CLOSING PEUGEOT
We have run UG since February 2014 as the investment case became compelling.
We have watched them go from being unprofitable to making 5% margins. The 2016-2018 targets of 4% therefore means that while probably low balling on company guidance margins have peaked until 2020.
The easy money has been made. From here growth will require investment and given the performance of the European car market YTD, positive surprises from here will be more difficult.
Add to that our concerns over peak earnings feeding through from the US and over the Chinese economy (which is one of Peugeot’s main growth drivers) we are happy to book profits and close the trade. +52.77%
UPDATE: PEUGEOT
FCF SMASHES IT
Wednesday • 24 February 2016 • 09:00
Tavares continues to deliver his “back to the race plan” in style.
We used the weakness in Jan as another BUY opportunity or to open a position as February numbers we believed would surprise to the upside. We felt it was still cheap on an EV basis and believed they continued to build up a cash pile.
Strong FY 2015 earnings this morning and they hit medium term targets ahead of schedule. FY profit triples and Net cash smashes estimates at 4.5bn EUR with 3.8bn EUR of FCF.
We are way off the highs here and with 12% of short interest there is a lot more to come.
For us the story is far from over. Stay Long +49.78% pre to days numbers.
UPDATE: PEUGEOT
CHINA SALES FLY (BUY)
Tuesday • 12 January 2016 • 09:04
CHINA DEC. RETAIL AUTO SALES RISE 16.9% ON YEAR, PCA.
Peugeot Citroen 2015 Sales Rose 1.2% to 2.97 Mln Vehicles.
PEUGEOT’S Picat says China tax cut aided vehicle sales.
Our favourite auto for the last few years and that continues in 2016 for us.
We felt that the China car sales would be very good due to the incentives created by the China tax cuts. We see them coming through now as December numbers have a big jump!
Peugeot numbers will surprise to the upside in February.
Use the recent pullback to BUY more or open a position as February numbers will surprise to the upside. It is still cheap on an EV basis and they continue to build up a cash pile.
BUY
UPDATE: PEUGEOT
BUY MORE AS FAURECIA SELLS FENDER UNIT
Tuesday • 15 December 2015 • 10:48
European car sales where very good this morning.
Rates are going up so cyclicals due a period of outperformance.
China car sales have been great helped by the tax cut as we continue to see them feeding through.
Plastic Omnium Agrees to Buy Faurecia Fender Unit for EU665M.
Peugeot own ~50% of Faurecia which is a 4.5bn EUR company. A 2.5% move in UG today is just what their Faurecia stake has gone up by today.
Buy more Peugeot here for the ST and LT as cost saving and price discipline will continue to play out in 2016.
STAY LONG/ADD INTO NUMBERS
Tuesday • 28 July 2015 • 14:55
Results are widely expected to be good tomorrow which is likely to produce some near term risk, but also likely to provide comfort for our longer term view; the auto margin for 1H should comfortably surpass the 2% 2018 target, which supports a stock price through EUR20
Cash is also likely to beat if it has been up-streamed quicker than expected from the de-consolidation of Finco.
Positive prints so far from GM and Ford are a good read for Peugeot’s ongoing European recovery (UGs production increase this quarter), and even if volumes are slightly lighter in China, the RMB move and mix effects are helpful.
As ever positioning will be the key. All autos have been sold on strength recently. But UG for us is the chosen long given margin progression, and we would use any weakness as a chance to add.
It has been a long for us since Feb 2014 (+54%) and we are happy to add here into numbers/stay Long.
THE THREE LIONS KEEP ROARING: STAY LONG +35.02%
Wednesday • 18 February 2015 • 16:08
One of our key longs since Feb 2014 and a top pick for 2015.
Another set of great numbers as FCF was alot better than expected.
Tavares and his back to the race plan is really hitting top gear.
They are still a great restructuring story with many levers to pull.
We took profits on half our position at the beginning of December.
We stay long and will add on any pull back below EUR13.
Currently +35%.
TAKING HALF OUR POSITION OFF HERE +14.8%
Thursday • 04 December 2014 • 16:09
Had a great and deserved run as played catch up vs the sector recently. We will take some profit off the table.
They are still our top pick for 2015.
Q4 will see them as cash positive.
The ongoing restructuring through the back to the race plan gives them a lot of levers to pull. Self help is still key.
It is a China story and Europe story. Where they continue to gain mkt share as both regions crank up the easing.
We will look to add again on any pull back.
SUPPORTIVE SALES, CHINA BLOW OUT
Wednesday • 19 November 2014 • 10:14
European cars released yesterday show sales were up 6.2% in Oct for the 14th straight gain.
Peugeot European sales rose 1.1% YoY with YTD vehicle sales up 5% to 2.43m.
Most notable was UG’s China sales which rose a meagre 31% in October to 63.8K units! This will be a major driver going forward.
Autos have been hit hard recently – but we are bullish into year end and through 2015, UG is our top pick.
Tavares is doing a great job and the restructuring is still in its early stages, we expect them to be cash positive in Q4.
Would add more around here.
FAURECIA RESULTS
Friday • 17 October 2014 • 07:36
Faurecia confirmed its guidance for 2014 as it reported a 6.5% year-on-year rise in revenue in the third quarter.
Faurecia recorded rises in product sales in all regions where it operates, with particularly strong growth in Asia.
The car parts maker continues to expect an increase in revenue on a like-for-like basis of between 2% and 4% this year.
Very good numbers and outlook. They have also been raised to Buy vs Hold at SocGen.
Peugeot and faurecia been battered with the sector and mkt.
Peugeot even more so than others in the sector. Time for the relative outperformance. Been a painful time for our Peugeot long as we have given back all our YTD gains. The Faurecia stake is worth 1.5-2bn and the company sees particularly strong growth in Asia which is half the Peugeot story. I would buy UG this morning.
PEUGEOT +21.7% ON THE YEAR. STILL BEARISH???
Wednesday • 1 October 2014 • 08:27
PEUGEOT CITROEN SEPT NEW CAR REGISTRATIONS RISE 17%.
FRENCH SEPT NEW CAR, LIGHT-VEHICLE REGISTRATIONS RISE 7.6%.
Peugeot brand CEO was on CNBC earlier, talking up China saying they are growing 4 times more than competitors.
He was also positive on Europe as they are taking market share as well as improvements working from the back to the race restructuring plan.
Still alot of bears out there. Its just the start!.
Stay long add anywhere around EUR10.
EUROPEAN AUTOS DOWN, FORD CUTTING 2014. BUYING OPPORTUNITY
Tuesday • 30 September 2014 • 14:22
UG FP: European autos down on back of Ford cutting 2014 pre-tax profit guidance to $6bn (vs 7-8bn prev). Citing South America, a $300m loss in Russia and $1bn in unexpected recall costs, mainly in North America. ML talking down Peugeot as part of that.
I see the –ve read to RNO/FIAT/VW but think any excessive move to the downside in Peugeot is a buying opportunity. Peugeot is all about Europe and China where they are taking mkt share and they also have the “Back to the Race” plan from Tavares, so have the self help restructuring angle . So far they have under promised to over deliver and I see that continuing. This is one of our favourite French names and European restructuring stories. Use any weakness below 10 as a buying opportunity as the cross read is limited except for general sentiment.
TAVARES MARCHES ON
Wednesday • 30 July 2014 • 07:52
Very good set of numbers. Profit at last. Not sure many can remember the last time they did that! However still hated and most don’t believe in them. Alot of big shorts still out there. Tavares doing his job of under promising to over deliver. FCF was awesome and that’s what RNO got attacked on yesterday.
Most calling them +5% or more. The way this trades and with everyone calling them +5% or more. Think we see +10% easy.
EXANE 16TH EUROPEAN CEO SEMINAR. BULLISH PRESENTATION FROM PEUGEOT
Wednesday • 18 June 2014 • 15:52
Conference feedback V bullish presentation by PSA.
“We don’t want to only post good results in 14e we want to transform the company into a profitable and cash generating business”.
Bullish presentation on pricing in Europe/Ems/China JV and royalties. Have full details if any interest.
People have tried to talk them down on the back of them not reaching targets and overestimating what they can do. We on the other hand have felt the opposite that they have under talked in order to over deliver. Signs of that happening. Tavares is the man and will deliver.
RIGHTS ISSUE STATISTICAL STUDY. BUY TODAY/TOMORROW
Wednesday • 07 May 2014 • 15:12
Peugeot one of our key calls in the France/CAC call.
Been a nice trading stock in and around the rights and the re-weight.
Now time to play them again on the long side.
Still a great European restructuring story.
Our Spec sits desk have done a study on the technical side of the rights trade and the study found that companies within the Consumer Discretionary industry have a average return post the rights issue of 21.42% with a 83% probability of a positive return and a 61% probability of a +10% spike.
The relative return in the 5 year period we covered was 14.48% on average. The cheapest day to buy is 4 days into the rights issue trading period. The recommendation is to buy UG FP around the 7th-8th May and hold for 3 months post the rights issue.
WARRANTS FURTHER ATTENTION
Tuesday • 29 April 2014 • 13:58
Peugeot announced today its EUR1.95bn rights issue, with Dongfeng & the French government taking 14.1% a piece.
The market has taken this well with shares up ~4%, inclusive of their new detached warrants.
The company said it will use the proceeds of this to make important investments in implementation of its “Back in the Race” strategy.
There is a +ve article on them in this week’s Economist which is worth a read and pushes the buy case.
We continue to like Peugeot and believe this stock will continue to outperform as the economic backdrop improves (particularly France) and through the execution of Tavares’s strategy.
This is still a good opportunity to buy. A study by our special sits guys suggests that companies within this sector produce an average post rights issue return of 21.4% with a 83% probability of a positive return and a 61% probability of a 10% spike. The rights will be the last supply event.
TAVARES STEERING IN THE RIGHT DIRECTION FOR US…
Wednesday • 16 April 2014 • 12:47
UG was hit hard on what the market perceived to be unambitious mid-term targets announced under Tavares’s “Back in the Race” plan on Monday.
The stock is still 5% lower than pre-announcement, which we believe is an over exaggeration hindered further by a poor market backdrop.
We believe the plan is clearly thought out; streamlining operations and targeting positive op free cash flow by 2016 at the latest. The plan is similar to those which helped Renault rebound from 2009.
Natixis said following their recent road show “targets have been set conservatively” as Tavares wants to give the plan credibility. The targets set by Tavares will in our opinion be met well before the “Back in the Race” plan and could even see them return to profit this year.
UG is the most leveraged to Europe where recent auto sales data have all outperformed expectations and the fleet is the oldest it has ever been.
UG is a great medium-term European equity restructuring play. This pull back is an opportunity to get back in to the name at an interesting level.
We are still bulls on Europe for 2014 and France in particular.
One of our top picks for 2014. Don’t doubt Tavares.
Tuesday • 18 March 2014 • 10:38
Success of the new Peugeot 308 with 60,000 orders already booked.
Launch of the Peugeot 308 SW in April.
Company announced introduction of a night shift starting on 2 June 2014 -600 jobs created and 450 temporary employees recruited (Link).
Doesn’t sound like a company struggling.
Still one of the most shorted stocks out there.
RNO vs UG still a lot of catch up.
Wednesday • 19 February 2014 • 09:37
The announcements this morning have done the job..details of the numbers look good,alot less cash burn than estimated. So far so good now over to Tavares.
Short interest up at ~26% and the borrow is maxed out…Lets see what Tavares says later but hopefully this is the start of the journey.
PEUGEOT….THE THREE LIONS…. TIME TO ROAR
Tuesday• 18 February 2014 • 16:06
Family/French state/Dongfeng.
Numbers and most likely details of the rights issue tomorrow and the future direction with the three lions in charge making the Peugeot investment case compelling.
Tomorrow should put to bed any cash flow issues.
They’ve had a cap increase before and it didn’t go well. This time however the Chinese are there for the lot.
Peugeot is attempting to cut its cash burn of €3bn last year by half in 2013.
The case is becoming compelling post the rights.
Europe car fleet is oldest it has been. Peugeot has around half its sales in Europe so is the most exposed.
Dongfeng will open up massive new markets to them.
Faurecia stake worth EUR 1.8/9bn may well be +ve news around the Faurecia and Banque PSA stake tomorrow.
With Carlos Tavares the new man from RNO in charge they have a man with the pedigree and a reputation as a go-getter to keep the plan on track.
Clarity on the rights tomorrow and remember after the event the state will not sell, nor will the Chinese and certainly not the family.
We prefer to own the new rather than the old. There will be some chin scratching from funds but in the end there will be only one conclusion, you have to have them.
Whatever happens when the rights issue is announced it will happen fast and could be the last liquidity event in this name…Be ready to act.