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The 2016 All-Europe Research Team: Benelux, No. 1: David Tailleur & team

David Tailleur and his Rabobank squad in Utrecht, who repeat at No. 1

David Tailleur
& team
Rabobank
First-Place Appearances: 4

Total Appearances: 10

Team Debut: 1998

David Tailleur and his Rabobank squad in Utrecht, who repeat at No. 1, boast an “impressive wealth of local knowledge,” one long-term investor observes. “They’re quite strong on agricultural commodities as well as coverage of financial institutions and insurance, especially in the Netherlands.” Of late, Tailleur’s team has been monitoring a major story with reach well beyond the Benelux area: consolidation in the supermarkets industry. Dutch giant Royal Ahold and Belgian competitor Delhaize Group acknowledged in May that they were discussing a merger, and by the end of the following month the retailers had confirmed their intention to unite. Optimistic about the €26.1 billion ($29.1 billion) transaction, Rabobank’s researchers boosted their rating on Ahold from hold to buy. The resulting entity will be the largest grocery chain operator in the Benelux countries — as well as the fifth-biggest in the U.S., where Ahold’s Stop & Shop and Giant outlets will be under the same ownership as Delhaize’s Food Lion and Hannaford stores. Moreover, Tailleur contends, Ahold management avoided paying a “takeover premium” to generate these benefits of scale. Earnings momentum in most of the combined retailer’s markets is already positive, he advises. His group expects the resulting Ahold Delhaize powerhouse to reward stockholders with “sizable cash returns fueled by cost savings” and to further benefit from the Dutch company’s emergence as a leader in online sales. “We especially like Ahold’s high free-cash-flow yield of circa 8 percent for 2016,” adds the 42-year-old leader. The deal is expected to close by July, and the analysts assign Ahold’s stock a target of €23.50. In mid-January it was trading at €19.27. Meantime, they continue to recommend that investors buy Royal BAM Groep, a Netherlands-based construction services provider with significant operations in Belgium, Germany, Ireland and the U.K. Already exceeding expectations amid Europe’s modest recovery, Tailleur explains, the executive team deployed €300 million in working capital last year while reducing costs by €100 million, bolstering the team’s forecast of “double-digit free-cash-flow yield in the 2015–’18 period.” BAM’s shares rocketed 94.9 percent, to €4.60, during the 12 months through mid-January, compared with the European market’s decline of 5.9 percent. Tailleur and his cohorts believe a price of €6.25 is justified in the nearer term, with €8 to €10 possible over the next few years.


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