VOW3:DEU – Market expectations are for Uniform ROA to remain muted, and management has concerns about momentum, guidance, and international markets

• Volkswagen Aktiengesellschaft (VOW3:DEU) currently trades near historical averages relative to UAFRS-based (Uniform) Assets, with a 1.1x Uniform P/B. At these levels, the market has muted expectations for the firm, and management may have concerns about maintaining strong performance, meeting guidance targets, and international segment performance
• Specifically, management may lack confidence in their ability to maintain strong momentum from the start of the year, and may be concerned about the underlying market strength and market conditions for a potential Traton IPO. Additionally, they may lack confidence in their ability to meet their target for FY 2018 cash flow generation, and to achieve stronger FY 2018 financial results compared to FY 2017. Furthermore, they may have concerns about headwinds in China, Turkey, and Argentina, and their ability to sustain growth in South America. They may also lack confidence in their ability to continue offsetting recent underperformance with strong results from H1 2018, and to maintain strong Audi sales growth in China