BUY Daimler into the Trucking Spin off VS SHORT BMW

*We see DAI as an attractive BUY with a pt of EUR 97 implying a 17% upside – we would hedge it with a short in BMW which therefore should provide us with a nice low volatility long/short trade

*UBS released a comprehensive note today where they upgrade DAI GY to Buy with a price target of EUR 100 where they highlight the Trucking spin as the right decision but not a catalyst to immediately crystalize SOTP – they expect fixing Trucks’ structural deficits in Europe to take some time

*While we agree that we might not see the value gap close on the event, the spin could well provide a great entry point into the trucking business which we also expect to outperform when it is separated and we have seen in the past that stock performance into the events tends to be good as well (except in situtations with some large withholding tax aspect to it like for VIV/UMG)

*We expect both the remaining car business and the trucking business to benefit from the spin as the two divisions will get the focus they deserve – we also expect it to help further in the EV transition with DAI trying to get ahead of the game with its new all-EV strategy going forward and as UBS highlights there are no large synergies being lost

*We have not seen any review of any withholding tax aspect or index inclusions – but according to a back of the envelop calc both companies should remain in the Dax at least – this should therefore also be a good indication that the trucking unit will be large enough for the other main ones

*We get to around a EUR 97 on our SOTP for DAI with around EUR 24.5 of that of that from the Trucks, this implies a 15% discount to NAV for DAI GY currently

*DAI is set to retain 30% of the truck unit post spin as a non-strategic stake – this will limit the free-float for the index inclusions like placing in Dax and MSCI somewhat

*DAI results set for 29 Oct, CMD 11 Nov, Spin Dec