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
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