Microsoft word - helvea morning news - 24.09.2012.doc

Morning News & Views
24 September 2012
Prices and Ratios as of 21 September 2012 SMI & OTHER EUROPEAN LARGER CAPS
Feedback from Adecco's Investors' Days in Paris - Day 2 ƒ NOVARTIS
Relaxin Phase II/III study released: Primary endpoint only met half way SWISS & OTHER EUROPEAN MID & SMALL CAPS
Competition in the Swiss direct non-life market is increasing ƒ MEDTECH
More details on the restructuring programme Solid performance from EGMs, contraceptive patch filed in EU, Helvea reaffirms BUY In advanced negotiations with Folli Follie Group for the acquisition of a 51% stake Helvea adjusts estimates after decision to exit the smaller loss-making countries SALES CONTACTS @ HELVEA
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This report is published by Helvea SA, Jargonnant 5, CH-1207 Geneva, Switzerland. Copyright 2012 Helvea SA and/or its affiliates. All rights reserved
Target: CHF49.0
ƒ Feedback from Adecco's Investors' Days in Paris - Day 2
Adecco held the second day of its Investors’ Days 2012 in Paris with presentations on "Lee
Hecht Harrison (LHH) - Global Leader in Career Transition & Talent Management" by Peter Alcide,
President and COO of LHH, on "Adecco's business in North America" by Bob Crouch, Regional Head of
Adecco North America, on "A look at Adecco in Latin America" by Enrique Sanchez, Regional Head of
Iberia and Latin America, and on "Adecco's developments in Managed Service Programmes (MSP) and
Vendor Management System (Beeline)" by Mike Wachholz, President of Pontoon, and by Doug Leeby,
President of Beeline, as well as some closing remarks by the CEO, Patrick de Maeseneire.
Opinion: The countercyclical outplacement business LHH has gained further importance for Adecco
after the DBM acquisition. It is market leader not only globally, but also in five important top markets. It
delivers a high profitability level also in comparison with peers. The integration of DBM and the
rebranding are on track, while the synergies are expected to exceed the initially targeted EUR20m.
In North America, the market is growing, driven by increasing penetration rates. Automotive, logistics
and transportation are still doing well, while larger clients are moving to MSP/VMS solutions. Adecco
has strong profitability in general as well as in professional staffing. A special focus was on Adecco’s
problem business IT staffing, which should be back on track now.
Latin America is an important part of Adecco’s growing emerging market business. It is characterised by
an informal workforce, which accounts for still more than 50%. Adecco is one of the leading
international players in Latin America. There too, it is strongly focused on gross margins and costs.
The company also gave an update on the MSP/VMS business, which has grown 70%-80% since the
last Investors’ Days two years ago. Adecco is very well positioned as the only global player offering
MSP (Pontoon) with a leading VMS (beeline).
Overall, Adecco has made once again clear that it is strongly focused on increasing shareholder value
with its EVA approach. Gross margin trends are good and cost control remains strict, while the
company uses the opportunity of the low interest environment to refinance itself with debt. However, it is
also clear that it needs top line growth (and therefore an improvement in the market) to reach its
medium-term EBITA margin target. The six strategic priorities have remained unchanged versus two
years ago, but are now at different levels.
Markets in Europe (which accounts for more than 60% of Adecco’s revenue) remain challenging overall.
We remain convinced about Adecco’s long-term strategy of focusing on profitability and, more
specifically, by management’s impressive cost-control management. We believe that Adecco is right to
be optimistic about beating previous peak penetration rates and that, consequently, the medium-term
EBITA margin target of over 5.5% is also achievable. However, this could take longer than initially
planned. In the short term, the shares will be driven by stock market sentiment.
Chris Burger, CFA – +41 (0)43 388 9259 –
Income statement
Valuation ratios
2011 2012E 2013E 2014E
2011 2012E 2013E 2014E
2 Helvea | Morning News & Views – 24 September 2012
Target: CHF69.0
ƒ Relaxin Phase II/III study released: Primary endpoint only met half way

Novartis has announced top-line results from the Phase II/III six-month RELAX-AHF study investigating
the efficacy and safety of RLX030/relaxin for the treatment of acute heart failure (AHF). Heart failure is
a disease in which the heart is unable to supply enough blood to meet the body's needs.
Relaxin, acquired from Cothera, is a recombinant form of human relaxin-2 which mimics a process that
occurs during pregnancy to lower vascular resistance and increase cardiac output. Around half of all
patients die within five years of diagnosis, particularly as a result of acute episodes in which their
symptoms suddenly become worse and urgent hospital treatment is needed. Acute heart failure (AHF)
places an enormous burden on healthcare systems and accounts for around two million hospitalisations
each year in the EU and the USA.
The study was a randomised, double-blind, placebo-controlled study involving 1,161 patients in 11
countries. In the study, RLX030 was given on admission to the hospital in the form of an intravenous
infusion for up to 48 hours in addition to loop diuretics and other medicines and was compared with
placebo on top of standard of care treatment for AHF. Primary endpoint was relief of dyspnea (or
shortness of breath, the most common symptom of AHF) while secondary endpoints were ‘Days alive
and out of hospital
’ together with ‘CV death or rehospitalisation due to heart failure or renal failure’.
The primary endpoint of dyspnea reduction was measured using different scales, only one of which
reached statistical significance. The study met the secondary endpoint, demonstrating that RLX030
reduces the number of deaths in patients with this disease, which has a higher mortality rate than most
other cardiovascular diseases.
The study will be presented at the American Heart Association (AHA) congress in Los Angeles in
November, 2012. Novartis will initiate discussions of the results of this single Phase III study with health
authorities worldwide shortly.


Top-line results of phase II/III study with Relaxin in AHF give too little details to give a fair assumption
regarding a future approval of the drug. Details of the primary endpoints, i.e. the 2 measures of dyspnea
which gave different results will be discussed at AHA. As Relaxin has been seen as a very high risk
asset by both the investment community and Helvea, there are very little sales expected by the market
although considering the significant number of AHF hospitalisations per year in the USA alone, the drug
has a multi-billion potential. We do not carry any sales estimates in our model
Odile Rundquist, PhD – +41 (0)22 354 9159 – orundquist@helvea.comOlav Zilian, MD, PhD+41 (0)22 354 9167
Income statement
Valuation ratios
2011 2012E 2013E 2014E
2011 2012E 2013E 2014E
24 September 2012 – Morning News & Views | Helvea
ƒ Competition in the Swiss direct non-life market is increasing
In early September 2012, inet24 started its operations as a direct insurer, initially in auto, at a later
stage also in household, travel, legal, and other lines. Risk carriers are the Australian QBE and the
German DAS (which belongs to Munich Re). The operations are entirely online and paperless.
Chairman of the firm is Urs Dickenmann, a former Credit Suisse banker. According to NZZ am Sonntag,
rates for comprehensive cover in motor insurance offered by iDirect24 (the auto insurance platform of
inet24) are significantly lower than those of some of its direct competitors.
Inet24 rates and comparison with other auto insurers
(in CHF)
Zürich Connect
Sources: NZZ am Sonntag, Helvea estimates N.B. rates are calculated for a 25 year old Swiss living in the canton of Zurich

Non-life insurance in Switzerland is extremely profitable (combined ratio of 89.7% in 2011 according to
FINMA) and therefore it was only a matter of time before a new competitor would enter the market.
Rates offered by inet24 are in some cases up to 20% lower. In the past, other insurers, which tried to
gain market share aggressively failed as a result of adverse selection. Generally, most Swiss customers
are not very price-sensitive, therefore mainly younger customers are likely to benefit from these
significantly lower rates. However, it remains to be seen how customers react to such an offer but in the
medium term competition is likely to increase as the direct channel gains traction and aggregators such
as Comparis will also play a more important role (not just in health insurance).
Daniel Bischof, CFA – +41 (0)43 388 9263 –
4 Helvea | Morning News & Views – 24 September 2012
ƒ GN ReSound launches ReSound Verso
Facts: GN ReSound has launched a new premium hearing aid family, ReSound VersoTM. ReSound
VersoTM features ear-to-ear connectivity.

ReSound VersoTM will be the first hearing aid ever that features both wireless direct
streaming of sound and ear-to-ear connectivity based on 2.4 GHz technology. We expect Sonova and
William Demant to release also similar products at the EUHA on 24-26 October 2012. With the launch,
GN Resound has however placed the ball now in Sonova’s and William Demant’s court and herewith
undermined the innovation leadership of the market leaders at least for a couple of weeks.
We are cautious on Sonova and William Demant due to their steep valuation. For the time being, we
rate Sonova at NEUTRAL with a PT CHF81.4 and William Demant at SELL with a PT DKK437.
Sonova will host its investor day this week on 27 September.
Simon Goetschmann – +41 (0)43 388 9264 –
Sector performance
24 September 2012 – Morning News & Views | Helvea
Target: CHF142.-
ƒ Solid performance from EGMs, contraceptive patch filed in EU, Helvea reaffirms BUY

As part of Helvea’s best ideas, Acino’s investment case is very attractive in our view and the stock is
strongly undervalued. The main reasons are the following:
■ With the acquisition of Mepha/Cephalon’s Middle Eastern, African, Latin American and Asian businesses, the company has gained critical mass with its business-to-consumer (B2C) activity in EGMs and will benefit from the strong demand for Swiss branded generics from the middle class which has an increasing purchasing power. ■ The company has now a well-filled portfolio to meet the local needs and will be able to introduce its own Acino’s products (i.e. clopidogrel, goserelin implant, fentanyl patch, metoprol, alfuzosine and others) in these countries ■ Acino’s own high-margin products together with projects in collaboration with companies will expand margins and generate additional revenues: rivastigmine (Alzeihmer’s disease; approval in 2013), contraceptive patch with Bayer (filing announced with approval expected end of 2013, phase III results to be presented on 7-12 October in Rome), goserelin (launch in EGMS imminent; approval in developed countries end of 2015; leuprorelin ; approval in early 2016) ■ With a diversified business (broad geographic footprint and well-filed portfolio), the company expects strong sales growth (double-digit growth projected until at least 2015) and an increase of 7pp in the EBITDA margin over the coming 2 years. Odile Rundquist, PhD – +41 (0)22 354 9159 –
Income statement
Valuation ratios
2011 2012E 2013E 2014E
2011 2012E 2013E 2014E
6 Helvea | Morning News & Views – 24 September 2012
Target: CHF140.-
ƒ In advanced negotiations with Folli Follie Group for the acquisition of a 51% stake
Dufry has announced that it is in advanced negotiations with Folli Follie Group (FFG) for the
acquisition of a 51% participation in FFG’s travel retail business.

Dufry is an acquisitive growth story and it continues to be an active player in the market
consolidation process. FFG’s travel retail business is only active in Greece – in 2011, it generated sales
of around EUR290m with EBITDA of some EUR84m (approx. 29% margin). This compares with our
forecasts for Dufry of top line at CHF3.2bn (adding some 10% to group sales) and an EBITDA margin of
15% for 2012. Historically, had Dufry paid 10X EBITDA for acquisitions, which would bring the purchase
price for to some EUR430m (51%). Although the target seems to have above-average profitability and a
very long contract duration until 2048, the expectedly lower growth profile might be an argument against
an exaggerated purchase multiple. If the purchase price were to fall within this range, we would assume
Dufry to be in a position to finance the acquisition through debt. We believe that in such a scenario the
net debt/EBITDA ratio would amount to 3X and that the company’s current covenant (before re-
negotiation) stands at 3.25X at the end of 2012. We see today’s announcement as positive for Dufry. It
is in line with their growth strategy and it underpins the company’s active role in the consolidation
process. Dufry should continue to benefit from rising scale. We reiterate our BUY recommendation.
Michael Heider – +41 (0)43 388 9255 –
Income statement
Valuation ratios
2011 2012E 2013E 2014E
2011 2012E 2013E 2014E
24 September 2012 – Morning News & Views | Helvea
Target: CHF320.-
ƒ Helvea adjusts estimates after decision to exit the smaller loss-making countries
We have adjusted our estimates after the company announced its decision to exit its loss-
making tour operating activities in Italy, Spain, the Netherlands, Belgium and Russia, as well as the
B2C online platform Octopustravel. For 2012, we have included one-off costs of CHF80m (CHF35m
cash relevant and CHF45 non-cash relevant) as guided for by the company. As the process to exit will
take some time (especially in Italy), we still forecast a smaller sales and loss contribution from these
operations for 2013, but we have completely excluded them from our 2014 estimates. This finally
results in approx 5% higher net profit estimates for 2013 and 2014.
Kuoni: Changes to Helvea's estimates (2012-2014)
Gross profit
Net result
Underlying EPS (CHF)
Sources: Company data; Helvea estimates Kuoni has changed significantly over the past few years. The main drivers are now the Global Travel Services, emerging markets and visa business. Not only is Kuoni now not comparable to what it used to be in the past, but neither is the new Kuoni directly comparable to more charter-based tour operators like TUI Travel and Thomas Cook. However, we believe that the market has still not fully realised this. We therefore clearly think that Kuoni is pursuing the most attractive strategy in the industry. Even if the current market environment is difficult, the current valuation is attractive in our view, especially when taking into account the faster-growing and higher margin business of VFS Global. In addition, Kuoni has a sound balance sheet and strong free cash flow. Chris Burger, CFA – +41 (0)43 388 9259 –
Income statement
Valuation ratios
2011 2012E 2013E 2014E
2011 2012E 2013E 2014E
8 Helvea | Morning News & Views – 24 September 2012
Kuehne + Nagel
Hannover Re
GAM Holding
Credit Suisse
Bucher Industries
OC Oerlikon
Fresenius Medical Care
Novo Nordisk
Lonza Group
Phoenix Mecano
Bureau Veritas
Hannover Re
Barry Callebaut
Munich Re
Symrise AG
Symrise AG
Nobel Biocare
24 September 2012 – Morning News & Views | Helvea
Comet Holding AG
Julius Baer Group
Arbonia Forster
Merck KGaA
Zurich Insurance Group
Swiss Life Holding
Zurich Insurance Group
Barry Callebaut
Geneva +41 22 354 9000 ■ London +44 20 7054 7100 ■ Montreal +1 514 288 3556 New York +1 212 935 5150 ■ Zurich +41 43 388 9200 Helvea publications are also available on Bloomberg: <HELV> <GO> and on our web site: (credentials available on request) 10 Helvea | Morning News & Views – 24 September 2012

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The following is an explanation of the ratings, if any, included in this Document.
- Expected return based on 12-month price targets -
Mid-cap & Small-cap
There are four possible ratings: BUY, ACCUMULATE, NEUTRAL OR REDUCE.
For each rating there is a different price target appreciation, expressed as a percentage, according to the classification of the company in one of the two investment categories into which the universe of companies covered by Helvea is divided. Large-Cap (L) universe comprises the constituents of the Swiss SMI Index together with those non-Swiss companies covered by Helvea.
Mid- and Small-Cap (M&S) universe is defined to be al other shares under coverage.
EXAMPLES of certain ratings:
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