Denmark's C20 index in sharp reversal – #SaxoStrats
- TDC’s takeover of Swedish MTG is in my view a long-term risky move TDC had to take. Stand-alone telecommunication companies are dying due to technology and price pressure. Short-term here the market is not rewarding TDC for their bold move into content. Investors are sending the shares down 9%. Compared to peers in our quant model TDC is valued around average. The shareholder yield on the other hand is very attractive but is likely going to go down to pay for the acquisition and integration of MTG. While the price move is big for TDC the index point impact is around 2.3 pts. so nothing major.
- Novo Nordisk missed 2018 estimates today and investors are worried over the weak USD despite the majority of the impact is hedged by their Treasury. Shares are down 7% which is 11.4 index pts. weighing down on OMXC25 Index. Novo Nordisk also recently lost the bid for Belgium Ablynx is another growing concern for investors because Novo Nordisk need some diversification in the pipeline. Novo Nordisk is in our top 40 list in our quant model driven by recent strong momentum and the industry’s best quality (return on capital). Even with today’s disappointment we have to remember that Novo Nordisk actually increased their EBITDA margin in 2017 to highest levels ever at 46.7%. The biggest risk here is dramatic changes to the pricing structure on US drug prices with yesterday’s announced partnership between Amazon, Berkshire and JPMorgan to change health care as evidence of change to come in the US. Novo Nordisk is only valued 15% above the global equity market on EV/EBITDA but has significantly higher business moat and return on capital. The company guides with 2-5% revenue growth in local currencies. A big concern is the massive slowdown in growth in their China business.
- Coloplast shares are down 5% or 3.2 index pts. as FY18 Q1 disappointed. We are much more worried about Coloplast because the valuation is extremely elevated (57% premium) and there is little scope for further EBITDA margin expansion which will be drag on profit growth going forward as top line growth is expected to slow down over time .
– Edited by Clare MacCarthy
Steen Jakobsen is chief economist and CIO at Saxo Bank