Liams Last Post : Elan ammend their trial, Irish Banks shareholders endure their own trial...

Liams Last Post Tuesday 15/12/09

 

Good Afternoon ,

 

The year is really now starting to Drag. Newsflow is incredibly light , the big news today was the news of the 'Modification to the Elan clinical trial being run with Transition Therapeutics. 9 deaths on the trial , none of course directly linked to the trial but 9 nonetheless , so the trial is modified to stop the two highest dose groups within the trial. Not good news... and a blow for the drug which was supposed to have a potentially benign safety profile.   We had ascribed a 10% chance of success for this drug providing a per share value of c.50c in our Elan SOTP of $7.33/share... obviously this will be 'Ammended' too now.

The FBD news of their increasing estimate of the cost of the flood claims impacted the stock yesterday , the investment case remains very valid despite the increased one off cost of claims so the market reacted somewhat more positively and thstock continued to claw back the losses of yesterday. Elan managed a rather stoic performance with the stock pnly down -2%

 

The long suffering holders of the irish financials today continued to watch their stocks move lower. AIB -7.5% , having recovered from its low of over -10% at one stage and Irish Life which also fell -4.5% drifted on no news.  Bank of Ireland only down -2.3% was an absolutely heroic performance.

 

Fyffes holders await the final signature on the EU banana regime duty change. Potentially very earnings accretive unless the lower duty is competed away. Given the sector track record , I see no reason to assume that the lower duty wont be competed away immediately but it might provide a filip to sentiment even for a short while..

 

Markets today .... little ado about nothing , opened , dropped , recovered touched positive territory in Europe and closed basically flat on yesterday.  London eased into the close to finish down -0.5% and the USA after a decline inthe US EMpire State manufacturing index is down -.17% aat 5pm

 

Have a good evening.

 

Liam

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.

 

Liams Last Post : Quiet , Dubai relief and DCC deal the highlights

Good Afternoon ,

 

I was away for a couple of Days in Frankfurt. Always good to get out of Dublin these days and to find a world where there is a more optimistic view of the world in 2010 , a world where  everyone is not under the cosh of NAMA and a government that is faced with taking very tough decisions just to keep the show on the road.  THe perception from the Germans I spoke to towards Ireland was favourable and there was indeed a recognition as reflected nthe coverage of the likes of the FT that the Irish government has taken significant steps to address the economiy and the position we find ourselves in... 

 

Kingspan fell -3.3% despite the Friday bolt-on deal. The Deal highlights how Kingspans rapid reduction in net debt balances combined with a stabilisation in its sales run-rate allows management to restart considering acquisition opportunities we estimate that Kingspan has the capacity to invest 200m in acquisitions over the next two years.

 

The DCC deal was decent size and is earnings accretive by just over 1% this year and mearly 4% next year. I have to say that DCC under this management team seem just determined to deliver deal after deal in their chosen space. The de-emphasis of the Food and Healthcare businesses is evident to all and sundry now so one has to think that at some stage that these are likely to be disposed of. this acquisition of Brogans Holdings Ltd, a 447m litre oil distribution and fuel card business in Scotland and the north of England for cash consideration of 47.2m. Brogans operates 87 road tankers out of 15 locations and generated operating profits of 7.9m in the year to May 2009 (operating margin of 2.4%). The acquisition adds c.10% to DCC's existing volumes of c.4.5bn litres and increases its market share in the UK oil distribution market from 13% to 14%. The pre-synergy multiple of just under 6x historic operating profit looks attractive

 

The CEO of ICG last week sold 7.1% of his 16% stake in the company, which appears to have been purchased by Rokeby Investments Ltd, an investment company controlled by him , This news caused a stir on friday when it broke...but it sems like just moving stock around for tax purposes...

 

Overall Volumes thin now , THis year definitely over as far as the markets are concerned.  The Dubai bail out by Abu Dhabi was a surprise which took the pressure off markets to everyones relief.

 

Most markets range bound though and closed the day net up between 0.5% and 1% across he major markets.  Ireland was broadly flat on the day. The banks down , CRH up but Kingspan and Grafton still struggling .

 

  

Have a good evening

 

Liam

 

---

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Merrion Stockbrokers Limited (registration no. 307878)
is a limited liability company whose registered office is at
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Liams Last Post : Irish Financials as 'event driven value opportunities'... maybe getting there ...

Good Afternoon ,

 

A Messy miserable day for markets not helped by US economic data , a rather tepid reception to Ben Bernankes pronouncements last night which hardly took the market by surprise and the news of property Losses in Dubai and to crown it all the Downgrade of the credit rating of Greece.

  

Today Merrion have published a note on the Banks, updating our NAMA discount assumptions and the amounts required to bring the banks to an 8% equity Tier 1 ratio.  For AIB we are now forecasting a 35% NAMA discount and 27% for Bank of Ireland. It would appear that as we get closer to the NAMA event taking place that discretion and caution is guiding the behaviour of all the advisors involved and everyone is looking to protect themselves in terms of the valuations they are prepare to sign off on. So the earlier fears of NAMA simply overpaying are dissipating somewhat.  Clearly the Higher the discount , the higher the equity required to recapitalise the banks. The problem for the market has been to look at the scale of the recapitalisation required relative to the current market capitalisation and then shy away from the banks... in some cases the screeching of tyres as the potential investor has roared off into the distance has been obvious...

 

But I personally believe that times are getting very interesting now for anyone who is prepared to look for elusive 'EVENT DRIVE VALUE OPPORTUNITIES' and Bank of Ireland is potentially a very interesting story...

 

If you take the starting point that the support by the government in the form of preference shares is sufficient to meet regulatory capital requirements , then the only reason that the Bank would look to recapitalise with common equity is to free itself from government influence and to make itself more attractive to equity investors. 

 

We are approaching D-Day for NAMA which will provide certainty, the EU re-structuring is hardly likely to be that onerous for the banks especially when the experience of RBS is taken into account. So the obvious solution to the re-capitalisation of Bank of ireland would be for the Government to agree to under write an equity issue which would repay the Preference shares and protect the pre emption rights of existing shareholders. A similar scheme was already done with Lloyds earlier this year. 

 

I believe that investors are clever sophisticated people who like being presented with simple propositions and the Irish banks have had more variables than any sensible person would look at but over time the options are coalescing and there is a rising degree of certainty which can be priced by the market...

 

If the Government , once they get over the budget tomorrow and NAMA after that , see the light and I presume they will , then a mechanism whereby they underwrite the issue that pays them back could be a huge success... there is nothing like an issue which is already underwritten to create investor interest. The key here is the extent of the discount to the price that the issue takes place at.  It is our view that Bank of Ireland can earn 13%  post recapitalisation to 8% equity Tier 1 on a pre provision normalised profit level which is 36% lower than previous peak profits. This is attractive. 

 

AIB needs a massive injection of cash which we think is most probably in two tranches and requires more imagination....than looking at Bank of Ireland. 

 

I commend Sebastians note to you... definitely worth some quiet contemplation, especially if you are charged with looking for value and performance ....

 

The Easier play is of course Irish Life...but I think I have done this one to death recently... And there is FBD...roaringly cheap and not requiring any re-capitalisation... 

 

Plenty of value in the Irish financials.... and the smoke is clearing....Get your boots on... might not be time to wade in yet... but I sense an opportunity coming... 

 

 

Tomorrow we look forward to being fleeced in the budget... Can hardly wait ...

 

Have a good evening ,

 

Liam

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.

 

 

 

 

Liams Last Post : Ryanair the debate of the day...Cyclicality upon us...

Good Afternoon ,

 

Market Strength from Friday did not carry over into Mondays trade and though there was little news , there was plenty of noteworthy stuff going on in Ireland with Merrion publishing a note on Ryanair , re-iterating our cautious view and the Hold recommendation , Another broker in Dublin , on the other hand also published a note on Ryanair today returning the stock to its conviction list for 2010. The other note followed the initiation by a UK broker last week with quite bullish assumptions. As one person said to me that their blues skies scenario is the central case.

 

I have to say I believe the John Mattimoe position and I agree with his view that Ryanair is transitioning to a cyclical company and that the issue is how much the market de-rates the multiple paid for a cyclical earnings

 

. I know that there is a battle of perceptions being waged in the share price which has been a relative basket case in terms of performance.  I think there is general agreement that the business is in transition....and that the only real difference is in emphasis with the DAVY note focussing on the cashflow generation potential of the business whereas the Merrion note looks at the valuation rating and the Merrion Note has some detailed modelling of the continued growth strategy scenario or the constrained growth scenario. The constrained growth scenario shows profit per passenger rising faster to our assumption of Eur11.02 in both scenarios by 2018.  Our conclusion is that this is a long way out and that Ryanair will be the dominant player in the low fares sector with the sector maturing too as it grows to 30% of the total market. In short our view is that the cyclical nature of their earnings at these levels of market penetration will be attributes a lower earnings multiple.

 

I am sticking with Johns view and it is interesting as Ryanair has done nothing except execute its strategy flawlessly but the market cannot really decide how to call what happens next. My gut feeling is that the bulls will be disappointed over time but that the stock will remain resilient while there is no obvious really bearish case.

 

 Stock like Glue stuck within a very narrow range today...down -0.08%

 

Quiet day... most markets recovered in the afternoon , the USA futures were showing negative at the opening but the market opened up and has held itself in positive territory....Ben Bernanke speech will set the tone for the evening.

 

 

Have a good evening.

 

Liam

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.

 

 

 

 

Liams Last Post : Liamo's 10 Key Picks for 2010... Steal a march... and get re-postiioning now...

Good Afternoon ,

 

Rather than commentating on what has happened today I thought I would send you my thoughts such as they are right now looking ahead to 2010.  I have included current prices so you can hold me accountable… I reserve the right to change my mind over time about this list over time depending on market developments.

 

This is my own collection of ideas arising out of conversations I have been having with colleagues in both sales and research and observing the past few weeks of company statements and results. There has been much debate about the prospects for Ireland next year...and while I believe I am not being Naiive about the challenges facing Ireland , I am fully aware of the abysmal state of the economy and how tough life is and is getting for everyone as the rich go bust and are increasingly appearing in the courts as banks aggressively chase personal guarantees and the middle/high income earners face large tax hikes , and the public service unrest all reflect the reality of the new Ireland…however….Looking at Irish consumer sentiment improving as released yesterday, unemployment remaining stable for 3 months at 12.5% and the fact that the consensus is now for 2009 to be the bottom for earnings for a large number of the Irish stocks with some earnings estimates now being raised for both the 2009 and 2010 outlook, it is worth humbly suggesting that Ireland Inc is at an inflection point in perception....and Irish stocks which remain out of favour could come in for some serious attention early in the new year...

 

Gazing ahead to 2010 …I have narrowed down my favourites to 10 ( There were other candidates) … where there is Secular growth , Growth with Defensive qualities and event driven re-structuring plays…. So steal a march and get cracking now in terms of re-positioning your portfolio now... 

 

Needless to say , feel free to disagree and I would love to hear better suggestions…

 

I hope this provides some food for thought….

 

Have a good evening ,

 

Liam

 

 

 

LIAMO'S  IRELAND IDEAS for 2010

 

********** Secular Growth Stories ***********************

 

Paddy Power (25.5)  UK and  Australia online and market share play with potential for other European deals such as the French PMU deal and always the prospect that at some stage that the US market may open up to it , while having robust performance from Ireland through downturn. Not cheap but genuine momentum. I love it…

 

Norkom  : (1.27) Company confident in its future growth prospects, in the US, Continental Europe, Middle East and Asia-Pacific and progress on its strategy to broaden its potential market base by partnering to broaden customer base. Trading on 10.3x 2010 EPS.  EV/EBITDA basis  8.0x calendarised 2010 forecasts are undemanding multiples for a company expected to delivery earnings growth above 20% into the medium term.

 

DCC : (18.97)   Strong balance sheet platform to acquire oil distribution assets in UK . Medium term opportunity in wider European market. The energy business will continue to grow and grow and DCC is likely to become rated as a highly profitably energy distribution business than a poorly understood conglomerate.

 

********** Re-Structuring Plays *******************

 

Irish Life : (3.30)  Re-structuring play to unlock the value of the Life company and solve the capitalisation and funding issues at the Bank. There were negative details contained within the IMS re Commercial property exposure which were clearly disappointing and the market reacted very badly to the news. The negative in the IMS is that Recapitalisation requirements to get to 8% Equity Tier 1 has increased to c. €1B and it is significant compared to the current market Cap of the company but our end 2010 embedded value forecast for the life business is €1.5B or c. €5.40/share.  The general insurance associate holding at book value adds an incremental 50c/share.  Assuming that confidence in the embedded value returns (i.e. the downward revisions/surprises stop) and the valuation pulls to 1x (compared to an historic range above 1.4x reflecting the strong franchise and growth potential and an estimated 0.65x currently) and the general insurance associate is valued at book , we derive a  fair value per share estimate of Eur10.46.

   

 

********** Cyclical recovery ************************

 

CRH  (17.69) Likely meaningful improvement in earnings next year despite further overall top line weakness. Cost savings will be an important dynamic allowing CRH strong leverage to a recovery. CRH's ROCE has compressed much more significantly this time compared to previous downturns. An EV/Capital Employed valuation of just under 1x remains very attractive for a company with the potential to re-establish an attractive level of ROCE in a recovery and to invest further capital in acquisitions

 

Grafton  : (3.15) UK economy play and play on RMI and DIY , massive costs taken out , big leverage to recovery. Grafton in their recent IMS confirmed that the trends which they had noted earlier of a stabilisation of business have continued. The company have indicated comfort with trading at their UK merchanting business and while consensus expectations are for the company to scrape into a loss at the EPS level , we are at the top of the range of forecasts looking for 16c eps for next year , top of the range at the moment but given the previous peak earnings was 83.5c , there is a long way to go to if the UK economy particularly continues to pickup.  

 

Smurfit : (5.70)  SKG's mid-cycle earnings capacity is greater than previously estimated. SKG can reach mid-cycle EBITDA earlier than anticipated due to the impressive pace of recent supply-driven price increases. Consequently, an EV valuation of 6x mid-cycle EBITDA is now appropriate, equivalent to €8.25 per share.

 

 

************  Defensive Growth / Value ************************

 

Total Produce  : (34.5c)Defensive cash generative fruit distributor on 5.5x earnings , Lowly values P/E of 5.5x,  and a high FCF yield of 18% and  yielding 5.4%.

I would like to bid for this company myself….

 

Kerry :  (20.25) Consensus growth expectations could rise sharply , The Kerry management remain focused on maximizing cross selling and product development maximization through the implementation of their 'Go to Market' strategy which provides the opportunity for the company to outperform its official topline growth targets of 2-4%, particularly as the strategy is rolled out through Asia-Pacific and EMEA. The 'Go To Market' strategy essentially brings the company's capabilities assembled through its numerous acquisitions under one roof  in the USA and allows them to leverage off the assembled expertise they have acquired. This combined with margin accretion through further cost rationalization and the SAP driven savings, suggests that potential earnings growth over the medium term could be significant and ahead of current consensus. Kerry trades on a discount in terms of P/E to the other ingredients manufacturers but on a similar EV/Ebitda multiple but if earnings growth accelerates then this could trigger strong performance.

 C&C  : (2.85)  Deal driven management team going to drive momentum . The stock is now trading at 11.4c our calendarised 2010 EPS forecast, a 20% discount to the brewing sector. The valuation is underpinned by the free cash flow yield of 8.7% in 2010.  The Gaymers deal reduces reliance on the RoI and GB sales will  be balanced between the off and on trade. Cider portfolio diversification across multiple brands across a range of price points should allow C&C achieve improved traction and market share with customers, both on and off trade. Focussed deal driven management team going to continue to drive this hard.

 

 

 

 

 

Liam

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.

 

 

 

 

Liams Last Post : Dubai scares again, end of November flurry of Irish Corporate news.

Good Afternoon ,

 

Well the Tale of Dubai continues to unfold with the Dubai Minister for Finance pointing out that while Dubai World is state owned it was set up on a commercial basis and the debts are not state guaranteed. The Minister said that the projects were financed on an individual basis and the Government of Dubai would not guarantee them.

The FT outlined that the problems in Dubai are likely to raise issues of the compliance of many bonds issued as Shariah Bonds with full compliance with Sharia law.  Don't ask me anything about this  but it could be a hornets nest of itself. 

 

Plenty of Corporate news today also with Aryzta reporting numbers which were weak, and commentary and tone was cautious. the company is continuing to see a decline in consumer sentiment and has little visibility over when recovery will occur (management suggesting that it does not expect a return to top-line qrowth until perhaps Q4 FY2010). We were expecting a somewhat more positive tone on outlook with perhaps some signs of stabilisation in some geographies. Margins improved 120bps in Food Group driven by yoy Grange Castle benefits and further in-sourcing of product in Hiestand. Some commentators had suggested that Q1 was to be a low point in the revenue cycle. We have amended our forecasts for FY2010 and are now forecasting divisional revenue growth/declines as follows: Food Europe revenue -4.6% (previously -4.2%); Food USA revenue -7.4% (previously -6.0%) (FX @ $1.50/€ is a 9.4% decline yoy); Food Developing markets +5.0% (previously +4.4%). Operating margins in food now forecasted to be 12.3% (previously 12.15%). For Origin we have reduced our expectations for the FY slightly with EPS now expected to be 33.6c (down 1.5% from previous forecasts). Overall for Aryzta, we forecast EPS of 224.3c (broadly in line with management's guidance) a 0.2% reduction on our previous forecast.  

 At €25.15 the stock is now trading at 11.2x our FY2010 EPS forecasts. We feel a multiple between 11-12x forward earnings fairly values the business , Retain Hold,

 

However our friend Jon Cox at Kepler which being equally cautious was anxious to point out that while there continues to be a decline in sales , that management have not rowed away from the target to Double profits over five years and that with four years to go and a balance sheet which will support a decent acquisition he remains a Buyer of th stock arguing that the valuation is a discount to the European peer group. You pays your miney and takes your choice as they say but it is interesting the differences of perception between a zurich and a Dublin based analyst on the stock.  Aryzta rallied +1.2%

 

Origin which is 70% owned by Aryzta also reported today, Numbers are a car crash but probably the low point here. I like K+S and do have a sympathy (which took me a long time to understand or appreciate why farmers would have long term relationships with Masstock) and from what I know about the impact on Crop yields from taking a fertiliser Holiday , I think that origin should hopefully see some recovery in the near future...Origin closed +4.7%

 

Bank of Ireland held a Conference call after the said they formally propose to Join NAMA. There was some confusion and nerves about the way they had changed the wording in their statement but it appears that Bank of Ireland management want to put out what they now perceive as the the worst case scenario in terms of an actual amount of losses to be crystallised post NAMA but the number still appears to be comfortably within their previously stated guidance of 6.9bn. As a reminder Merrion analyst Sebastian Orsi has based his BUY recommendation on 9bn of losses so if the loss managed to come in the region of Bank Guidance then there is a lot f value here to be unlocked (including taking into account a rights issue)   Bank of Ireland closed down -5.3%

 

Irish Life management came in to meet the desk at Lunchtime today. It was very hard to get excited with this meeting. I was struck by the management team actually saying that the expected losses in commercial prperty that they mentioned on their IMS call were already factored into the capital base. The market reacted very badly to the statement , the share price has tanked and yet here was the CEO , The FD and the Head of Investor relations shaking their heads about the fact that they had singularly failed to manage to persuade the market of this point. We also learned today that two of the properties concerned are in Europe and not ireland which would have been at least a start in the communication stakes. Luxembourg and Brussels and that they will write back the values of their HQ buildings if and when Jones Lang tells them they can... It would appear that there are a lot of advisors urging extreme caution so the IMS was more cautious than they would normally have been. The market also has started to believe contrary to the management that they are excluded from the third force whereas on the view of CEO Kevin Murphy the Irish Nationwide/EBS merger is the first step prior to the Permanent TSB getting involved and negotiating witht he Government who will effectively control the Nationwide /EBS entity.  Theo other interesting snippet is that the deal is unlikley to be consummated before the end of 2010 at which stage the management team were suggesting that the Bank would be close to being profitable again and thus have a value higher than zero. There will be a rights issue here too mabe towards the end of Q1 to re-capitalise the bank. This is already in expectations. Second bite at the Cherry. I think we can safely say that the management have created a buying opportunity , it just takes time to uncover it... Irish Life closed today down 7% ...

 

And then C&C did their deal , well received acquisition of Constellation brands Cider businesses. I have read both statements , C&C are buying a business which is performing and which will be accretive to them in Year one, It seems a sensible extension of their strategy to become a distribution business with operating leverage potential rather than just trying to turn around a single premium or Fad brand. Either way the market liked it and the stocks rallied +8.5% 

 

Plenty of weakness today , on small volume , end of capital gains tax year sparking profit taking across the board on thin volume. Institutional business quiet unfortunately. Total produce got whacked -8.5% ,,, think this is an opportunity...on low volume 

 

So December looms ....

 

Have a good evening...

 

Liam 

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.

 

 

 

 

Liams Last Post : markets rebound as buyers take advantage of weakness

Good Afternoon ,

 

Strong end to a hairy week,  Markets reacted nervously this week , initially on the sell off in China at the weekend and then to the news from Dubai that they were seeking a standstill agreement with Bond holders.  That and the London Stock exchange technical breakdown made sure that Thanks Giving day was one to be remembered for al the wrong reasons… But the falls yesterday were on quite light volume , there is definitely money looking to be put to work and rather than a sense of panic ,  the atmosphere was definitely calmer with investors looking for opportunities.

 

Today as the week closes , there is a rebound in Europe though the USA catches up with a downward moves of -1.2% at this stage.

 

Across Europe the Financials have been the hardest hit sector down -3.85% , though there is a wide variation of performances within that group. Most sectors recorded losses this week , IT-2.1% , Industrials -2% energy -1.8% with Materials , Consumer discretionary and Utilities all down roughly -1.5%

 

In Ireland this will be the week remembered for the Public sector strike and the massive shopping day up the North. Next week the Public sector are going on strike again. It is incredible that the only sector with guaranteed employment and pensions went on strike for a day in a move that generated not a single iota of good will from the Private sector.

 

This week the only Corporate of note to report in Ireland was Greencore , the numbers were ok , we nudged up our forecasts but the stock has been quiet as the Carroll Stake placing is awaited

 

I still continue to Like CRH and having once again rebounded back into the 17's after testing the lows , I am happy that this is indeed a level to be buying the stock. Smurfit announced another price increase and with the mark down the price has come back , again an attractive level. Grafton is back at the levels I am happy to strongly push again and Irish Life has finally found a level where buyers are prepared to come back into the stock.

 

I have to say that I think that many of the ISEQ companies are at attractive levels , we have heard from almost the lot of them over the past few weeks and there has been no surprises and indeed a few upgrades and this is very significant looking ahead to 2010 and the next few crucial weeks to reposition portfolios to take advantage of  the recent pullback by adding to positions at these prices….

 

 

Have a great weekend ,  Aryzta numbers on Monday , they wont be good but we all know that …. And Ireland vs South Africa tomorrow…. The big test for the Iceman Johnny Sexton…

 

Liam

 

     

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.

 

 

 

 

Liams Last Post : Thanks Giving ... not for equity investors as Dubai scares the markets...

Good Afternoon ,

 

Thanks Giving Day was one of those days when the risks that we all try to forget about come back to haunt us….. The Dubai World scare managed to unnerve markets across Europe and with the USA closed , volumes were thinner than usual so the volatility got amplified

 

The markets were awaiting the start of trading of the Lloyds Nil Paids tomorrow and this huge rights issue certainly did not help sentiment today.  The worries about who has exposure to Dubai is also one of those issues which has unnerved the financials sector. It is not certain how or what the ultimate outcome for Dubai will be and hopefully it is just a standstill agreement while they re negotiate terms etc rather than a default but nerves were frayed and the sell off into the close today highlights the fragility of sentiment.

 

Dubai has $59bn of debt and it may be forced to hold a fire sale of real estate investments worldwide to help realise cash to pay down its debts. Dubai holds significant investments in UK property so this could put pressure on the Commercial property market in the UK.

 

The LSE problem also contributed to the nervous environment.. Markets closed approximately -3.5% on average across the board , this time however Ireland was only down -2.5%.

 

In Ireland there was some significant volatility today , AIB was down -10% at one stage , though it closed down -7.6% , Smurfit was also down at one stage by about -9% but closed – 3.26% , Grafton headed closer to the Eur 3.00 level and closed at 3.09 -5.3% .  Aer Lingus is within 10% of its absolute lows experienced during August , the bones of he plan are known , we await its execution but in terms of an opportunity to take another look , it is very interesting again.  On the large caps or certainly larger cap stocks in Ireland , CRH which had been really looking better over the past few weeks has dipped below eur17.00 , just at the point where it looked like this was bottoming out.  I was banging the table about this a few percent higher … I see no reason t not bang the table a bit harder right now…

 

We hosted a Roadshow with FBD in London yesterday , it went well ,.and the analyst who had liked the stock came back even more confident having had the privilege of hearing the management present 6 times and to question them about issues between meetings. Big Free Cash Flow Yield on this one….

Total Produce fell -5% , this is a range trading stock , this is an interesting levels again.

Some interesting Irish Economic statistics….never timely unfortunately but worthwhile contemplating nonetheless. Exports rose in September after falling in July and August, according to fresh preliminary figures from the Central Statistics Office . Seasonally adjusted exports rose by 11 per cent during September to €7.2 billion, while imports fell by 2 per cent to €3.4 billion. On an unadjusted basis, the value of exports was unchanged from a year earlier, while the value of imports was down 26 per cent. The trade surplus was up 43 per cent to €4 billion. In the first eight months of the year the value of exports stood at €57 billion, unchanged year on year. Imports decreased 23 % from €39 million to €30 million.

Exports rising is a positive sign , says something about increasing competitiveness and maybe something about better world demand though our exports to Germany and Britain were down. Exports to Germany fell -20% and Britain down –15% but exports to the USA were up by +13%. In terms of the detail , Ireland imports and Exports of Computer equipment were down sharply in Both directions , and Exports of metal Ores was also down sharply. It will come as no surprise to know that Car imports were down -78% as was consumption of Petrol.   

At least no need to worry about the Wall Street close tonight.

 

Have a good evening

 

Liam

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.

 

 

 

 

Liams Last Post : ANglo pursues its former CEO , Greencore talk the talk but investors wait for the placing.

Good Afternoon ,

  What goes around comes around....The most interesting news this evening is that Anglo Irish Bank has issued proceedings against its former chief executive David Drumm relating to a recent move by the couple to transfer property out of their joint names into Lorraine Drumm's alone. That would have the effect of putting the property which was used as a security on a Eur8m loan out of reach of the bank.

Wow is all I can say... a NAMA case in his own right ?  I wonder how the other directors are getting on with their loans... Putting the property out of reach suggests that they are all caught on the horns of their own hype that the market would go on forever and now it looks like the collateral which is obviously personal recourse to the family home etc maybe called…. There will be few tears shed when this news which appeared on the RTE website gets into general circulation.

 

In Economic News in the USA today , the good news continued to come with Sales of single-family homes increasing +6.2% to a seasonally adjusted annual rate of 430,000. Home sales in September fell 2.4% to 405,000. Year over year, sales were up 5.1% since October 2008 and Inventories declined. There were an estimated 239,000 homes for sale at the end of October. That represented a 6.7 months' supply at the current sales rate. An estimated 250,000 homes were for sale at the end of September,  equivalent to 7.4 months' inventory.

 

Greencore produced its results this morning , , all looked ok and certainly the company is continuing to talk the talk about the prospets in the USA. The disposals of Water and the possibility of a disposal of the MAlt business would take pressure off the fears about how they would fund this growth. THe stock was however quiet onth enews and closed +0.54% , obviously buyers await the Carroll Stake placing...

 

The Banks were a bit better today , not much on the news front , I spent the day yesterday with one of my Kepler Friends Dirk Becker and the subject of bank capital and amounts which needed to be raised across Europe just reminded me about how the Irish Banks like their European breethren were too slow in recognising the looming problems and they have faile drepeatedly to take advantage of any opportunities to tap the markets for the capital that they require. It woudl appear that Bank capital is back, on the agenda across Europe again , It never went off the agenda in Ireland but the scale of fund raisings suggests that the banks who move fastest when or if any window opens up will be the best positioned over time. We have written a note to that effect some time ago but the shift in sentiment since the heady days of September when some of the large European Banks were testing the waters for investor appetite with investor days and presentations which served to get everyone bulled up for a while are now firmly behind us...   

 

The Irish Market opened at its high and range tradede before taking the decisive move downwards at midday. Looks Like someone range the bell to trigger the sell off or just nerves ahead of the US economic releases.  Most markets rallied at 14:30 but Ireland and it does look like Wall Stret too has seenthe best of the day. Lets see how it plays out . 

 

The Dollar continues to Slide to 1.5088 and Gold touches $1200 an oz with Oil just a touch stronger

 with Brent touching $78 a bbl.

 

 

Thanks Giving Week , a big week for US retail sales , not many irish flocking to take advantage of the weaker Dollar , I was pleased to buy my son a new bike for his 1oth Birthday yesterday. I was left scrambling around Dublin as inventories appeared low for some reasonand I was pleased to buy the appropriate bike. I have to say I was less pleased to day to see that the same Bike is for sale in Belfast for a whopping 23% less ...Guess where I am going to my christmas shopping....it wont be Dublin.

 

Have a good evening ...

 

Liam

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.

 

 

Liams Last Post : A better day , Cyclicals and construction in Vogue in Ireland

Good Afternoon ,

 

European markets opened strongly this morning after the performance of the US on Fridaynight , Sentiment improved today though markets have been range trading in quite narrow ranges for some time...

 

CRH , which I had pointed out had been a massive underperformer jumped +3.5% today and outperformed its peer which were also up but within a range of 1.5% to 3% , so maybe just maybe it is begining to show some relative strength. 

Grafton is still consolidating at theselevels , I have to admit I am getting more comfortable with this one at these levels but would like to turn more aggressively positive if it dipped down towards the EUr3.00 level. 

 

It was the cyclicals who returned to favour but the market was overall better so it was just degrees of performance with Smurfit also coming in for support and closing +3.3%. Smurfit was reacting to the news RISI reports that Spanish containerboard producer Europac has announced it plans to raise kraftliner prices by 60 per tonne effective January 1. It previously raised kraftliner prices by 60 per tonne from September 1. Europac notes that the shortage of kraftliner production in Europe and declining imports from the US have decreased stocks considerably.

 

The foods which had been an area of safe refuge in the past week also benefitted late inthe day as Kerry which had been down -1% at one stage closed the day +0.6% 

 

Irish Life is still struggling , I do think that the current price levels are attractive though so am encouraging clients to use the weakness as a buying opportunity. The absence of the third force proposition , the capital hole and the increase in Commercial property writedowns is the issue though but we are resolute in our belief that the stock is worth eur 6.00 so it has to be attractive here. 

 

AIB and Bank of Ireland benefitted from a generally more supportive environment though AIB closed +2.1% and Bank of Ireland +0.6%

 

Tullow was off about 0.5% despite the prce fall of -4.6% from its former Ugandan partner Heritage in the news of their disposal of their stakes in Uganda to ENI. The Tullow price is resilient at these levels despite the fact that on conservative valuations it looks expensive. The market is prepare to take a view of the porpsects of the Tullow acreage and prospects and wait for reserves to be proved up over time.

 

Aer Lingus reacted to the notie of the London investor day with an element of bemusement .... the stock was up 0.89% , the market awaits news from the management and the outcome of theor engagement with the Unions at the labour Relations comission. THe market need to know this management can deliver , the previous CEO Dermot Mannion cost saving plan was a coup for the Unions who negotiated some cost savings with a long payback . THis time , it has to be quick , all achieved in one go and cant be seen as a sop to the Unions...

 

ICG jumped +3.8% better probably helped by the media story at the weekend that the emergence of a trade buyer was becoming more likely in the aftermath of the placing of the Carroll stake,.

 

The Greencore price was flat on the day , despite the media stories about an imminent placing of the shares of Liam Carroll and the news of the disposal of the Water business and the interest in the Malt business which if disposed of would provide the capital for Greencore management to execute their USA growth strategy. I like the notion of what Greencore are planning to do. I am aware of the success of the European retailers and the rapid growth of private label in the USA but I am just not so sure that Greencore have any defensible long term unique selling point to be successful in the USA. This is heresy for some who think that Greencore can do no wrong but first they have to make the divestments and then re-invest through acquisitions. The stock is not expensive though so while the Jury is out on their ability to execute their USA strategy, if they can , then there is also significant upside to the sharepirce from these levels.

 

Across Europe markets were well up today , THe DJ Eurostoxx 50 index was up +2.2% , the Dow Jones +1.3% , and London +2% whereas Ireland was +1.4% .

 

Have a good Evening

 

Liam

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

www.merrion-capital.com

Disclaimer www.merrion-capital.com/disclaimer.html

Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.