We believe that most of the negative news is priced at this level and Carrefour offers attractive valuation and good management. December consumer confidence figures in France rose to a new high last week and same-store sales at hypermarkets rose for the first time in three. Carrefour is not exposed to the strengthening Euro due to its high exposure to Europe (85% of sales) and better outlook for consumption in Europe. We expect Carrefour to reach a level of EUR 85, which is an upside potential of approx. 29%.
Henkel (HEN3 GY; EUR 69.11) is a valuation and consumer play. The company generates about 77% of sales in detergents, body care & toiletries (Schwarzkopf) and cosmetics. The remaining 23% comes from its consumer chemical unit Cognis. Despite the high exposure to consumer products Henkel is valued much more like a chemical stock than a consumer goods stock such as L'Oreal, Wella, Unilever etc. Its discount to its direct peers is close to 50%, which we feel is unwarranted. Henkel's management is committed to find a solution for Cognis. We expect this to happen in Q2 or Q3 of 2001. We believe that a full disposal is more likely now and if cyclicals experience a rally the timing could be earlier rather than later. This would lead to a re-rating in the stock closer to its direct peers. Our target for Henkel is EUR 82 or 24% from current levels.
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