results on 13th February 2013.

• Sodexo: H1 results on 18th April 2013.

• Compass Group: AGM and IMS on 2nd February 2013.

• Bureau Veritas: FY results on 27th February 2013

Top Picks

14


Hotels : Top pick We are maintaining Accor

1 M 3 M 6 M 31/12/11 Travel&Leisure 2.2% 9.9% 16.3% 1.6% DJ Stoxx 600 2.4% 6.2% 11.6% 2.3%


Companies covered ACCOR BUY EUR32 vs. 31


InterContinental Hotels NEUTRAL 1650p vs. 1620


MELIA HOTELS SELL EUR5.8 vs. 5.7




As in Q3 2013, limited divergence in Q4 performances compared to the first part of the year between the two main competitors, with Accor up 2.9% and IHG +5.3% in local currency and +3.4% in euro. Again the best performance was Melia Hotels (9.2%) despite the group’s exposure to Spain (45% total rooms), a significant portion of hotels owned and under fixed-leased contracts (45%) and the group’s financial uncertainties.

NEW FAIR VALUE

We take the opportunity to update our DCF-derived fair values as the result of two factors: 1) the roll-out of our model to 2013 from 2012 and 2) the new BG valuation criteria using now a risk-free rate of 3.3% vs. 3.4% previously and equity risk premium of 6.1% vs. 6.3%.

Stock Rating Currency Fair Value Change (%) Theoritical New Old potential Accor Buy EUR 32 31 3% 19% IHG Neutral GBP (p) 1650 1620 2% -7% Melia Sell EUR 5.8 5.7 2% -8%



As previously, hotels’ fundamentals remain favourable, i.e. demand is still growing at a better pace than supply of number of rooms. Nevertheless, all groups regularly highlight the low visibility due to the uncertainty of the global economic environment especially in mature countries. Share price volatility should remain high.

CONCLUSION AND TOP PICK

Accor (Buy, Fair Value EUR32): The group’s strategy and news flow will continue to have positive effects on its valuation. From the asset light business model switch, the new target of 80% under franchise and management contract by the end of 2016 (previously 80% by the end of 2015 but including variable lease contracts which represents 22% of total rooms after the Motel 6 disposal) will have a positive impact especially on the EBIT margin, FCF and ROCE. New guidance from the group will be given during the FY results on 20th February. With a pipeline of nearly 120,000 new rooms, Accor has one of the most significant number of rooms to be opened and the most diversified by geography. Regarding Accor’s exposure to Europe, i.e. 63% of total current number of rooms and 28% of the pipeline, the group is one of the main hoteliers acting for the market consolidation which will be positive for RevPAR. France (46% total EBIT) highlights perfectly this trend with the number of rooms decreasing over 4 years, branded hoteliers taking market shares from independents. Financials sound good. Mid-year, after the Motel 6 disposal and the major acquisition of Mirvac in Australia and New Zealand, net debt reached EUR804m for a gross debt of EUR2,162m. During Q3, Accor pursued strategic acquisitions with Grupo Posadas in LatAm for a total amount of USD275m. Disposals are on track reaching EUR887m at the end of H1, i.e. 75% of the EUR1.2bn group’s target by the end of the year. Based on our forecasts, and despite S&P’s recent decision to retain a discounted rate of 7% vs. 8% for the calculation of the NPV of minimum lease payments included in net debt, we are anticipating a special dividend equal to last year of EUR0.5 per share after an ordinary P/O of 50%. At the current share price, the stock is trading at 11.2x EV/EBIT 2013e vs. median historical of 12.6x and compared to 13.4x for peers. NEXT CATALYSTS

• Accor: FY revenue on 17th January 2012 and FY results on 20th February 2013.

• IHG: Q3 results on 6th November

• Melia Hotels: Q3 results on 7th November

Top Picks

15

Environmental Services : 2012 review, 2013 prospects, and Top Picks

1 M 3 M 6 M 31/12/12 Utilities 2.3% -2.9% -0.2% 0.1% DJ Stoxx 600 2.8% 7.0% 12.5% 2.8%


Companies covered PENNON GROUP BUY 810p


SECHE ENVIRONNEMENT BUY EUR34 vs. 34


SUEZ ENVIRONNEMENT NEUTRAL EUR10.5 vs. 10


VEOLIA ENVIRONNEMENT BUY EUR13 vs. 12.9


Prces as close of 11th January

LOOKING BACK ON 2012

In 2012, environmental stocks in our coverage underperformed the Stoxx 600 index by between ~6% and ~25%. Veolia, our top-pick for the whole year 2012, posted the best performance in our coverage list, with an absolute increase of 8.1%, while Suez achieved a gain of 2.3%. 2012 was marked by several negative elements:

(i) Continued concerns around price pressure in Water divisions, notably in France.

(ii) The cyclicality of Waste divisions materialised with a deceleration of growth through the year and the negative impact on margins from both volumes and pricing pressure.

(iii) Heavy balance sheet for most companies, a thematic punished by the market within the context of the Eurozone crisis.


Main investors themes in 2013 are likely to be:

(i) The impact of the GDP evolution on the Waste businesses should remain one of the main themes in 2013. Our forecasts are based on a flattish GDP growth in the OECD region. While this will not drive profit strongly up, this should help to put an end to the declining trend started in Q2 2012. The basis of comparison will improve as of Q2 2013.

(ii) Should the recyclate prices remain at the YE12 level in 2013, this would imply flattish growth y/y. As a consequence, we will continue to closely monitor their evolution, as any deviation would have a large impact.

(ii) We believe 2013 will also be led by efficiency programmes and their impacts on the P&L. In 2012, most companies implemented cost-cutting measures, and/or increased their initial targets. Initial efforts appear to be on track. However, a still-difficult economic environment prompts cautiousness. We have a preference for companies with the greatest room for manoeuvre.

NEW FAIR VALUES

We take the opportunity to update our DCF-derived fair values, as the result of two factors: (i) the roll-out of our model to 2013 from 2012 (except for Pennon for which fiscal year ends in March); (ii) new BG valuation criteria (risk-free rate of 3.3% vs. 3.4% previously, equity risk premium of 6.1% vs. 6.3% previously).

Stock Rating Currency Fair value Change (%) Upside potential (%) New Old Pennon Group Buy GBP 810 810 0% 25% Séché Env. Buy EUR 35.0 34.0 3% 25% Suez Env. Neutral EUR 10.5 10 5% 17% Veolia Env. Buy EUR 13.0 12.9 1% 49%


CONCLUSIONS AND TOP PICK

As 2013 is set to be ruled by macro concerns, we have a preference for undervalued stocks, with significant potential positive catalysts. In this context, our top pick is Veolia Environnement.

In this context, Veolia Environnement (BUY FV EUR13 vs. 12.9) remains in our top pick list. While the turnaround is beginning to be marginally factored in by investors, we believe there is room for sustainable positive momentum, with newsflow having likely reached an inflection point. Moreover, we believe the large cost savings plan (net impact of EUR470m in 2015) is largely overlooked by the market and that group targets are modest ; FY12 results should be the occasion for the new CEO François Tétreau to provide investors with more clarity on his intentions. We expect EUR120m of positive impact from the cost-cutting measures in 2013. A secured dividend of EUR0.70/share is set to be paid in 2013, providing a ~8% yield as backed by management, in order to compensate for low visibility on the P&L metrics, given the large restructuring plan. We expect 32% EPS growth p.a. between 2013 and 2015.

Top Picks

16


Pennon (BUY FV 810p) is our second top pick in the sector, following the recent share price weakness and backed by a very attractive company profile. 75% of the group profits come from the UK regulated water segment, which offers strong visibility on cash-flow generation and protection against inflation. The 25% remaining of the profits are made in the UK waste market, which is facing a structural shift from landfill towards recycling and improved profitability with GBP10-20bn of required investments by 2020. We estimate that thanks to a GBP1bn+ capex programme in Waste, Pennon will grow its group EPS by ~14% p.a. between FY12 and FY16. We believe the start of 2013 is the right time to take advantage of the recent share price weakness which has been due to the materialisation of the main risks we had highlighted: (i) regulatory uncertainty for the water activity (licence change as well as potential change in inflation formulae in the UK); and (ii) cyclicality of the waste business. Most of these risks are now fading, offering a very attractive point, in our view.

Top Picks

17

Construction & Materials : TOP Picks Q1 2013 : Holcim and Vinci: some catalysts in Q1…

1 M 3 M 6 M 31/12/11 Cons & Mat 3.2% 10.5% 14.4% 0.2% DJ Stoxx 600 2.4% 5.6% 11.6% 2.3%


Companies covered CIMENTS FRANCAIS SELL EUR45 vs. 42


CRH SELL EUR14.3 vs. 13.5


EIFFAGE NEUTRAL EUR33 vs. 32


HEIDELBERGCEMENT SELL EUR43 vs.40


HOLCIM BUY CHF75 vs. 70


IMERYS SELL EUR44 vs. 40


ITALCEMENTI SELL EUR3.8 vs. 3.3


LAFARGE NEUTRAL EUR47 vs. 44


SAINT GOBAIN NEUTRAL EUR32 vs. 30


VICAT BUY EUR54 vs. 51


VINCI BUY EUR45 vs. 44



LOOKING BACK ON Q4 2012 European financial uncertainties seem to be remaining under control which has led the risk appetite to increase since H2 2012. Unsurprisingly, our sample has posted a decent performance in Q4 with most of the stock finishing the end year higher than at the end of Q3. Our Building Materials sample has posted +10% in absolute, bang in line with the Stoxx600. Saint-Gobain and Lafarge were essentially the top performers, delivering +8% and +5% respectively vs. the Stoxx600. Our Construction coverage sample posted a mixed Q4 vs. the Stoxx 600, with Eiffage up 22% while Vinci was down -1.3%.

WHAT WE SEE FOR 2013 The macro-economic environment remains gloomy in Europe and there is little to expect in H1 2013 in our view. This area should be characterised by a lack of visibility in particular for companies with high exposure to Construction (CRH, Heidelbergcement, Vicat and Italcementi) but also to industrial segments (Saint-Gobain, Imerys).

In the US, the picture should remain mixed with an ongoing recovery in housing but a difficult infrastructure market due to delays in implementing MAP-21. In addition, the comparison basis is likely to be tough due to a mild winter 2011/2012 in this regions. Recall our stocks sample posted on average LFL of +16% in Q1 2012 and +7% in Q2 2012.

We remain more optimistic about emerging countries, notably Asia, the Middle East and Latin America. Demand for building materials is still being driven by population growth as well as infrastructure plans in some key countries (India, Philippines, Indonesia…)

Nevertheless, we still expect momentum to remain positive in 2013 especially in Building Materials as prices continue to rise and energy bills decline. Cost-cutting programmes will also be an important driver for 2013 but mainly when it can be leveraged by some volume in particular in Asia, the Middle East & Africa or Latin America. The best ways to play these plans are Holcim/Lafarge as these groups are closing the gap with Heidelbergcement/CRH in our view.

At this stage, we think it is too earlier to play a gradual stabilisation in Europe as well as a ramp up of the US infrastructure market due to MAP-21.


In this context, we would play Vinci as we have identified some potential on the ANA acquisition and Holcim for its potential on cost reductions, which we think the consensus has under-estimated.

Vinci (BUY, FV EUR45):

After a disappointing performance in 2012 (-9.5% relative performance to the CAC40), due to fears of a special tax on motorways, a potential limit of tax-deductibility of interest payment as well as a “low profile communication”. Our understanding is the government is planning to double the “redevancedomaniale” which is a specific tax on motorways and therefore Vinci should be protected by Article 32 of the concessions contract.

Although Vinci has been selected to acquire ANA at a price slightly higher than initial estimates, we believe it could be for a good reason. At this stage, the concession contract has not been disclosed but we have identified a few elements that could explain this price differential of EUR3bn instead of EUR2.5bn.

We see some potential on commercial revenues where ANA has pax revenues of only EUR5.1, compared to ADP at EUR15.1. Commercial diversification is still very limited compared to its European competitors at around 12% of revenues for ANA vs.21% for ADP. Although ANA’s Regulated Asset Base was on a single till collection system previously, we can only hope the new concession contract will be a dual till system. Vinci will have the incentive to develop other activities such as commercial activities (c. 12% of 2011 revenues) and also real estate (4% of 2011 revenues). We believe the higher price could also be linked to the concession length which is 50 years according to Vinci. Another factor will obviously be the capex spent on the Regulated Asset Base, which is currently unknown.

Top Picks

18


Finally, Vinci has recently adjusted its net profit target to “close to last year” from “down -3/4%”. Knowing the company’s usual caution, we cannot rule out a positive surprise on the earnings side. Indeed, we believe the margin especially on the road works division could have been better than previously anticipated.

The stock is trading at a 2012e PE of 10.6x on our forecasts, which implies a 18% discount to its 2005-11 historic average.

Holcim (BUY, FV CHF75):

Over a week, the share price has dropped 3% and is one of the worst performers amongst our sample due to price pressures in India. This country is Holcim’s biggest exposure (20% of group’s EBITDA) and our model indicates a decline of 1% in price over a year implies a -0.8% decline in EPS. We see this share price weakness as temporary and believe it could create a good level to either reinforce or start building up a position in Holcim.

Numerous reasons lead us to believe the price pressures in India may only be temporary: (1) a cold wave in the northern and central regions has impacted construction activities. This lower demand came after prices have rallied 15% over the first 9 months of 2012!; (2) a difficult comparison base as prices started to rise in December 2011. We see a revival in Indian demand in 2013, especially after the 5% increase in volume in 2012, short of expectations at 7-8%. We believe the demand should improve on the back of the 5th infrastructure plan 2012-17, which has been delayed due to Indian administration slowness (voted in April 2012).

Beyond India, we like the group’s geographic footprint. Holcim’s exposure to Europe is limited to 22% of EBITDA (i.e. the lowest among the large cement groups). Asia excluding India accounts for another 21% of group’s EBITDA whereas Latin America represents 21%. NA is limited to 8% but we think the group has leverage given the size of the Saint Genevieve plant when volume comes back.

Holcim has the most ambitious cost-cutting programme among the industry by 2014. The group is targeting to achieve cost cutting of CHF880m in 2013 and 2014. For comparison, Lafarge aims to deliver EUR650m over the same period. This being said, Holcim would have cut its cash cost by 20% since the beginning of the 2009 crisis or in line with other cement peers which comforts us in the feasibility of the savings.

In addition, the Swiss group already announced bad news, with a CHF410m write-off due to the European division as well as an extra charge of CHF100m for cutting costs.

The share is trading on a 2013e EV/EBITDA of 7.4x which is in line with its historic average since 2005 and a 7% premium compared to peers. These levels are unsurprising, Holcim is traditionally trading at a premium to peers due to geographic exposure.

NEW ESTIMATES AND FAIR VALUES

We take the opportunity to release our new fair values, which are based on our new 2013 estimates and new BG valuation criteria (risk-free rate 3.3% vs. 3.4% previously, equity risk premium 6.1% vs. 6.3% previously). On average, we increased our FV by 7%.

EUR Recommendation Fair Value Change (%) Theoretical New Old upside (%) CimentsFrançais Sell 45 42 7% 2% CRH Sell 14.3 13.5 6% -4% Eiffage Neutral 33 32 3% -8% Heidelbergcement Sell 43 40 8% -7% Holcim (CHF) Buy 75 70 7% 13% Imerys Sell 44 40 10% -7% Italcementi Sell 3.8 3.3 13% -23% Lafarge Neutral 47 44 7% -2% Saint-Gobain Neutral 32 30 7% 0% Vicat Buy 54 51 6% 13% Vinci Buy 45 44 2% 22%

Source: Bryan Garnier& Co. estimates

NEXT CATALYSTS

FY results; Vinci on 5thFebruary and Holcim on 27th February

Top Picks

19

Insurance : Top picks Q1 2013 - Allianz and AXA

1 M 3 M 6 M 31/12/11 Insurance 4.4% 13.4% 27.2% 3.3% DJ Stoxx 600 2.8% 7.0% 12.5% 2.8%


Companies covered AEGON NEUTRAL EUR5.2 vs.4.8


ALLIANZ BUY EUR118 vs.112


AXA BUY EUR16.5 vs.15.5


CNP ASSURANCES NEUTRAL EUR14 vs. 13.5


EULER HERMES SELL EUR63 vs. 56


HANNOVER RE SELL EUR59 vs. 52


MUNICH RE SELL EUR136 vs. 130


SCOR BUY EUR24 vs. 23.5


SWISS RE SELL CHF70 vs. 62


ZURICH INSURANCE GROUP SELL CHF252 vs. 248




Q3 2012 results, released in November, came in better than expected:

• Excluding Zurich, all the companies we cover reported better-than-expected results, driven by solid underwriting performances (P&C, reinsurance) and high capital gains, mainly on bonds.

• Companies that issued FY guidance (Allianz, Hannover Re, Munich Re) clearly said they would be in a position to exceed them, and provided higher guidance.

Q4 2012 has been another positive quarter for asset valuations, with European rates down (record low for the 10Y Euro rate at 2.6% at year-end), corporate and financial sector spreads down (respectively -16 bps and -72 bps for iTraxx Main and iTraxx Senior Financial) and equities slightly up.

These moves have been driven by central banks’ still favourable behaviour and lower risk premiums on risky assets, starting with the financial sector (no more “systemic” risk premium): quarterly average spread between corporate and financials (41 bps) is back to pre-Euro sovereign debt crisis (Q3 2010). Spot spread at end-2012 (24 bps) has not been this low since October 2010.

Hurricane Sandy will translate into significant but easily-manageable insured losses for the industry. Latest estimates are in the USD25bn area, i.e. 38% of FY worldwide natcat insured losses.

In this favourable environment:

• Insurers’ NAVs should have increased again (growing unrealiszed capital gains).

• The sector performed well (+6% vs. market), mainly driven by recovery stories (Generali +10% vs. sector, AXA +6% vs. sector), whereas reinsurers have underperformed (-4% vs. sector on average) due to their defensive status.

NEW ESTIMATES AND FAIR VALUES

We take the opportunity to update our earnings forecasts for 2012-2014.

On average we have increased our operating profit estimates by 3% for 2012 (primary insurance +2%, reinsurance +6%) and by 1% for both 2013 and 2014. Net profit estimates have been increased by 4% for 2012 (primary insurance -1%, reinsurance +16%) and by 1% for both 2013 and 2014.

2013-2014 adjustments are minor and, as such, not really significant. The 2012 increases are more noticeable and mainly reflect above-expectation Q3 numbers.

We also release our new fair values, which are based on our new 2013 estimates and new BG valuation criteria (risk-free rate 3.3% vs. 3.4% previously, equity risk premium 6.1% vs. 6.3% previously).

On average, upside potential is limited to 5%.

EUR Recommendation Fair Value Change (%) Theoretical upside New Old upside (%)

Aegon Neutral 5.2 4.8 8% 3% Allianz Buy 118 112 5% 12% AXA Buy 16.5 15.5 6% 21% CNP Neutral 14.0 13.5 4% 10% ZIG (CHF) Sell 252 248 2% 0% Hannover Re Sell 59 52 13% 0% Munich Re Sell 136 130 5% 0% Scor Buy 24.0 23.5 2% 11% Swiss Re (CHF) Sell 70 62 13% 2% Euler Hermes Sell 63 56 13% -6%

Source: Bryan Garnier & Co. estimates

Top Picks

20



Macro-economic environment remains gloomy in Europe, with aggressive public spending cuts leading to a stronger-than-expected recession and higher-than-expected budget deficits. The unemployment rate is at record levels (11.8%), and still going up. At some point, social risk could become a critical issue.

On the other side, financial market risks seem under control, mainly thanks to central banks. The risk appetite has been gradually rising since July 2012. News flow has been positive for banks (see Basle 3 adjustments on liquidity ratios).

Despite new delays for Solvency 2 (2016 at best vs. 2014), the discussions we held with different insurance companies led us to believe that they do not plan to change their asset allocation, and do not plan to materially increase the equity part of the portfolio (4% on average at end-September 2012, of which 5% for primary insurers and 2% for reinsurers). Remember that since 2008, insurers and reinsurers have gradually rebalanced their investment portfolios towards more defensive asset classes (“strong” govies, corporate bonds, cash). This was influenced by investors’ wishes and Solvency 2 economics. In the end, investment yields have gradually come under pressure (-90 bps over the 2007-2012e period), which has been negative for profitability, as investment income is the main contributor to operating profit (70% in P&C, more than 85% in life).

As a consequence, the key issue for the listed insurance sector remains profitability prospects, with 2012-2014 expected ROE in the 9-11% area, below cost of equity, mainly due to negative impacts of low interest rates. Based on our 2013 expectations, we see limited average upside potential for the sector (c. 5%). Further upside potential would mainly derive from exogenous criteria: higher interest rates, lower risk premium, lower beta…


Our top picks for Q1 2013 are Allianz (Buy, FV EUR118 vs. EUR112) and AXA (Buy, FV EUR16.5 vs. EUR15.5).

At Allianz, P&C underwriting results have been improving through price increases, lower large claims and productivity gains, and partially compensated for recurring pressure on investment income. P&C represents 50-55% of operating profit. The company has strong solvency (economic solvency at 202% at end-September 2012, i.e. EUR23.8bn theoretical excess economic capital), a healthy investment portfolio (EUR12bn unrealised capital gains after tax and policyholder participation on bonds and equities at end-September 2012), operating cash flows above EUR15bn p.a., and a solid and credible management team. The stock is currently trading in line with peers (P/E, P/NAV) but a 10-15% premium would not appear unwarranted to us. FY 2012 numbers will be published on 21st February 2013.

At AXA, P&C insurance (40% of operating profit) has been producing particularly convincing earnings momentum, mainly on the back of its retail franchise (price momentum: +2.9% in H1 2012) and a well-executed plan to optimise the risk portfolio and costs. Targets for combined ratios in 2015 (reported combined ratio < 96%, combined ratio excluding run-offs < 97%) are quite credible. In life insurance (50% of operating profit), traditional life business and US business remain lacklustre, but the bulk of profits stems from protection/health (66% of total life division), with sales growing at least 10% p.a. with fine margins (> 40% NBV margin). The stock is currently trading at a 10-15% discount to peers (P/E, P/NAV), which is not justified in the current financial environment. FY 2012 numbers will also be published on 21st February 2013.

In the reinsurance industry, our only positive recommendation is Scor (Buy, FV EUR24 vs. EUR23.5) with a convincing track record (both in terms of operating performances and acquisitions), potential premium growth (c. 15% CAGR over 2010/2013), positive impacts from the Transamerica Re deal, plus a healthy investment portfolio. The stock is currently trading at a c. 15% discount to its NAV. FY 2012 numbers will be published on 6th March 2013.

Top Picks

21

IT Services 12 FV Analyst Healthcare 25 FV Analyst Consumer Goods 10 FV AnalystBUY Alten 33 EUR Gregory Ramirez BUY Actelion 56 CHF Eric Le Berrigaud BUY adidas 82 EUR Peter Farren

Altran 7.5 EUR Gregory Ramirez Astra Zeneca 3440 p Eric Le Berrigaud Essilor 80 EUR Cedric Rossi Cap Gemini 45 EUR Gregory Ramirez Bayer 75 EUR Martial Descoutures Luxottica 35 EUR Cedric Rossi SAP 70 EUR Gregory Ramirez DiaSorin 31 EUR Mathieu Chabert SELL Geox 1.6 EUR Peter FarrenSopra 56 EUR Gregory Ramirez Fresenius MC 65.5 EUR Mathieu Chabert H&M 225 SKr Peter FarrenSteria (Groupe) 16 EUR Gregory Ramirez Fresenius SE 96 EUR Mathieu Chabert Inditex 100 EUR Peter Farren

SELL Indra Sistemas 9.5 EUR Gregory Ramirez Galapagos 21.5 EUR Mathieu Chabert Tods 80 EUR Peter FarrenSoftware AG 32 EUR Gregory Ramirez Grifols 29.5 EUR Mathieu Chabert NEUTRAL Puma 238 EUR Peter FarrenTemenos 16 CHF Gregory Ramirez Ipsen 29 EUR Mathieu Chabert Burberry 1550 p Peter Farren

NEUTRAL Atos Origin 60 EUR Gregory Ramirez NicOx 3.2 EUR Mathieu Chabert Pandora 83 DKK Peter FarrenDassault Systèmes 91 EUR Gregory Ramirez Novartis 68 CHF Eric Le Berrigaud

Sage Group 340 p Gregory Ramirez Orpea 38 EUR Mathieu Chabert HPC & Other Consumer goods 4 FV AnalystQiagen 17 EUR Mathieu Chabert BUY L'Oreal 112 EUR Loic Morvan

Renewables 4 FV Analysts Roche Holdings 202 CHF Eric Le Berrigaud Groupe SEB 70 EUR Cedric Rossi BUY Nordex 4.9 EUR Julien Desmaretz Sanofi 84 EUR Eric Le Berrigaud SELL Beiersdorf 63 EUR Loic MorvanSELL Gamesa 0.8 EUR Julien Desmaretz Shire 2250 p Martial Descoutures NEUTRAL BIC 97 EUR Cedric Rossi

NEUTRAL SMA Solar 17 EUR Julien Desmaretz Sorin 2.4 EUR Mathieu Chabert

Vestas 35 DKK Julien Desmaretz Stratec 40 EUR Mathieu Chabert

Zealand 152 DKK Eric Le Berrigaud Luxury 9 FV AnalystEnvironmental Services 4 FV Analyst SELL Nobel Biocare 8.9 CHF Mathieu Chabert BUY Hugo Boss 95 EUR Peter Farren

BUY Pennon Group 810 p Julien Desmaretz NEUTRAL bioMérieux 66 EUR Mathieu Chabert PRADA 82 HKD Cedric RossiSéché Env. 35 EUR Julien Desmaretz GlaxoSmithkline 1630 p Eric Le Berrigaud Richemont 82 CHF Loïc MorvanVeolia Environnement 13 EUR Julien Desmaretz Merck 100 EUR Martial Descoutures Christian Dior 145 EUR Loïc Morvan

NEUTRAL Suez Environnement 10.5 EUR Julien Desmaretz Novo Nordisk 1000 DKK Eric Le Berrigaud LVMH 160 EUR Loïc MorvanUCB 42 EUR Martial Descoutures NEUTRAL The Swatch Group 490 CHF Loïc Morvan

S. Ferragamo 18.6 EUR Loïc Morvan

Insurance 10 FV Analyst Hermes 194 EUR Loic Morvan

BG Corporate 7 FV Analysts BUY Allianz 118 EUR Olivier Pauchaut PPR 150 EUR Loic MorvanTransgene 21 EUR Pharma Team Scor 24 EUR Olivier Pauchaut

Innate Pharma 3.0 EUR Cedric Moreau AXA 16.5 EUR Olivier Pauchaut Beverages 8 FV AnalystCellectis 8.80 EUR Cedric Moreau SELL Zurich Insurance Group 252 CHF Olivier Pauchaut BUY AB InBev 75 EUR Nikolaas FaesHybrigenics 1.74 EUR Cedric Moreau Euler Hermes 63 EUR Olivier Pauchaut Diageo 1900 p Nikolaas FaesLeadMedia 7.4 EUR Pauline Roux Hannover Re 59 EUR Olivier Pauchaut Heineken 60 EUR Nikolaas Faes

ConcoursMania 14 EUR Pauline Roux Munich Re 136 EUR Olivier Pauchaut Pernod Ricard 91 EUR Nikolaas Faes

Sword Group 19 EUR Gregory Ramirez Swiss Re 70 CHF Olivier Pauchaut Rémy Cointreau 109 EUR Nikolaas FaesNEUTRAL CNP 14 EUR Olivier Pauchaut NEUTRAL Carlsberg 650 DKK Nikolaas Faes

Aegon 5.2 EUR Olivier Pauchaut Beam 61 USD Nikolaas FaesDate SAB Miller 2633 p Nikolaas Faes18/01/13 Actelion (Buy, FV CHF56 vs. 51) Our all-included new FV . Business Services 4 FV Analyst18/01/13 Prada (Buy, HKD82 vs. 72) Beyond a tough comparison base in Q4 BUY Sodexo 72 EUR Bruno de la Rochebrochard Building/Construct. 11 FV Analyst17/01/13 Astrazeneca (Buy vs. Neutral, FV 3440p vs. 2860p) attractive risk-reward Burea Veritas 100 EUR Bruno de la Rochebrochard BUY Vinci 45 EUR Sven Edelfelt

17/01/13 Healthcare TopPicks : Sanofi, Astrazeneca, Fresenius MC NEUTRAL Edenred 24.5 EUR Bruno de la Rochebrochard Holcim 75 EUR Sven Edelfelt16/01/13 Luxury Goods Top Picks : adidas, SEB, Luxottica Compass Group 730 p Bruno de la Rochebrochard Vicat 54 EUR Sven Edelfelt16/01/13 Beverages Top Picks : Heineken , Rémy Cointreau SELL Ciments Francais 45 EUR Sven Edelfelt16/01/13 Construction & Materials : Vinci, Holcim Hotels/Leisure 3 FV Analyst Imerys 44 EUR Sven Edelfelt

16/01/13 SAP (€70 vs 72) Preliminary FY12 results do not change the fundamental story BUY Accor 32 EUR Bruno de la Rochebrochard Heidelbergcement 43 EUR Sven Edelfelt15/01/13 Groupe SEB (BUY vs. Neutral, FV €70 vs 57) Play recovery in emerging markets NEUTRAL InterContinental 1650 p Bruno de la Rochebrochard Italcementi 3.8 EUR Sven Edelfelt15/01/13 Business Services Top Pick, Randstad SELL Melia Hotels 5.8 EUR Bruno de la Rochebrochard CRH 14.3 EUR Sven Edelfelt15/01/13 Hotels, Top Picks , Accor NEUTRAL Eiffage 33 EUR Sven Edelfelt14/01/13 IT &Software Top Picks, CapGemini, Altran Lafarge 47 EUR Sven Edelfelt14/01/13 Environmental Services Top Picks, Veolia Env. Pennon Staffing 2 FV Analyst Saint Gobain 32 EUR Sven Edelfelt14/01/13 Insurance Top Picks, Allianz AXA BUY Randstad 33 EUR Bruno de la Rochebrochard10/01/13 Swatch Group (CHF490 s. 455) Sales above CHF8bn NEUTRAL Adecco 52 CHF Bruno de la Rochebrochard

106 companies covered - BUY : 54 (51%); Neutrals 31 (29%); Sell 21 (20%)

Top Picks

22


Top Picks

23

Bryan Garnier stock rating system For the purposes of this Report, the Bryan Garnier stock rating system is defined as follows: Stock rating

BUY Positive opinion for a stock where we expect a favourable performance in absolute terms over a period of 6 months from the publication of a recommendation. This opinion is based not only on the FV (the potential upside based on valuation), but also takes into account a number of elements including a SWOT analysis, positive momentum, technical aspects and the sector backdrop. Every subsequent published update on the stock will feature an introduction outlining the key reasons behind the opinion.

NEUTRAL Opinion recommending not to trade in a stock short-term, neither as a BUYER or a SELLER, due to a specific set of factors. This view is intended to be temporary. It may reflect different situations, but in particular those where a fair value shows no significant potential or where an upcoming binary event constitutes a high-risk that is difficult to quantify. Every subsequent published update on the stock will feature an introduction outlining the key reasons behind the opinion.

SELL Negative opinion for a stock where we expect an unfavourable performance in absolute terms over a period of 6 months from the publication of a recommendation. This opinion is based not only on the FV (the potential downside based on valuation), but also takes into account a number of elements including a SWOT analysis, positive momentum, technical aspects and the sector backdrop. Every subsequent published update on the stock will feature an introduction outlining the key reasons behind the opinion.

Distribution of stock ratings

BUY ratings 51.4% NEUTRAL ratings 28.4% SELL ratings 20.2%

Research Disclosure Legend 1 Bryan Garnier shareholding

in Issuer Bryan Garnier & Co Limited or another company in its group (together, the “Bryan Garnier Group”) has a shareholding that, individually or combined, exceeds 5% of the paid up and issued share capital of a company that is the subject of this Report (the “Issuer”).

No

2 Issuer shareholding in Bryan Garnier

The Issuer has a shareholding that exceeds 5% of the paid up and issued share capital of one or more members of the Bryan Garnier Group.

No

3 Financial interest A member of the Bryan Garnier Group holds one or more financial interests in relation to the Issuer which are significant in relation to this report

No

4 Market maker or liquidity provider

A member of the Bryan Garnier Group is a market maker or liquidity provider in the securities of the Issuer or in any related derivatives.

No

5 Lead/co-lead manager In the past twelve months, a member of the Bryan Garnier Group has been lead manager or co-lead manager of one or more publicly disclosed offers of securities of the Issuer or in any related derivatives.

No

6 Investment banking agreement

A member of the Bryan Garnier Group is or has in the past twelve months been party to an agreement with the Issuer relating to the provision of investment banking services, or has in that period received payment or been promised payment in respect of such services.

No

7 Research agreement A member of the Bryan Garnier Group is party to an agreement with the Issuer relating to the production of this Report.

No

8 Analyst receipt or purchase of shares in Issuer

The investment analyst or another person involved in the preparation of this Report has received or purchased shares of the Issuer prior to a public offering of those shares.

No

9 Remuneration of analyst The remuneration of the investment analyst or other persons involved in the preparation of this Report is tied to investment banking transactions performed by the Bryan Garnier Group.

No

10 Corporate finance client In the past twelve months a member of the Bryan Garnier Group has been remunerated for providing corporate finance services to the issuer or may expect to receive or intend to seek remuneration for corporate finance services from the Issuer in the next six months.

No

11 Analyst has short position The investment analyst or another person involved in the preparation of this Report has a short position in the securities or derivatives of the Issuer.

No

12 Analyst has long position The investment analyst or another person involved in the preparation of this Report has a long position in the securities or derivatives of the Issuer.

No

13 Bryan Garnier executive is an officer

A partner, director, officer, employee or agent of the Bryan Garnier Group, or a member of such person’s household, is a partner, director, officer or an employee of, or adviser to, the Issuer or one of its parents or subsidiaries. The name of such person or persons is disclosed above.

No

14 Analyst disclosure The analyst hereby certifies that neither the views expressed in the research, nor the timing of the publication of the research has been influenced by any knowledge of clients positions and that the views expressed in the report accurately reflect his/her personal views about the investment and issuer to which the report relates and that no part of his/her remuneration was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Yes

15 Other disclosures Other specific disclosures: Report sent to Issuer to verify factual accuracy (with the recommendation/rating, price target/spread and summary of conclusions removed).

No

A copy of the Bryan Garnier & Co Limited conflicts policy in relation to the production of research is available at www.bryangarnier.com

London Dowgate Hill House 14-16 Dow Gate Hill London EC4R 2SU Tel: +44 (0) 207 332 2500 Fax: +44 (0) 207 332 2559 Authorised and regulated by the Financial Services Authority (FSA)

Paris 26 Avenue des Champs Elysées 75008 Paris Tel: +33 (0) 1 56 68 75 00 Fax: +33 (0) 1 56 68 75 01 Regulated by the Financial Services Authority (FSA) and l’Autorité des Marchés Financiers (AMF)

New York 750 Lexington Avenue New York, NY 10022 Tel: +1 (0) 212 337 7000 Fax: +1 (0) 212 337 7002 FINRA and SIPC member

Geneva rue de Grenus 7 CP 2113 Genève 1, CH 1211 Tel +4122 731 3263 Fax+4122731 3243 Regulated by the Swiss Federal Banking Commission

New Delhi The Imperial Hotel Janpath New Delhi 110 001 Tel +91 11 4132 6062 +91 98 1111 5119 Fax +91 11 2621 9062

Important information This independent investment research report (the “Report”) was prepared by Bryan Garnier & Co Limited and is being distributed only to clients of Bryan Garnier & Co Limited (the “Firm”). Bryan Garnier & Co Limited is authorised and regulated by the Financial Services Authority (the “FSA”) and is a member of the London Stock Exchange. This Report is provided for information purposes only and does not constitute an offer, or a solicitation of an offer, to buy or sell relevant securities, including securities mentioned in this Report and options, warrants or rights to or interests in any such securities. This Report is for general circulation to clients of the Firm and as such is not, and should not be construed as, investment advice or a personal recommendation. No account is taken of the investment objectives, financial situation or particular needs of any person. The information and opinions contained in this Report have been compiled from and are based upon generally available information which the Firm believes to be reliable but the accuracy of which cannot be guaranteed. All components and estimates given are statements of the Firm, or an associated company’s, opinion only and no express representation or warranty is given or should be implied from such statements. All opinions expressed in this Report are subject to change without notice. To the fullest extent permitted by law neither the Firm nor any associated company accept any liability whatsoever for any direct or consequential loss arising from the use of this Report. Information may be available to the Firm and/or associated companies which are not reflected in this Report. The Firm or an associated company may have a consulting relationship with a company which is the subject of this Report. This Report may not be reproduced, distributed or published by you for any purpose except with the Firms’ prior written permission. The Firm reserves all rights in relation to this Report. Past performance information contained in this Report is not an indication of future performance. The information in this report has not been audited or verified by an independent party and should not be seen as an indication of returns which might be received by investors. Similarly, where projections, forecasts, targeted or illustrative returns or related statements or expressions of opinion are given (“Forward Looking Information”) they should not be regarded as a guarantee, prediction or definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. A number of factors, in addition to the risk factors stated in this Report, could cause actual results to differ materially from those in any Forward Looking Information.

Disclosures specific to clients in the United Kingdom This Report has not been approved by Bryan Garnier & Co Limited for the purposes of section 21 of the Financial Services and Markets Act 2000 because it is being distributed in the United Kingdom only to persons who have been classified by Bryan Garnier & Co Limited as professional clients or eligible counterparties. Any recipient who is not such a person should return the Report to Bryan Garnier & Co Limited immediately and should not rely on it for any purposes whatsoever.

Notice to US investors This research report (the “Report”) was prepared by Bryan Garnier & Co. Ltd. for information purposes only. The Report is intended for distribution in the United States to “Major US Institutional Investors” as defined in SEC Rule 15a-6 and may not be furnished to any other person in the United States. Each Major US Institutional Investor which receives a copy of this Report by its acceptance hereof represents and agrees that it shall not distribute or provide this Report to any other person. Any US person that desires to effect transactions in any security discussed in this Report should call or write to our US affiliated broker, Bryan Garnier Securities, LLC. 750 Lexington Avenue, New York NY 10022. Telephone: 1-212-337-7000. This Report is based on information obtained from sources that Bryan Garnier & Co. Ltd. believes to be reliable and, to the best of its knowledge, contains no misleading, untrue or false statements but which it has not independently verified. Neither Bryan Garnier & Co. Ltd. and/or Bryan Garnier Securities LLC make no guarantee, representation or warranty as to its accuracy or completeness. Expressions of opinion herein are subject to change without notice. This Report is not an offer to buy or sell any security. Bryan Garnier Securities, LLC and/or its affiliate, Bryan Garnier & Co. Ltd. may own more than 1% of the securities of the company(ies) which is (are) the subject matter of this Report, may act as a market maker in the securities of the company(ies) discussed herein, may manage or co-manage a public offering of securities for the subject company(ies), may sell such securities to or buy them from customers on a principal basis and may also perform or seek to perform investment banking services for the company(ies).

Bryan Garnier Securities, LLC and/or Bryan Garnier & Co. Ltd. are unaware of any actual, material conflict of interest of the research analyst who prepared this Report and are also not aware that the research analyst knew or had reason to know of any actual, material conflict of interest at the time this Report is distributed or made available.

Bryan, Garnier & Co · For instance, Scor, the lowest beta in Insurance has been removed and...

Documents

Transcript of Bryan, Garnier & Co · For instance, Scor, the lowest beta in Insurance has been removed and...