You Can’t Buy a BlackBerry Passport – ‘Being Sexy’

It’s a good thing that some people can’t buy BlackBerry Ltd. (BBRY)’s Passport phone, Chief Executive Officer John Chen said.

That means it’s popular.

Disclosure : Blackberry remains one of Jack A. Bass Managed Accounts largest long positions.

Shortages of the business-focused smartphone show that efforts to turn around the unprofitable company, formerly known as Research In Motion Ltd. (BB), are taking hold, Chen told an MIT Enterprise Forum event today in Hong Kong. Demand for the phone — the first major new device released globally since Chen took charge in November — has exceeded the Canadian company’s expectations.

“I’m glad to have inventory issues. It shows that people want the phone,” said Chen, 59. “We took a very conservative approach and didn’t order too many.”

In his attempt to return the company to profitability by 2016, Chen is focusing on products such as the BlackBerry Blend feature that appeals to corporate customers because it helps them merge work and personal information. BlackBerry’s smartphone shipments sank to 13.7 million units last year from 52.3 million in 2010, according to data compiled by Bloomberg, as it struggled to compete with touch-screen devices produced by Apple Inc. (AAPL) and Samsung Electronics Co.

‘Being Sexy’

The Passport pre-sold 200,000 units in the first two days, selling out in six hours on BlackBerry’s website and within 10 hours on Amazon.com. The square-screen smartphone is designed for business users who write e-mails, study spreadsheets and read documents on their phones.
BlackBerry was focused on the 30 percent of the market that sees their phones as a tool, not as an entertainment portal, Chen said.

“That is not a space that we can afford to be in now. Being sexy and being a workhorse are two different things,” he said.

Chen, a Hong Kong native, said he doesn’t yet have a strategy for expanding into China. The company got 16 percent of its sales from the Asia-Pacific region during the fiscal year that ended in March, compared with 19 percent from the U.S., according to data compiled by Bloomberg. Chen said he hopes to get ideas when he attends the Asia-Pacific Economic Cooperation summit in Beijing next month, his first trip to the country as CEO.

“China is too big a market to ignore,” Chen said. “It is clear that BlackBerry needs to and should be in that market.”

Shares of BlackBerry rose 1.3 percent to $9.42 at 9:37 a.m. New York time.

Good News on Chesapeake : $5.4 Billion Divestment.

Readers will note that we have been out of CHK for a very long time but today’s news marks a real turn in the company . Finally it will have a substantial reduction in the debt that kept our manged accounts away from the sector and this stock in particular.

Chesapeake Energy Corp. (CHK), the company that forced out its co-founder last year amid an investor revolt, plans to sell natural gas and oil shale fields to Southwestern Energy Co. (SWN) for $5.4 billion in its biggest-ever divestment.

The transaction includes 1,500 wells and drilling rights across 413,000 acres in the southern Marcellus Shale and eastern Utica Shale in Pennsylvania and West Virginia, Oklahoma City-based Chesapeake said in a statement today.

Chief Executive Officer Doug Lawler is exiting some shale prospects to devote drilling crews and rigs to oil-rich formations that have delivered rates of return in excess of 20 percent. Before today, Chesapeake had sold or spun-off more than $3 billion in gas fields, office buildings, pipelines and rigs this year, as it unwinds deals done by former CEO Aubrey McClendon.

Today’s announcement marks a major step in Chesapeake’s transformation and a dramatic improvement in our financial strength as we seek to maximize value for our shareholders,” Lawler said in the statement.

The transaction, which is expected to close before the end of the year, won’t impact Chesapeake’s production growth targets, Lawler said. Chesapeake, which had fallen 31 percent this year, surged 11 percent to $19.65 at 8:45 a.m. in New York, before the start of regular trading. Southwestern fell 5.3 percent to $33.80.

Reserves Boost

For Southwestern, the transaction represents the first major foray into oil-rich shale for a company that has been almost exclusively focused on gas production. Wells that are part of the deal produce the equivalent of 56,000 barrels of crude a day, 45 percent of which is oil and so-called gas liquids such as propane. The acquisition also is Southwestern’s largest-ever deal, according to data compiled by Bloomberg.

The purchase will increase Houston-based Southwestern’s reserves by one-third to the equivalent of 890 million barrels of crude at a cost of about $24 per barrel.

“We think the sale is transformational for both parties,” Scott Hanold, an analyst at RBC Capital Markets, said in a note to clients today.

A shortage of gas-processing plants and pipelines in the Appalachian region could delay Southwestern’s plans to expand output from its new assets. Those bottlenecks should ease in the coming years as more infrastructure is added, Hanold wrote.

Dismantling Empire

In an internal e-mail today, Lawler announced plans for a town hall-style meeting with employees on Oct. 20 to discuss the impact of the sale and long-term growth plans. Senior managers and human resources executives have already met with employees at the affected divisions to talk about transitioning to Southwestern, he said in the e-mail.

Chesapeake announced plans in July to expand in the Rocky Mountains amid Lawler’s campaign to reduce costs, unload unprofitable gas fields and untangle complex financing arrangements created during the reign of his predecessor.

Since becoming CEO two months after McClendon’s dismissal in April 2013, Lawler has outperformed the average gas and oil production estimates of analysts in quarterly Bloomberg surveys.

Southwestern expects to sell equity and debt before closing to finance the transaction. Bank of America Corp. advised Southwestern and will provide a $5 billion bridge loan.

Statoil ASA (STL), co-owner of some of the West Virginia and Pennsylvania assets, has 30 days to acquire the stake at the agreed price, Southwestern said.

(Southwestern scheduled a conference call for 11 a.m. New York time. To listen, dial 877-407-8035 in the U.S. and 201-689-8035 from overseas.)

Netflix – Lower Price Target

NFLX : NASDAQ : US$448.59

BUY
Target: US$450.00

COMPANY DESCRIPTION:
Netflix is the world’s leading Internet television network
with over 50 million members in more than 40 countries
enjoying more than one billion hours of TV shows and
movies per month, including original series. For one
monthly price, Netflix members can watch as much as
they want, anytime, anywhere, on nearly any Internet connected device.
Telecommunications
LOWERING ESTIMATES, TARGET ON WEAK ADDS AND GUIDANCE; BUY
Investment recommendation
Netflix reported results after the close with weaker-than-expected
subscriber trends notably in the US. Although financial results were
largely in line with expectations, the company believes that the $1 price
increase – in addition to certain market factors including large-scale
credit card data breaches – contributed to the net addition weakness.
While we believe the shortfall is due to neither intensifying competition
in this nascent category nor penetration maturation, we are nevertheless
reducing our estimates and price target accordingly.

Investment highlights
 Material shortfall on subscribers – While we anticipated domestic
add trends would rebound strongly following dramatic network
improvements during the quarter, the price increase appears to
have dampened the impact. Despite an improved content library,
managing any price increase relative to such improvements remains
a delicate balancing act, in our view.

 Financial metrics remain solid – We note financial metrics for Q3/14
were largely in line with expectations. Adjustments to our forecast
reflect a lower subscriber base, higher marketing and G&A spend.
Continue to play the secular trend – Despite the fact that Q3/14
produced unexpectedly-weak subscriber trends and a weaker-than expected outlook, we continue to believe management will refine
their approach in determining the appropriate mix of pricing
changes to content improvements that will continue to redefine the
programing as we know it. With the changes, however, we are
reducing our estimates and price target to $450 from $550

Dry Bulk Sector : we are still out of the sector – watchlist only

Dry Bulk Shipping

The dry bulk shipping industry is affected by numerous factors—like world economies’ growth and commodity supply and demand. Considering the various world economies, China’s economic growth rate impacts dry bulk shipper’s movement. China is an important commodity market.

The sell-off

Since the beginning of September 2014, dry bulk shipping companies—like Navios Maritime Holdings Inc. (NM), DryShips Inc. (DRYS), Knightsbridge Shipping Ltd. (VLCCF), and Safe Bulkers Inc. (SB)—have all suffered great losses.

NM fell by 47%. DRYS fell by 42.9%. VLCCF fell by 41.8%. SB fell by 35.8%.

The Guggenheim Shipping ETF (SEA) tracks a variety of major shipping companies worldwide. It fell by 17.8%. It underperformed the S&P 500. The S&P 500 decreased by 4.8%.

Important indicators

Why have these dry bulk shipping companies fallen so much over the last few months? What do the industry fundamentals look like? We’ll use key indicators to help us answer these questions throughout this series.

The dry bulk shipping companies transport dry bulk—like iron ore, coal, and grain—around the world using vessels.

China is one of the largest commodity importers in the world. China’s manufacturing and real estate sector remains a key driver of dry bulk trade throughout the world.

At an industry level, iron ore exports out of Australia and Brazil are key data points to follow. Since coal is used to generate electricity, we’ll take a look at China’s recent thermal power output trends.

To gauge industry players’ sentiment and expectations of the industry outlook, we’ll look at newbuild and second-hand vessel prices. We’ll look at the Capesize and Panamax vessels in particular. We’ll also look at ship ordering activities.

We’ll provide the Baltic Dry Index’s fourth quarter outlook. We’ll also discuss analyst opinions on dry bulks—provided by RS Platou.

We’ll start by looking at the Baltic Dry Index. It’s an Index that reflects the overall rate of transporting dry bulks on water.

Why the Baltic Dry Index is decreasing

Baltic Dry Index

The Baltic Dry Index measures the cost of major raw materials. The raw materials are transported by sea in the global economy. It indicates a strict demand supply price situation. When the cost to move goods by ship is lower, there are less goods to ship.

The Baltic Exchange Dry Bulk Index is a combination of rates for different ship sizes. It factors in the average daily earnings of Capesize, Panamax, Supramax, and Handysize dry bulk transport vessels. Most of the vessel classes that make up the Index are at their lowest level for this time of year—since at least 2006. Capesize ships are an exception. They’re used to carry iron ore or coal cargoes of ~150,000 deadweight tonnage (or DWT).

September performance

The Baltic Dry Index recorded a decreased percentage in trading to 1,063 on September 30, 2014, from 1,151 at the beginning of the month. So far in October, the Index decreased more to 1,029 as of October 6, 2014. Capsizes pulled down the Index by the maximum rate. On a year-over-year (or YoY) basis, the Index recorded a decreased percentage from 2,115 on October 7, 2013. Since October 2, the iron ore ship charter cost—charter cost to ship iron ore—declined the most.

Impact on companies

How the Baltic Dry Tanker Index performs, especially its YoY growth, is one factor that has significant implications for dry bulk companies.

Historical trends suggest strong third and fourth quarters. Investors should watch the Index for any rate of increase.

As a result, the following dry bulk companies—like Star Bulk Carriers Corp. (SBLK), Safe Bulkers Inc. (SB) Baltic Trading Inc. (BALT), and Knightsbridge Tankers Ltd. (VLCCF), and the Guggenheim Shipping ETF (SEA)— could benefit in the short-term.

However, if the YoY changes remain in the negative, then the long-term outlook for these companies will remain in the negative
Company downgrades

Some of the largest names in the sector—including Capesize giant Knightsbridge Shipping Ltd (VLCCF) and Danish owner Norden—have also been downgraded in RS Platou’s recent quarterly report.

Knightsbridge is the largest Capsize owner listed in the U.S. It has been cut to sell from buy. Norden was downgraded to neutral.

Meanwhile, in the weaker dry cargo market, Platou also downgraded Diana Shipping (DSX) and Golden Ocean. It downgraded them from buy to neutral.

Platou analysts, Frode Morkedal and Herman Hildan, said that Knightsbridge is an attractive long-term investment vehicle. In the near term, weaker rates will bring a lower dividend.

Norden was downgraded to neutral. This was a result of the expected marginal rate improvement. It will pull its operating numbers back to black in 2015. However, the numbers won’t be at a level that justifies a higher stock price.

This could impact other companies in the industry like DryShips Inc. (DRYS), Safe Bulkers Inc. (SB), and the Guggenheim Shipping ETF (SEA).

Oil Enters Bear Market

Brent Falls to Lowest Since 2010 After IEA Cuts Forecast

Brent crude fell to the lowest level in almost four years after the International Energy Agency said oil demand will expand this year at the slowest pace since 2009. West Texas Intermediate slipped for the fifth time in six days.

Futures dropped as much as 3.1 percent in London and 2.1 percent in New York. Oil consumption will rise by about 650,000 barrels a day this year, 250,000 fewer than the prior estimate, the Paris-based agency said in its monthly market report. U.S. crude supplies probably grew by 2.5 million barrels last week, according to a Bloomberg survey of analysts before a report from the Energy Information Administration on Oct. 16.

Oil futures have collapsed into bear markets as shale supplies boost U.S. output to the most in almost 30 years and global demand weakens. The biggest producers in the Organization of Petroleum Exporting Countries are responding by cutting prices, sparking speculation that they will compete for market share rather than trim output. Saudi Arabia won’t alter its supplies much between now and the end of the year, a person familiar with its oil policy said on Oct. 3.

“The IEA report is killing Brent,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “This is the fourth month in a row where they’ve cut their demand forecast. There’s tremendous downside risk for the market.”

Fourth Month

Brent for November settlement declined $2.54, or 2.9 percent, to $86.35 a barrel on the London-based ICE Futures Europe exchange at 10:24 a.m. in New York. It slipped to $86.17, the lowest intraday price since Dec. 1, 2010. The volume of all futures traded was 68 percent above the 100-day average for the time of day. Prices have decreased 22 percent this year.

WTI for November delivery dropped $1.71, or 2 percent, to $84.03 a barrel on the New York Mercantile Exchange. The contract settled at $85.74 yesterday, the lowest close since December 2012. Volume was 72 percent higher than the 100-day average. The U.S. benchmark grade traded at a $1.96 discount to Brent, down from $3.15 at yesterday’s close.

The IEA reduced its estimate for demand growth this year for the fourth month in a row, meaning oil consumption will expand by about half the rate of 1.3 million barrels a day anticipated in June. The IEA cut its 2015 demand growth forecast by 100,000 barrels a day to 1.1 million. About 200,000 barrels a day less crude will be needed from OPEC this year and next than estimated previously, the agency said.

Market Share

OPEC, which supplies about 40 percent of the world’s crude, is raising output as its members compete for market share while seeking to meet increased domestic demand. The group pumped 30.935 million barrels a day in September, the most since August 2013, according to a Bloomberg survey. The gain was led by Libya, where output climbed by 280,000 barrels a day to 780,000, the fifth straight increase.

“The recovery in Libyan oil production has pushed up total OPEC output at a time when demand growth is slowing,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “OPEC has a serious problem.”

Iraq said on Oct. 12 that it will sell its Basrah Light crude to Asia at the biggest discount since January 2009, following cuts by Saudi Arabia and Iran. Middle East producers almost always follow the lead of Saudi Arabia, OPEC’s largest member when setting export prices. The Saudis need to deepen price cuts for Asia by between 70 cents and $1 a barrel to restore a competitive position against other Middle Eastern and West African suppliers, according to JPMorgan Chase & Co.

Divergent Views

Oil ministers from Kuwait and Algeria have dismissed possible output cuts as the price slump prompted Venezuela to call for an emergency OPEC meeting. The group is scheduled to gather on Nov. 27 in Vienna.

The EIA, the Energy Department’s statistical arm, will release its weekly petroleum inventory report on Oct. 16 at 11 a.m. in Washington, a day later than usual because of yesterday’s Columbus Day holiday. Crude supplies rose 5.02 million barrels to 361.7 million in the week ended Oct. 3, the biggest increase since April, EIA data showed.

“The market isn’t expected to get any relief from Thursday’s inventory numbers,” Yawger said. “We’re looking for it to show a substantial build in crude supplies, coming on top of a 5 million-barrel build the previous week. There’s plenty of crude on hand.”

The report will probably show that gasoline stockpiles dropped by 1.55 million barrels in the week ended Oct. 10, according to the median estimate in the Bloomberg survey of eight analysts. Inventories of distillate fuel, a category that includes diesel and heating oil, are projected to have slipped by 1.65 million barrels.

Fuel Prices

Bankers’ Petroleum

 

COMPANY DESCRIPTION:

Bankers’ operations are focused on developing heavy oil assets in Albania, which include rights to develop the Patos-Marinza and Kuçova heavy oil fields (both 100% interest) during the 25-year licence period. Bankers has an opportunity to unlock immense potential from its 5.4 billion barrels oil-in-place Patos-Marinza field by applying modern techniques to optimize recovery factors, expand its resource base, and increase production.

All amounts in US$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production CHANGING TIDES IN THE MARKET;

RAISING TARGET PRICE

Investment recommendation Following Bankers’ most recent marketing tour, we believe investor sentiment continues to strengthen. In our view, the shift is attributable to several quarters of solid production growth, a positive reserve update and the company’s consistency in meeting production guidance. We also believe that the market has generally become more receptive to international investments and to Bankers’ story in particular.
Investment highlights

In our view, the markets have become more receptive to the risk associated with international E&Ps.
 Given the decline in Brent prices over the last couple of weeks, we believe Bankers’ strong share price performance relates to ongoing marketing efforts by the company.
Valuation We are maintaining our BUY recommendation and increasing our target price from C$6.00 to C$7.25/share.

Our revised target now accounts for 80% of the risked upside in our model. We maintain our view that there will always be some apprehension toward Albania-based investments, which may prevent full recognition of upside potential. At current prices, we project a potential return to target of ~30%.
Risks In additional to general commodity risk, we believe Bankers is subject to country risk associated with its Albania operations. While the company has increased efforts to improve netbacks, we believe potential large- scale enhanced recovery efforts

Radius Health Raising Target Price to $ 30

RDUS : NASDAQ : US$23.11
BUY 
Target: US$30.00

COMPANY DESCRIPTION:
Radius is a biotechnology company focused on
discovering, developing, and commercializing drugs for
endocrine disorders. Its wholly owned lead asset is
abaloparatide, in Phase 3 for treatment of
postmenopausal osteoporosis.
All amounts in US$ unless otherwise noted.
Life Sciences — Biotechnology
RAD1901 EARLY, BUT INTERESTING FOR BRAIN METASTASES
Investment highlights
$1.7B Seragon acquisition advantageous to RAD1901
Roche’s recent ~$1.7B acquisition of Seragon for its early-stage SERD
(ARN-810) suggests healthy interest in the SERD area, including
RAD1901. We also believe RAD1901’s potential to cross the blood brain
barrier could be an advantage vs. current therapies. Additionally,
RAD1901 may avoid the uterine cancer and bone loss risk associated
with AIs or tamoxifen, possibly permitting RAD1901 to earlier treatment
settings in hormone receptor positive metastatic breast cancer (MBC).
RAD1901 early, but could address ~$1.4B market in MBC
Analysis shows RAD1901 has potential to penetrate the ~$850M
hormone receptor positive MBC population and ~$540M MBC + brain
metastases market. We do not include RAD1901 in our valuation given
its early stage, but believe continued positive data could contribute to
long-term upside for RDUS.
Recent Phase I update at EORTC conference promising
New highlights from the Phase I MTD trial for RAD1901 showed
suppression of ER signals via PET scans after only six days of dosing, a
move forward towards initiating a 1b clinical trial, possibly starting
YE14. We expect top-line data from the Phase I MTD trial YE14 at
SABCS and results from the 1b trial in MBC presented at ASCO in 2015.
Raising price target to $30 from $26
We are raising our price target to $30 from $26 given prior market
expansion for injectable non-bisphosphonate drugs. We believe
abaloparatide will have better efficacy data compared to Forteo, which
could expand the market.

We are raising our US peak sales estimate to ~$820M vs. ~$650M previously.

Family Dollar Stores Target Price $ 74.50

FDO : NYSE : US$77.75
HOLD 
Target: US$74.50 

COMPANY DESCRIPTION:
Family Dollar operates over 8,000 retail discount stores
in 44 states, providing a merchandise assortment
including consumables, home products, apparel and
accessories, seasonal goods, and electronics.
Merchandise is generally sold for $1 to $10.
Consumer & Retail — Specialty Retail
RAISING PRICE TARGET TO $74.50,
IN LINE WITH DEAL PRICE DESPITE SOFT Q4
Investment recommendation
We continue to move closer to the completion of the acquisition
of FDO by Dollar Tree (DLTR : NASDAQ : $56.70 | HOLD). In
early September, the companies accelerated the expected
timeframe to the end of November, compared to the initial
schedule of early 2015. We are raising our price target to the
deal price of $74.50 (which includes $59.60 in cash and $14.90
in stock). We would take a much more positive view on the
combined entity as it would create an instant market-share
leader with over 13,000 stores and annual sales of $18B. We
think DLTR’s superior merchandising organization and greater
store consolidation than what was included in the companies’
initial outlook would drive annual synergies above the $300MM
the merger is expected to generate by year three.
Investment highlights
 Dollar General is still in the picture. DG extended its
$80/share tender offer to 10/31, but FDO remains confident
this combination would not receive antitrust approval.
 Q4 EPS missed our estimate by $0.07, but shares should
continue to trade on the potential acquisition. FDO reported
Q4 EPS of $0.73 on SSS +0.3% on top of flat. Gross margin
was 90bps below our forecast, and there was 16 bps more of
SG&A expense deleverage than we had anticipated.

Oil Bear Market

OPEC’s Biggest Supply Boost Since ’11 Spurs Bear Market

OPEC increased oil production by the most in almost three years, helping to drive prices toward a bear market. Iran and Saudi Arabia offered their oil at the deepest discounts since 2008, adding to speculation that members of the group are competing for market share.

The Organization of Petroleum Exporting Countries, which supplies 40 percent of the world’s oil, increased output by 402,000 barrels a day in September to 30.47 million, the group’s Vienna-based secretariat said in a monthly report. Iran matched Saudi Arabia yesterday by cutting the price of its main export grade to Asia by $1 a barrel, according to two people with knowledge of the pricing decision.

Brent futures, the international benchmark, traded at a four-year low today. Saudi Arabia told OPEC it raised output 11 percent last month, adding to speculation it will seek to preserve its share of export markets. Crude production is mounting in the U.S., Russia and Libya, while the pace of demand growth is lower as the economy slows in China, the world’s second-largest oil consumer.

“It’s a fight for market share out there at the moment,” Ole Sloth Hansen, an analyst at Saxo Bank A/S, said by e-mail today. “OPEC will have to come up with something otherwise the market will view it as a free invitation to carry on selling.”

Libyan Return

OPEC production last month climbed by the most since November 2011 and was the highest in more than a year, the group’s data show. Libya bolstered supplies by 250,600 barrels a day to 787,000 and Iraq added 134,500 to 3.164 million, according to secondary sources cited by the report. That more than compensated for an estimated drop of 50,400 barrels a day in Saudi output to 9.605 million.

Saudi Arabia’s own communications to the group showed an increase of 107,100 barrels a day to 9.704 million in September, according to separate data in the report.

Price cuts announced last week by Saudi Arabia, matched by Iran yesterday, fueled speculation it may let oil fall rather than cut production and cede market share. OPEC members in West Africa are also showing signs of greater competition, said Julian Lee, an oil strategist at Bloomberg First Word in London. Nigerian sales of crude for November have been slower than usual after Angola moved more quickly to reduce prices, he said.

Saudi Pressure

Brent for November settlement slid to $88.11 a barrel on the London-based ICE Futures Europe exchange today, the lowest in almost four years. West Texas Intermediate, the U.S. benchmark, dropped as low as $83.33 a barrel on the New York Mercantile Exchange, the least since July 3, 2012.

OPEC’s September production increase contributed to the fall of more than 20 percent in both grades from their June peaks, said Saxo Bank’s Hansen. A drop of that size meets a common definition of a bear market.

“Saudi Arabia is leaning back a bit to force better co-operation” from other members on production cuts, Thina Saltvedt, an analyst at Oslo-based Nordea Markets, said by phone. “The demand side is getting weaker and weaker. It doesn’t look good if OPEC isn’t willing to tighten things up.”

OPEC’s output in September was about 300,000 barrels a day higher than the daily average of 30.2 million the group expects is needed in the fourth quarter. Its 12 members will probably cut either their output or formal production target of 30 million barrels a day when they next meet on Nov. 27 in Vienna, said 11 of 20 analysts surveyed by Bloomberg News yesterday. Estimates ranged from a reduction of 500,000 to 1 million barrels a day.

The organization kept unchanged annual forecasts for global oil demand, and the amount of crude OPEC will need to provide, for this year and next.

“The recovery in gasoil consumption for industry and transportation use, along with emerging winter demand” will support the market in coming months, it said.

Monsanto Company : Update Target Price $149

 

MON : NYSE :

US$109.73 BUY 
Target: US$149.00 ↓

Company Description

Monsanto is a leading global provider of seeds,
biotechnology traits, and glyphosates. The company
operates two segments: Seeds and Genomics and
Agricultural Productivity. The seeds and genomics
segment consists primarily of soybeans, corn, cotton, and
vegetable seed brands, as well as biotechnology traits
that help control weeds and insects. The agricultural
productivity segment consists of crop protection,
including glyphosates.
All amounts in US$ unless otherwise noted.

Agriculture — Biotechnology
Q4/F14 RESULTS MOSTLY IN LINEAND F15 GUIDANCE IS REITERATED

Investment highlights
 Monsanto reported adjusted Q4/F14 EPS of US$(0.27) versus our
and consensus estimate of US$(0.24). F2015 annual guidance was
provided at US$5.75-6.00 versus our original estimate of US$6.04
and consensus of US$6.01. This guidance is in line with
management’s prior comments of double-digit to mid-teen growth
in F15 EPS.
 Operationally, we expect further improvement in Seeds & Genomics
in F15, with our expectation of YOY gross margin growth of 11.7%.
We expect to see a continued lift in the product portfolio (a
laddering-up, if you will), with farmers seeing an increased bill (a
benefit to Monsanto) but being offset by increased yield to the
farmer (a benefit to the farmer). As the fiscal year unfolds, we
anticipate confirmation of the 10-12M acres of Intacta and a good
(although delayed) order book for the US spring, both of which we
see as comforting highlights for investors through a more
challenging commodity price environment
Valuation
We continue to rate the shares of Monsanto a Buy but have lowered our
target price to US$149 (from US$155 previously) based upon a 21.5x
multiple (from 22x previously) to our F16 EPS. The reduction in our
multiple is due to the general commodity pricing environment and
investors’ increased conservative approach towards agriculture equities.

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