STOCKS NEWS EUROPE-Bet on post-reform French recovery -UBS

French stocks that have seen profitability tumble in recent years are good options to bet on a successful reform to the French economy, strategists at UBS say, with return-on-equity (ROE) set to recover and valuations looking undemanding.

While there is low confidence in a French economy which is relatively uncompetitive and unprofitable, new measures to improve labour flexibility and cut taxes should help boost corporate profitability, UBS (Xetra: UB0BL6 - news) says.

The Swiss bank therefore recommends betting on a profit recovery in stocks where price-to-book valuations have moved even lower than the return-on-equity on a relative basis.

"French quoted ROE has collapsed, but at least its price-to-book has moved with it. If the market pays up for France to reform and get its ROE back in line with Germany, France offers upside," the strategists write in a note.

The bank screens for French companies which have seen ROE tumble since peaking in 2007 to be at least 15 percent lower than European peers, and which trade at a price-to-book discount to their European sector.

Alstom (Paris: FR0010220475 - news) , Nexans (Dusseldorf: NXS.DU - news) and Renault (TLO: RENA-U.TI - news) feature on UBS's list for return-on-equity recovery plays.

Reuters messaging rm://alistair.smout.thomsonreuters.com@reuters.net