6 Contents Market View: Equities cautious ahead of ECB Aer Lingus: Release traffic stats and announce positive union vote on IASS NOVEMBER 2014 Market View European equities opened lower, despite a record close in the S&P overnight A worsening European economy and signs Britain’s recovery has stumbled are hardening the stance of some Bank of England members, who want to keep the benchmark rate at a record-low 0.5 percent German Factory orders were lower this morning at 0.8% (survey 2.3%, prior -5.7%) Economic data will focus on the Bank of England Rates meeting at 12.00 and ECB Rates meeting at 12.45. Aer Lingus – (N/C) Previous Close €1.69 Following yesterday’s IMS Aer Lingus released October traffic stats this morning, showing continued growth in its long haul offering Short haul was 2.1% lower YoY, however long haul posted another strong performance, up 29% YoY Significantly, following the IMS, Aer Lingus also announced that it had received trade union support on the longstanding pension issue Comment: While load factors remained below low cost competitors at 79.6%, the company continues to improve this metric and total passengers carried was also up 2.3% YoY. The positive trade union ballot announced yesterday is an important step forward for the company and a resolution of the pension issue should remove a substantial overhang for the share price. The proposal must now receive shareholder approval and be put forward by the Pension trustee for approval by the Pension Authority. Should this occur it would be more good news for the flag carrier, which saw operating profit increase 19% to €112.9m in the last quarter. The company has sufficient free cash flow and cash on deposit to meet the proposed €191m pension obligation and any resolution would remove a significant liability on the balance sheet moving forward. The shares are trading on 13x FY15e earnings against the industry on 10x, however we would expect the airline to re-rate closer to peers once the pension issue is resolved. Siemens – (N/C) Previous Close €89.08 Siemens has released earnings this morning largely in line with consensus Revenues were up 1% YoY to €20.6bn but slightly below consensus of €20.68bn Q4 total sectors profit was €2.195bn, below consensus of €2.4bn Comments: Results are largely in line for Siemens with net income up to €1.44bn and EPS of €1.72 for the quarter. The company also confirmed the sale of its hearing aid unit for €2.2bn. We removed Siemens from the core portfolio noting geo-political concerns and the impact on-going sanctions in Russia would have on performance. The company has again reiterated this concern while discussing the outlook for 2015. Siemens sees EPS growth of 15% in 2015, however, given that they expect organic growth to be flat YoY the increase is likely to come from divestures of noncore businesses, like the sale of the hearing aid unit, announced today. We continue to like the restructuring story of Siemens but remain cautious given the potential impact of on-going geo-political tensions could have on earnings. The shares trade on 11.3x FY15e earnings a discount to peers on 14x. Siemens: Earnings in line IRISH PAPERS TODAY Ikea, Pepsi amongst 340 companies with secret Luxembourg tax deals (The Irish Times) Glanbia has paid over €1bn into Luxembourg companies to cut Irish tax bill (The Irish Independent) Tone of Trichet letter made it clear ECB was calling the shots for Ireland (The Irish Times) TH INTERNATIONAL PAPERS TODAY Republicans push for probusiness reform (Financial Times) AstraZeneca profits falls sharply (Wall Street Journal) Cameron loses support from EU allies (Financial Times) www.cantorfitzgerald.ie Equities Research Portfolio Management Bonds Regulatory Information This material is approved for distribution in Ireland by Cantor Fitzgerald Ireland Ltd. Cantor Fitzgerald Ireland Ltd (“CFIL”) is regulated by the Central Bank of Ireland. Cantor Fitzgerald Ireland Ltd is a member firm of the Irish Stock Exchange and the London Stock Exchange. 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