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
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