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THE EUROPEAN RIDDLE

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the european riddle countries, sectors or stocks? james buckley – PowerPoint PPT presentation

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Title: THE EUROPEAN RIDDLE


1
THE EUROPEAN RIDDLE COUNTRIES, SECTORS OR
STOCKS?
  • James Buckley

2
Ireland
3
Irish Equity Market
  • Irish equity market underperformed in 2005
  • Market on 2006 PE of 14X, in line with MSCI
    Europe Ex UK
  • Forecast EPS growth of 15, premium to MSCI
    Europe Ex UK
  • Earnings yield of 7.5 compares to 10 year Bond
    yield of 2.5

Source Davys Stockbrokers as at Dec 2005
4
Irish index 2006
3/1/06 29/12/06 Absolute Return 26
10000
9500
Irish Overall IN Eqty Prc
9000
8500
8000
7500
7000
6500
17Feb
10Mar
21Apr
2 Jun
14Jul
4Aug
15Sep
6Oct
17Nov
8Dec
Source Bloomberg as at 29/12/06
5
Interesting Stock Opportunities
  • Bank of Ireland
  • CRH
  • Anglo-Irish
  • CC
  • Mcinerney

6
Irish stock performance 2006
  • Bank of Ireland 29
  • CRH 25
  • Anglo-Irish 22
  • CC 145
  • Mcinerney28

Source Bloomberg as at 3/1/07
7
Greece
8
Strategic Geopolitical Location
  • Leading investor in Albania, Bulgaria, Macedonia
    and in top 3 for Romania
  • Greek population to rise significantly post EU
    enlargement stage 2
  • Energy hub with pipelines to Turkey, Italy and
    Black Sea
  • Selected Greek stocks offer significant exposure
    to Balkans

9
Greek index 2006
2/1/06 29/12/06 Absolute Return 20
ASE General INDE Eqty Prc
4600
4400
4200
4000
3800
3600
3400
3200
Jan06
3Mar
Apr
May
16Jun
7Jul
18Aug
Sep
20Oct
1Dec
Source Bloomberg as at 29/12/06
10
Interesting Stock Opportunities
  • Cosmote
  • National Bank of Greece
  • Bank of Piraeus
  • Coca-Cola Hellenic

11
Greek stock performance 2006
  • Cosmote 21
  • Bank of Piraeus 68
  • National Bank of Greece -15
  • CCHBC 4
  • Bank of Cyprus 58
  • To date sale/from date purchase

Source Bloomberg as at 3/1/07
12
Denmark
13
Danish Equity Market
  • Danish equity market increased around 40 in 2005
  • Market on 2006 PE of 14.7X, relative to 17x for
    2004 and 2005
  • Forecast EPS growth of 15, premium to MSCI
    Europe Ex UK
  • Earnings yield of 6.8 compares to 10 year Bond
    yield of 3.3

Source Cheuvreux as at Dec 2005
14
Danish index 2006
2/1/06 29/12/06 Absolute Return 10
OMX Copenhagen 2 Eqty Prc
460
440
420
400
380
360
340
Jan06
3Mar
Apr
May
16Jun
7Jul
18Aug
Sep
20Oct
1Dec
Source Bloomberg at 29/12/06
15
Interesting Stock Opportunities
  • Danske Bank
  • A.P.Moller-Maersk
  • TDC

16
Danish Stock performance 2006
  • Danske Bank 12
  • Maersk -23
  • To date sale

Source Bloomberg as at 3/1/07
17
Growth theme in Peripheral Europe intact
  • Economic growth in the euro zone has improved
  • Peripheral euro zone economies are even more
    attractive

Source Consensus Forecast December 11th, 2006
18
Prospective valuations for 2007
  • Ireland forward PE 13X for 12 eps growth
  • Greece forward PE13X for 19 eps growth
  • Denmark forward PE 16X for 13.5 eps growth
  • Europe ex UK forward PE 13X for 9 eps growth

Source JP Morgan as at 3/1/07
19
Baring European Growth - 31/01/07 Country bets
  • Overweight
  • Ireland 10.2 versus 1.94 benchmark
  • Austria 6 versus 1.4 benchmark
  • Underweight
  • Spain 2 versus 9 benchmark
  • Germany 10.3 versus 16.4 benchmark

20
European Growth Top 10 holdings
Top 10 current overweight stocks
Top 10 current underweight stocks

Nestle S.A. -2.50
Novartis AG -2.28
Banco Santander Central -1.92
Telefonica S.A. -1.66
BNP Paribas S.A. -1.59
Siemens AG -1.59
Nokia Corp. -1.53
Sanofi-Aventis S.A. -1.52
Banco Bilbao Vizcaya -1.50
Allianz SE -1.46

Bank of Cyprus PCL 2.49
Julius Baer Holding AG 2.28
Anglo Irish Bank Corp. 2.25
Telenor ASA 2.24
Ryanair Holdings PLC 2.23
Cargotec Oyj 2.21
Software AG 2.20
Piraeus Bank S.A. 2.16
Cosmote Mobile 2.08
Lonza Group AG 2.07

Source Baring Asset Management as at 31/1/07
Relative to MSCI Europe ex UK index
For Comparative Purposes Only
21
Julius Baer
Relative Strength vs. MSCI Europe ex UK
8-Feb-2006 to 9-Feb-2007 (Daily)
  • Growth double-digit earnings growth forecast
    06-08, driven by net inflows and improved
    operating efficiency
  • Management Entirely new management team post
    GAM/SBC acquisition from UBS in 2005
  • Value Creation New targets for cost income
    revenues as of AUM and net new money inflows
    set
  • Valuation Trades on 17x 2006 PE, falling to
    14.5X 2007, broadly in line with peer group.
    Scope for further upgrades

08-Feb-2006100 Local
Julius Baer Holding AG (BAER-CH) 131.1
130
125
120
115
110
105
100
Source Baring Asset Management 2007
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
See Important Information
22
CC Group
Relative Strength vs. MSCI Europe ex UK
8-Feb-2006 to 9-Feb-2007 (Daily)
  • Growth Revenue and earnings growth double
    digit, as they roll out Magners in the UK and
    take market share
  • Management Track record of building a
    successful brand with Bulmers in Ireland
  • Value Creation Recently sold an underperforming
    asset (snacks) above market forecasts
  • Valuation 18.8x 2007 PE, but growing earnings
    at 20 plus and generating upgrades

08-Feb-2006100 Local
220
CC Group PLC (GCC-IE) 185.2
200
180
160
140
120
100
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Source Baring Asset Management 2007
See Important Information
23
Telenor
Relative Strength vs. MSCI Europe ex UK
8-Feb-2006 to 9-Feb-2007 (Daily)
  • Growth Revenue and profit growth coming from
    mobile communications growth in Russia, Thailand
    and Bangledesh
  • Management Over deliver on financial objectives
    and kept winning strategy of emerging market
    growth
  • Value Creation deliver better return on capital
    than cost of capital even in higher risk emerging
    markets. 2.8bn offered for Ukranian asset, total
    investment of 200m
  • Valuation 13.6x 2006 PE is at market level, for
    higher profit growth

08-Feb-2006100 Local
160
Telenor ASA (TEL-NO) 158.9
150
140
130
120
110
100
90
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Source Baring Asset Management 2007
See Important Information
24
European Growth Current Characteristics
  • Fund Size (UK million) 261.2
  • Number of holdings in portfolio 46
  • Large-cap eurgt5bn () 78.99
  • Mid-cap eur2-5bn () 12.02
  • Small Cap eurlt2bn () 6.29
  • Tracking Error 3.60

Source Baring Asset Management, data as 31/1/2007
25
European Growth (Continental Europe -
Retail) Performance as at 31st January 2007
Source Baring Asset Management, Standard
Poors. (bid to bid, in sterling, with net income
reinvested).
Past performance is not a guide to future
performance
39/102
14/113
5/124
Rank
2nd
1st
1st
Quartile
European Growth (Continental Europe Retail) is
a UK Authorised Unit Trust, managed by Baring
Fund Managers Limited (Authorised and regulated
by the Financial Services Authority).
Annualised returns. Index is MSCI Europe ex UK
Micropal, UK Registered Investment Funds
Equity Europe ex UK Reference to the index is for
comparative purposes only.
26
Important Information
  • This document is issued by Baring Asset
    Management Limited and in jurisdictions other
    than the UK it is provided by its investment
    advisory affiliates. It has been produced for,
    and is intended for receipt by, professional
    investors/advisers and must not be relied on by
    any other category of recipient. The value of any
    investments and any income generated may go down
    as well as up and is not guaranteed. Past
    performance is not a guide to future performance.
    Quoted yields are not guaranteed. We reasonably
    believe that the information contained herein
    from 3rd party sources, as quoted, is accurate as
    at the date of publication. This document must
    not be relied on for purposes of any investment
    decisions. This document may include
    forward-looking statements which are based on our
    current opinions, expectations and projections.
    We undertake no obligation to update or revise
    any forward-looking statements. Actual results
    could differ materially from those anticipated in
    the forward-looking statements. The information
    in this document does not constitute investment,
    tax, legal or other advice or recommendation or,
    an offer to sell or an invitation to apply for
    any product or service of Baring Asset Management
  • Research Material
  • Baring Asset Management only produces research
    for its own internal use. Where details of
    research are provided in this document it is
    provided as an example of research undertaken by
    Baring Asset Management and must not be used, or
    relied upon, for the purposes of any investment
    decisions. The information and opinions expressed
    herein may change at anytime.
  • Date complied 13 February 2007
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