26/01/2010

PEERS & MARKETS

18-22 January 2010 was a bad week on international share markets, ending over three per cent down. In Europe sales mainly concerned the banking sector (-6.2% on the European reference index), auto& parts (-5.7%) and basic resources (-5.5%). The main drivers behind performance on the stock exchange being the reform of the US banking sector and fears of a fall in demand in 2010. Pirelli ended the week (€0.42, -6.5%) in line with the European auto&parts sector. During the week Goldman Sachs raised the target price to 0.61€ (from 0.50€) confirming the Neutral recommendation. The upside reflects both the improved evaluation of Pirelli Tyre (positive forecasts for the tyre business in 2010) and the annulment of the holding discount (of 15%) on the NAV (according to the broker this is Pirelli’s strong commitment to becoming a pure tyre player). The positive outlook for Pirelli was also confirmed by Morgan Stanley (TP €0.52, Overweight) and Equita (TP €0.51, Buy) with the Consensus Target Price settling at 0.483€ on a coverage of 18 brokers, 71% the BUYs, 29% the Holds.  A downward turn for Pirelli RE by -2.9% in line with the European real estate market (-2.1% Epra index).