Thales was sold as the stock became fully valued. Its revenue stream remains defensive, but on the other hand the elimination of the discount to fair value will increase the danger of a share overhang from Dassault, which owns 5%. Other dangers include a forced merger with Safran, as the new French administration has made no bones about its desire to produce French national champions. Recent trading updates and guidance suggested that the stock was fully pricing in the new order flow.
Thales is France's leading defence systems company; the rationalisation of the company's assets over the years means that the majority of divisions are focused on systems rather than heavy manufacturing. The exception is the Naval activities which, under its new structure, look set to construct the UK's future aircraft carriers. A healthy order book, and continued focus on costs, gives over 20% upside, in our view, for the share price to reach fair value.
| Sedol |
Type |
Price |
Date |
| 4162791 |
Sell |
EUR 42.985 |
16/05/2007 |
| 4162791 |
Buy |
EUR 40.416 |
20/03/2007 |
|
