Technology, Healthcare and Oil & Gas look interesting
Erste Group analysts see current environment weighing on indebted companies. High financing needs will burden the free cash flow to equity and thus continue to dampen equity valuations even in the case of companies with more stable business models.
“To put it simply, in times of high costs of capital, capital intensive stocks are losers. We would favour stocks with low capital intensity, low gearing ratio and rather high expected return on capital employed (ROCE) development for 2009-2011”, says Henning Esskuchen (foto).
Considering those criteria Technology, Healthcare and Oil & Gas look interesting.
Telecoms would also look interesting, but the rather high capital intensity is a drawback. Despite their capital intensity, utilities also offer stable ROCE for 2009-2011 and the overall gearing ratio seems reasonable.
On the other side of the board, although Media, Basic Resources and Personal Goods seem to have a satisfactory internal financing capacity over the period 2009-2011, their gearing ratio does not look too convincing.
Despite their rather modest capital intensity, stocks in Chemicals, Industrial Goods and Services, Travel and Tourism, and Food and Beverages post low expected ROCE development for 2009-2011. Furthermore, apart from Chemicals, the gearing level of the others seems quite high and indicates a rather weak balance sheet quality.
Erste Group analysts estimate restored trust in the financial sector is a prerequisite for a stable recovery and would consider as good indicators rising velocity of money accelerated loan growth and declining credit spreads.
“For the time being, the signs that financial markets are on a path of lasting improvement are still weak. Companies’s debt security issuance has continued to increase”, the report informed.
Erste Bank analysts state it might be that companies expect the environment to worsen further and want to make sure to have enough liquidity, as further downgrades, would lead to rising refinancing costs.
“To put it simply, in times of high costs of capital, capital intensive stocks are losers. We would favour stocks with low capital intensity, low gearing ratio and rather high expected return on capital employed (ROCE) development for 2009-2011”, says Henning Esskuchen (foto).
Considering those criteria Technology, Healthcare and Oil & Gas look interesting.
Telecoms would also look interesting, but the rather high capital intensity is a drawback. Despite their capital intensity, utilities also offer stable ROCE for 2009-2011 and the overall gearing ratio seems reasonable.
On the other side of the board, although Media, Basic Resources and Personal Goods seem to have a satisfactory internal financing capacity over the period 2009-2011, their gearing ratio does not look too convincing.
Despite their rather modest capital intensity, stocks in Chemicals, Industrial Goods and Services, Travel and Tourism, and Food and Beverages post low expected ROCE development for 2009-2011. Furthermore, apart from Chemicals, the gearing level of the others seems quite high and indicates a rather weak balance sheet quality.
Erste Group analysts estimate restored trust in the financial sector is a prerequisite for a stable recovery and would consider as good indicators rising velocity of money accelerated loan growth and declining credit spreads.
“For the time being, the signs that financial markets are on a path of lasting improvement are still weak. Companies’s debt security issuance has continued to increase”, the report informed.
Erste Bank analysts state it might be that companies expect the environment to worsen further and want to make sure to have enough liquidity, as further downgrades, would lead to rising refinancing costs.