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Extraction Summary
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People
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Organizations
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Locations
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Events
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Quotes
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Summary
This document is page 19 of a Bank of America Merrill Lynch 'Global Cross Asset Strategy' report dated November 30, 2016. It provides financial analysis recommending a long position in European Healthcare equities, citing favorable valuations compared to the Food & Beverage sector and reduced regulatory risk following the Republican win in the US elections. The page includes four charts (34-37) illustrating dividend growth forecasts and price-to-earnings ratios. The document bears the Bates stamp HOUSE_OVERSIGHT_014450, indicating its inclusion in a congressional oversight investigation.
Organizations (5)
| Name | Type | Context |
|---|---|---|
| Bank of America Merrill Lynch |
Publisher of the Global Cross Asset Strategy report
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| Bloomberg |
Cited as a source for charts
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| Datastream |
Cited as a source for charts
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| IBES |
Cited as a source for charts
|
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| Republican Party |
Mentioned regarding the 'clean sweep' in US elections affecting drug pricing
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Timeline (2 events)
2016-11-30
Locations (2)
| Location | Context |
|---|---|
|
Market focus (European equities)
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Context of elections and drug pricing regulations
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Key Quotes (3)
"We switch our European sector pair trade preferring Healthcare over Food & Beverage into an outright long in Healthcare."Source
HOUSE_OVERSIGHT_014450.jpg
Quote #1
"We believe the Republican clean sweep in the US elections represents a positive catalyst as it significantly decreases the potential for legislative initiatives to aggressively control drug pricing in the US."Source
HOUSE_OVERSIGHT_014450.jpg
Quote #2
"Our sector analysts forecast EU Pharma to deliver a 2018-21E EPS CAGR of 11%, up from mid-single digit levels in recent years."Source
HOUSE_OVERSIGHT_014450.jpg
Quote #3
Full Extracted Text
Complete text extracted from the document (2,517 characters)
Chart 34: SX5E dividends: 2-yr implied growth in 2018 still looks cautious
[Bar chart showing percentages from -15% to 10% for years 2011-2019]
■ 2 year growth implied / realised %
Source: BofA Merrill Lynch Global Research, Bloomberg
[Bar chart showing percentages from -15% to 10% for years 2011-2019]
■ 2 year growth implied / realised %
Source: BofA Merrill Lynch Global Research, Bloomberg
Chart 35: BofAML’s SX5E Dec18 div forecast implies 8% upside
[Bar chart showing index points from 70 to 150 for years 2000-2019]
ESTX50 realised dividends
Dividend futures
Consensus
BofAML
[Annotation pointing to 2016 bar: 117.3div pts paid in 2016 YTD]
[Labels on bars for 2017, 2018, 2019: 117.1, 123.1, 124.8]
Source: BofA Merrill Lynch Global Research, Bloomberg
[Bar chart showing index points from 70 to 150 for years 2000-2019]
ESTX50 realised dividends
Dividend futures
Consensus
BofAML
[Annotation pointing to 2016 bar: 117.3div pts paid in 2016 YTD]
[Labels on bars for 2017, 2018, 2019: 117.1, 123.1, 124.8]
Source: BofA Merrill Lynch Global Research, Bloomberg
European equities: switch to outright long Healthcare
We switch our European sector pair trade preferring Healthcare over Food & Beverage into an outright long in Healthcare. Both sectors have suffered versus the market from the rotation out of defensives and bond proxies. That has reduced the valuation of the Food & Beverage sector to less extreme levels. Meanwhile Healthcare looks very attractively valued and we see compelling risk reward in the sector on an outright basis at current levels.
We switch our European sector pair trade preferring Healthcare over Food & Beverage into an outright long in Healthcare. Both sectors have suffered versus the market from the rotation out of defensives and bond proxies. That has reduced the valuation of the Food & Beverage sector to less extreme levels. Meanwhile Healthcare looks very attractively valued and we see compelling risk reward in the sector on an outright basis at current levels.
The fundamental bull case for Health rests on the strong pipeline of new products for the big cap pharma universe. Our sector analysts forecast EU Pharma to deliver a 2018-21E EPS CAGR of 11%, up from mid-single digit levels in recent years. Historically that would justify a PE re-rating and a multiple for the pharma sub-sector nearer 17-18x than the current 13x 2018 PE.
Chart 36: Extreme overvaluation in Food & Bev has moderated
[Line graph showing values 0.80 to 1.80 for years 2001-2015]
Food & Bev 12m fwd PE relative
Source: BofA Merrill Lynch Global Research, Datastream, IBES, Bloomberg
[Line graph showing values 0.80 to 1.80 for years 2001-2015]
Food & Bev 12m fwd PE relative
Source: BofA Merrill Lynch Global Research, Datastream, IBES, Bloomberg
Chart 37: Healthcare PE – back near market multiple and patent cliff lows
[Line graph showing values 0.80 to 1.70 for years 1999-2015]
HealthCare 12m fwd PE relative
Source: BofA Merrill Lynch Global Research, Datastream, IBES, Bloomberg
[Line graph showing values 0.80 to 1.70 for years 1999-2015]
HealthCare 12m fwd PE relative
Source: BofA Merrill Lynch Global Research, Datastream, IBES, Bloomberg
We believe the Republican clean sweep in the US elections represents a positive catalyst as it significantly decreases the potential for legislative initiatives to aggressively control drug pricing in the US. The catalyst for the sector to re-rate will come progressively from newsflow around new products. The next 12 months should see progress on this front with several of the European large caps expected to announce key data on important drugs in 2017.
Bank of America Merrill Lynch
Global Cross Asset Strategy – Year Ahead | 30 November 2016
19
HOUSE_OVERSIGHT_014450
Global Cross Asset Strategy – Year Ahead | 30 November 2016
19
HOUSE_OVERSIGHT_014450
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