Morgan Stanley European Equity Derivatives

Pre-trade Analysis (MSEOOPEN) Rob Cronin

Ross Montgomery
Risk and Exposures Mathieu Renault

Overview

Vol Optimized Re-Opening Winners

Members 41 Rebalance Semi-Annual (Liquidity) / Semi-Annual (Comp.)

Min. Liquidity $5 mn Exclusions Special Sits and hard to b orrow names
Trade Time $10m 48m Constraints Sector (30%), Country (None), Stock (9%)

MSEOOPEN SXXP
DNA

# Stocks 41 600
Currency EUR EUR Performance
Cyclical 88% 40%
10% 10%
Defensives 0% 4%
12M Mom. Long 0% 26% 0% 0%
Composition

12M Mom. Short 64% 17% -10% -10%

Cheap 5% 19% -20% -20%
Expensive 25% 25%
High Quality 0% 35% -30% -30%
Low Quality 19% 17% -40% -40%
High Growth 9% 27% -50% -50%
Low Growth 62% 17%
-60% -60%
Volatility (180D) 51.6% 32.4%
Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
Beta to SXXP (2Y) +1.50 +1.00
Risk

BETA to EUR TWI (2Y) -1.15 -1.50 MSEOOPEN MSEOOPEN vs. SXXP (RHS)
Short Base % of FF 4.7% 1.3% Source: MS EU Equity Derivatives
Time to Trade $10Mn 48m 2m

Factor Overlap Revenue Exposure of Indices

100%
90% 40%
80% 33%
35% 31% 30%
70%
60% 30% 25%
50% 25% 21%
40% 21%
30% 18%
20%
20%
10% 15% 10%
0% 10%
5%
0%
Dev Europe (ex. UK Emerging US
UK) Markets

MSEOOPEN SXXP MSEOOPEN SXXP

Source: MS EU Equity Derivatives Source: MS EU Equity Derivatives

Index Correl (Last 6 Months) Short Base as % of FF

100% 89% 9.5%
80% 8.5%
80% 69%68%
7.5%
60% 52% 6.5%
45%
40% 5.5%
16%11% 4.5%
20% 3.5%
0% 2.5%
-20% 1.5%
0.5%
-40% -28% -27%
EUR 2/10 Y EUR TWI Euro HY Oil Gold
YC Debt
MSEOOPEN SXXP MSEOOPEN SXXP
Source: MS EU Equity Derivatives Source: MS EU Equity Derivatives, Markit

SALES AND TRADING COMMENTARY (NOT A PRODUCT OF RESEARCH) Source for charts: Morgan Stanley European Derivatives Desk, Bloomberg, Markit

This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell 1
any security or instrument or to participate in any particular trading strategy. Please refer to important information at the end of this document.
 Morgan Stanley European Equity Derivatives

Pre-trade Analysis (MSEOOPEN) Rob Cronin

Ross Montgomery
Basket Composition Mathieu Renault

Sector/Country Weights
Sector Exposure Country Exposure
35% 50%
30% 45%
25% 40%
35%
20%
30%
15% 25%
10% 20%
5% 15%
0% 10%
5%
0%

MSEOOPEN SXXP MSEOOPEN SXXP

Source: MS EU Equity Derivatives
Source: MS EU Equity Derivatives

Composition: Top 25 Names (84% of weight)

Composition Fundamentals Trading

Mkt. Cap Debt to Short Base Next Beta to
Stock Name Sector Weight PE Ratio ROE YTD Perf.
($Bn) Equity (% of FF) Earnings SXXP
HMB SS Hennes & Mauri-B Retail 8.5% 29 24x 25% 1.5x 14% 29-Jan 1.4 -18%
CPG LN Compass Group Travel/Leis. 8.0% 28 33x 29% 1.6x 0% 24-Nov 1.1 -36%
DG FP Vinci Sa Constr. Mats. 7.5% 54 16x 16% 1.6x 1% 05-Feb 1.4 -25%
FER SQ Ferrovial Sa Constr. Mats. 6.7% 18 - 13% 2.3x 0% 29-Oct 1.1 -22%
NXT LN Next Plc Retail 4.4% 11 17x 138% 5.7x 2% 01-Apr 1.4 -10%
SW FP Sodexo Sa Travel/Leis. 4.1% 11 18x 17% 1.5x 3% 29-Oct 1.1 -41%
INF LN Informa Plc Media 3.5% 8 18x 4% 0.5x 0% 10-Mar 1.3 -50%
FGR FP Eiffage Constr. Mats. 3.2% 8 11x 14% 3.0x 0% 24-Feb 1.3 -30%
ABF LN Assoc Brit Foods Food & Bev. 3.1% 18 14x 8% 0.5x 1% 03-Nov 1.1 -33%
BLND LN Brit Land Co Plc Real Estate 2.9% 4 14x -15% 0.5x 6% 18-Nov 1.1 -43%
IHG LN Intercontinental Travel/Leis. 2.8% 10 27x -27% - 7% 18-Feb 1.6 -18%
LAND LN Land Securities Real Estate 2.7% 5 11x -10% 0.6x 1% 10-Nov 1.0 -47%
AMS SQ Amadeus It Group Technology 2.7% 25 - 23% 0.9x 1% 06-Nov 1.3 -34%
JD/ LN Jd Sports Fashio Retail 2.6% 10 24x 22% 2.1x 1% 15-Apr 1.5 -3%
LHA GY Deutsche Luft-Rg Travel/Leis. 2.5% 6 - 12% 1.0x 15% 05-Nov 1.3 -50%
URW NA Unibail-Rodamco- Real Estate 2.4% 7 5x 4% 1.1x 30% 01-Nov 1.4 -70%
MKS LN Marks & Spencer Retail 2.3% 2 9x 1% 1.1x 1% 04-Nov 1.2 -57%
GFS LN G4S Plc Industrials 2.2% 4 14x -34% 10.9x 2% 12-Mar 1.4 -5%
AC FP Accor Sa Travel/Leis. 1.8% 7 - 7% 0.8x 4% 19-Feb 1.4 -42%
CCL LN Carnival Plc Travel/Leis. 1.7% 10 - 8% 0.5x 0% 26-Oct 2.2 -73%
FHZN SE Flughafen Zu-Reg Industrials 1.7% 4 - 13% 0.5x 9% 12-Mar 0.9 -27%
RTO LN Rentokil Initial Industrials 1.6% 13 36x 28% 1.4x 0% 04-Mar 1.0 18%
BVI FP Bureau Veritas S Industrials 1.6% 10 24x 29% 2.9x 0% 25-Feb 1.0 -16%
EZJ LN Easyjet Plc Travel/Leis. 1.6% 3 - 12% 0.6x 0% 17-Nov 1.8 -64%
RYA ID Ryanair Hldgs Travel/Leis. 1.6% 17 - 13% 0.8x 0% 02-Nov 1.2 -15%

SALES AND TRADING COMMENTARY (NOT A PRODUCT OF RESEARCH) Source for charts: Morgan Stanley European Derivatives Desk, Bloomberg, Markit

This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell 2
any security or instrument or to participate in any particular trading strategy. Please refer to important information at the end of this document.
 Morgan Stanley European Equity Derivatives

Pre-trade Analysis (MSEOOPEN) Rob Cronin

Ross Montgomery
Valuations & Earnings Mathieu Renault

Summary Table
MSEOOPEN SXXP
Now %-ile Now %-ile
Valuations Profitability Growth Balance
PE Ratio 17.1x 71% 17.4x 93%
Valuation

Sheet
EV to EBITDA 9.0x 10% 10.4x 28% 100%
FCF to Mkt Cap 4.5% 34% 5.2% 71% 80%
Div Yield 1.8% 3% 2.3% 3% 60%
40%
EBIT Margin 10.4% 50% 12.5% 66% 20%
Profit.

0%
ROE 11.7% 12% 11.2% 5%
ROI 5.4% 7% 5.8% 2%

12m EPS Grw. 62% 100% 13% 100%

Growth

Long-Term Growth -1% 3% 4% 2%

Sales 1Yr Growth 5% 33% 4% 22% MSEOOPEN (%-iles vs. 2016) SXXP (%-iles vs. 2016)
Source: MS EU Equity Derivatives
Debt to Equity 1.1x 95% 0.8x 93%
B/S

Oper. Leverage 0.5x 5% 0.5x 3%

Long Term Earnings Growth = 3-5Y EPS Growth Estimates

Valuation (12m Forward PE)

PE Ratio (12m Forward) PE Ratio vs. Other MS Thematics

22x 25% 26x 100%
20% 24x
20x 22x 80%
15% 20x 60%
18x 10% 18x
5% 16x 40%
16x 14x
0% 20%
12x
14x -5% 10x 0%
-10%
12x
-15%
10x -20%
Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

MSEOOPEN Prem/(Disc.) to SXXP (RHS) PE Ratio Percentile vs. 2016 (RHS)

Source: MS EU Equity Derivatives Source: MS EU Equity Derivatives

EPS Long-Term Growth Estimates

Long-Term EPS Growth Estimates (3-5Y) Long-Term Growth Est. (3-5Y) vs. Other MS Thematics
12% 6% 100%
5%
10% 4% 80%
8% 3% 60%
2%
6% 1% 40%
0% 20%
4% -1%
2% -2% 0%

0%
-2%
Jan-18 Jan-19 Jan-20

MSEOOPEN SXXP EPS LTG Est. (3-5Y) Percentile vs. 2016 (RHS)
Source: MS EU Equity Derivatives Source: MS EU Equity Derivatives

SALES AND TRADING COMMENTARY (NOT A PRODUCT OF RESEARCH) Source for charts: Morgan Stanley European Derivatives Desk, Bloomberg, Markit

This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell 3
any security or instrument or to participate in any particular trading strategy. Please refer to important information at the end of this document.
Morgan Stanley European Equity Derivatives

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