Good Afternoon ,
The first friday of the week , the last Friday of February and the month end window dressing rally came to an abrupt end as the attempted mid week rally fizzled out.
At least we had the big surprise rally on Wednesday which perked us all up and kept us interested and Wednesday was particularly pleasant after the big slump on Tuesday which I remember as a particularly depressing day. Good to have one day per week where optimism and hope stirs us with enthusiasm.
Grafton numbers this morning were interesting, equally interesting was the sheer number of UK analysts who follow what is a small company but one with an impressive track record and it is also the number 4 player in the UK market. The focus was very much on the outlook but Grafton impressed with strong cash flows and by their conviction that they will be profitable and cash generative this year. The confidence was underscored by their decision to pay a dividend (in the way of a share repurchase scheme) of 5c. This is significantly lower than the 12c of last year but management indicated that they would aspire to continue to make two semi annual payments. LFL sales fell in both Ireland and the UK in January and February. The level wasn’t quantified as management believe the figure would be very misleading as sales trends in the two months were distorted by (i) the snow storms, and (ii) some builders taking extended Christmas holidays. However, management did say the decline was ‘double digit’ and was a level that was ‘not particularly surprising’. Management consider that the sales trend in March will be more relevant and will update on this in the IMS due in late April. In relation to the UK, management don’t disagree with the view of Travis Perkins that the UK builders merchant market is likely to see a peak-to-trough volume decline of c.25%.
The economic news today was interesting with German Consumer confidence rising unexpectedly according to the German GFK index which was released yesterday. Elsewhere according to IMF data German GDP declined by -2.1% in Q4 and the IMF expects German GDP to contract -2.5% this year.
Official EU figures have confirmed that the annual rate of inflation in the euro zone dropped to 1.1% in January.The fall brought the rate to its lowest point since July 1999. It was down sharply from the 1.6% that the Eurostat data agency recorded in December. This should pave the way for the ECB to cut rates by a further 50bp in March.
European Bank for Reconstruction and Development, the European Investment Bank and the World Bank have pledged to invest €24.5 billion to fight the financial crisis in central and eastern Europe with a mixture of equity and debt financing, credit lines and risk insurance. The EIB will provide €11 billion of lending facilities, while the World Bank will provide support totalling about €7.5 billion.
In Ireland , there was a surprise increase in Residential mortgage lending in January rising from €350 million to €482 million, The amount lent for residential property mortgages was equivalent to the total advanced during the final three months of 2008. Despite this monthly increase, the annual rate of mortgage lending continued to decline, dropping to 5.4 per cent from 5.8 per cent in December, the bank said in its statistics. Overall private sector credit increased by €3.3 billion in January, although this monthly increased brought the annual rate of increase down 0.5 per cent to 6 per cent.
We look forward with baited breath to see what the AIB results will bring on Monday, March 2nd. Our adjusted EPS forecast of 63c is slightly below the recently guided 66c. While we expect a relatively robust performance at the operating profit level (+9% y/y) loan loss provisions of c. €1.8B (1.39% of average loans) are expected to reduce underlying PBT to €878m, a 63% y/y decline. The implied loss before tax is €280m in H2. The outlook for credit quality will be one of the key concerns for investors. The November trading update indicated an anticipated loan loss provisions (llps) range of 0.90% to 1.10% for 2009. The recent (February 2009) trading update indicated that credit quality had deteriorated further and management was increasing its base expectations for 2008 llps (to c. 100 bps from 75 bps) as well as accelerating c. €500m of llps into 2008 from 2009 in the form of an IBNR
We anticipate AIB will generate losses at Group level over the next two years. These losses are expected to erode the capital base of the company. At this juncture we expect AIB’s equity tier I capital ratio to decline to 4.9% in 2010. Incorporating the €3.5B of Government preferred shares, we expect the core tier I capital ratio to remain above 7%. While we anticipate losses over the next two years, we expect AIB will pay the Government pref coupons in cash (the impact is incorporated into our net interest income forecasts) rather than shares given it has sufficient distributable reserves to do so.
In the near term, equally important to the asset quality outlook is liquidity. Management guided for low-teens deposit growth in 2008 in its November trading update and the loans/deposit ratio was anticipated to fall to c. 150%. It was also indicated that no material outflows of deposits were seen around the timing of the introduction of the Irish Government bank guarantee (end September). While interbank spreads have declined, reducing funding costs, term-debt funding markets for banks remain essentially closed. A current update on funding flows will be of interest.
The comments earlier this week by Minister Lenihan talking on RTE radio about investors removing deposits from the Banks continues to gain momentum with stories abounding of people taking cash out quietly and of course the banks share prices continue to slide. This Minister needs to get some savvy advisers and re-assure the public soon. Publicly saying that the withdrawals had not reached critical levels only creates more unease rather than offering confidence. I fear there is lack of understanding of basic communication here. There will be much interest on AIB and what they say if anything about this on their conference call.
The US market dealt with news of the latest bailout of CITI which was widely as expected in terms of details but the announcement was taken as disappointing with the US government ending up owning 36% of CITI .
The horrible number was the revised Q4 US GDP number which was revised to -6.2% from a prior estimate of -3.8% . This is the worst quarterly performance since Q1 1982.
US market opens down sharply and oil prices falling again.
Looks like a dreary end to a dreary month.
Am looking forward to the match the Ireland vs England Game tomorrow , not to mention the French/welsh match this evening.
Hope you have a great weekend ,
Look forward to March…. At least the days are getting longer…(should probably say Brighter , they feel like just taking longer and longer)
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
Friday, February 27, 2009
Thursday, February 26, 2009
Liams Last Post: Markets have a go at a better day...
Good Afternoon
A case of the same old same old today with Ireland opening better despite the -1% fall on Wall street last night. Ireland spiked early before capitulating to fall 30 points from 2062 to a low of 2030 , rallied to 2045 and then almost straight line down to 2022 before rallying into the close. Market closed below yesterdays levels though as CRH and Ryanair were both down -1% on the day..
The Irish Government announced it had sold 3bn of 3 year bonds at 170bp over midswaps and a coupon rate of 3.9%
In the financials sector Bank of Ireland confirmed the rumoured appointment of Richie Boucher as new CEO. Interesting internal appointment providing a direct line of continuity to the current board. Hardly the sweeping change that the Minister promised to bring about. Bank of Ireland closed down -3.6% at 27c and AIB slipped to 47.8c also down -4.4%
All eyes were on RBS who produced breathtakingly terrible numbers which had been anticipated and it said it would re-structure aggressively and participate in the UK bad debt insurance scheme. The stock responded positively and rallied +25% to 29p. Still hard to believe just how far this has fallen too , or that it has trebled from the lows of a few weeks ago. Option money like the irish financials.
Irish Life crept +11% today with the better sentiment and ok volume.
The UK builders merchants had an OK day with Travis Perkins up nearly 6% which helped drag Grafton and Kingspan better , Grafton +2% , Kingspan +2% to 2.14 and SIG in the UK the insulation distributor was up1-% today. Irish Nerves still very frayed though.
Tomorrow we have Grafton numbers which will reveal a lot about the managements current thinking. Hardly likely to say anything positive and we expect the dividend to be cut if not suspended altogether. We expect Grafton to announce EPS of 32.0 cents for the year ended December 2008. The results are due on Friday, February 27th. Expected normalised EPS decline of 61.7% yoy reflects the operational gearing impact of the continued slowdown in new residential construction activity in both UK and Ireland. We are forecasting like-for-like sales declines of 8.5% yoy in the UK and 20.0% yoy in Ireland. In the outlook comments we will look for: an update on the expected rate of sales declines in both the UK and Irish business in 2009 (we are forecasting LFL falls of 15% in the UK and 20% in Ireland); the incremental impact of cost restructuring actions in 2009; and cash generation from working capital release and reduced capex. We are forecasting a further fall in EPS to 4c in 2009. While there continues to be uncertainty in the outlook for trading conditions in Grafton's key markets, the shares should be supported by the tangible equity base (c.€1.95 / share), free cash generation (double digit free cash yields based on our estimates) and the strategic value of Grafton's market positions
C&C traded decent volume today at 95c with over 4m shares changing hands. Do think this is an interesting speculative play from here.
Jean Claude Trichet , the President of the ECB was in Dublin today , he said that hard decisions will have to be taken by the government to overcome the "severe challenges" facing the Irish economy. He went on to say he was "optimistic" about the prospects for the Irish economy, but he cautioned that the Government must adopt an economic policy that "convincingly reduces future public deficits" and recovers lost competitiveness. Mr Trichet said advantages such as the Irish economy's openness to trade, a high degree of flexibility, a business-friendly regulatory environment and a skilled workforce had not been lost as a result of the global financial crisis, but the unprecedented international economic shock had come at the same time as the Irish economy's necessary rebalancing. "Some things will of course have to change. But none of the positive characteristics are lost nor should they be lost in the crisis,"
Economic statistics in the US were very weak again but the market is ignoring this today. Durable good orders came in -5.2% vs expectations of -2.5% , though adjusted for transport the number was in line. Initial jobless claims were 667k vs the 625k that was expected and new Home sales fell -10% vs expectations of -2.1%. Disastrous for the US housing market but the housebuilders stocks are up at 5pm by 1.8%
Friday tomorrow , Lets see what Grafton brings. The results season in Ireland kicks off in earnest from Tomorrow with a really busy week next week. Expect no good news but will be interesting to see the scale of down grades and the reaction of the stocks to bad news which is anticipated at this stage.
At the close , Ireland was down marginally , the US is up +0.8% and London closd +1.7% with Europe rebounding by +2.2%
Have a good evening.
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
A case of the same old same old today with Ireland opening better despite the -1% fall on Wall street last night. Ireland spiked early before capitulating to fall 30 points from 2062 to a low of 2030 , rallied to 2045 and then almost straight line down to 2022 before rallying into the close. Market closed below yesterdays levels though as CRH and Ryanair were both down -1% on the day..
The Irish Government announced it had sold 3bn of 3 year bonds at 170bp over midswaps and a coupon rate of 3.9%
In the financials sector Bank of Ireland confirmed the rumoured appointment of Richie Boucher as new CEO. Interesting internal appointment providing a direct line of continuity to the current board. Hardly the sweeping change that the Minister promised to bring about. Bank of Ireland closed down -3.6% at 27c and AIB slipped to 47.8c also down -4.4%
All eyes were on RBS who produced breathtakingly terrible numbers which had been anticipated and it said it would re-structure aggressively and participate in the UK bad debt insurance scheme. The stock responded positively and rallied +25% to 29p. Still hard to believe just how far this has fallen too , or that it has trebled from the lows of a few weeks ago. Option money like the irish financials.
Irish Life crept +11% today with the better sentiment and ok volume.
The UK builders merchants had an OK day with Travis Perkins up nearly 6% which helped drag Grafton and Kingspan better , Grafton +2% , Kingspan +2% to 2.14 and SIG in the UK the insulation distributor was up1-% today. Irish Nerves still very frayed though.
Tomorrow we have Grafton numbers which will reveal a lot about the managements current thinking. Hardly likely to say anything positive and we expect the dividend to be cut if not suspended altogether. We expect Grafton to announce EPS of 32.0 cents for the year ended December 2008. The results are due on Friday, February 27th. Expected normalised EPS decline of 61.7% yoy reflects the operational gearing impact of the continued slowdown in new residential construction activity in both UK and Ireland. We are forecasting like-for-like sales declines of 8.5% yoy in the UK and 20.0% yoy in Ireland. In the outlook comments we will look for: an update on the expected rate of sales declines in both the UK and Irish business in 2009 (we are forecasting LFL falls of 15% in the UK and 20% in Ireland); the incremental impact of cost restructuring actions in 2009; and cash generation from working capital release and reduced capex. We are forecasting a further fall in EPS to 4c in 2009. While there continues to be uncertainty in the outlook for trading conditions in Grafton's key markets, the shares should be supported by the tangible equity base (c.€1.95 / share), free cash generation (double digit free cash yields based on our estimates) and the strategic value of Grafton's market positions
C&C traded decent volume today at 95c with over 4m shares changing hands. Do think this is an interesting speculative play from here.
Jean Claude Trichet , the President of the ECB was in Dublin today , he said that hard decisions will have to be taken by the government to overcome the "severe challenges" facing the Irish economy. He went on to say he was "optimistic" about the prospects for the Irish economy, but he cautioned that the Government must adopt an economic policy that "convincingly reduces future public deficits" and recovers lost competitiveness. Mr Trichet said advantages such as the Irish economy's openness to trade, a high degree of flexibility, a business-friendly regulatory environment and a skilled workforce had not been lost as a result of the global financial crisis, but the unprecedented international economic shock had come at the same time as the Irish economy's necessary rebalancing. "Some things will of course have to change. But none of the positive characteristics are lost nor should they be lost in the crisis,"
Economic statistics in the US were very weak again but the market is ignoring this today. Durable good orders came in -5.2% vs expectations of -2.5% , though adjusted for transport the number was in line. Initial jobless claims were 667k vs the 625k that was expected and new Home sales fell -10% vs expectations of -2.1%. Disastrous for the US housing market but the housebuilders stocks are up at 5pm by 1.8%
Friday tomorrow , Lets see what Grafton brings. The results season in Ireland kicks off in earnest from Tomorrow with a really busy week next week. Expect no good news but will be interesting to see the scale of down grades and the reaction of the stocks to bad news which is anticipated at this stage.
At the close , Ireland was down marginally , the US is up +0.8% and London closd +1.7% with Europe rebounding by +2.2%
Have a good evening.
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
Wednesday, February 25, 2009
Liams Last Post : Morning Rally fizzles out as day wears on
Good Afternoon
Well the Dow was bound to have an up day , but what went up inevitably only comes down…. The mixture of Obama and Bernanke trying to inject some confidence particularly with Bernanke trying to assuage fears about nationalisations of the US banks did help support the market. Barack Obama, in his first address to Congress as President, said he would act with the “full force of the federal government” to mend the US economy, while Federal Reserve Chairman Ben Bernanke reassured said no big US banks are likely to be nationalised outright in the near future.
Almost predictably the rally in Europe fizzled out just before the opening of trading in the USA. There are interesting patterns for day traders to look at but the trend is unbroken on the downside as Investors realised that President Obama speech was long on rhetoric and short on practicalities.
The news in the USA that spooked the market thsi afternon was that Mortgage applications fell -15% and existing Home sales in January fell -5.3% compard to expectations of a rise in sales of 1.1% and compared to the prior month where existing home sales were up 6.5%.
Also SAKS the upmarket retailer reported a fiscal fourth-quarter loss on slumping sales and margins, as the retailer resorted to steep markdowns. Saks saw continued weakness across all its regions. Sales at its flagship New York City store, which began to fall off in in the third quarter, continued to lag in the latest period. Revenue fell 15% to $835.5 million, with sales at stores open at least a year falling by the same amount. Gross margin plunged to 20.8% from 37.1% on markdowns. There had been expectations that the high end luxury stores would rove more reislient but that is obviously not the case either.
In Ireland the market rallied like all the European markets , the financials continued to be uder pressure today and certainly not heled bythe large picture of Minister Brian Lenihan in the business section of the Irishs times which reported on the Minister statement made on RTE radio where he acknowledged that Investors were moving deposits from the Irish Banks but apparently the amonts had not reached a critical level. Apparently the minister was responding to the claims made by Senator Shane Ross who had said that ivestors had taken Billions out. It is not re-assuring that the Minister is not reported as offering any comfort to depositors. Minister Lenihan is reported as having said ‘What’s crucial for Ireland is that we retain international confidence to attract these funds,” and “It’s a battle for financial survival. We have to keep working at it.”. Hardly Inspiring Stuff and only highlights a lack of appreciation of the need for the Government to take leadership role and to try and re-assure depositors.
The EU commission has also put forward today proposal for a common approach to valuing toxic bank assets. The guidelines leave up to governments how they choose to deal with such assets - for example by setting up "bad banks" or using and asset insurance schemes - but are aimed at ensuring that such schemes do not result in unfair competition.
In terms of the Irish market today , Irish Life continued to struggle hitting a low of 61c before closing at 65c don 5c from yesterday. AIB closed down -3.9% at 50c and bank of Ireland closed effectively flat at 28c.
CRH beneftted from the rally in the US materials stocks last night but drifted through the afternoon to close +2.3% at 16.00 having hit a high today of 16.76 and a low of 15.80 , so volatility aplenty here. Grafton rose +5% to 1.32 despite Wolseley announcing that it is going to close 4 stores in Ireland with 180 jobs to go. Kingspan tried to rally but is stuck at 2.10 , the news of it being selected to exit the Eurostoxx 600 index is not good news for Kingspan.
APN News and Media, in which Independent has a 39.1% stake released its FY08 results this morning with Net Profit after tax (pre exceptionals) of A$140.1m (-17% yoy) and EBITDA of A$319.5m (-11% yoy) which were broadly in line with expectations. INM share price was flat at 15c today.
Elan announced today details of the restructuring program that it had flagged at the time of its Q4 results. The effects of this restructuring are already incorporated into 2009 guidance and our forecasts (both P&L and cashflow). The company is looking to reduce operating expenses by $50m annually, predominantly in G&A and R&D but also a small reduction in COGS. This will be achieved through the mothballing of the biological manufacturing and filling activities in Athlone (Republic of Ireland); a reduction in the expense related to the company’s manufacturing ambitions in biologics (pending phase III results of AAB-001); and some reductions in R&D and general and administrative expense in the US. This will result in the targeted reduction of 230 jobs or approximately 14% of the company’s workforce. The impact on 2009 will be a projected saving of $30m in operating costs, but this will be offset by increased R&D costs related to ongoing AAB-001, ELND-005 and ACC-001 trials. The company expects a charge of $15m in severance and related charges to fall in H1 2009. Elan price fell by -0.9% today.
Aryzta comparator , the B2B Bakery group CSM reported its Q4 and FY08 results this morning, in which it stated that the combination of cost input rises and economic slowdown resulted in a 13% fall of EBITA to €133.1m. The group’s Bakery supply divisions were hit by volume declines of 5% in H208, as demand fell due to down scaling and a “one-off de-stocking effect”.
The Bakery supplies division in North America reported underlying sales growth of 14% in FY08, primarily due to price increases as volume remained stable. The division had a strong Q4 with net sales up 18.5% and EBITDA improved by 28% yoy. The group noted that its premium type products had a poor performance as customers aimed to lower their costs. The bakery supplies division in Europe had underlying sales growth of 5.7% for the year. In Q4, net sales rose 1% and EBITA fell 32%. The division came under pressure to lower selling prices in Q408, and margins suffered due to the group having a number of long term contracts for its raw materials. While many of its products serve basic food needs, sales of its luxury pastry products suffered.
The group expects the difficult market conditions to continue in 2009, however margins should benefit from lower raw material costs and both past and present cost efficiency programmes including the restructuring of its bakery activities in the UK and Belgium. CSM will also focus on changing its products to meet changing demands by investing in R&D. All in all not great trends for Aryzta which is very much exposed to the prospect of consumers trading down.
Not much by way of other major moves , with the exception of Paddy Power which was up 4.5% at 11.49.
So a half hearted rally fizzles out , At least we had a burst of enthusiasm this morning. Wall Street now -1.8%
Ash Wednesday , First day of Lent , given what we are all giving up these days , I am looking to take up something …. Any Ideas ?
Have a few…already
Prize for the most useful ideas…. Promise..
Have a good evening
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
Well the Dow was bound to have an up day , but what went up inevitably only comes down…. The mixture of Obama and Bernanke trying to inject some confidence particularly with Bernanke trying to assuage fears about nationalisations of the US banks did help support the market. Barack Obama, in his first address to Congress as President, said he would act with the “full force of the federal government” to mend the US economy, while Federal Reserve Chairman Ben Bernanke reassured said no big US banks are likely to be nationalised outright in the near future.
Almost predictably the rally in Europe fizzled out just before the opening of trading in the USA. There are interesting patterns for day traders to look at but the trend is unbroken on the downside as Investors realised that President Obama speech was long on rhetoric and short on practicalities.
The news in the USA that spooked the market thsi afternon was that Mortgage applications fell -15% and existing Home sales in January fell -5.3% compard to expectations of a rise in sales of 1.1% and compared to the prior month where existing home sales were up 6.5%.
Also SAKS the upmarket retailer reported a fiscal fourth-quarter loss on slumping sales and margins, as the retailer resorted to steep markdowns. Saks saw continued weakness across all its regions. Sales at its flagship New York City store, which began to fall off in in the third quarter, continued to lag in the latest period. Revenue fell 15% to $835.5 million, with sales at stores open at least a year falling by the same amount. Gross margin plunged to 20.8% from 37.1% on markdowns. There had been expectations that the high end luxury stores would rove more reislient but that is obviously not the case either.
In Ireland the market rallied like all the European markets , the financials continued to be uder pressure today and certainly not heled bythe large picture of Minister Brian Lenihan in the business section of the Irishs times which reported on the Minister statement made on RTE radio where he acknowledged that Investors were moving deposits from the Irish Banks but apparently the amonts had not reached a critical level. Apparently the minister was responding to the claims made by Senator Shane Ross who had said that ivestors had taken Billions out. It is not re-assuring that the Minister is not reported as offering any comfort to depositors. Minister Lenihan is reported as having said ‘What’s crucial for Ireland is that we retain international confidence to attract these funds,” and “It’s a battle for financial survival. We have to keep working at it.”. Hardly Inspiring Stuff and only highlights a lack of appreciation of the need for the Government to take leadership role and to try and re-assure depositors.
The EU commission has also put forward today proposal for a common approach to valuing toxic bank assets. The guidelines leave up to governments how they choose to deal with such assets - for example by setting up "bad banks" or using and asset insurance schemes - but are aimed at ensuring that such schemes do not result in unfair competition.
In terms of the Irish market today , Irish Life continued to struggle hitting a low of 61c before closing at 65c don 5c from yesterday. AIB closed down -3.9% at 50c and bank of Ireland closed effectively flat at 28c.
CRH beneftted from the rally in the US materials stocks last night but drifted through the afternoon to close +2.3% at 16.00 having hit a high today of 16.76 and a low of 15.80 , so volatility aplenty here. Grafton rose +5% to 1.32 despite Wolseley announcing that it is going to close 4 stores in Ireland with 180 jobs to go. Kingspan tried to rally but is stuck at 2.10 , the news of it being selected to exit the Eurostoxx 600 index is not good news for Kingspan.
APN News and Media, in which Independent has a 39.1% stake released its FY08 results this morning with Net Profit after tax (pre exceptionals) of A$140.1m (-17% yoy) and EBITDA of A$319.5m (-11% yoy) which were broadly in line with expectations. INM share price was flat at 15c today.
Elan announced today details of the restructuring program that it had flagged at the time of its Q4 results. The effects of this restructuring are already incorporated into 2009 guidance and our forecasts (both P&L and cashflow). The company is looking to reduce operating expenses by $50m annually, predominantly in G&A and R&D but also a small reduction in COGS. This will be achieved through the mothballing of the biological manufacturing and filling activities in Athlone (Republic of Ireland); a reduction in the expense related to the company’s manufacturing ambitions in biologics (pending phase III results of AAB-001); and some reductions in R&D and general and administrative expense in the US. This will result in the targeted reduction of 230 jobs or approximately 14% of the company’s workforce. The impact on 2009 will be a projected saving of $30m in operating costs, but this will be offset by increased R&D costs related to ongoing AAB-001, ELND-005 and ACC-001 trials. The company expects a charge of $15m in severance and related charges to fall in H1 2009. Elan price fell by -0.9% today.
Aryzta comparator , the B2B Bakery group CSM reported its Q4 and FY08 results this morning, in which it stated that the combination of cost input rises and economic slowdown resulted in a 13% fall of EBITA to €133.1m. The group’s Bakery supply divisions were hit by volume declines of 5% in H208, as demand fell due to down scaling and a “one-off de-stocking effect”.
The Bakery supplies division in North America reported underlying sales growth of 14% in FY08, primarily due to price increases as volume remained stable. The division had a strong Q4 with net sales up 18.5% and EBITDA improved by 28% yoy. The group noted that its premium type products had a poor performance as customers aimed to lower their costs. The bakery supplies division in Europe had underlying sales growth of 5.7% for the year. In Q4, net sales rose 1% and EBITA fell 32%. The division came under pressure to lower selling prices in Q408, and margins suffered due to the group having a number of long term contracts for its raw materials. While many of its products serve basic food needs, sales of its luxury pastry products suffered.
The group expects the difficult market conditions to continue in 2009, however margins should benefit from lower raw material costs and both past and present cost efficiency programmes including the restructuring of its bakery activities in the UK and Belgium. CSM will also focus on changing its products to meet changing demands by investing in R&D. All in all not great trends for Aryzta which is very much exposed to the prospect of consumers trading down.
Not much by way of other major moves , with the exception of Paddy Power which was up 4.5% at 11.49.
So a half hearted rally fizzles out , At least we had a burst of enthusiasm this morning. Wall Street now -1.8%
Ash Wednesday , First day of Lent , given what we are all giving up these days , I am looking to take up something …. Any Ideas ?
Have a few…already
Prize for the most useful ideas…. Promise..
Have a good evening
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
Tuesday, February 24, 2009
Liams Last Post: ISEQ breaks then finds support at 2000 level
Good Afternoon ,
The ISEQ index touched below 2000 today a level last reached in June 1995 .before staging a rally late in the day to close down a mere -1.3% , The US market has tried to hold itself in positive territory today after the Fed Chairman Ben Bernanke said in Congressional testimony that he expects the U.S. recession will end this year and that 2010 "will be a year of recovery," if government action causes some stabilization in financial markets. But he said that officials must successfully break an "adverse feedback loop" in which economic and financial strains become self-reinforcing.Bernanke went on to say that If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability -- and only if that is the case, there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery. For now, the U.S. is undergoing a "severe contraction,"
In Ireland Kerry had decent figures and earnings estimates were upgraded for the year which is a rare achievement in this environent.
The news that the Gardai had raided the Offices of Anglo Irish Bank certainly did not help sentiment in Dublin today and Irish Life which has already seen the pressured resignation of the CEO , THE FD and the Head of Treasury reacted badly and fell -26% tp 70c. Truly one hell of a mess and an astonishing collapse of a business which most analysts have considered to be amongst the lower end of the risk curve until recently.
CRH helped the market recover this afternoon as it closed up +2.6% , though Grafton fell a further -1% and Kingspan slipped a bit at the end to 2.04 -2% as it finds support (for the moment anyway) at the 2.00 level.
Aer Lingus shocked as the price fell to new all time lows of 70c and decent volume was traded here , Aer Lingus closed at 75c -10.8% on the day and this impacted Ryanair which fell -3.3% to the 3.00 level.
Norkom fell -18.6% today on small volume as there seems to be a series of investors just happy to dump the smaller stocks at this point.
In the US the market is worried about Citi and its further needs for Government assistance ,. US consumer Confidence numbers hit their lowest levels since records began in 1967 and German business confidence hit a 26 year low.
A short last post , a very disappointing day , maybe tomorrow will be brighter and better ?
Have a good evening
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
The ISEQ index touched below 2000 today a level last reached in June 1995 .before staging a rally late in the day to close down a mere -1.3% , The US market has tried to hold itself in positive territory today after the Fed Chairman Ben Bernanke said in Congressional testimony that he expects the U.S. recession will end this year and that 2010 "will be a year of recovery," if government action causes some stabilization in financial markets. But he said that officials must successfully break an "adverse feedback loop" in which economic and financial strains become self-reinforcing.Bernanke went on to say that If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability -- and only if that is the case, there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery. For now, the U.S. is undergoing a "severe contraction,"
In Ireland Kerry had decent figures and earnings estimates were upgraded for the year which is a rare achievement in this environent.
The news that the Gardai had raided the Offices of Anglo Irish Bank certainly did not help sentiment in Dublin today and Irish Life which has already seen the pressured resignation of the CEO , THE FD and the Head of Treasury reacted badly and fell -26% tp 70c. Truly one hell of a mess and an astonishing collapse of a business which most analysts have considered to be amongst the lower end of the risk curve until recently.
CRH helped the market recover this afternoon as it closed up +2.6% , though Grafton fell a further -1% and Kingspan slipped a bit at the end to 2.04 -2% as it finds support (for the moment anyway) at the 2.00 level.
Aer Lingus shocked as the price fell to new all time lows of 70c and decent volume was traded here , Aer Lingus closed at 75c -10.8% on the day and this impacted Ryanair which fell -3.3% to the 3.00 level.
Norkom fell -18.6% today on small volume as there seems to be a series of investors just happy to dump the smaller stocks at this point.
In the US the market is worried about Citi and its further needs for Government assistance ,. US consumer Confidence numbers hit their lowest levels since records began in 1967 and German business confidence hit a 26 year low.
A short last post , a very disappointing day , maybe tomorrow will be brighter and better ?
Have a good evening
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
Monday, February 23, 2009
Liams Last Post : No light at end of this tunnel...
Good Afternoon ,
Another week begins and we 'celebrate' with a 14 year low on the ISEQ.
The banks tried to set the tone this morning with a higher and brighter start but these days what opens up in hope takes almost no time to give up the ghost.
Ireland though is being dragged down by the general weakness across equity markets. London is off -.77% , Europe -.85% , Wall street is off the lows for the moment and down 0.75%
The intra day trading range of the Irish financials is and continues to be amazing , AIB traded up 10% at one stage and closed the day -2.5% , Irish Life joins the Euro saver menu as it slides to new lows at 95c down -6.6%
The market digested the contents of the much awaited PWC report. There was little thah had not been discussed or leake in the final, version of the report and certainly nothing that would be considered good news.
CRH did relatively well down only -0.13% . Merrion research published a note highlighting our views regarding a pre-emptive equity issue. We argued that shareholders will consider: (i) the dilution until proceeds are deployed; (ii) the appropriateness of issuing pre-emptively with the share price near both the five year low and NAV; and (iii) could it tempt management to deploy the proceeds prematurely or to be less disciplined in its acquisition process, particularly if the large number of opportunities do not materialise? Underwriting costs and the required price discount are likely to be concerns in current market conditions. There is also a risk that it could be misinterpreted as a veiled warning on the interest cover outlook. We concluded that a pre-emptive rights issue in the near term is unnecessary and would not be without risk. It would be better to wait for compelling deals to materialise and then present the case for new equity if debt capacity is insufficient. We believe a near-term rights issue is unlikely and expect this will be clear when CRH reports on March 3rd, allowing equity raising concerns to dissipate. We re-iterate the BUY recommendation on the stock.
Grafton continued its precipitous slide after the recent high only 8 days ago where it hit 1.81. The closing price of 1.26 is a fall of over 30%.
ICON had Q4 numbers this morning. The results were in line (as expected given guidance was updated in Jan 2009) with revenue reported as $220.1 m for the quarter compared to our forecasts of $222m and Bloomberg consensus of $218.5m. Adjusted EPS of 35.1 cent came in 3.5% ahead of our forecasts of 33.9 cent Most of the beat on the EPS level was due to an unexpected benefit from the minority interest line during the quarter of $0.514m. As expected DSO deteriorated during the quarter with reported DSO of 69 days compared to 64 days in Q4 2007 and 54 days in Q3 2008. The outlook contained one carefully worded statement “…we have entered 2009 in a good position, although the difficult economic climate has put some customers under pressure and has created a degree of uncertainty. We remain positive, though cautious, as 2009 commences.” THe conference call was long with no major surprises , the environment is difficult. The stock fell -5% to $21.90 at 4.30pm.
With the markets on the drift internationally , all the stocks which had been decent performers such as DCC also get dragged down -5.75% today at 10.69 , having hit a recent high too of 12.46 eight days ago.
Independent news and media also fell -11.7% today having been up 20% at one stage… Smurfit also down -5.8% down to 1.26.
A very different end to the news headlines first thing this morning which were heralding the first up day in Europe for 10 days… Guess what , that was this morning , day 11 now …
Have a good evening… at least we have pancakes to look forward to tomorrow ,
p.s. Welcome back all who were away last week…
Liam
Merrion Stockbrokers
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.
Another week begins and we 'celebrate' with a 14 year low on the ISEQ.
The banks tried to set the tone this morning with a higher and brighter start but these days what opens up in hope takes almost no time to give up the ghost.
Ireland though is being dragged down by the general weakness across equity markets. London is off -.77% , Europe -.85% , Wall street is off the lows for the moment and down 0.75%
The intra day trading range of the Irish financials is and continues to be amazing , AIB traded up 10% at one stage and closed the day -2.5% , Irish Life joins the Euro saver menu as it slides to new lows at 95c down -6.6%
The market digested the contents of the much awaited PWC report. There was little thah had not been discussed or leake in the final, version of the report and certainly nothing that would be considered good news.
CRH did relatively well down only -0.13% . Merrion research published a note highlighting our views regarding a pre-emptive equity issue. We argued that shareholders will consider: (i) the dilution until proceeds are deployed; (ii) the appropriateness of issuing pre-emptively with the share price near both the five year low and NAV; and (iii) could it tempt management to deploy the proceeds prematurely or to be less disciplined in its acquisition process, particularly if the large number of opportunities do not materialise? Underwriting costs and the required price discount are likely to be concerns in current market conditions. There is also a risk that it could be misinterpreted as a veiled warning on the interest cover outlook. We concluded that a pre-emptive rights issue in the near term is unnecessary and would not be without risk. It would be better to wait for compelling deals to materialise and then present the case for new equity if debt capacity is insufficient. We believe a near-term rights issue is unlikely and expect this will be clear when CRH reports on March 3rd, allowing equity raising concerns to dissipate. We re-iterate the BUY recommendation on the stock.
Grafton continued its precipitous slide after the recent high only 8 days ago where it hit 1.81. The closing price of 1.26 is a fall of over 30%.
ICON had Q4 numbers this morning. The results were in line (as expected given guidance was updated in Jan 2009) with revenue reported as $220.1 m for the quarter compared to our forecasts of $222m and Bloomberg consensus of $218.5m. Adjusted EPS of 35.1 cent came in 3.5% ahead of our forecasts of 33.9 cent Most of the beat on the EPS level was due to an unexpected benefit from the minority interest line during the quarter of $0.514m. As expected DSO deteriorated during the quarter with reported DSO of 69 days compared to 64 days in Q4 2007 and 54 days in Q3 2008. The outlook contained one carefully worded statement “…we have entered 2009 in a good position, although the difficult economic climate has put some customers under pressure and has created a degree of uncertainty. We remain positive, though cautious, as 2009 commences.” THe conference call was long with no major surprises , the environment is difficult. The stock fell -5% to $21.90 at 4.30pm.
With the markets on the drift internationally , all the stocks which had been decent performers such as DCC also get dragged down -5.75% today at 10.69 , having hit a recent high too of 12.46 eight days ago.
Independent news and media also fell -11.7% today having been up 20% at one stage… Smurfit also down -5.8% down to 1.26.
A very different end to the news headlines first thing this morning which were heralding the first up day in Europe for 10 days… Guess what , that was this morning , day 11 now …
Have a good evening… at least we have pancakes to look forward to tomorrow ,
p.s. Welcome back all who were away last week…
Liam
Merrion Stockbrokers
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.
Friday, February 20, 2009
Liams Last Post : a -10% week....The bears have it ....
Good Afternoon
Well it is everyones favourite time of the week : Close of Business on Friday. Or should I just say close of markets…
What a week , The ISEQ the of the week was 8:00am on Monday and the low of the week 4.30 on Friday… On a graph the slope is a nice 45 degree downward sloping line. It tells the story a fall of over -11% , not much else you need to know , Wall street at the opening today took out the previous intra day low from last November and at 4.30pm is 80 points below that level.
We are in results season in Europe and almost without exception every company that reports is guiding lower and it is fascinating to see the European markets slowly now begin to realise that there will be no bounce in H2 2009. It is like going back in time. From an Irish perspective I think we all thought this time last year that as the market had been such a poor performer in 2007 that there might be a bounce at some stage in 2008 and the attrition that we experienced since then now looks like it is only really beginning in earnest in Europe.
The Financials are behaving like options still , the AIB trading statement gave no comfort to investors, the Political heat is rising to reveal the names of the Anglo Golden Circle of the 10 special ones.
Irish Life has all but collapsed as the news of Denis Casey resignation only became apparent late last Friday it took a while for the market to really get to grips with the news. Irish Life opened on Monday at a price of 1.85 and closed the week at 1.08 , market voting with its feet as Irish Life got downgraded by the ratings agencies as a result of the transactions with Anglo.
A week later and despite all the negative publicity , there has been no further fallout from Anglo. This is incredible to me. The investment proposition that Anglo told investors for years was about the effectiveness of the central credit committee and Willie McAteer and David Drum and Sean Fitzpatrick before him had all made a virtue of every loan being approved at this committee. It would appear that there may have been a certain amount of latitude though in whose loans were approved publicly and whose dot not if the only two people so far who have seen fit to resign have been the CEO and the FD.
This afternoon the Anglo annual report has just been published and will provide lots to dwell on…but no good news needless to say. Interesting to see how much the executives and Non executives paid themselves for shepherding the bank and shareholdrs interests into oblivion.
CRH fell sharply as both St.Gobain and Lafarge announced two individual rights issues today of 1.5bn each. I have to say that at a price of 15.23 , that CRH is a very improbable candidate to now announce a defensive and dilutive rights issue especially as the Enterprise value to capital employd ratio is now less than 0.9x . This should should put a floor under the shareprice of CRH … though the previous low may well be tested along the way.
Aer Lingus continued its slide , one wonders just at what discount to cash does this have to fall to before it finds a floor m United Drug continued its downward trajectory to close at 1.76 a whopping -30% fall on the week for a stock which had been considered relatively defensive.
Europe today too had a miserable day to complete a miserable week -3.3% today and a fall of almost -10% on the week. With the Dow jones falling almost -10% too.
The Bear market is alive and well….
Have a good weekend…if you can….
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
Well it is everyones favourite time of the week : Close of Business on Friday. Or should I just say close of markets…
What a week , The ISEQ the of the week was 8:00am on Monday and the low of the week 4.30 on Friday… On a graph the slope is a nice 45 degree downward sloping line. It tells the story a fall of over -11% , not much else you need to know , Wall street at the opening today took out the previous intra day low from last November and at 4.30pm is 80 points below that level.
We are in results season in Europe and almost without exception every company that reports is guiding lower and it is fascinating to see the European markets slowly now begin to realise that there will be no bounce in H2 2009. It is like going back in time. From an Irish perspective I think we all thought this time last year that as the market had been such a poor performer in 2007 that there might be a bounce at some stage in 2008 and the attrition that we experienced since then now looks like it is only really beginning in earnest in Europe.
The Financials are behaving like options still , the AIB trading statement gave no comfort to investors, the Political heat is rising to reveal the names of the Anglo Golden Circle of the 10 special ones.
Irish Life has all but collapsed as the news of Denis Casey resignation only became apparent late last Friday it took a while for the market to really get to grips with the news. Irish Life opened on Monday at a price of 1.85 and closed the week at 1.08 , market voting with its feet as Irish Life got downgraded by the ratings agencies as a result of the transactions with Anglo.
A week later and despite all the negative publicity , there has been no further fallout from Anglo. This is incredible to me. The investment proposition that Anglo told investors for years was about the effectiveness of the central credit committee and Willie McAteer and David Drum and Sean Fitzpatrick before him had all made a virtue of every loan being approved at this committee. It would appear that there may have been a certain amount of latitude though in whose loans were approved publicly and whose dot not if the only two people so far who have seen fit to resign have been the CEO and the FD.
This afternoon the Anglo annual report has just been published and will provide lots to dwell on…but no good news needless to say. Interesting to see how much the executives and Non executives paid themselves for shepherding the bank and shareholdrs interests into oblivion.
CRH fell sharply as both St.Gobain and Lafarge announced two individual rights issues today of 1.5bn each. I have to say that at a price of 15.23 , that CRH is a very improbable candidate to now announce a defensive and dilutive rights issue especially as the Enterprise value to capital employd ratio is now less than 0.9x . This should should put a floor under the shareprice of CRH … though the previous low may well be tested along the way.
Aer Lingus continued its slide , one wonders just at what discount to cash does this have to fall to before it finds a floor m United Drug continued its downward trajectory to close at 1.76 a whopping -30% fall on the week for a stock which had been considered relatively defensive.
Europe today too had a miserable day to complete a miserable week -3.3% today and a fall of almost -10% on the week. With the Dow jones falling almost -10% too.
The Bear market is alive and well….
Have a good weekend…if you can….
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
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.
Thursday, February 19, 2009
Liams Last Post : Quiet , rangebound day , all eye on US...
Good Afternoon ,
Quiet day. Ireland closed down slightly having been range bound for the day but most of the trading was done at the lower levels. European markets opened brighter and range traded trying to escape higher than last nights closing levels but like a magnet was drawn bac and eventually finished effectively falt on the day. THe FTSE index also tried valiantly to rally but got no where and slipped back to just above last nights closing levels.
The Dow Jones has been up and down all day too. Crucial levels according to some now that we have had an effective 50% fall from the peak. Ireland has fallen by 82% from the peak and shows no sign of support being reached. The optimists say history suggests the market is due for a bear market bounce.
The market is not listening.
In Ireland AIB popped out a trading update unexpectedly , There’s obviously numerous moving parts, but one other point on the AIB trading statement is the pre-provision performance seems to be a bit stronger than anticipated. The increase in loan loss provisions to 100 bps from 75 would take about 325m off pbt. The statement indicates their EPS expectation declined by c. 6c to 114 vs 120 after the increase. On a pre-tax basis, this works out to c. €65m, so the pre-provision op profit looks a bit better than the €2.4B I have in for 08. In the short term, this is of course overwhelmed by the Loan loss provisions, but it’s not insignificant.
Market too knows that it is only a story of the speed and scale of loan losses but did give the market a little something to chat about this afternoon.
In the UK Grafton Peer Travis Perkins reported an 18% fall in adjusted EPS in FY2008 to 123p (slightly ahead of expectations of 121p), with group sales flat and adjusted operating profit down by 15%, while the dividend was suspended (no final dividend was declared). Travis notes that the speed and scale of the impact of the financial markets turmoil has been greater than expected and it expects that 2009 ‘is likely to prove a very tough year’. It sees ‘limited prospects for a return to growth in 2010. Not much to grasp at if looking for a bullish read across to Grafton.
Ladbrokes also had numbers today and their comments on Ireland were instructive. ;adbrokes added a net 71 shops to the estate, the majority of which were in Northern Ireland. While the like for like Northern Ireland performance showed good gross win growth of 21.3%, the shops in
the Republic of Ireland suffered an 8.8% like for like constant currency gross win decline. This reflected the more challenging economic environment and, with no machines, a greater reliance on Irish horseracing which experienced an unusually high number of abandonments.
The underlying gross win performance for Ireland was down 6.6% during the year.
Again not great reading but there is a chance that the market has already discounted this. My fear is that discretionary consumer expenditure in Ireland is likely to collapse from here and so I am firmly in the fence here at this point. Instinctively I fear the environment but I like the company and how they do what they do.
Overall an uneventful day , all eyes on the US which continues to slide. Tomorrows direction in Europe definitely at the merci of the US. And given the range bound nature of trading today , there is little conviction that we are in for any respite.
Do have a good evening , this story continues…
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
http://www.merrion-capital.com/" href="http://www.merrion-capital.com/">http://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.
Quiet day. Ireland closed down slightly having been range bound for the day but most of the trading was done at the lower levels. European markets opened brighter and range traded trying to escape higher than last nights closing levels but like a magnet was drawn bac and eventually finished effectively falt on the day. THe FTSE index also tried valiantly to rally but got no where and slipped back to just above last nights closing levels.
The Dow Jones has been up and down all day too. Crucial levels according to some now that we have had an effective 50% fall from the peak. Ireland has fallen by 82% from the peak and shows no sign of support being reached. The optimists say history suggests the market is due for a bear market bounce.
The market is not listening.
In Ireland AIB popped out a trading update unexpectedly , There’s obviously numerous moving parts, but one other point on the AIB trading statement is the pre-provision performance seems to be a bit stronger than anticipated. The increase in loan loss provisions to 100 bps from 75 would take about 325m off pbt. The statement indicates their EPS expectation declined by c. 6c to 114 vs 120 after the increase. On a pre-tax basis, this works out to c. €65m, so the pre-provision op profit looks a bit better than the €2.4B I have in for 08. In the short term, this is of course overwhelmed by the Loan loss provisions, but it’s not insignificant.
Market too knows that it is only a story of the speed and scale of loan losses but did give the market a little something to chat about this afternoon.
In the UK Grafton Peer Travis Perkins reported an 18% fall in adjusted EPS in FY2008 to 123p (slightly ahead of expectations of 121p), with group sales flat and adjusted operating profit down by 15%, while the dividend was suspended (no final dividend was declared). Travis notes that the speed and scale of the impact of the financial markets turmoil has been greater than expected and it expects that 2009 ‘is likely to prove a very tough year’. It sees ‘limited prospects for a return to growth in 2010. Not much to grasp at if looking for a bullish read across to Grafton.
Ladbrokes also had numbers today and their comments on Ireland were instructive. ;adbrokes added a net 71 shops to the estate, the majority of which were in Northern Ireland. While the like for like Northern Ireland performance showed good gross win growth of 21.3%, the shops in
the Republic of Ireland suffered an 8.8% like for like constant currency gross win decline. This reflected the more challenging economic environment and, with no machines, a greater reliance on Irish horseracing which experienced an unusually high number of abandonments.
The underlying gross win performance for Ireland was down 6.6% during the year.
Again not great reading but there is a chance that the market has already discounted this. My fear is that discretionary consumer expenditure in Ireland is likely to collapse from here and so I am firmly in the fence here at this point. Instinctively I fear the environment but I like the company and how they do what they do.
Overall an uneventful day , all eyes on the US which continues to slide. Tomorrows direction in Europe definitely at the merci of the US. And given the range bound nature of trading today , there is little conviction that we are in for any respite.
Do have a good evening , this story continues…
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
http://www.merrion-capital.com/" href="http://www.merrion-capital.com/">http://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.
Wednesday, February 18, 2009
Liams last Post : At Least markets tried to rally...but then...
Good Afternoon ,
After the blow out on the downside last night European markets tried to open better this morning but the rally was short lived. 23 minutes is all it took for the ISEQ to get back to last nights close but the market did bounce to do straight to a session high at 08:50 am before capitulating to cross into negative territory at 9.18am and with a brief flirtation with yesterdays closing level the market has remained resolutely in negative territory all day. Indeed the market has range traded with a series of little sucker rallies with lower lows and lower highs throughout the day.
In Europe the brighter opening had given way to negative territory after 6 minutes though the sharp drop was stabilised at around 10am and just as in Ireland the market retraced to briefly flirt with positive territory before retesting the session lows off -2% and remained in a range for the rest of the day
The FTSE too mirrored the performance of the rest of Europe and it too closed over 1% lower.
The German Finance Minister Peer Steinbrueck yesterday and again today spoke publicly about the fact that some of the 16 Eurozone countries are ‘getting ito difficulties ‘ and that these countries may need help. He sent further today and said that Germany would show its ability to act to prevent a crisis in the Eurozone prompted by the sharp widening of the CDS spreads on Irish , Greek and Spanish government debt.
The EU commission made some hard hitting comments on Irelands stability programme which envisages a progressive reduction of the Government deficit to below the 3% of GDP reference value in 2013, assuming a recovery of economic activity after 2010. The EU Commission said that the growth scenario is somewhat optimistic and the consolidation measures presently lack detail. Further risks stem from the measures in place to support the financial sector, in particular bank guarantees and, concerning the debt ratio, the possibility of further capital injections or nationalisations of banks. And the commission went on to invite Ireland to (i) limit the widening of the deficit in 2009 and specify and rigorously implement a substantial broad-based fiscal consolidation program for 2010 and beyond; (ii) in order to limit risks to the adjustment, strengthen the binding nature of the medium-term budgetary framework as well as closely monitor adherence to the budgetary targets throughout the year. I have to say this is pretty direct advice and interesting that the Commission is not holding back in its views.
The other developing theme and you guess it , not a positive is the sharp deterioration of the Eastern European economies. AIB , CRH and Kingspan would have significant Eastern European exposure which will add reason to worry about these stocks.
In the financials the list o resignations continues with the departure of Michael Walsh, Chairman of Irish Nationwide Building Society. No official explanation of his departure has been provided. It was reported last evening that the Government was unaware of his resignation, hence it would seem unlikely that he would be moving to become involved with any of the other Irish banks. The Finance Minister did state yesterday that a new CEO will be appointed to Bank of Ireland within three weeks time. The CEO role remains open at Anglo.
There was little corporate news , little real activity but another down day with AIB down -4.5% at 63c , Bank of Ireland down -2% , Irish Life which fell precipitously to 1.05 at one stage rallied to close up on the day at 1.275. Minister Lenihan stated in the Dail that Irish Life was well capitalised and had minimal capital requirements. A new management team is what it needs. Maybe the departure of almost all those responsible for bringing Irish Permanent and Irish Life together may create the momentum to crystalise the value of the Life assurance business if a solution or a taker for the Permanent TSB book can be found.
Grafton continued to slide , down another 5.7% today down 27% from the high of the last week , Kingspan rallied +3% , still down -25% on the week. United Drug carried on the de-rating of yesterday and fell a further -10%. We have adjusted our United Drugs EPS forecasts for the current year (to September 2009) by 16% from 27.4 cent to 22.96 cent (a 10.7% decline yoy) and for FY 2010 to 24.41 cent (reduced by 16% from 28.9 cent). We have a HOLD recommendation on United Drug.
The other notable feature of today was the weakness in the primary agricultural stocks such as Origin -9% (albeit on tiny volume ) and Glanbia which fell -10% and Property vehicle Blackrock fell to a new low of 2.7c , the market totally ignoring the companies protestations about the NAV being worth 25c.
Aer Lingus fell another 4% to 95c , Ryanair looks cracking value here at 3.15 a week after our meeting with Michael O’Leary . Independent News and Media fell yet again , this time down -13% to 16.1
Look on the bright side , Another day down…
Have a good evening,
Liam Boggan
Merrion Stockbrokers
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.
After the blow out on the downside last night European markets tried to open better this morning but the rally was short lived. 23 minutes is all it took for the ISEQ to get back to last nights close but the market did bounce to do straight to a session high at 08:50 am before capitulating to cross into negative territory at 9.18am and with a brief flirtation with yesterdays closing level the market has remained resolutely in negative territory all day. Indeed the market has range traded with a series of little sucker rallies with lower lows and lower highs throughout the day.
In Europe the brighter opening had given way to negative territory after 6 minutes though the sharp drop was stabilised at around 10am and just as in Ireland the market retraced to briefly flirt with positive territory before retesting the session lows off -2% and remained in a range for the rest of the day
The FTSE too mirrored the performance of the rest of Europe and it too closed over 1% lower.
The German Finance Minister Peer Steinbrueck yesterday and again today spoke publicly about the fact that some of the 16 Eurozone countries are ‘getting ito difficulties ‘ and that these countries may need help. He sent further today and said that Germany would show its ability to act to prevent a crisis in the Eurozone prompted by the sharp widening of the CDS spreads on Irish , Greek and Spanish government debt.
The EU commission made some hard hitting comments on Irelands stability programme which envisages a progressive reduction of the Government deficit to below the 3% of GDP reference value in 2013, assuming a recovery of economic activity after 2010. The EU Commission said that the growth scenario is somewhat optimistic and the consolidation measures presently lack detail. Further risks stem from the measures in place to support the financial sector, in particular bank guarantees and, concerning the debt ratio, the possibility of further capital injections or nationalisations of banks. And the commission went on to invite Ireland to (i) limit the widening of the deficit in 2009 and specify and rigorously implement a substantial broad-based fiscal consolidation program for 2010 and beyond; (ii) in order to limit risks to the adjustment, strengthen the binding nature of the medium-term budgetary framework as well as closely monitor adherence to the budgetary targets throughout the year. I have to say this is pretty direct advice and interesting that the Commission is not holding back in its views.
The other developing theme and you guess it , not a positive is the sharp deterioration of the Eastern European economies. AIB , CRH and Kingspan would have significant Eastern European exposure which will add reason to worry about these stocks.
In the financials the list o resignations continues with the departure of Michael Walsh, Chairman of Irish Nationwide Building Society. No official explanation of his departure has been provided. It was reported last evening that the Government was unaware of his resignation, hence it would seem unlikely that he would be moving to become involved with any of the other Irish banks. The Finance Minister did state yesterday that a new CEO will be appointed to Bank of Ireland within three weeks time. The CEO role remains open at Anglo.
There was little corporate news , little real activity but another down day with AIB down -4.5% at 63c , Bank of Ireland down -2% , Irish Life which fell precipitously to 1.05 at one stage rallied to close up on the day at 1.275. Minister Lenihan stated in the Dail that Irish Life was well capitalised and had minimal capital requirements. A new management team is what it needs. Maybe the departure of almost all those responsible for bringing Irish Permanent and Irish Life together may create the momentum to crystalise the value of the Life assurance business if a solution or a taker for the Permanent TSB book can be found.
Grafton continued to slide , down another 5.7% today down 27% from the high of the last week , Kingspan rallied +3% , still down -25% on the week. United Drug carried on the de-rating of yesterday and fell a further -10%. We have adjusted our United Drugs EPS forecasts for the current year (to September 2009) by 16% from 27.4 cent to 22.96 cent (a 10.7% decline yoy) and for FY 2010 to 24.41 cent (reduced by 16% from 28.9 cent). We have a HOLD recommendation on United Drug.
The other notable feature of today was the weakness in the primary agricultural stocks such as Origin -9% (albeit on tiny volume ) and Glanbia which fell -10% and Property vehicle Blackrock fell to a new low of 2.7c , the market totally ignoring the companies protestations about the NAV being worth 25c.
Aer Lingus fell another 4% to 95c , Ryanair looks cracking value here at 3.15 a week after our meeting with Michael O’Leary . Independent News and Media fell yet again , this time down -13% to 16.1
Look on the bright side , Another day down…
Have a good evening,
Liam Boggan
Merrion Stockbrokers
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 ; Nightmare continues, Mystery how it ends ?
Good Afternoon ,,
Round two of the week , Markets all down , Ireland down -2% as CRH cracks under disappointment re the scope and scale of the Obama stimulus plan and also growing talk in the market about whether or not CRH are likely to have an equity issue. Obviously only the company know whether they will go for an issue or not. IF CRH do go to the market it is not clear how a fund raising will be received.
CRH is in a relatively comfortable position in terms of its debt covenants. Our forecasts currently for 2010 EBITDA interest cover for CRH are 8.8x compared to managements admitted comfort level of 6x and the actual covenant level of 4.5x. What is clear to us is that unless the environment deteriorates very rapidly , that CRH could debt finance nearly 4bn of acquisitions before getting tight in terms of their covenants. So if they go to the market the market will want a decent explanation. If it is just defensive the market will worry that if CRH are topping up cash that things will get much worse. The market may worry that CRH might go on an acquisition splurge at the wrong time if it had resources burning a hole in its pocket. Anyway suffice it to say that the market is now spooked about CRH and will be waiting for the results announcement on March 3 to get a clear steer re a funding or not. Meanwhile it is likely to be volatile.
Speaking of volatile the irish financials have had an extra ordinary day with AIB and Bank f Ireland getting close to the levels of the lowest priced Government warrants. Have to say that this did bring some punters out of hiding and the stocks rallied with AIB ultimately closing the day up almost 20% having been down -18% at 42c.
And back to Irish life where today Fitch Ratings placed Irish Life & Permanent's (ILP) Individual Rating of 'B/C' on Rating Watch Negative (RWN). At the same time, the agency has affirmed ILP's Support Rating at '2'. The rating action reflects Fitch's concerns over the placing by ILP of a collateralised deposit with Anglo Irish Bank Corporation in September 2008. The agency notes that the Group Chief Executive, Group Finance Director and Head of Group Treasury of ILP have resigned over the incident. In the context of a sharp deterioration in economic growth in Ireland and dislocated financial markets, Fitch is concerned by the loss of these senior members of ILP's management and the time it may take to replace them. Fitch is also concerned about possible breaches in procedures and any rating action by Fitch may be influenced by how the regulators treat the incident. It may be that the new management will review the strategy of ILP and Fitch will closely assess any changes that may be implemented. The agency will also examine the possible impact on the bank of the financial market's reaction to the incident. Fitch aims to resolve the RWN when it has more complete information. Irish Life traded down to a low of 1.22 before rallying towards the close to finish at 1.275 down a mere -11% . Truly a nightmare for the poor investors who have stayed loyal to this one.
Elsewhere the poor global equity market environment continued to weigh as usual on volumes and prices.
Kingspan fell -4.5% to 2.03 and its UK distribution per SIG also fell -7% , Grafton which looked like the real value play last week now available on special offer at 1.39 . mcInerney which is slowly disappearing dealt at 9c -10%
United Drug failed to dispense the happy pills and their trading statement offered no comfort to investors with the management team working towards flat profits o a constant currency basis which led to sharp reductions in earnings estimates. United Drug closed down 20% at 1.93 today.
Smurfit rallied towards the close to the 1.45 level having flirted into the 1.30’s at one stage.
Independent News and Media fell -9% to 18.3c
DCC fell -2% , Paddy Power -2.8% and even Ryanair is now trading at 3.09 with all the excitement of last week firmly eradicated.
Has to be time for the mid week rally ? Maybe not with Wall street down -3% , the UK down -2.5% and Europe -2.4% .
So lets hope that you have an interesting evening ( hardly going to be positive surprises from the US tonight ), would be nice to have something to look forward to , think a quiet one for me. Going Swimming !
Have a good evening
Liam
Liam Boggan
Merrion Stockbrokers
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.
Round two of the week , Markets all down , Ireland down -2% as CRH cracks under disappointment re the scope and scale of the Obama stimulus plan and also growing talk in the market about whether or not CRH are likely to have an equity issue. Obviously only the company know whether they will go for an issue or not. IF CRH do go to the market it is not clear how a fund raising will be received.
CRH is in a relatively comfortable position in terms of its debt covenants. Our forecasts currently for 2010 EBITDA interest cover for CRH are 8.8x compared to managements admitted comfort level of 6x and the actual covenant level of 4.5x. What is clear to us is that unless the environment deteriorates very rapidly , that CRH could debt finance nearly 4bn of acquisitions before getting tight in terms of their covenants. So if they go to the market the market will want a decent explanation. If it is just defensive the market will worry that if CRH are topping up cash that things will get much worse. The market may worry that CRH might go on an acquisition splurge at the wrong time if it had resources burning a hole in its pocket. Anyway suffice it to say that the market is now spooked about CRH and will be waiting for the results announcement on March 3 to get a clear steer re a funding or not. Meanwhile it is likely to be volatile.
Speaking of volatile the irish financials have had an extra ordinary day with AIB and Bank f Ireland getting close to the levels of the lowest priced Government warrants. Have to say that this did bring some punters out of hiding and the stocks rallied with AIB ultimately closing the day up almost 20% having been down -18% at 42c.
And back to Irish life where today Fitch Ratings placed Irish Life & Permanent's (ILP) Individual Rating of 'B/C' on Rating Watch Negative (RWN). At the same time, the agency has affirmed ILP's Support Rating at '2'. The rating action reflects Fitch's concerns over the placing by ILP of a collateralised deposit with Anglo Irish Bank Corporation in September 2008. The agency notes that the Group Chief Executive, Group Finance Director and Head of Group Treasury of ILP have resigned over the incident. In the context of a sharp deterioration in economic growth in Ireland and dislocated financial markets, Fitch is concerned by the loss of these senior members of ILP's management and the time it may take to replace them. Fitch is also concerned about possible breaches in procedures and any rating action by Fitch may be influenced by how the regulators treat the incident. It may be that the new management will review the strategy of ILP and Fitch will closely assess any changes that may be implemented. The agency will also examine the possible impact on the bank of the financial market's reaction to the incident. Fitch aims to resolve the RWN when it has more complete information. Irish Life traded down to a low of 1.22 before rallying towards the close to finish at 1.275 down a mere -11% . Truly a nightmare for the poor investors who have stayed loyal to this one.
Elsewhere the poor global equity market environment continued to weigh as usual on volumes and prices.
Kingspan fell -4.5% to 2.03 and its UK distribution per SIG also fell -7% , Grafton which looked like the real value play last week now available on special offer at 1.39 . mcInerney which is slowly disappearing dealt at 9c -10%
United Drug failed to dispense the happy pills and their trading statement offered no comfort to investors with the management team working towards flat profits o a constant currency basis which led to sharp reductions in earnings estimates. United Drug closed down 20% at 1.93 today.
Smurfit rallied towards the close to the 1.45 level having flirted into the 1.30’s at one stage.
Independent News and Media fell -9% to 18.3c
DCC fell -2% , Paddy Power -2.8% and even Ryanair is now trading at 3.09 with all the excitement of last week firmly eradicated.
Has to be time for the mid week rally ? Maybe not with Wall street down -3% , the UK down -2.5% and Europe -2.4% .
So lets hope that you have an interesting evening ( hardly going to be positive surprises from the US tonight ), would be nice to have something to look forward to , think a quiet one for me. Going Swimming !
Have a good evening
Liam
Liam Boggan
Merrion Stockbrokers
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.
Hi , This is the First of the Liams Last Posts on this site .
Liams Last Post was first started as a daily email to clients reviewing the market action in Irish equities and highlighting interesting snippets and price action and also my personal views on stocks and opportunities that may arise in Ireland and for that matter elsewhere.The Blog was started to document the dramatic events that startd to unfold in global equity markets and the incredible moves that occurred unfortunately nthe downside in terms of price moves in Ireland.
It is personal view only. Any opinions on individual stocks are not to be contrued as recommendations to be relied on.
See the disclaimer
I am going to jump in and upload the last post of yesterday to kick of the life of this blog.
Liam
Liam BogganMerrion Stockbrokerswww.merrion-capital.comDisclaimer www.merrion-capital.com/disclaimer.htmlMerrion 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 was first started as a daily email to clients reviewing the market action in Irish equities and highlighting interesting snippets and price action and also my personal views on stocks and opportunities that may arise in Ireland and for that matter elsewhere.The Blog was started to document the dramatic events that startd to unfold in global equity markets and the incredible moves that occurred unfortunately nthe downside in terms of price moves in Ireland.
It is personal view only. Any opinions on individual stocks are not to be contrued as recommendations to be relied on.
See the disclaimer
I am going to jump in and upload the last post of yesterday to kick of the life of this blog.
Liam
Liam BogganMerrion Stockbrokerswww.merrion-capital.comDisclaimer www.merrion-capital.com/disclaimer.htmlMerrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.
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