MORNING NOTE

11 February 2015

Healthcare Conference Thursday, 19 March 2015 Brussels. Click here to register.

CONTENTS
Company / Sector

Comment

Recommendation

Price

Barco
DSM
Euronav
Galapagos
Heineken
Heineken Holding
ING
IO&W
NN Group
WDP

FY14 results preview

4Q in line, slightly better than expected guidance
Fourth quarter results
1.6m IWT grant for hepatitis B program
FY14 slightly better than expected, TP upped
FY14 profit of 760m allows for 0.74 final DPS
Solid underlying Q4, dividend reinstated
Analyst meeting: positive trend confirmed
Strong Q4, Solvency II guidance reassures
Good FY14 results and outstanding outlook

Hold
Accumulate
Suspended
Buy
Buy
Buy
Buy
Accumulate
Buy
Buy

57.74
45.52
9.69
19.11
64.60
57.17
11.21
25.30
23.84
68.72

CHANGES IN RECOMMENDATION
Company

From

54.00
53.00
22.00
72.00
64.00
15.00
26.00
27.00
80.00

CHANGES IN TARGET PRICE

To

KEY FIGURES
(at close)

Target Price

Company

From

To

Heineken
Heineken Holding
IO&W
WDP

68.00
60.00
25.00
74.00

72.00
64.00
26.00
80.00

CHANGES IN EPS FORECAST

Price

1D

1M

12M

Company

AEX
BEL20
CAC40
DAX30
FTSE100
EUROSTOXX50
STOXX50

453.8
3,543.8
4,695.7
10,753.8
6,829.1
3,383.1
3,252.7

0.6%
0.9%
1.0%
0.9%
-0.1%
1.1%
0.1%

9.2%
9.1%
12.4%
11.5%
5.0%
11.2%
10.1%

16.5%
21.6%
10.8%
15.8%
3.6%
11.6%
13.8%

IO&W ()
WDP ()

DJIA
S&P500
NASDAQ Comp

17,729.2
2,046.7
4,726.0

-0.5%
-0.4%
-0.4%

-1.0%
-0.8%
-0.2%

12.3%
13.9%
14.6%

USD/EUR
GBP/EUR

0.8831
1.3475

0.1%
0.2%

4.5%
5.3%

20.3%
11.9%

Bel govt
French govt
Dutch govt

0.61%
0.65%
0.46%

4.0bps
4.0bps
4.0bps

-13.0bps
-13.0bps
-14.0bps

-182.0bps
-162.0bps
-144.0bps

From
2014

To
2015
1.70
4.31

2014

2015
1.71
4.42

Source: KBC Securities

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

kbcsecurities.com

Refer to important disclosures, disclaimers and analyst certifications at the end of the body of this research.

MORNING NOTE

11 February 2015

CORPORATE CALENDAR

ROADSHOW CALENDAR

Date

Company

Event

Date

Company

Place

11.02.15

DSM
Euronav
Heineken
Heineken Holding
ING
NN Group
WDP
Ageas
Akzo Nobel
Barco
KBC
Montea
Telenet
Leasinvest RE
Lotus Bakeries
TNT Express
TNT Express
Wolters Kluwer
AEGON
Arcadis
BAM Group
Befimmo
EVS
Gimv
Randstad
Sipef

Results FY14
Results FY14
Results FY14
Results FY14
Results FY14
Results 4Q14
Results FY14
Results FY14
Results FY14
Results FY14
Results FY14
Results FY14
Results FY14
Results FY14
Results FY14
Results FY14
Investor Day
Results FY14
Results FY15
Results FY14
Results FY14
Results FY14
Results FY14
Results 3Q14
Results 1Q15
Results FY14

17.02.15

Cofinimmo
Fagron
Fagron
Befimmo
Ageas
Umicore
Ablynx
Elia
D'Ieteren
D'Ieteren
Elia

Brussels
London
London
Paris
Brussels
Paris
Paris
Brussels
London
London
Brussels

12.02.15

13.02.15
17.02.15
18.02.15
19.02.15

18.02.15
20.02.15
26.02.15
02.03.15
03.03.15
04.03.15
09.03.15

For an overview of our upcoming events, please click here.

PUBLICATION OVERVIEW
Date

Company / Sector

Title report

Recommendation

10.02.15
06.02.15
05.02.15

Telenet
Ageas
Corbion
Mobistar
Arcadis
BinckBank
ING
Real Estate

Prime European cable asset

Life is good in Asia. TP up 11% on Taiping Life
Earnings momentum about to accelerate
Investment case remains intact
2015 to profit from Fx, M&A and organic growth
Focus on capital return, asset management
Lukewarm 4Q14E, Russia/oil under control
Constructing a view on 2015
January: All quiet as results season nears
Trends favouring the laundry business
On the right track but priced for perfection
Firming US$ drives earnings upgrade
2015: What's up, Doc? BUY-O-TECH?!
Upper end REBITDA guidance within reach
Everybody is looking at the dollar, dont forget the ye ...
Wake-up call after improving like-for-like growth
More caution on Laser projector warranted
Benelux e-commerce: growing at different speeds
The Swiss Franc Nightmare
A new site near Paris: The Wolf becomes Le loup
Judgment day is coming on 18 February

Accumulate
Buy
Buy
Accumulate
Buy
Accumulate
Buy

53.00
42.00
19.00
21.00
31.00
9.00
15.00

Accumulate
Hold
Buy

20.00
50.00
4.50

Accumulate
Accumulate
Accumulate
Hold

21.00
36.00
20.00
54.00

Accumulate
Buy
Hold

53.00
40.00
5.80

04.02.15

03.02.15
02.02.15
30.01.15
29.01.15
28.01.15

26.01.15
23.01.15
20.01.15
16.01.15
14.01.15

Jensen-Group
Melexis
Nyrstar
Biotechnology
Mobistar
Picanol
Beter Bed Holding
Barco
Various
DSM
Kinepolis
TNT Express

Target Price

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

MORNING NOTE

11 February 2015

BARCO
FY14 results preview
TECHNOLOGY HARDWARE & EQUIPMENT

CURRENT PRICE

57.74

HOLD

BELGIUM

TARGET PRICE

54.00

RATING UNCHANGED

65

116

63

112

61

107

59

103

57

99

55

94

53

90

51

86

49

81

47

77
F

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.barco.com
Market Cap
Shares outst.
Volume (daily)
Free float

BAR BB
BAR.BR
750.0m
13.0m
1,288,202
73.9%

Next corporate event

Results FY14: 12 February 2015
( m)
Sales
REBITDA
Net earnings
Adj. EPS ()
P/E (x)
EV/REBITDA
FCF Yield
Dividend yield

2014E
908.9
108.0
42.2
2.71
21.3
3.7
8.9%
2.7%

Guy Sips
+32 2 429 30 02
guy.sips@kbcsecurities.be

2015E
916.4
119.0
41.5
3.29
17.5
3.2
3.9%
2.9%

2016E
941.4
127.2
46.7
3.70
15.6
2.8
4.3%
3.0%

Barco FY14 results will be out tomorrow Thursday 12 February 2015 before
market. The main numbers to look at are consensus for 2H14E sales (incl.
Defense a Aerospace) of 551.2m and 76.1m 2H14E EBITDA. Although
Defense & Aerospace would be sold (the initial agreement was reached in
September 2014), FY14 results reporting may still include this division.
The numbers in our recent note More caution on Laser projector warranted
(dated 23 January 2015) were on an as-if-Defense & Aerospace-was-sold
basis. We adopted our model already in this regard. On 2 February 2015
Barco reported indeed the finalising of the sale of its Defense & Aerospace
division to US-based Esterline Corporation on January 31, 2015. Barco
indicated again that the proceeds of this transaction will fund growth
initiatives in the core divisions (Entertainment, Enterprise, Healthcare). To
reflect this, Barco will (again) change its divisional reporting. So this will be
the last reporting split in Entertainment & Corporate, Healthcare,
Industrial&Government, Defense & Aerospace and Ventures. FY14E
consensus sales forecasts are respectively 509.1m, 188.4m, 166.1m,
139.0m and 49.0m resulting in 1,049.2m FY14E consensus sales
including Defense & Aerospace and 910.2m without this division. FY14E
EBITDA consensus per division is respectively 83.1m, 23.4m, 6.3m,
19.0m and -1.4m, resulting in 131.0m FY14E consensus EBITDA
including Defense & Aerospace and 112.0m without this division.
Recall that Barcos order book at end-3Q14 stood at 488.9m, (+ 25.5m y/y
and + 9.1m q/q. 3Q14 incoming orders were a weaker-than-expected
247.6m (-14.1% y/y). Sales in 3Q were 257.9m (+0.8% y/y). 3Q14 sales
of Entertainment& Corporate decreased 1.9% to 129.8m, +1.4% for
Healthcare, while Industrial & Government recovered nicely, growing 22.2%
y/y to 41.8m. Barco indicated that EBITDA and EBITDA margin for 3Q14
improved relative to 3Q13. However, at the time of the 1H14 results (23 July
2014) management said that it expects to deliver consolidated revenues for
2H14 that are ahead of 2H13, while at the 3Q14 trading update this was
lowered to Barco is confident about delivering results for 2H14 that are
comparable to 2H13. ( 560.1m sales and 76.5m EBITDA in 2H13 while
consensus for 2H14E (incl. Defense & Aerospace) is respectively at
551.2m and 76.1m)
Conclusion
In the short run, Barcos share price will react on the fact if they can beat or
miss the consensus for 2H14E sales (incl. Defense & Aerospace) of
551.2m and 76.1m 2H14E EBITDA. For the longer run, although we
admit Barco should benefit from the current euro weakness, we have a more
cautious view with a Target Price of 54 and a HOLD rating. Our main
argument is that more caution on Laser projector is warranted as Barco
seems to be caught in a Catch 22: Laser projectors ASPs are not declining
fast enough to increase the penetration rate in the Digital Cinema market
while the penetration rate of Laser projectors in the Digital Cinema market is
not increasing because the Laser projectors ASPs are not declining fast
enough!

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

MORNING NOTE

11 February 2015

DSM
4Q in line, slightly better than expected guidance
CHEMICALS

CURRENT PRICE

45.52

ACCUMULATE

NETHERLANDS

TARGET PRICE

53.00

RATING UNCHANGED

57

108

54

101
95

51

89

48

83

45

77

42

71

39

65
F

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.dsm.com
Market Cap
Shares outst.
Volume (daily)
Free float

DSM NA
DSMN.AS
7,819.5m
179.1m
35,093,746
100.0%

Next corporate event

Results 1Q15: 29 April 2015
( m)
Sales
REBITDA
Net earnings
Adj. EPS ()
P/E (x)
EV/REBITDA
FCF Yield
Dividend yield

2014E 2015E 2016E

9,224.7 9,521.4 9,839.2
1,168.1 1,153.8 1,254.3
352.5
426.4
497.3
2.45
2.38
2.72
18.6
19.1
16.7
8.6
8.7
8.0
1.3%
4.5%
4.4%
3.6%
3.7%
3.8%

Wim Hoste
+32 2 429 37 13
wim.hoste@kbcsecurities.be

4Q14 EBITDA from contin. operations decreased by 3%, from 297m in 4Q13 to
288m in 4Q14, broadly in line with our and CSS forecasts of respectively
290m and 288m. 4Q revenue from contin. operations was up by 9% to
2,374m (KBCS 2,316m, CSS 2,271m). 4Q net result was negative at
-107m (KBCS 96m) following a 186m impairment (on caprolactam).
Nutrition: 4Q14 revenue grew by 8% to 1,124m (KBCS 1,072m, CSS
1,066m) with organic growth of 4% (volume +3%, price/mix +1%). Sales
declined by 3% organically for Human Nutrition & Health ( 394m). US retail sales
for Multivitamins and Omega-3 dietary supplements continued to decline, with
positive momentum outside the US. Sales in infant nutrition normalized after
earlier destocking. Food & Beverage markets continue to be sluggish in mature
markets with good development in emerging markets. Demand for premixes
stayed healthy. Sales were up by 10% org. for Animal Nutrition ( 572m), broken
down in a 7% volume effect and a 3% price/mix effect (which means that lower vit
E prices were compensated for by higher prices for several other vitamins and
ingredients). Sales performance was strong in almost all active ingredients and
premix businesses. EBITDA decreased by 4% to 200m (KBCS 211m, CSS
212m) which means that the EBITDA margin landed at 17.8% (vs. 20.6% in
3Q14).
Performance Materials: Revenue increased by 7% to 699m (KBCS 705m,
CSS 688m) with organic growth of 3% (volume +4%, price/mix -1%). EBITDA
grew from 77m in 4Q13 to 87m in 4Q14 (KBCS 85m, CSS 82m), on the
back of good volume growth and efficiencies.
Polymer Intermediates: 4Q revenue grew by 18% to 465m (KBCS 443m,
CSS 424m) with organic growth of 14% (volume +25%, price/mix -11%).
EBITDA decreased by 23% to 23m (KBCS 22m, CSS 21m).
The Corporate line saw EBITDA decrease from -15m in 4Q13 to -19m in
4Q14 while innovation reported a -3m EBITDA vs. -3m in 4Q13.
Net debt decreased only slightly vs. end 3Q14 (from 2.48bn to 2.42bn), which
was below our expectations (around 2bn).
Outlook: DSM aims to deliver a 2015 EBITDA slightly ahead of 2014, with the
overall impact of currencies on 2015 roughly neutral (recall that we estimate the
unhedged CHF impact (at a 1.05 rate vs. the EUR) at about 80m, but this
should be compensated by the USD we believe). The impact from vitamin E
prices (at January levels persisting through the entire year) would be 80m on
EBITDA. We currently bank on a FY15 EBITDA from continuing operations of
1,154m with consensus at 1,168m (vs. the FY14 number of also 1,168m).
Strategy update: There was no precise update on the strategic actions DSM
intends to engage into for Polymer Intermediates (caprolactam and acrylonitrile)
and Composite Resins.
Conclusion: 4Q14 results were broadly in line with consensus with Nutrition
slightly below expectations and the other divisions slightly above. The
caprolactam impairment was unexpected but is not a major surprise neither. Net
debt was higher than expected while 2015 guidance is slightly better than our
forecasts. All in all, we stick to our Accumulate rating and our (Sum-of-the-parts
based) target price of 53.

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

MORNING NOTE

11 February 2015

EURONAV
Fourth quarter results
INDUSTRIAL TRANSPORTATION

CURRENT PRICE

9.69

BELGIUM

TARGET PRICE

12.0

114

SUSPENDED

Euronav this morning released its 4Q14, preliminary FY14 results.

109

11.0

103

10.0

98
92

9.0

87
82

8.0

76

7.0

71
F

Price

Rel. to index (RHS)

For the full year, Euronav reported EBITDA, EBIT, result from JVs and net
result of $ 172.5m, $ 11.5m, $ 30.3m and $ -45.8m.

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.euronav.be
Market Cap
Shares outst.
Volume (daily)
Free float

The company reported EBITDA, EBIT, result from joint ventures and net
result for the quarter of $ 67.6m, $ 19.7m, $ 8.0m and $ -3.9m. Note the
financial result of $ -37.5m is impacted by the early repayment of the
$ 235.5m bond, as announced on 3 February. As this bond was issued below
par, Euronav has amortized $ 20.4m in 4Q14, bringing the amortization
related to this bond to $ 31.9m for FY14. A further $ 4.1m will be amortized in
1Q15.

EURN BB
EUAV.BR
1,542.3m
159.2m
1,417,298
70.5%

Next corporate event

($ th)
2014E 2015E 2016E
Sales
455,763 736,608 636,439
REBITDA
220,330 489,422 380,550
Net earnings
-19,963 198,432 106,856
Adj. EPS ($)
-0.16
1.26
0.68
P/E (x)
8.7
16.2
EV/REBITDA
13.2
5.3
6.3
FCF Yield
8.2% 21.5% 16.1%
Dividend yield
0.0%
5.2%
5.2%

During the fourth quarter, Euronavs VLCC fleet operated on the spot market
through TI earned on average a TCE rate of $ 31,650/day. Euronavs
Suezmax vessels operated on TC contracts earned on average $ 30,513/day
while its Suezmaxes operated spot earned on average $ 24,248/day.
So far, Euronav has covered 53% of its available spot VLCC revenue days
for the first quarter at an average of $ 59,400/day. Approximately 69% of its
available spot Suemax revenue days for the quarter have been fixed at
$ 40,300/day on average. Last week, average VLCC earnings weakened by
9% to $ 56,857/day on Friday. Average Suezmax earning were up by 16%
w/w to $ 57,334/day.

Wouter Vanderhaeghen
+32 2 429 37 30
wouter.vanderhaeghen@kbcsecurities.be

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

MORNING NOTE

11 February 2015

GALAPAGOS
1.6m IWT grant for hepatitis B program
PHARMACEUTICALS & BIOTECHNOLOGY

CURRENT PRICE

19.11

BUY

BELGIUM

TARGET PRICE

22.00

RATING UNCHANGED

21.0

104

19.0

95

17.0

86

15.0

77

13.0

68

11.0

59

9.0

50
F

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.glpg.com
Market Cap
Shares outst.
Volume (daily)
Free float

GLPG NA
GLPG.BR
578.7m
30.3m
1,323,132
100.0%

Next corporate event

Results FY14: 6 March 2015
( th)
2014E 2015E 2016E
Sales
100,668 108,832 50,149
REBITDA
28,453 -3,540 -61,027
Net earnings
18,919 -3,111 -62,241
Adj. EPS ()
0.62
-0.10
-2.05
P/E (x)
30.6
EV/REBITDA
13.3
FCF Yield
-17.3%
1.6%
-9.3%
Dividend yield
Jan De Kerpel, PhD
+32 2 429 84 67
jan.dekerpel@kbcsecurities.be

News:
The Flemish IWT awarded a 1.6m grant to support the discovery and
development of new hepatitis B treatments to a consortium in which
Galapagos will collaborate with the Belgian Rega Institute (University of
Leuven) and the University of Heidelberg. No impact.
Our View:
The project wants to discover and develop novel compounds to cure chronic
hepatitis B infection. Galapagos will use its target discovery and compound
screening technology to develop compounds against viral protein targets and
on inhibitors of host call proteins. The academic partners will contribute to the
development of assays, perform analysis of the mechanism of action of drug
candidates, and bring in expertise of the virus and its life cycle to accelerate
the progression of drug development.
It is not disclosed how much of the grant money will be allocated to the
Galapagos work.
Chronic Hepatitis B is caused by the hepatitis B virus. About a third of the
world population has been infected at one point in their lives, including 240
million to 350 million who have chronic infections. In those who get infected
around the time of birth 90% develop chronic hepatitis B while less than 10%
of those infected after the age of five do. According to the WHO, over
650,000 people die of hepatitis B each year. The disease is now only
common in East Asia and sub-Saharan Africa where between 5 and 10% of
adults have chronic disease. Rates in Europe and North America are less
than 1%.
Acute hepatitis B infection does not usually require treatment and most adults
clear the infection spontaneously. Treatment of chronic infection may be
necessary to reduce the risk of cirrhosis and liver cancer. There are several
small-molecule antiviral drugs on the market and two immune modulating
treatments (interferon). None of the available treatments can clear the
infection, as they focus on stopping the virus from replicating, thus minimizing
liver damage.
In hepatitis C, a closely related virus, the pharma industry (lead by Gilead
and AbbVie) has been able to develop therapies which have changed the
treatment paradigm drastically, thereby reaching a high level curation, which
is also the aim of the Galapagos-Rega-Heidelberg collaboration. While the
new hepatitis C drugs have been huge commercial success (Gileads Sovaldi
booked $ 10bn in its first commercial year), the high pricing of the new
hepatitis C drugs have caused a debate on drug pricing.
Conclusion:
We welcome the IWT grant which will allow Galapagos to support its early
discovery efforts in the search for new hepatitis B therapies. No impact on
our valuation.

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

MORNING NOTE

11 February 2015

HEINEKEN
FY14 slightly better than expected, TP upped
BEVERAGES

CURRENT PRICE

64.60

BUY

NETHERLANDS

TARGET PRICE

72.00

RATING UNCHANGED

72

131

67

125
119

62

113

57

108

52

102
96

47

91

42

85
F

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.heineken.com
Market Cap
Shares outst.
Volume (daily)
Free float

HEIA NA
HEIN.AS
37,209.8m
576.0m
54,573,310
57.6%

Next corporate event

Trading update 1Q15: 22 April 2015
( m)
2014E 2015E 2016E
Sales
19,029.5 19,266.8 20,052.8
REBITDA
4,443.1 4,665.5 4,963.3
Net earnings
1,450.1 2,054.1 1,919.3
Adj. EPS ()
2.98
3.38
3.71
P/E (x)
21.7
19.1
17.4
EV/REBITDA
10.9
9.9
9.0
FCF Yield
3.5%
6.2%
6.6%
Dividend yield
1.5%
1.7%
1.8%
Wim Hoste
+32 2 429 37 13
wim.hoste@kbcsecurities.be

FY14 results were slightly better than our and CSS figures. FY group beer
volumes increased by 1.8% (+2.0% organically vs +1.7% expected by KBCS &
CSS) to 198.8m hl (KBCS 198.4m, CSS 198.5m). 4Q group beer volume grew by
+2.1% organ. to 49.6m hl (KBCS 49.3m, CSS 49.5m). FY consol. beer volume
increased by 1.9% org. to 181.3m hl (KBCS & CSS 180.9m). FY14 group
revenue grew by 0.1% (+3.3% org.) to 21,191m (KBCS 20,961m, CSS
21,197m). Group revenue per hl (incl. JV) grew by 1.4% in FY (vs +1.5% in
1H14 and +0.9% in 3Q14). FY cons. revenue increased by 3.0% org. to
19.26bn (KBCS 19.03bn, CSS 19.2bn). FY14 group operating profit
(beia) grew by 5.2% (+7.8% org.) to 3,359m (KBCS 3,318m, CSS 3,337m).
FY14 consol. operating profit (beia) grew by 8.7% org. to 3,129m (KBCS
3,081m, CSS 3,102m). The figures imply a 3.8% growth in 2H cons.
operating profit (beia). FY14 net profit (beia) grew by 11% (+14% org.) to
1,758m (KBCS 1,714m, CSS 1,743m).
FY14 group beer volumes breakdown: Africa +6.7% org. to 29.3m hl (KBCS
29.2m, CSS 29.1m); Americas +3.7% org. to 57.0m (KBCS 57.0m; CSS 57.2m);
Asia +5.0% org. to 24.0m hl (KBCS & CSS 24.1m); CEE -4.2% organ. to 46.0m hl
(KBCS 45.7m, CSS 45.6m); Western Europe +2.3% org. to 42.5m hl (KBCS &
CSS 42.4m).
FY14 consolidated operating profit (beia) breakdown: Africa +8.8% org. to
655m (KBCS 660m, CSS 647m), Americas +16% org. to 780m (KBCS
823m, CSS 804m); Asia Pacific +5.4% org. to 550m (KBCS 532m, CSS
550m); CEE 4.5% org. to 272m (KBCS 253m, CSS 260m); Western
Europe +4.5% to 852m (KBCS 821m, CSS 851m).
Net debt increased from 10.9bn mid-2014 to 11.1bn at year-end 2014 (KBCS
10.2bn, CSS 9.1bn but we assume CSS included the closing of the Mexican
packaging business sale in 2014). Net debt/EBITDA landed at 2.5x vs the target
of below 2.5x which would have reached if the Empaque sale would have closed.
Heineken proposed to increase dividend from 0.89 in FY13 to 1.10 (recall
interim div of 0.36 was already paid) with dividend pay-out policy upped from
30-35% to 30-40%
Outlook: The group expects positive organic revenue growth in 2015 with volume
growth below 2014 (+2.0% - vs KBCS +2.3%, CSS +1.9%). Rev/hl is guided up
although limited because of deflationary and off premise pressure in some
markets. Marketing & selling expenses are guided slightly up as a percentage of
revenue (2014:12.7%). Further cost savings are not quantified. Input costs
should be slightly lower in 2015 (excluding FX). Heineken reiterates 40bps
consolidated operating profit (beia) margin improvement in medium term, but
2015 will show below 40bps margin improvement because of the impact from the
Empaque sale (about 25bps impact). Translational FX impact is estimated at
130m (consol operating profit level) and 80m (net profit beia).The statements
compare to our FY15 forecasts of a group beer volume of 203.0m (CSS 202.0m),
cons. operating profit (beia) of 3,248m (CSS 3,282m) and net profit (beia) of
1,944m (CSS 1,919m).
Conclusion: Despite slightly lower than expected vol. growth guidance for 2015
(in line with CSS), we reiterate our BUY rating as we expect further profit growth
in 2015 and we consider valuation attractive, at 9.9x EV/REBITDA15E and 9.0x
EV/REBITDA16E. We roll forward our valuation models and increase TP to 72
(from 68).

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

MORNING NOTE

11 February 2015

HEINEKEN HOLDING
FY14 profit of 760m allows for 0.74 final DPS
EQUITY INVESTMENT INSTRUMENTS

CURRENT PRICE

57.17

BUY

NETHERLANDS

TARGET PRICE

64.00

RATING UNCHANGED

63

124

59

119

55

110

115

51

106

47

97

102
93

43

88

39

News:
The FY14 net result of Heineken Holdings participating interest in Heineken
NV (50%) amounts to 760m, up 11% y/y. Heineken Holding proposes to
distribute a cash dividend of 0.74 p.s., identical to Heinekens dividend
(Heinekens policy pay-out ratio widened from 30-35% to 30-40% of net
profit. Ex-date of the final dividend will be 27 April 2015, while payment is
scheduled for 6 May 2015. In 2014, Heineken Holding already distributed an
interim dividend of 0.36.

84
F

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
HEIO.NA
Reuters
HEIO.AS
www.heinekeninternational.com
Market Cap
16,465.6m
Shares outst.
288.0m
Volume (daily)
7,255,379
Free float
33.5%
Next corporate event

Our View:
The dividend amount is in line with Heineken NVs dividend policy to pay out
30% to 40% of net profit (beia) and is hence in line with forecasts. Statutory
annual results for a holding company such as Heineken Holdings, which is
the archetype of a cascade company without operational costs end zero net
cash, are not a stock price driver.
KBCS decided to increase its target price on Heineken, on the back of strong
profit growth for 2015 (despite somewhat lower volume guidance). Valuation
is deemed attractive on EV/REBITDA 2015 and 2016 multiples, leading to a
TP increase from 68 to 72. For an in-depth overview of Heineken NVs
FY14 results, we refer to comments in todays morning note.

Results 1Q15: 22 April 2015

( m)
Net result
Adj. net result
Basic EPS ()
ROE
Adj. eq. value
Premium/disc.
DPS ()
Dividend yield

2011
2012
303.0 1,479.0
0.0 1,477.0
1.17
5.13
6.4% 33.3%
40.80
50.47
13.5% 17.9%
0.83
0.89
2.4%
2.2%

Yves Franco
+32 2 429 45 04
yves.franco@kbcsecurities.be

2013
691.0
683.0
2.37
12.0%
48.78
5.7%
0.89
1.9%

In the media, it is rumoured that Femsas stake in Heineken (12.5%) and

Heineken Holding (14.9%) could be up for sale. In total, Femsa has roughly
20% of Heineken. The agreed upon lock-up period since takeover in 2010
ends 3 May 2015.
Conclusion:
We have increased our TP on Heineken Holding from 60 to 64, reflecting
an increase of the portfolios underlying potential on the back of todays
decision by KBCS to increase Heineken TP (from 68 to 72).
Based on yesterdays closing price we estimate adjusted equity value per
share at 64.6, with a current discount of 11.5%, which compares to a 2-year
historical average of 10%. Our new TP of 64 implies a 10% discount to
target equity value and an upside potential of 13%. Buy maintained.

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

MORNING NOTE

11 February 2015

ING
Solid underlying Q4, dividend reinstated
BANKS

CURRENT PRICE

11.21

BUY

NETHERLANDS

TARGET PRICE

15.00

RATING UNCHANGED

13.0
115
111

12.0

107
103
100

11.0

96
92

10.0

88

INGs 4Q14 results were slightly short of expectations but this is due to
one-offs while the underlying operating performance is ahead of our
and CSS estimates. The capital generation was moreover stronger than
expected allowing for an earlier-than-anticipated resumption of the
dividend (2H14 versus 1H15). The groups pledge to return additional
capital to shareholders (market conditions permitting) will lastly be
taken positively by the market. BUY reiterated.

84
9.0

80
F

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.ing.com
Market Cap
Shares outst.
Volume (daily)
Free float

INGA NA
ING.AS
42,429.9m
3,801.5m
211,939,093
99.1%

Next corporate event

Results 1Q15: 7 May 2015
( m)
NBI
GOP
Net profit
Adj. EPS ()
DPS ()
P/E (x)
P/BV (x)
Dividend yield

2014E
15,542
6,795
1,052
0.97
0.00
11.6
0.9
0.0%

2015E
16,372
7,493
4,799
1.11
0.44
10.1
0.9
4.0%

Matthias De Wit, CFA

+32 2 429 37 17
matthias.dewit@kbcsecurities.be

2016E
16,506
7,539
4,637
1.16
0.52
9.7
0.8
4.6%

ING Group reported Q4 results which were slightly short of expectations on

the underlying PBT level ( 783m vs. CSS 828m) due to higher than
anticipated restructuring charges and other one-off elements (e.g. negative
CVA/DVA charges).
Excluding these non-operational items, the underlying operating performance
was very solid on the back of better than anticipated Net Interest Margins
(1.53% versus 1.49% CSS), lower than expected Loan loss provisions
( 400m versus 432m CSS) and diligent cost management. The Underlying
PBT excluding one-offs rose 20.1% y/y to 1376m, reflecting higher net
interest income, lower expenses and lower risk costs.
The capital generation was moreover solid with the banks BIII CT1 ratio
increasing 30bps q/q to 11.4% (CSS 11.2%). Following the divestment of the
Insurance stakes, the pro-forma Group CET1 ratio on a fully loaded basis is
13.1%.
Backed by its solid capital position, the group decided to reinstate the
dividend proposing to pay 0.12 per share (CSS 0.08). For next year, the
group reiterates its intention to pay at least 40% of net income while it will
evaluate additional capital returns at the end of each financial year.
Credit trends/asset quality: The NPL ratio increased slightly to 3.0% in 4Q14
due to the implementation of the EBA forbearance definition in 4Q14. On a
l-f-l basis, NPLs were broadly stable compared to the previous quarter. Loan
loss provisions were lower than anticipated at 400m (CSS 432m).
Russia/oil and gas: The Russian exposures were actively managed down
and Russian NPLs remained under control (at 3%). Oil and gas exposures
have moreover not translated into a higher risk costs.

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

MORNING NOTE

11 February 2015

IO&W
Analyst meeting: positive trend confirmed
REAL ESTATE INVESTMENT & SERVICES

CURRENT PRICE

25.30

ACCUMULATE

BELGIUM

TARGET PRICE

26.00

RATING UNCHANGED

28.0

120
116
112
109
105
101
98
94
90
87
83

26.0
24.0
22.0
20.0
18.0
F

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.intervest.be
Market Cap
Shares outst.
Volume (daily)
Free float

INTO BB
PRIF.BR
364.9m
14.4m
143,462
47.3%

Next corporate event

Results 1Q15: 5 May 2015
( m)
Current Result
Portf. Result
Net Profit
Adj. EPS ()
NAV ()
P/E (x)
DPS ()
Dividend yield

2014
23.1
-6.1
16.9
1.56
19.8
14.1
1.40
6.4%

2015E
28.0
0.6
28.6
1.71
20.3
14.8
1.54
6.1%

2016E
28.0
0.6
28.7
1.70
20.5
14.9
1.53
6.0%

Koen Overlaet-Michiels
+32 2 429 37 21
koen.overlaet-michiels@kbcsecurities.be

IOWs FY NRI remained stable y/y, but EPS dropped 8.2% due to higher
(one-off) operating, but mainly financing charges. Looking ahead, the
financing charges are expected to come down sharply as the expensive
75m bond matures in June, paving the way for EPS & DPS growth in FY15.
Portfolio rebalancing towards logistics:
Most appealing is the portfolio rebalancing towards logistics. This segment
accounted only for 42% of the portfolio at start-FY14, but evolved to 48%
today. Management guides for a further shift to 60/40 in the near future. This
could be accelerated through the divestment of some lower-performing
offices. This shift becomes increasingly likely now that investor interest for
tier 2 offices has grown. However, the offered prices today are not
satisfactorily yet. On the other hand, sufficient acquisition files for logistics
prevail, while growth can come from tailored expansion on existing landbanks too. The current debt ratio of 49% offers in our view sufficient flexibility.
Strong performance in lease renewals:
IOW performed strongly in FY14, by renewing 20% of the leases and by
signing for 2% of new leases. Remarkable was thereby the accompanying
increase in occupancy of the offices segment. We see less maturity risk in
FY15 as only 6% of the leases expire. Additionally, it becomes clear that
concepts like RE:flex and turn-key solutions start paying-off. Though, there
P&L impact is still moderate.
Renegotiated Deloitte contracts towards 31 December 2016:
An agreement was made with Deloitte to end all contracts on 31 December
2016. This creates for IOW a clear cut off point, as of when new tenants can
enter the building. Deloitte represents 8% of current rental income. We
however see that the companys growth is creating a certain cushion to limit
this impact. After the departure, several opportunities exist for this Breeam
Very Good site. E.g. It can be rented to new tenants in the current state
(market interest exists as NATO is located opposite), the asset can be sold in
the market or redeveloped into a campus concept (American interest),
Portfolio quality maintenance:
IOW has invested heavily over the past years to make its office buildings
compliant with the new R22 regulation in use as of 2015. It thereby replaced
several cooling/heating installations. Additionally, the company refurbished
several rooftops of logistics buildings in portfolio.
Model updates and TP increase:
We left our NRI base unchanged, but added external portfolio growth of
roughly 20m to our estimates and an extension of the Deloitte contract to
end-FY16. We apply a neutral indexation in FY15. The financing charges
were tempered, taking into account the bond expiry. Hence, this results in a
marginal increase in EPS from 1.70 to 1.71 in FY15 and from 1.66 to
1.70 in FY16. As a result, we attain a higher valuation range leaving us to
up our TP from 25 to 26, Accumulate reiterated.

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

10

MORNING NOTE

11 February 2015

NN GROUP
Strong Q4, Solvency II guidance reassures
LIFE INSURANCE

CURRENT PRICE

23.84

BUY

NETHERLANDS

TARGET PRICE

27.00

RATING UNCHANGED

28.0

130

27.0

125

26.0

120

25.0

116

24.0

111

23.0

106

22.0

101

21.0

97

20.0

92

19.0

NN Group reported a strong set of 4Q14 results marked by better than

expected operating earnings and capital generation. The H2 dividend
moreover beats expectations and the SII guidance is reassuring. BUY
reiterated.
NN Group reported a Q4 operating result of 260m, which is 9% ahead of
our and CSS expectations. The beat is driven by better than anticipated
Dutch life and holding segment results.

87
J

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.nn-group.com
Market Cap
Shares outst.
Volume (daily)
Free float

NN NA
NNBR.O
8,342.3m
350.0m

28.6%

Next corporate event

( m)
Premiums
GOP
Net profit
Adj. EPS ()
EV per share
DPS ()
P/E (x)
Dividend yield

2014E
9,468
1,064
563
2.27
30.9
0.50
14.8
2.1%

2015E
9,658
1,132
903
2.43
32.9
1.09
9.2
4.6%

Matthias De Wit, CFA

+32 2 429 37 17
matthias.dewit@kbcsecurities.be

2016E
9,851
1,203
941
2.58
34.9
1.29
8.9
5.4%

Dutch Life results ( 157m versus 141m CSS) benefited from relatively high
capital gains on private equity ( 23m) which boosted the investment margin.
Non-life results ( 35m versus 32m CSS) were marked by a significant
improvement in the combined ratio to 99.4% from 103.6% in 4Q13. Insurance
Europe was slightly short of expectations ( 40m versus CSS 48m) while
the holding segment was ahead ( -24 versus -39m CSS).
Solvency increased to an industry-leading level of 303%, while we and CSS
were looking for 287% and 286%, respectively. The strong increase is driven
by organic capital generation and positive market impacts. The latter mainly
stem from lower interest rates, which boosted the bond revaluation reserves.
The company moreover provided a reassuring update on Solvency II guiding
for a SII ratio of around 200% (standard formula), which is significantly better
than expected. The group will apply for a partial internal model which could
provide a further boost to its SII ratio if approved by the regulator.
Backed by its strong capital position, the group proposed a DPS of 0.57
over the second half of the year. This corresponds to a pay-out of 200m
which is ahead of the 175m guidance. The group states that it remains
committed to distributing excess capital in a form which is most appropriate
and efficient for shareholders at that specific point in time. which may
include a repurchase of part of ING Group's shareholding in NN Group.
We expect the group to announce such a repurchase (of part of ING Groups
shareholding) in the course of H1, when we expect ING to divest another
stake in NN.

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

11

MORNING NOTE

11 February 2015

WDP
Good FY14 results and outstanding outlook
REAL ESTATE INVESTMENT TRUSTS

CURRENT PRICE

68.72

BUY

BELGIUM

TARGET PRICE

80.00

RATING UNCHANGED

124
121
117
114
110
107
103
100
96
93
89
86

FY14 results beat estimates:

2014: net current result per share increased by 6.4% to 4.10 and
confirmation of dividend increase by 5% to 3.40 gross per share.
2015: expected increase in net current result per share by 7% to at least
4.40 and dividend increase by 6% to 3.60, which means the target for
2016 becomes achievable one year earlier.
2016: the above results in an upgrade of the ambition of the 2013-16
growth plan by almost 10% to a net current result per share of 4.70 to
5.00, previously 4.40 to 4.60.

WDP BB
WDPP.BR

In 2014, NRI rose 13.1% y/y from 82.6m to 93.4m ( 94.9m KBCSe). This
increase results from the continued growth of the portfolio in 2013 to 2014, in
Belgium and the Netherlands, by means of acquisitions and the completion of
pre-leased projects. L-f-l rental growth remained stable y/y at 0.0%. The
operating result before result on portfolio increased 14.3% y/y from 81.8m
to 93.5m ( 94.0m), corresponding to an operating margin of 91.8%.

75
71
67
63
59
55
51
47
F

Price

Rel. to index (RHS)

Source: Thomson Reuters Datastream

Bloomberg
Reuters
www.wdp.be
Market Cap
Shares outst.
Volume (daily)
Free float

1,198.4m
17.4m
851,626
73.4%

Next corporate event

( m)
Current Result
Portf. Result
Net Profit
Adj. EPS ()
NAV ()
P/E (x)
DPS ()
Dividend yield

2014
67.3
0.8
68.1
4.10
39.2
13.6
3.40
6.1%

2015E
79.9
29.2
109.1
4.42
42.7
15.6
3.60
5.2%

2016E
88.7
25.8
114.5
4.72
46.9
14.6
3.80
5.5%

Koen Overlaet-Michiels
+32 2 429 37 21
koen.overlaet-michiels@kbcsecurities.be

The financial result (excl.IAS39) evolved from - 21.4m to - 25.4m ( 26.0m), following higher debt and a slightly reduced cost of debt. Hence,
the net current result per share rose 6.4% y/y from 3.85 to 4.10 ( 4.08).
The portfolio is positively revalued by 20m of which 18m is, as expected,
attributable to the Netherlands (yield compression).
Strong portfolio fundamentals confirmed:
The 1.6bn portfolios occupancy stood at 97.6% (97.4% FY13), the average
lease maturity at 7.1 years (7.3) and the net yield at 7.3% (7.5%).
Balance sheet metrics remain sound:
WDP typically applies a debt ratio between 55-60%. At end-FY14, the debt
ratio amounted to 55.8% (54.6 % in FY13), but good ICR of 3.3x (3.6x),
average cost of debt dropped to 3.5% (3.6%) and average debt maturity rose
to 4.1years (3.4y). The NAV (EPRA) rose from 35.9 to 39.2 per share.
Outlook:
WDP guides for 7% growth in net current result per share in FY15.
The c. 275m investments realised in 2014 will fully contribute to the
FY15 result. In addition, various purchases realised or planned in 15.
WDP assumes the average cost of debt to evolve towards 3%.
70% of 11% contracts maturing in FY15 have already been extended
WDP assumes a minimum average occupancy rate of 96% for 2015.
Our view & Conclusion:
WDPs FY14 results beat the guidance as well as our higher estimates.
Additionally, we see the portfolio and balance sheet quality confirmed. The
upped growth target exceeds expectations. Current investment volume
stands already at 525m ( 600m initial target by FY16, upped to 800m).
We believe these results confirm our positive stance on the co. We reiterate
our BUY rating and up our TP from 74 to 80.

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

12

MORNING NOTE

11 February 2015

CONTACT DETAILS
ANALYST TEAM
Analyst

Contact

Coverage

Wouter Vanderhaeghen (Head of Research)

+32 2 429 37 30

Shipping & Industrials

Jan De Kerpel

+32 2 429 84 67

Biotech & Pharma

Ruben Devos

+32 2 429 58 43

Telco & Media

Matthias De Wit

+32 2 429 37 17

Financials

Yves Franco

+32 2 429 45 04

Holdings & Staffing

Dieter Furniere

+32 2 429 18 96

Engineering, Transport & Utilities

Wim Hoste

+32 2 429 37 13

Chemicals & Breweries

Guy Sips

+32 2 429 30 02

Small & Midcaps Benelux

Koen Overlaet-Michiels

+32 2 429 37 21

Real Estate

Alan Vandenberghe

+32 2 429 18 06

Food Retail & Credit Research

Dirk Verbiesen

+32 2 429 39 41

Oil Services & Construction

EQUITY SALES TEAM

Sales

Contact

Sebastien Fuki (Head of Sales)

+32 2 417 53 43

Stefaan De Lathouwer

+32 2 417 44 68

Xavier Gossaert

+32 2 417 53 68

Margo Joris

+32 2 417 25 66

Kris Kippers

+32 2 417 28 08

Augustin Lanne

+32 2 417 51 45

Tim Leemans

+32 2 417 32 28

Marco Miserez

+32 2 417 36 81

Sales (US)
Hubert Dubrule (Head of US Sales)

+1 212 845 22 74

Sebastiaan Pol

+1 212 845 20 52

Sofie Van Gijsel

+1 212 541 06 48

Sales Trading
Isabel Sebreghts

+32 2 417 63 63

Tim Leemans

+32 2 417 32 28

Marco Miserez

+32 2 417 36 81

Loc De Smet

+32 2 417 36 99

BOND SALES TEAM

Sales

Contact

Alexander Lehmann (Head of Sales)

+32 2 417 46 25

Maurizio Bartolo

+32 2 417 48 02

Bert Beckx

+32 2 417 31 57

Toon Boyen

+32 2 417 25 65

Valentin Checa

+32 2 417 25 40

Alban Kerdranvat

+32 2 417 25 45

Bart Mathijssen

+32 2 417 57 12

Koen Princen

+32 2 417 44 65

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13

MORNING NOTE

11 February 2015
The company disclosures can be consulted on our website http://www.kbcsecurities.com/disclosures.

KBC Securities NV
Havenlaan 12
Avenue du Port
1080 Brussels
Belgium
+32 2 417 44 04
Regulated by FSMA and NBB

KBC Securities USA, Inc.

1177 Avenue of the Americas
New York, NY 10036
US
+1 212 845 2200
Regulated by FINRA

KBC Securities NV Polish Branch

ul. Chmielna 85/87
00-805 Warsaw
Poland
+48 22 581 08 00
Regulated by PFSA

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Jungmannova 745/24
110 00 Prague 1
Czech Republic
+420 221 424 111
Regulated by CNB

KBC Securities NV Hungarian Branch

Lechner dn fasor 10
1095 Budapest
Hungary
+361 483 4005
Regulated by PSZAF

Analyst certification: The analysts identified in this report each certify, with respect to the companies or securities that the individual analyses that (i) the views expressed in this
publication reflect his or her personal views about the subject companies and securities, and (ii) he or she receives compensation that is based upon various factors, including his
or her employers total revenues, a portion of which are generated by his or her employers investment banking activities, but not in exchange for expressing the specific
recommendation(s) in this report.

This publication has been prepared by KBC Securities NV which is regulated by FSMA (Financial Services and Markets Authority) and by NBB (National Bank of Belgium) or one
of its European subsidiaries (together "KBC Securities"). This publication is provided for informational purposes only and is not intended to be an offer, or the solicitation of any
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The information herein has been obtained from, and any opinions herein are based upon, sources believed reliable, but neither KBC Securities nor its affiliates represent that it is
accurate or complete, and it should not be relied upon as such. All opinions, forecasts, and estimates herein reflect our judgement on the date of this publication and are subject
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