Nice 8% move to the upside yesterday as management have delivered.

But we feel as a result of what they have done today the market will ‘re-rate’ them.

Now the confidence is coming back investors don’t need a discount as no more fears about buying WRT1V etc.

Historically the market has paid more than 15x .15x and with the buyback of £1bn of stock (5%) and we are looking for a PT of 1130-50.

We would be very happy to take a 7% profit in a week here but are just as comfortable holding them for the rerating as they move to a diversified industrial company and away from a pure play aerospace company. Looking for 1130.

We are closing here for the short-term.



Thursday • 12 June 2014 • 16:10

Down 19% this year, hurt mainly by disappointing final results for 2013.

Investor day provides the opportunity for management to restore confidence. No one expects to be blown away by them but some form of control and a continued sensible M&A strategy coupled with news on buybacks and the dividend will go a long way.

Yesterdays Emirates blow and JPM’s bearish note provides a good entry point. The announcement to scrap 70 Airbus A350s (dented the order book ~3.5% or £2.6b). RR/ is confident this capacity will be taken by other airlines.

A cancellation of 70 orders is relatively insignificant in relation to its total order book of 5,500 and although disappointing does not change its improving earnings trajectory.

Market has had concerns that they would only see top line positive growth by 2015 as mentioned in a broker note yesterday. The company has been calling round today saying they expect top and bottom line growth which would be a big positive.

At these levels the risk/reward offers significant upside into the investor day and would be happy to own them anywhere below 1025.