Good Afternoon ,
Normal service resumes markets after the recent rally which had almost gotten everyone excited that the end of the near market maybe in sight. The strength of the rally over the last few days has seen prices push ahead and through the chart resistance levels and now we are seing a pull back which in an ideal world will see these levels become supports.
The market was driven on a wave of enthusiasm after the Geithner plan was fleshed out. This week we have the G20 Summit to look forward to and await to see if any signs of coordinated action can be agreed which will lend further weight to the optimists camp.
Wall street was reeling his afternoon after the news that the US had rejected the request of GM and Chrysler for further Bailout money. The new US administration told the carmakers to come up with new plans or risk insolvency. GM has received $13.4bn in government aid and had asked for an additional $16.6bn. Chrysler has received $4bn and had asked for another $5bn. But both companies failed to meet targets on cutting their debt and reducing the cost of benefits paid to workers.
A draft of the G-20 communique was leaked over the weekend. It has not been received very positively. It was described as having no real substance on most of the big issues - as predicted and the language on monetary policy and fiscal policy is completely vacuous suggesting the Europeans won big and the U.S. lost on these issues), and the “regulatory reform” initiative amounts to building more ornate structures
Spain nationalised Bank Caja Castilla-La Mancha after arrangements to have it taken over or merged failed. The Bank of Spain appointed administrators to run the savings bank and removing its management. THe Spanish Government pledged to guarantee as much as 9 billion euros ($12 billion) of the lender’s liabilities.
Spain like Ireland is in the midst of a banking crisis based after its own property bubble burst. Loan defaults in Spain have tripled since 2007, and unemployment is now 14 %,the highest in the European Union. The government is forecasting a contraction of 1.6 percent this year which is still a long way ahead better than the forecasts in Ireland where we are looking at a 7% to 8% (Read 10%+ contraction) this year.
The Financials really gave up the ghost today with AIB -14% , BOI down a mere -9% and Irish Life -10% , the UK banks were all down sharply too with RBS -12.5% and Lloyds -15%.
The Building materials stocks got walloped also with CRH -3.2% ,Grafton -3.5% and Kingspan -1.9%.
Elan continued to drift as the rumoured bid by lundbeck failed to materialise (again)…
The resignation of John Holberry from C&C had little impact on the price thought the statement was honest saying that the arrival of the new management team had dented Mr Holberrys hopes of progression at C&C.
Smurfit dropped -6%,Independent News and Media fell -6%
Aer Lingus remained grounded and Ryanair continued to struggle with a continuous flow of stock for sale.
Paddy Power also fell -3.5% hit as much by the market as the read across from 888 holdings results. 888 said that the broader economic climate remains challenging and overall revenue in Q1 is expected to be slightly lower than Q4, which was a slightly longer quarter. Poker and Emerging grew quarter on quarter and new customer levels were considerably better than expected, while Casino trading was challenging.
Overall a quiet and weak start to the week , Ireland closed down -1.9% , European markets closed down -3.8% , while London fell also -3.5% and Wall Street is down -3.6% at 5pm.
Have a good evening.
Lets hope this is just a pull back rather than the end of the mini rally.
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, March 30, 2009
Friday, March 27, 2009
Liams Last Post : Rangebound but steady , four to Rely on !
Good Afternoon ,
A range trading day in Dublin today up and down and closing just about flat. European markets had a more straightforward day almost straight down -1.8% and London closed down too -0.7%
Not much corporate news today , the Elan bid did not happen and Elan fell -8% after the strong false rally yesterday.
United Drug rallied +7% today after the share price has been under serious pressure for some time now. C&C fell -5% as the market starts to focus on possible tax hikes with the April 7th budget.
Kingspan fell -4.7% though CRH was positive and Grafton rose just under 1%.
The Profit Warning from Air France was enough to out the flag carriers under pressure , British Airways fell -3% , Lufthansa fell -2.7% but Aer Lingus held flat and Ryanair stayed in its range though closed +1%.
At 5pm , Wall Street is -1.8% , the rally finally succumbs to some profit taking but lets hope the street manages an orderly close and the pattern of building and range trading continues as this will provide a platform or support for the markets to stabilise and hopefully push on.
Merrion Research published a note today called Four to rely on highlighting four stocks to follow in Ireland for the medium term. In our view, the recovery in the Irish equity market (excluding the banks) will be more influenced by policy actions outside of Ireland and the direction of global equity markets than events domestically. However, with financial uncertainty remaining high and the Irish domestic economy likely to underperform, we identify four stocks which we believe will benefit from the ultimate cyclical recovery but which also provide relative defensive characteristics in the interim . Our criteria for choosing these stocks are:
- Solid balance sheets - reasonable leverage levels, no covenant or short term refinancing concerns.
- Strong free cash flow generation.
- Ability to sustain or grow ROACE over the next 3-5 years.
- Proven management track record.
- Low dependence on the Irish economy.
- Attractive valuation.
The four stocks we have chosen initially are CRH, Ryanair, Kerry Group and DCC. Their strong cashflow and balance sheet characteristics will allow these companies to invest in their businesses and/or take advantage of low valuations in their sectors to ultimately emerge from this recession in a strong structural position within their industries at a time when others are retrenching due to high leverage.
Food for thought
Have a good weekend
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.Go
A range trading day in Dublin today up and down and closing just about flat. European markets had a more straightforward day almost straight down -1.8% and London closed down too -0.7%
Not much corporate news today , the Elan bid did not happen and Elan fell -8% after the strong false rally yesterday.
United Drug rallied +7% today after the share price has been under serious pressure for some time now. C&C fell -5% as the market starts to focus on possible tax hikes with the April 7th budget.
Kingspan fell -4.7% though CRH was positive and Grafton rose just under 1%.
The Profit Warning from Air France was enough to out the flag carriers under pressure , British Airways fell -3% , Lufthansa fell -2.7% but Aer Lingus held flat and Ryanair stayed in its range though closed +1%.
At 5pm , Wall Street is -1.8% , the rally finally succumbs to some profit taking but lets hope the street manages an orderly close and the pattern of building and range trading continues as this will provide a platform or support for the markets to stabilise and hopefully push on.
Merrion Research published a note today called Four to rely on highlighting four stocks to follow in Ireland for the medium term. In our view, the recovery in the Irish equity market (excluding the banks) will be more influenced by policy actions outside of Ireland and the direction of global equity markets than events domestically. However, with financial uncertainty remaining high and the Irish domestic economy likely to underperform, we identify four stocks which we believe will benefit from the ultimate cyclical recovery but which also provide relative defensive characteristics in the interim . Our criteria for choosing these stocks are:
- Solid balance sheets - reasonable leverage levels, no covenant or short term refinancing concerns.
- Strong free cash flow generation.
- Ability to sustain or grow ROACE over the next 3-5 years.
- Proven management track record.
- Low dependence on the Irish economy.
- Attractive valuation.
The four stocks we have chosen initially are CRH, Ryanair, Kerry Group and DCC. Their strong cashflow and balance sheet characteristics will allow these companies to invest in their businesses and/or take advantage of low valuations in their sectors to ultimately emerge from this recession in a strong structural position within their industries at a time when others are retrenching due to high leverage.
Food for thought
Have a good weekend
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.Go
Thursday, March 26, 2009
Liams Last Post : markets hang on, Elan rumours, Aer Lingus
Good Afternoon ,
The story of the day in Ireland erupted in the Afternoon with the rumour that Lundbeck is about to bid for Elan.The market believed this story and Elan share price rallied +15% . Lets see how this unfolds. Biogen
IDEC , Elan’s partner in Tsyabri held an analyst day yesterday where they held a separate session on the prospects for re-energising Tsyabri. The most interesting part of their presentation that I saw was the survey of Physician confidence in Tsyabri which had been growing steadily until the first case of PML post re-launch got stuffed as the second case came and then began to recover and the incidence the third case of PML had little influence on the recovery of the perception of the drug.
The Irish market was up again +0.42% , Europe +0.36% and London + 0.6% with Wall street +0.9% after the most remarkable last few minutes straight line rally as witnessed last night. Markets have been steady for a while now , we have been gettng supportive comments from governments and stmulus packages everywhere (except Ireland where the word hair shirt will be given a new meaning on April 7th) . It does look like we have been through the worst part of this market but the fear remains that this is just another bear market rally.
Late in the day , United Drug rallied +5% , C&C sparked into life and jumped +3.7% , Kerry +2.5% , Total produce fell -1.8% but its sister company rallied +4..76%
The financials had a quiet day , AIB down -1.5% , Bank of Ireland +6% , Irish life -3%
We published a note this afternoon making an explicit recommendation that Aer Lingus management take steps to cancel the long haul aircraft orders and conserve cash. The argument is potent that the management team act decisively to protect shareholder value and retain cash rather than deploy cash into assets which are unlikely to generate an acceptable return. Makes sense to me , there is significant value locked up in Aer Lingus but the management team are under pressure to prove that they are capable of unlocking value for their shareholders.
Ryanair for its part continues to find it hard to rally and remains at 2.80. INM also struggles at 16c as Denis O’Brien appeared on CNBC this morning but did not convince anyone that there is a solution to the debt roll overs imminent that will be friendly to current shareholders.
Irish GDP figure today were a bit shocking with 2008 GDP fell 2.3% in volume terms to €183.7bn while GNP declined 3.1%. For Q4, the decline was 7.5% y/y in GDP and 6.7% in GNP at constant prices. Q4 features include Consumer spending -4.% in volume terms, Capital Investment -30.6%, Exports -4.9% , Imports -10.4%, Industrial Output -12.5% (of which building & construction -24%) and Agriculture -5.4%.
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 story of the day in Ireland erupted in the Afternoon with the rumour that Lundbeck is about to bid for Elan.The market believed this story and Elan share price rallied +15% . Lets see how this unfolds. Biogen
IDEC , Elan’s partner in Tsyabri held an analyst day yesterday where they held a separate session on the prospects for re-energising Tsyabri. The most interesting part of their presentation that I saw was the survey of Physician confidence in Tsyabri which had been growing steadily until the first case of PML post re-launch got stuffed as the second case came and then began to recover and the incidence the third case of PML had little influence on the recovery of the perception of the drug.
The Irish market was up again +0.42% , Europe +0.36% and London + 0.6% with Wall street +0.9% after the most remarkable last few minutes straight line rally as witnessed last night. Markets have been steady for a while now , we have been gettng supportive comments from governments and stmulus packages everywhere (except Ireland where the word hair shirt will be given a new meaning on April 7th) . It does look like we have been through the worst part of this market but the fear remains that this is just another bear market rally.
Late in the day , United Drug rallied +5% , C&C sparked into life and jumped +3.7% , Kerry +2.5% , Total produce fell -1.8% but its sister company rallied +4..76%
The financials had a quiet day , AIB down -1.5% , Bank of Ireland +6% , Irish life -3%
We published a note this afternoon making an explicit recommendation that Aer Lingus management take steps to cancel the long haul aircraft orders and conserve cash. The argument is potent that the management team act decisively to protect shareholder value and retain cash rather than deploy cash into assets which are unlikely to generate an acceptable return. Makes sense to me , there is significant value locked up in Aer Lingus but the management team are under pressure to prove that they are capable of unlocking value for their shareholders.
Ryanair for its part continues to find it hard to rally and remains at 2.80. INM also struggles at 16c as Denis O’Brien appeared on CNBC this morning but did not convince anyone that there is a solution to the debt roll overs imminent that will be friendly to current shareholders.
Irish GDP figure today were a bit shocking with 2008 GDP fell 2.3% in volume terms to €183.7bn while GNP declined 3.1%. For Q4, the decline was 7.5% y/y in GDP and 6.7% in GNP at constant prices. Q4 features include Consumer spending -4.% in volume terms, Capital Investment -30.6%, Exports -4.9% , Imports -10.4%, Industrial Output -12.5% (of which building & construction -24%) and Agriculture -5.4%.
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, March 25, 2009
Liams Last Post : What goes up , maybe maybe build a base..
Good Afternoon ,
What goes up....Maybe , maybe might hold on these levels or at least begin to form base at these levels.
Markets see sawed today , Dublin opened just below yesterdays close , rallied turned sharply down and fell 72 points ,rallied above the previous intra day high and then fell to back again from these levels but managed to hold a gain for the day of +1.5% , London closed down -0.3% and European markets held a 1% gain while Wall street began brightly and has stayed in positive territory though off the highs. Wall street is +1.8% at 16:45pm.
The banks in Ireland went suddenly weaker this morning when Brian Lenihan spoke about the grave economic difficulties the country faces.
Ryanair was in focus again today with good two way flow in the stock , I have to say my gut feeling is that the stock should be bought here and the weakness is technical rather than fundamental. The stock eventually found support today and closed +1% . Aer Lingus is struggling at these levels +1.7%
CRH was weaker earlier but rallied with Wall Street strength , Grafton and Kingspan fell prey to some short term profit taking
Elan had a strong day and rallied +7% as US broker Cowen suggested that the stock might trade positively through the next month ahead of presentation of data to the American Academy of Neurology (AAN) meeting.
United drug traded down in decent volume today. The stock looks cheap but until the budget on April 7th , it is not clear how the budget will impact the stock and this uncertainty coupled with the market not being terribly impressed with the performance of one of the last acquisitions the company made as it appears that the Due Diligence process was somewhat lacking in focus or that the produce portfolio that the company bought was misunderstood.
Short and sweet today… markets look like they may be finding a bottom. Hope they do.
Getting a bit more bullish I have to say that the market may have bottomed here , not seeing much selling pressure or panic which is re-assuring.
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.
What goes up....Maybe , maybe might hold on these levels or at least begin to form base at these levels.
Markets see sawed today , Dublin opened just below yesterdays close , rallied turned sharply down and fell 72 points ,rallied above the previous intra day high and then fell to back again from these levels but managed to hold a gain for the day of +1.5% , London closed down -0.3% and European markets held a 1% gain while Wall street began brightly and has stayed in positive territory though off the highs. Wall street is +1.8% at 16:45pm.
The banks in Ireland went suddenly weaker this morning when Brian Lenihan spoke about the grave economic difficulties the country faces.
Ryanair was in focus again today with good two way flow in the stock , I have to say my gut feeling is that the stock should be bought here and the weakness is technical rather than fundamental. The stock eventually found support today and closed +1% . Aer Lingus is struggling at these levels +1.7%
CRH was weaker earlier but rallied with Wall Street strength , Grafton and Kingspan fell prey to some short term profit taking
Elan had a strong day and rallied +7% as US broker Cowen suggested that the stock might trade positively through the next month ahead of presentation of data to the American Academy of Neurology (AAN) meeting.
United drug traded down in decent volume today. The stock looks cheap but until the budget on April 7th , it is not clear how the budget will impact the stock and this uncertainty coupled with the market not being terribly impressed with the performance of one of the last acquisitions the company made as it appears that the Due Diligence process was somewhat lacking in focus or that the produce portfolio that the company bought was misunderstood.
Short and sweet today… markets look like they may be finding a bottom. Hope they do.
Getting a bit more bullish I have to say that the market may have bottomed here , not seeing much selling pressure or panic which is re-assuring.
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, March 24, 2009
Liams Last Post: Ryanair bullish, Ireland gets bonds away
Good Afternoon ,
The Geithner plan certainly ignited the markets yesterday evening and led to a brighter and more enthusiastic opening across Europe. Corporate newsflow was thin on the ground and while the markets reacted positively at the opening it was clear quite early on that the rally was unlikely to be sustained for the day and at around 10am the markets all retraced to yesterdays closing levels and indeed range traded below yesterdays closes for the most of the rest of the day. Europe was relatively the strongest place though Ireland , The UK and the US all stayed below yesterdays closing levels.
The initial enthusiasm of several large asset managers to be involved yesterday helped drive the market's positive reception. But the plan assumes, like its predecessors, that the basic problem is one of liquidity. It aims to put a price on securities that are not trading. If the problem is really one of solvency - that current prices for these assets are accurate - the gains will not be durable.
The news today in Ireland was about the successful Irish Government bond auction and the news that the EU commission was extending the deadline to bring the budget deficit into line to 2013 due to the scale of the problem. The actual statement from the commission read as follows :
While general government debt in Ireland stood at 40.6% of GDP in 2008, below the 60% reference value, the general government deficit is set to have reached 6.3% of GDP. According to the Commission's January forecasts, the deficit is expected to widen further to 11% in 2009 and to 13% of GDP in 2010 on a no-policy-change basis. The Commission, therefore, recommends to the Council to decide on the existence of an excessive deficit in Ireland and to make recommendations with a view to bringing this situation to an end. In view of the very weak economic situation in Ireland and the size of the deficit, a multi-annual deadline for the correction of the excessive deficit appears warranted. The Commission recommends to the Council that the Irish authorities take measures to achieve the 2009 deficit target. Thereafter, additional annual efforts going beyond those foreseen in the January 2009 Stability Programme addendum might be necessary to bring the deficit below the 3% of GDP reference value by 2013, if downside risks to the budgetary targets were to materialize. The strategy's credibility hinges on the timely specification of the consolidation measures to achieve this consolidation path. Given the scale of the required adjustment, a broad-based consolidation effort will be necessary, addressing both the expenditure and the revenue side of the budget. In order to further enhance the credibility of the medium-term consolidation strategy, it will also be crucial to strengthen the Irish medium-term budgetary framework.
The NTMA bind auction results were as follows : 4.0% Treasury Bond 2011: €300m at a weighted average price of 101.319, yield of 3.459%. Bid to cover ratio of 3.8. 4.5% Treasury Bond 2020: €700m at a weighted average price of 89.536, yield of 5.808%. Bid to cover ratio of 2.7. The spread between Irish and German 10-year debt narrowed 24 basis points today to 249 basis points. The average spread during the past 10 years between Irish and German 10-year debt was 18 basis points.
AIB has today announced a new post, upcoming changes to its board and a shake-up of management.Donal Forde, currently managing director, AIB Bank Republic of Ireland, has been appointed to the role of Director of Group Strategy, a new post. Robbie Henneberry, currently managing director AIB Bank Great Britain and Northern Ireland, has been appointed managing director of AIB Bank in the Republic of Ireland. Meanwhile, AIB's Board also announced today that Mr Forde has decided not to seek re-election at the forthcoming AGM on May 13. Michael J Sullivan, independent director, will retire after the AGM.
Ryanair were in the news as Michael O’Leary spoke to the media at a route launch in Madrid where he said that if anything Ryanair would be upgrading their forecasts for passenger numbers through March 2010 and said that the recession is prompting a shift to budget travel. Ryanair also said that their projections wont be impacted by the recent rise in the price of oil.
Not surprising that the market has given up some ground this afternoon , however the US looks like it is going to have another attempt to get the rally going , this would be a very positive sign that the market in the US seems determined to see this plan as good news .
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 Geithner plan certainly ignited the markets yesterday evening and led to a brighter and more enthusiastic opening across Europe. Corporate newsflow was thin on the ground and while the markets reacted positively at the opening it was clear quite early on that the rally was unlikely to be sustained for the day and at around 10am the markets all retraced to yesterdays closing levels and indeed range traded below yesterdays closes for the most of the rest of the day. Europe was relatively the strongest place though Ireland , The UK and the US all stayed below yesterdays closing levels.
The initial enthusiasm of several large asset managers to be involved yesterday helped drive the market's positive reception. But the plan assumes, like its predecessors, that the basic problem is one of liquidity. It aims to put a price on securities that are not trading. If the problem is really one of solvency - that current prices for these assets are accurate - the gains will not be durable.
The news today in Ireland was about the successful Irish Government bond auction and the news that the EU commission was extending the deadline to bring the budget deficit into line to 2013 due to the scale of the problem. The actual statement from the commission read as follows :
While general government debt in Ireland stood at 40.6% of GDP in 2008, below the 60% reference value, the general government deficit is set to have reached 6.3% of GDP. According to the Commission's January forecasts, the deficit is expected to widen further to 11% in 2009 and to 13% of GDP in 2010 on a no-policy-change basis. The Commission, therefore, recommends to the Council to decide on the existence of an excessive deficit in Ireland and to make recommendations with a view to bringing this situation to an end. In view of the very weak economic situation in Ireland and the size of the deficit, a multi-annual deadline for the correction of the excessive deficit appears warranted. The Commission recommends to the Council that the Irish authorities take measures to achieve the 2009 deficit target. Thereafter, additional annual efforts going beyond those foreseen in the January 2009 Stability Programme addendum might be necessary to bring the deficit below the 3% of GDP reference value by 2013, if downside risks to the budgetary targets were to materialize. The strategy's credibility hinges on the timely specification of the consolidation measures to achieve this consolidation path. Given the scale of the required adjustment, a broad-based consolidation effort will be necessary, addressing both the expenditure and the revenue side of the budget. In order to further enhance the credibility of the medium-term consolidation strategy, it will also be crucial to strengthen the Irish medium-term budgetary framework.
The NTMA bind auction results were as follows : 4.0% Treasury Bond 2011: €300m at a weighted average price of 101.319, yield of 3.459%. Bid to cover ratio of 3.8. 4.5% Treasury Bond 2020: €700m at a weighted average price of 89.536, yield of 5.808%. Bid to cover ratio of 2.7. The spread between Irish and German 10-year debt narrowed 24 basis points today to 249 basis points. The average spread during the past 10 years between Irish and German 10-year debt was 18 basis points.
AIB has today announced a new post, upcoming changes to its board and a shake-up of management.Donal Forde, currently managing director, AIB Bank Republic of Ireland, has been appointed to the role of Director of Group Strategy, a new post. Robbie Henneberry, currently managing director AIB Bank Great Britain and Northern Ireland, has been appointed managing director of AIB Bank in the Republic of Ireland. Meanwhile, AIB's Board also announced today that Mr Forde has decided not to seek re-election at the forthcoming AGM on May 13. Michael J Sullivan, independent director, will retire after the AGM.
Ryanair were in the news as Michael O’Leary spoke to the media at a route launch in Madrid where he said that if anything Ryanair would be upgrading their forecasts for passenger numbers through March 2010 and said that the recession is prompting a shift to budget travel. Ryanair also said that their projections wont be impacted by the recent rise in the price of oil.
Not surprising that the market has given up some ground this afternoon , however the US looks like it is going to have another attempt to get the rally going , this would be a very positive sign that the market in the US seems determined to see this plan as good news .
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, March 23, 2009
Liams Last Post : Grandslam and Geithner ignites the market
Good Afternoon ,
In the aftermath of the Grandslam weekend , the two corporate stories in Ireland were about McInerney Homes and about Independent News and Media.
McInerneys are due to come and talk to us after them market closes. It is a story which relies more now on market conditions not deteriorating from here , frankly it is difficult to see that there is much of a play for equity investors at this point and that is reflected in the continued slide of the shareprice to 9c.
INM slipped out an announcement on Friday which announced the appointment o brokers to engage with the bond holders as the efforts to refinance the bond which falls due in May have been abandoned. We have see the power shift on the Board to Denis O’Brien. The Bond holders will be reluctant to re-negotiate terms which will put them at any disadvantage in terms o their ranking for re-payment and with a 400m re financing due next year after this 200m one , the pressure is now really on.
Ryanair continued to feel the pressure today , it has been prey to nearly continuous selling pressure for a couple of weeks now and while the stock looks very cheap , it really is stuck in the mire at this point.
Elsewhere it was all about The US Treasury secretary new bank bailout plan. The markets are very excited about this one.
The following is from the Treasury release itself about how it will work. (Very clearly , this is a good deal lfor the banks and encourages risk taking with downside protection and leveraged sharing of upside)
• The Process for Purchasing Assets Through The Legacy Loans Program: Purchasing assets in the Legacy Loans Program will occur through the following process:
o Banks Identify the Assets They Wish to Sell: To start the process, banks will decide which assets – usually a pool of loans – they would like to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio. Assets eligible for purchase will be determined by the participating banks, their primary regulators, the FDIC and Treasury. Financial institutions of all sizes will be eligible to sell assets.
o Pools Are Auctioned Off to the Highest Bidder: The FDIC will conduct an auction for these pools of loans. The highest bidder will have access to the Public-Private Investment Program to fund 50 percent of the equity requirement of their purchase.
o Financing Is Provided Through FDIC Guarantee: If the seller accepts the purchase price, the buyer would receive financing by issuing debt guaranteed by the FDIC. The FDIC-guaranteed debt would be collateralized by the purchased assets and the FDIC would receive a fee in return for its guarantee.
o Private Sector Partners Manage the Assets:Once the assets have been sold, private fund managers will control and manage the
The Legacy Securities Program: The goal of this program is to restart the market for legacy securities, allowing banks and other financial institutions to free up capital and stimulate the extension of new credit. The resulting process of price discovery will also reduce the uncertainty surrounding the financial institutions holding these securities, potentially enabling them to raise new private capital. The Legacy Securities Program consists of two related parts designed to draw private capital into these markets by providing debt financing from the Federal Reserve under the Term Asset-Backed Securities Loan Facility (TALF) and through matching private capital raised for dedicated funds targeting legacy securities.
1. Expanding TALF to Legacy Securities to Bring Private Investors Back into the Market: The Treasury and the Federal Reserve are today announcing their plans to create a lending program that will address the broken markets for securities tied to residential and commercial real estate and consumer credit. The intention is to incorporate this program into the previously announced Term Asset-Backed Securities Facility (TALF).
o Providing Investors Greater Confidence to Purchase Legacy Assets:As with securitizations backed by new originations of consumer and business credit already included in the TALF, we expect that the provision of leverage through this program will give investors greater confidence to purchase these assets, thus increasing market liquidity.
o Funding Purchase of Legacy Securities: Through this new program, non-recourse loans will be made available to investors to fund purchases of legacy securitization assets. Eligible assets are expected to include certain non-agency residential mortgage backed securities (RMBS) that were originally rated AAA and outstanding commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) that are rated AAA.
o Working with Market Participants: Borrowers will need to meet eligibility criteria. Haircuts will be determined at a later date and will reflect the riskiness of the assets provided as collateral. Lending rates, minimum loan sizes, and loan durations have not been determined. These and other terms of the programs will be informed by discussions with market participants. However, the Federal Reserve is working to ensure that the duration of these loans takes into account the duration of the underlying assets.
2. Partnering Side-by-Side with Private Investors in Legacy Securities Investment Funds: Treasury will make co-investment/leverage available to partner with private capital providers to immediately support the market for legacy mortgage- and asset-backed securities originated prior to 2009 with a rating of AAA at origination.
Side-by-Side Investment with Qualified Fund Managers: Treasury will approve up to five asset managers with a demonstrated track record of purchasing legacy assets though we may consider adding more depending on the quality of applications received. Managers whose proposals have been approved will have a period of time to raise private capital to target the designated asset classes and will receive matching Treasury funds under the Public-Private Investment Program. Treasury funds will be invested one-for-one on a fully side-by-side basis with these investors.
Offer of Senior Debt to Leverage More Financing: Asset managers will have the ability, if their investment fund structures meet certain guidelines, to subscribe for senior debt for the Public-Private Investment Fund from the Treasury Department in the amount of 50% of total equity capital of the fund. The Treasury Department will consider requests for senior debt for the fund in the amount of 100% of its total equity capital subject to further restrictions.
With Wall street up an enthusiastic 4.3% , European markets have continued to rally and are up +3.3% with London +3% and Ireland +1.7% .
Well the question is now …. Is it over ? a surprising number of people I have spoken to are beginning to get very bullish here , if this plan works and it unlocks credit markets then anything can happen. Interesting to see stocks test resistance levels here. Lets hope they break through and move ahead.
Grand Slam ends the Recession ? (Or the Treasury helps reflate the bubble ? Maybe …. Who cares if it works….Gotta believe in something , and today is maybe a good a day to start ?
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.
In the aftermath of the Grandslam weekend , the two corporate stories in Ireland were about McInerney Homes and about Independent News and Media.
McInerneys are due to come and talk to us after them market closes. It is a story which relies more now on market conditions not deteriorating from here , frankly it is difficult to see that there is much of a play for equity investors at this point and that is reflected in the continued slide of the shareprice to 9c.
INM slipped out an announcement on Friday which announced the appointment o brokers to engage with the bond holders as the efforts to refinance the bond which falls due in May have been abandoned. We have see the power shift on the Board to Denis O’Brien. The Bond holders will be reluctant to re-negotiate terms which will put them at any disadvantage in terms o their ranking for re-payment and with a 400m re financing due next year after this 200m one , the pressure is now really on.
Ryanair continued to feel the pressure today , it has been prey to nearly continuous selling pressure for a couple of weeks now and while the stock looks very cheap , it really is stuck in the mire at this point.
Elsewhere it was all about The US Treasury secretary new bank bailout plan. The markets are very excited about this one.
The following is from the Treasury release itself about how it will work. (Very clearly , this is a good deal lfor the banks and encourages risk taking with downside protection and leveraged sharing of upside)
• The Process for Purchasing Assets Through The Legacy Loans Program: Purchasing assets in the Legacy Loans Program will occur through the following process:
o Banks Identify the Assets They Wish to Sell: To start the process, banks will decide which assets – usually a pool of loans – they would like to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio. Assets eligible for purchase will be determined by the participating banks, their primary regulators, the FDIC and Treasury. Financial institutions of all sizes will be eligible to sell assets.
o Pools Are Auctioned Off to the Highest Bidder: The FDIC will conduct an auction for these pools of loans. The highest bidder will have access to the Public-Private Investment Program to fund 50 percent of the equity requirement of their purchase.
o Financing Is Provided Through FDIC Guarantee: If the seller accepts the purchase price, the buyer would receive financing by issuing debt guaranteed by the FDIC. The FDIC-guaranteed debt would be collateralized by the purchased assets and the FDIC would receive a fee in return for its guarantee.
o Private Sector Partners Manage the Assets:Once the assets have been sold, private fund managers will control and manage the
The Legacy Securities Program: The goal of this program is to restart the market for legacy securities, allowing banks and other financial institutions to free up capital and stimulate the extension of new credit. The resulting process of price discovery will also reduce the uncertainty surrounding the financial institutions holding these securities, potentially enabling them to raise new private capital. The Legacy Securities Program consists of two related parts designed to draw private capital into these markets by providing debt financing from the Federal Reserve under the Term Asset-Backed Securities Loan Facility (TALF) and through matching private capital raised for dedicated funds targeting legacy securities.
1. Expanding TALF to Legacy Securities to Bring Private Investors Back into the Market: The Treasury and the Federal Reserve are today announcing their plans to create a lending program that will address the broken markets for securities tied to residential and commercial real estate and consumer credit. The intention is to incorporate this program into the previously announced Term Asset-Backed Securities Facility (TALF).
o Providing Investors Greater Confidence to Purchase Legacy Assets:As with securitizations backed by new originations of consumer and business credit already included in the TALF, we expect that the provision of leverage through this program will give investors greater confidence to purchase these assets, thus increasing market liquidity.
o Funding Purchase of Legacy Securities: Through this new program, non-recourse loans will be made available to investors to fund purchases of legacy securitization assets. Eligible assets are expected to include certain non-agency residential mortgage backed securities (RMBS) that were originally rated AAA and outstanding commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) that are rated AAA.
o Working with Market Participants: Borrowers will need to meet eligibility criteria. Haircuts will be determined at a later date and will reflect the riskiness of the assets provided as collateral. Lending rates, minimum loan sizes, and loan durations have not been determined. These and other terms of the programs will be informed by discussions with market participants. However, the Federal Reserve is working to ensure that the duration of these loans takes into account the duration of the underlying assets.
2. Partnering Side-by-Side with Private Investors in Legacy Securities Investment Funds: Treasury will make co-investment/leverage available to partner with private capital providers to immediately support the market for legacy mortgage- and asset-backed securities originated prior to 2009 with a rating of AAA at origination.
Side-by-Side Investment with Qualified Fund Managers: Treasury will approve up to five asset managers with a demonstrated track record of purchasing legacy assets though we may consider adding more depending on the quality of applications received. Managers whose proposals have been approved will have a period of time to raise private capital to target the designated asset classes and will receive matching Treasury funds under the Public-Private Investment Program. Treasury funds will be invested one-for-one on a fully side-by-side basis with these investors.
Offer of Senior Debt to Leverage More Financing: Asset managers will have the ability, if their investment fund structures meet certain guidelines, to subscribe for senior debt for the Public-Private Investment Fund from the Treasury Department in the amount of 50% of total equity capital of the fund. The Treasury Department will consider requests for senior debt for the fund in the amount of 100% of its total equity capital subject to further restrictions.
With Wall street up an enthusiastic 4.3% , European markets have continued to rally and are up +3.3% with London +3% and Ireland +1.7% .
Well the question is now …. Is it over ? a surprising number of people I have spoken to are beginning to get very bullish here , if this plan works and it unlocks credit markets then anything can happen. Interesting to see stocks test resistance levels here. Lets hope they break through and move ahead.
Grand Slam ends the Recession ? (Or the Treasury helps reflate the bubble ? Maybe …. Who cares if it works….Gotta believe in something , and today is maybe a good a day to start ?
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.
Friday, March 20, 2009
liams last Post : Rally holds,Sunshine and Grand Slam weekend
Good Afternoon ,
(And it is …
3 days of sunshine and a market which despite some jitters has shown some signs of stability and being able to absorb some shocks without panic this week.
Little corporate news in Ireland today but decent performance from the fianncials as there were stories about the ECB saying that they would support countries in trouble and obviously Ireland ranks high in the list of potential candidates. AIB +12% , bank of Ireland +22% and irish Life breaking confidently above the eurr1.00 level to close at 1.30 a massive +44% jump.
CRH traded steadily today ahead f it goin in to the Dow Jones Stozxx dividend index. , Kerry and DCC are also going into some indices this weekend and so have been technically well supported as index tracking funds bought their positions in the stocks.
Noteworthy movers elsewhere today were Aryzzta +3% in Dublin but up nearly 10% in the Swiss line. On the other hand and in contradiction Origin which Aryzta owns 70% of fell -9.6%. Fyffes jumped +5% and Smurfit Kappa also rallied +3.77%.
Ryanair which had been under pressure rallied +4.9% to eur3.00 but Aer Lingus slipped back to 59.2c
Friday 5pm , Wall Street is slightly down , the European markets have shed -1.8% , London is up 0.7% and Dublin , buoyed by CRH and Ryanair climbed +1.7%
In Europe the lading sectors this week were the Financials +13% , IT +3.5% , utiities +2.4% and the definsive consumer staples fell -2.3% and Healthcare fell -0.24% reflecting sector rotation into the now higher beta Financials.
The story of the week was the surpise move by the Fed on the quantitive easing front.
In Ireland , we look forward to The National Treasury Management Agency auction of two Irish Government bonds with a total value of between €750m and €1 billion next Tuesday. The two bonds are the 4% Treasury Bond 2011 and the 4.5% Treasury Bond 2020. Tthe NTMA plans to raise about €10 billion this year to help fund the State's budget deficit. All eyes will be on these auctions as a key test of the Government credibility in International markets.
In the meantime , the climax of the Six nations is tomorrow and Ireland has the chance to win the Grand Slam in Cardiff tomorrow. (I overhear a colleague saying that if Ireland wins the Grandslam it might trigger a recovery in the caltic tiger and pull us out of the recession ... Wishful thinking , a nice thought. Have a good weekend.
Liam
___________________________________________
Liam Boggan
Head of International Equities
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.
(And it is …
3 days of sunshine and a market which despite some jitters has shown some signs of stability and being able to absorb some shocks without panic this week.
Little corporate news in Ireland today but decent performance from the fianncials as there were stories about the ECB saying that they would support countries in trouble and obviously Ireland ranks high in the list of potential candidates. AIB +12% , bank of Ireland +22% and irish Life breaking confidently above the eurr1.00 level to close at 1.30 a massive +44% jump.
CRH traded steadily today ahead f it goin in to the Dow Jones Stozxx dividend index. , Kerry and DCC are also going into some indices this weekend and so have been technically well supported as index tracking funds bought their positions in the stocks.
Noteworthy movers elsewhere today were Aryzzta +3% in Dublin but up nearly 10% in the Swiss line. On the other hand and in contradiction Origin which Aryzta owns 70% of fell -9.6%. Fyffes jumped +5% and Smurfit Kappa also rallied +3.77%.
Ryanair which had been under pressure rallied +4.9% to eur3.00 but Aer Lingus slipped back to 59.2c
Friday 5pm , Wall Street is slightly down , the European markets have shed -1.8% , London is up 0.7% and Dublin , buoyed by CRH and Ryanair climbed +1.7%
In Europe the lading sectors this week were the Financials +13% , IT +3.5% , utiities +2.4% and the definsive consumer staples fell -2.3% and Healthcare fell -0.24% reflecting sector rotation into the now higher beta Financials.
The story of the week was the surpise move by the Fed on the quantitive easing front.
In Ireland , we look forward to The National Treasury Management Agency auction of two Irish Government bonds with a total value of between €750m and €1 billion next Tuesday. The two bonds are the 4% Treasury Bond 2011 and the 4.5% Treasury Bond 2020. Tthe NTMA plans to raise about €10 billion this year to help fund the State's budget deficit. All eyes will be on these auctions as a key test of the Government credibility in International markets.
In the meantime , the climax of the Six nations is tomorrow and Ireland has the chance to win the Grand Slam in Cardiff tomorrow. (I overhear a colleague saying that if Ireland wins the Grandslam it might trigger a recovery in the caltic tiger and pull us out of the recession ... Wishful thinking , a nice thought. Have a good weekend.
Liam
___________________________________________
Liam Boggan
Head of International Equities
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, March 19, 2009
Liams Last Post :CRH completes , markets ok, Dollar devalues
Good Afternoon ,
The biggest news this morning was the completion of the CRH rights issue. 94% take up was slightly higher than was anticipated but given the deep discount the takeup was always likely to be high. The rump 8m share qwas placed comfortably at the opening of the market today.The stock has been a very strong performer of late through the issue and now the focus will be back onto the fundamentals. The Relative performance of the stock has been enormous so there must be a chance that the stock will lag in terms of performance from here as the market will now focus on the prospects for what CRH do with the money raised. Also with the dollar sharp weakness post the Fed action on quantitative easing last night the exposure of CRH to the Dollar will be an issue in the short term.
The Dollar issue is likely to spread across the market and the rapidity of the move will undoubtedly have caught all analysts by surprise. THe Dollar Euro moved by 4.4% today after a 3+% move late yesterday.
Elan presented a ta US healthcare conference today , The presentation was described as very dull by our man Sam who listened in to the presentation. The stock fell 3.6% today.
C&C has definitely got some momentum behind it now as the management roadshow to introduce themselves to the shareholders continues to be well received. The stock is not expensive here , and the comparative performances in terms of Month on Month data will get relatively easier from here. The market is anticipating the launch of the Pear product. I always feel there is a seasonal element to the performance of the stock and despite the smart comments that we had our summer yesterday , I remain optimistic that there is a decent trade in it from here.
Aryzta fell another 1.2% today , the absolute valuation here is not expensive but again they are dollar and Eastern Europe exposed on top of an already poor Ireland and UK so the stock faces continuous headwinds from here.
Ryanair is stuck amidst the turbulence with a steady flow of stock coming out everyday. Today the stock tried to go better but closed down -0.2% at 2.865 Aer Lingus rebounded from the lows but 60c is still a long way off the NAV figure of 1.38 that we estimate. Value is screaming to be unlocked but the management team now in open period are not taking the market by storm and wading in to buy shares….
Smurfit Kappa continued to drift but on thin volume and is down another 1%.
INM fell again down -0.5% to close below 19c.
Norkom on the other hand continues to rally though on very light volume and is up 71% from the recent 35c low as it trades at 60c.
In terms of the Financials , the sector traded strongly again and AIB jumped +10% , Bank of Ireland +18% , Irish life +20% but option money they continue to be though the focus and rumours of nationalisation has quietened down over the past two weeks.
At 5pm , Wall Street is down -1.3% , Europe closed up +1% and London was positive +0.3% , Ireland closed down -0.5% as CRH drifted after the strong run.
At least the markets are hanging in there , I hope that markets can hold these levels and move on from here. Lots of stocks are now at resistance levels , everytime we have got to these levels in the last few months the stocks have quickly weakened again. Here is hoping that we get to build a base from here and push through these levels. The problem for the Eurozone countries is that the US and UK are effectively competitively devaluing and this creates its own problems.
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 biggest news this morning was the completion of the CRH rights issue. 94% take up was slightly higher than was anticipated but given the deep discount the takeup was always likely to be high. The rump 8m share qwas placed comfortably at the opening of the market today.The stock has been a very strong performer of late through the issue and now the focus will be back onto the fundamentals. The Relative performance of the stock has been enormous so there must be a chance that the stock will lag in terms of performance from here as the market will now focus on the prospects for what CRH do with the money raised. Also with the dollar sharp weakness post the Fed action on quantitative easing last night the exposure of CRH to the Dollar will be an issue in the short term.
The Dollar issue is likely to spread across the market and the rapidity of the move will undoubtedly have caught all analysts by surprise. THe Dollar Euro moved by 4.4% today after a 3+% move late yesterday.
Elan presented a ta US healthcare conference today , The presentation was described as very dull by our man Sam who listened in to the presentation. The stock fell 3.6% today.
C&C has definitely got some momentum behind it now as the management roadshow to introduce themselves to the shareholders continues to be well received. The stock is not expensive here , and the comparative performances in terms of Month on Month data will get relatively easier from here. The market is anticipating the launch of the Pear product. I always feel there is a seasonal element to the performance of the stock and despite the smart comments that we had our summer yesterday , I remain optimistic that there is a decent trade in it from here.
Aryzta fell another 1.2% today , the absolute valuation here is not expensive but again they are dollar and Eastern Europe exposed on top of an already poor Ireland and UK so the stock faces continuous headwinds from here.
Ryanair is stuck amidst the turbulence with a steady flow of stock coming out everyday. Today the stock tried to go better but closed down -0.2% at 2.865 Aer Lingus rebounded from the lows but 60c is still a long way off the NAV figure of 1.38 that we estimate. Value is screaming to be unlocked but the management team now in open period are not taking the market by storm and wading in to buy shares….
Smurfit Kappa continued to drift but on thin volume and is down another 1%.
INM fell again down -0.5% to close below 19c.
Norkom on the other hand continues to rally though on very light volume and is up 71% from the recent 35c low as it trades at 60c.
In terms of the Financials , the sector traded strongly again and AIB jumped +10% , Bank of Ireland +18% , Irish life +20% but option money they continue to be though the focus and rumours of nationalisation has quietened down over the past two weeks.
At 5pm , Wall Street is down -1.3% , Europe closed up +1% and London was positive +0.3% , Ireland closed down -0.5% as CRH drifted after the strong run.
At least the markets are hanging in there , I hope that markets can hold these levels and move on from here. Lots of stocks are now at resistance levels , everytime we have got to these levels in the last few months the stocks have quickly weakened again. Here is hoping that we get to build a base from here and push through these levels. The problem for the Eurozone countries is that the US and UK are effectively competitively devaluing and this creates its own problems.
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, March 18, 2009
Liams Last Post : markets take time out, CRH holds Ireland up
Good Afternoon
Interesting day for the markets , on the back of another strong day yesterday , European and the UK markets have given up ground today though Ireland continues to make ground driven by CRH with a 40% weightin gin the index , it is hardly representative anymore.
Not the greatest amount of corporate newsflow in Ireland after the St. Patricks day celebrations. AIB has found resistance levels but Bank of Ireland continues to go better and was today up 12% at 36c. These big percentage moves are still tiny penny or two moves in reality...
Kingspan had been one of the stell ar performers over the last week but today it paused and gave back -8% of its gains. Grafton also gave up about -2.4% . SIG , the UK distributor of Kingspan Insulation products announced an 11 for 7 issue itself at a 28% discount. A defensive issue though it has been speculated about for some time. SIG closed down -4% today.
C&C steadly gt dragged up as the market digested the UK Nielsen news of yesterday which shows the rate of decline of the product slowed. TOtal Produce regained 8% today to trade again at 27c with 1.25m shares trading.
On the negative side in Ireland Smurfit was once again friendless as US corrugated box shipments in February dropped by 12.7% on an actual basis and 8.3% on a same day basis (adjusted for one less shipping days in the latest month) or an effective decline of 10.5%. Smurfit Kappa stock fell -2.86%
Ryanair yesterday confirmed that it has agreed with all of its pilot groups a 12 month pay freeze. The pilots have also agreed to work productivity improvements as an alternative to management’s original proposal of a pay cut (of up to 10%). The pay freeze is consistent with earlier management plans and reinforces its aim to reduce non-fuel unit costs by 5% in the year to March 2010. Ryanair has also announced that it is to take a fifth aircraft out of its Dublin base this summer. Ryanair had previously announced that it would reduce the number of its Dublin based aircraft from 22 to 18, and this will now reduce to 17. As a result, the yoy decrease in its average weekly number of flights in Dublin this summer will be 20%, up from a previous target of 16%. Aer Lingus is also reducing its capacity in Dublin by 4% this year, so the capacity action of the airlines in response to the fall-off in demand in Dublin will help mitigate the impact on yield of that demand reduction. Ryanair has seen consistent flows of stock and today the stock which was under pressure most of the day actually rebounbded to close up 1% , having been down -5% at one stage.
Aer Lingus which continues its roadshow today found some support and the price rallied by +4% to 59.4c.
INM also fell today by -5% and everyone awaits the next move from Denis O'Brien to get a feel for what happens in terms of how the debt package gets re-structured and at what cost if any to existing shareholders in terms of dilution.
Lots of stocks are now back at the levels they were at at the before the last pullback. The question is whither from here. The market has absorbed a lot of bad news and rallies. I am sceptical here of yet another false dawn , I would like to see confirmatory chart breakout signals before turning bullish just because the market has moved up. It is so easy to get it wrong here and to anticipate that something will go right just because you want it to. These markets are still very dangerous. I am looking to be more positive about the market though and I am hearing noises which would encourage especially in relation to the UK and some anecdotal stories about things bottoming in the USA also. Wishful thinking maybe , lets hope the market builds a base here and that it is not just another sucker rally.
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.
Interesting day for the markets , on the back of another strong day yesterday , European and the UK markets have given up ground today though Ireland continues to make ground driven by CRH with a 40% weightin gin the index , it is hardly representative anymore.
Not the greatest amount of corporate newsflow in Ireland after the St. Patricks day celebrations. AIB has found resistance levels but Bank of Ireland continues to go better and was today up 12% at 36c. These big percentage moves are still tiny penny or two moves in reality...
Kingspan had been one of the stell ar performers over the last week but today it paused and gave back -8% of its gains. Grafton also gave up about -2.4% . SIG , the UK distributor of Kingspan Insulation products announced an 11 for 7 issue itself at a 28% discount. A defensive issue though it has been speculated about for some time. SIG closed down -4% today.
C&C steadly gt dragged up as the market digested the UK Nielsen news of yesterday which shows the rate of decline of the product slowed. TOtal Produce regained 8% today to trade again at 27c with 1.25m shares trading.
On the negative side in Ireland Smurfit was once again friendless as US corrugated box shipments in February dropped by 12.7% on an actual basis and 8.3% on a same day basis (adjusted for one less shipping days in the latest month) or an effective decline of 10.5%. Smurfit Kappa stock fell -2.86%
Ryanair yesterday confirmed that it has agreed with all of its pilot groups a 12 month pay freeze. The pilots have also agreed to work productivity improvements as an alternative to management’s original proposal of a pay cut (of up to 10%). The pay freeze is consistent with earlier management plans and reinforces its aim to reduce non-fuel unit costs by 5% in the year to March 2010. Ryanair has also announced that it is to take a fifth aircraft out of its Dublin base this summer. Ryanair had previously announced that it would reduce the number of its Dublin based aircraft from 22 to 18, and this will now reduce to 17. As a result, the yoy decrease in its average weekly number of flights in Dublin this summer will be 20%, up from a previous target of 16%. Aer Lingus is also reducing its capacity in Dublin by 4% this year, so the capacity action of the airlines in response to the fall-off in demand in Dublin will help mitigate the impact on yield of that demand reduction. Ryanair has seen consistent flows of stock and today the stock which was under pressure most of the day actually rebounbded to close up 1% , having been down -5% at one stage.
Aer Lingus which continues its roadshow today found some support and the price rallied by +4% to 59.4c.
INM also fell today by -5% and everyone awaits the next move from Denis O'Brien to get a feel for what happens in terms of how the debt package gets re-structured and at what cost if any to existing shareholders in terms of dilution.
Lots of stocks are now back at the levels they were at at the before the last pullback. The question is whither from here. The market has absorbed a lot of bad news and rallies. I am sceptical here of yet another false dawn , I would like to see confirmatory chart breakout signals before turning bullish just because the market has moved up. It is so easy to get it wrong here and to anticipate that something will go right just because you want it to. These markets are still very dangerous. I am looking to be more positive about the market though and I am hearing noises which would encourage especially in relation to the UK and some anecdotal stories about things bottoming in the USA also. Wishful thinking maybe , lets hope the market builds a base here and that it is not just another sucker rally.
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, March 16, 2009
Liams Last Post: St.Patricks day looms,Markets up,News light
Good Afternoon ,
Very quiet here on the eve of St. Patricks day.
Markets continue to be strong though no exactly on the highest volume. Big rallies in the financials with AIB +11/3% and Bank of Ireland screaming up by 30% to 36.5c , Irish life joined n the fun with a +8% move.
CRH whose rights issues wraps up over the next few days was up+4.8% and the rights traded strongly +11% at 7.01. The European builing material sector also was strong with St. Gobain +4.7% and Wolseley +8% , Kingspan has been very strong which is remarkable as it fell like a stone a coupel of weeks ago on no news which was very worrying and has rallied very strongly also on no news. SIG in the UK put out an announcement this morning ahead of its results tomorrow saying they were looking at all options including a rights issue to improve their funding.
It occurs to me that stocks are now back at the top end of their trading ranges , all below the resistance levels and it will be interesting to see if this time there is sustained rally which gets the charts looking more healthy or whether this rally too fizzles out.
International markets were positive today with the FTSE +2.7% , Europe +2.7% and Ireland +3.7% with the Dow Jones +1.75% today.
One of the weak stocks in Ireland was United Drug which continued to slip , today down -6.25% with 283k shares having traded.
In the Foods, C&C where there will be Neilsen data released tomorrow was +3.6% higher and Aryzta which struggled last week a bit better today recovering by 3.3% , Total Produce continues to look cheap though the announcement of the 4% stake taken by a Swedish group saw the stock drift to day by -2.7%
In the Airlines Aer Lingus saw decent volume trade but the stock stayed at 57c in Dublin though it traded up to 59.8c +4.8% in London . Ryanair was up a tad at 2.975c +1.4%
Have Good Evening, I am going out to eat an Indian (not a whole one , they are small….) to celebrate my wedding anniversary… 13 lucky years….
Tomorrow , The traditional St.Patricks Day parade with the kids…
Back Wednesday !
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.
Very quiet here on the eve of St. Patricks day.
Markets continue to be strong though no exactly on the highest volume. Big rallies in the financials with AIB +11/3% and Bank of Ireland screaming up by 30% to 36.5c , Irish life joined n the fun with a +8% move.
CRH whose rights issues wraps up over the next few days was up+4.8% and the rights traded strongly +11% at 7.01. The European builing material sector also was strong with St. Gobain +4.7% and Wolseley +8% , Kingspan has been very strong which is remarkable as it fell like a stone a coupel of weeks ago on no news which was very worrying and has rallied very strongly also on no news. SIG in the UK put out an announcement this morning ahead of its results tomorrow saying they were looking at all options including a rights issue to improve their funding.
It occurs to me that stocks are now back at the top end of their trading ranges , all below the resistance levels and it will be interesting to see if this time there is sustained rally which gets the charts looking more healthy or whether this rally too fizzles out.
International markets were positive today with the FTSE +2.7% , Europe +2.7% and Ireland +3.7% with the Dow Jones +1.75% today.
One of the weak stocks in Ireland was United Drug which continued to slip , today down -6.25% with 283k shares having traded.
In the Foods, C&C where there will be Neilsen data released tomorrow was +3.6% higher and Aryzta which struggled last week a bit better today recovering by 3.3% , Total Produce continues to look cheap though the announcement of the 4% stake taken by a Swedish group saw the stock drift to day by -2.7%
In the Airlines Aer Lingus saw decent volume trade but the stock stayed at 57c in Dublin though it traded up to 59.8c +4.8% in London . Ryanair was up a tad at 2.975c +1.4%
Have Good Evening, I am going out to eat an Indian (not a whole one , they are small….) to celebrate my wedding anniversary… 13 lucky years….
Tomorrow , The traditional St.Patricks Day parade with the kids…
Back Wednesday !
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, March 13, 2009
Liams Last Post : Rally holds,Sir Anthony retires,Denis win
Good Afternoon,
Well Surprise Surprise , this rally has managed to stay in positive territory for four days since the low of the week was hit on Tuesday. The High of the week though came just before the opening on Wall street which is now down 0.8% on the day at the European close and always has the capacity to surprise on Friday.
The surprise event of the day was the news at INM where Sir Anthony O’Reilly announced his retirement with Gavin taking over as CEO , the most important news was the appointment of three directors representing Denis O’Brien to the Board of INM and a letter of support to the chairman supporting the moves.
The press release from INM is worth reading in its own right for the fulsome praise lavished on Sir Anthony and onto Gavin by the Chairman…INM stock rallied sharply on the news. It has been a binary bet for some time and this move signals the intent of Denis O’Brien to step in and help re-finance the group though how this will be done is not clear. INM closed at 17c +66% today.
The Financials continue to survive as independent entities. AIB today + 8.5% at 51c and Bank of Ireland +17.6% at 28c. Irish Life contnnued its somewhat perverse movements and moved down by 7.5%
In the Building Materials sector , there has been some very sold performance s across the sector this week despite the absence of any significant sector news. The CRH rights issue has been well received and the technical weakness that I had expected came to pass and provided a strong buying opportunity for supporters of the stock to get long as some institutions sold shares to take up their rights. CRH gained +3.6% today , the Nil paid gained +8.7% and Grafton jumped +6.5% and even Kingspan kept climbing to hit 2.50 helped by the strong continuing performance of SIG in the UK.
Elan drifted again however down -4% with the ADR down -5.5% , ICON has been doing ok ader the heavy pullback of the last week and today is up +1.8%
United Drug fell out of bed at the close down -9.4%
C&C continues to hold a new level at the 1.10 , Aryzta roadshow is triggering some profit taking and the stock is down today -2%
Ryanair fell another -1.7% , and Aer Lingus remained friendless at 57c.
At the close of European markets today, Europe remained just about in positive territory +0.3% , London was up+1.2% and the ISEQ was up +1.8%
Have a good evening ,
Good to go home after a relatively better week , Ireland face the Scots tomorrow at 5pm … bring it on.
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 Surprise Surprise , this rally has managed to stay in positive territory for four days since the low of the week was hit on Tuesday. The High of the week though came just before the opening on Wall street which is now down 0.8% on the day at the European close and always has the capacity to surprise on Friday.
The surprise event of the day was the news at INM where Sir Anthony O’Reilly announced his retirement with Gavin taking over as CEO , the most important news was the appointment of three directors representing Denis O’Brien to the Board of INM and a letter of support to the chairman supporting the moves.
The press release from INM is worth reading in its own right for the fulsome praise lavished on Sir Anthony and onto Gavin by the Chairman…INM stock rallied sharply on the news. It has been a binary bet for some time and this move signals the intent of Denis O’Brien to step in and help re-finance the group though how this will be done is not clear. INM closed at 17c +66% today.
The Financials continue to survive as independent entities. AIB today + 8.5% at 51c and Bank of Ireland +17.6% at 28c. Irish Life contnnued its somewhat perverse movements and moved down by 7.5%
In the Building Materials sector , there has been some very sold performance s across the sector this week despite the absence of any significant sector news. The CRH rights issue has been well received and the technical weakness that I had expected came to pass and provided a strong buying opportunity for supporters of the stock to get long as some institutions sold shares to take up their rights. CRH gained +3.6% today , the Nil paid gained +8.7% and Grafton jumped +6.5% and even Kingspan kept climbing to hit 2.50 helped by the strong continuing performance of SIG in the UK.
Elan drifted again however down -4% with the ADR down -5.5% , ICON has been doing ok ader the heavy pullback of the last week and today is up +1.8%
United Drug fell out of bed at the close down -9.4%
C&C continues to hold a new level at the 1.10 , Aryzta roadshow is triggering some profit taking and the stock is down today -2%
Ryanair fell another -1.7% , and Aer Lingus remained friendless at 57c.
At the close of European markets today, Europe remained just about in positive territory +0.3% , London was up+1.2% and the ISEQ was up +1.8%
Have a good evening ,
Good to go home after a relatively better week , Ireland face the Scots tomorrow at 5pm … bring it on.
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, March 12, 2009
Liams Last Post : Markets hanging in there....up , up maybe
Good Afternoon ,
Markets rallied today after an inauspicious start , The Irish Financials rallying rapidly with AIB +7% , Bank of Ireland +14% and Irish Life +4.8% , FBD which we road showed in London also fell -.9% to 5.70
The Building materials stocks continued to rally also despite no news , CRH +4% , the Nil paids +11% , Grafton however was down -1% though Kingsapn continues to rally +4.2% today to 2.47 , hard to quite understand what is going on here. SIG though was up +15%.
Elan rebounded by+2.7% after the fall yesterday though Icon continues to feel the pressure and fell -1.1% , C&C is going sideways after the recent rally etc.
The food companies continued to do ok though Aryzta was down slightly and Origin Enterprises was also down by -4% as Aryzta and origin meet investor post their results. Kerry +1.5% , Glanbia +3.3% , and Total produce +3.8% and Fyffes +2.8%
Smurfit Kappa has bottomed or the time being at the 1.26 level and INM gained +2% today to 10.2c despite the very bearish comments yesterday from Johnston Press.
We published a brief note on Aer Lingus today in the aftermath of their results yesterday. The note is entitled Time to Unlock Value –Investor Patience Wearing Thin’ . The key point of the note is that the the material change in guidance for 2009 (from the position only two months back) and the significant working capital and capex related deterioration in expected cash balances have seriously undermined board and management credibility and this is reflected in a lack of confidence in the stock. Board and management actions need to be more focused on unlocking value for shareholders. Options include: a reassessment of the current capex programme; a special dividend; and, possibly, positioning the company so that a fair value could be realised in an executable trade sale.
The Airlines all had a tough day today as British Airways predicted very weak travel trends. Aer Lingus fell back to 57c and Ryanair closed at 2.86 -1.6%
Paddy Power slipped again but only -0.83% on low volume.
At the close the Eurostoxx 600 index was up +0.5% , London +0.5% and Wall street after an initially weaker opening has rallied to be +1.8% .
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.
Markets rallied today after an inauspicious start , The Irish Financials rallying rapidly with AIB +7% , Bank of Ireland +14% and Irish Life +4.8% , FBD which we road showed in London also fell -.9% to 5.70
The Building materials stocks continued to rally also despite no news , CRH +4% , the Nil paids +11% , Grafton however was down -1% though Kingsapn continues to rally +4.2% today to 2.47 , hard to quite understand what is going on here. SIG though was up +15%.
Elan rebounded by+2.7% after the fall yesterday though Icon continues to feel the pressure and fell -1.1% , C&C is going sideways after the recent rally etc.
The food companies continued to do ok though Aryzta was down slightly and Origin Enterprises was also down by -4% as Aryzta and origin meet investor post their results. Kerry +1.5% , Glanbia +3.3% , and Total produce +3.8% and Fyffes +2.8%
Smurfit Kappa has bottomed or the time being at the 1.26 level and INM gained +2% today to 10.2c despite the very bearish comments yesterday from Johnston Press.
We published a brief note on Aer Lingus today in the aftermath of their results yesterday. The note is entitled Time to Unlock Value –Investor Patience Wearing Thin’ . The key point of the note is that the the material change in guidance for 2009 (from the position only two months back) and the significant working capital and capex related deterioration in expected cash balances have seriously undermined board and management credibility and this is reflected in a lack of confidence in the stock. Board and management actions need to be more focused on unlocking value for shareholders. Options include: a reassessment of the current capex programme; a special dividend; and, possibly, positioning the company so that a fair value could be realised in an executable trade sale.
The Airlines all had a tough day today as British Airways predicted very weak travel trends. Aer Lingus fell back to 57c and Ryanair closed at 2.86 -1.6%
Paddy Power slipped again but only -0.83% on low volume.
At the close the Eurostoxx 600 index was up +0.5% , London +0.5% and Wall street after an initially weaker opening has rallied to be +1.8% .
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, March 11, 2009
Liams Last Post : Rally fails ,Aer Lingus guidance issue.
Good Afternoon ,
The ISEQ index closed lower today by nearly 2% despite a very impressive performance from CRH which rose +5.8% despite going ex dividend by 48.5c , the Nil paid rights were very much in demand rising nearly +19%. The building materials sector which had been so weak has really rebounded over the past week despite the tough market conditions and held and extended their gains through as the market rallied yesterday. Grafton +56.75 today , Kingspan which looked like it had no floor two weeks ago now trading at 2.37 +3% today. McInerney signed a new agreement with their banks and the stock rallied +11% to 10c
Elan which was the subject of a mention by Morningstar newsletter as one of the next probable merger or deal candidates actually fell -4% in ADR and -6.2% in the ordinaries . ICON ontinues to struggle as the erger mania in large pharma continues and rumour of some of C=ICONS larges customers merging causing a defininte scare. The rumour is that either Bristol Myers or Astra Zeneca might bid for Sanofi and this would be negative as all are major clients of ICON.
C&C drifted after the management team spread their story yesterday. I was impressed with their level headedness and clarity of thoughts about what they need to do to stabilise and re-engineer the business for today’s demand conditions.
Not much action in the Food stocks, kerry down -2.5% , Aryzta -1.5% , Total produce gained a further 6% to 26c. Glanbia -2.6%
The Action today was in Aer Lingus and we meet the management now having already listened to their presentation twice. Stock got killed after their profit warning and the shock that the guidance given on January 6th during the Ryanair takeover bid battle turns out to be 'unachievable' if I can be so polite. Ryanair are furious as are many shareholders with the change in guidance from being profitable to a loss for 2009 of about 50m .. share price tanked today , down 27% to 58c but dealt as low at 48c earlier. Ryanair were off today -3.6%
Johnston Press had poor results which hit Indo’s a further -9.6% to 10.4c.
Paddy Power drifted after the strong run last week but also because the Irish are having a good time in Cheltenham. Should not be material to Paddy Power overall though. Stock was down -1.76%
The Irish financials did ok , except Irish Life gave up yesterdays gains and fell -12% , the stock seems to be negatively correlated to AIB and BOI over the last few days. AIB was up +7.7% , BOI fell -3.2% and
Tullow had results this morning , no major surprises and no change of recommendation but the stock fell by 6% after the run into the results.
Typical of the recent rallies to fizzle out . Sentiment at least boosted somewhat even if the higher prices are not really holding.
Have 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 closed lower today by nearly 2% despite a very impressive performance from CRH which rose +5.8% despite going ex dividend by 48.5c , the Nil paid rights were very much in demand rising nearly +19%. The building materials sector which had been so weak has really rebounded over the past week despite the tough market conditions and held and extended their gains through as the market rallied yesterday. Grafton +56.75 today , Kingspan which looked like it had no floor two weeks ago now trading at 2.37 +3% today. McInerney signed a new agreement with their banks and the stock rallied +11% to 10c
Elan which was the subject of a mention by Morningstar newsletter as one of the next probable merger or deal candidates actually fell -4% in ADR and -6.2% in the ordinaries . ICON ontinues to struggle as the erger mania in large pharma continues and rumour of some of C=ICONS larges customers merging causing a defininte scare. The rumour is that either Bristol Myers or Astra Zeneca might bid for Sanofi and this would be negative as all are major clients of ICON.
C&C drifted after the management team spread their story yesterday. I was impressed with their level headedness and clarity of thoughts about what they need to do to stabilise and re-engineer the business for today’s demand conditions.
Not much action in the Food stocks, kerry down -2.5% , Aryzta -1.5% , Total produce gained a further 6% to 26c. Glanbia -2.6%
The Action today was in Aer Lingus and we meet the management now having already listened to their presentation twice. Stock got killed after their profit warning and the shock that the guidance given on January 6th during the Ryanair takeover bid battle turns out to be 'unachievable' if I can be so polite. Ryanair are furious as are many shareholders with the change in guidance from being profitable to a loss for 2009 of about 50m .. share price tanked today , down 27% to 58c but dealt as low at 48c earlier. Ryanair were off today -3.6%
Johnston Press had poor results which hit Indo’s a further -9.6% to 10.4c.
Paddy Power drifted after the strong run last week but also because the Irish are having a good time in Cheltenham. Should not be material to Paddy Power overall though. Stock was down -1.76%
The Irish financials did ok , except Irish Life gave up yesterdays gains and fell -12% , the stock seems to be negatively correlated to AIB and BOI over the last few days. AIB was up +7.7% , BOI fell -3.2% and
Tullow had results this morning , no major surprises and no change of recommendation but the stock fell by 6% after the run into the results.
Typical of the recent rallies to fizzle out . Sentiment at least boosted somewhat even if the higher prices are not really holding.
Have 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, March 10, 2009
Liams Last Post : Cheltenham rally...? Off to the races
Good Afternoon ,
The Iseq index took its cue form Cheltenham this afternoon after basically ignoring the strong European and UK markets for most of the morning., The rally in Ireland co-incided witht the start of the first race in Cheltenham . The Dow Jones Industrial Average was higher by about 261 points. Gains were paced by shares of Citigroup which jumped 28% as the beleaguered giant said it was profitable during the first two months of the year, defying forecasts of losses. The news from an email distributed by Citi CEO sparked life in the US financials sector. Elsewhere in the US the Oil price rallied towards $50 per bbl and resources and materials stocks also rallied sharply. THe tech sector also recorded a sharp rally after the recent steep falls.
Ben Bernanke the FED chairman also managed to give some comfort to the market which has taken most of his recent pronouncements badly. Today he said that said it was important to address the valuation of illiquid assets. He said that he wouldn't support suspension of "mark to market" rules. The Fed chairman also signaled it isn't too early to consider longer-term reforms including putting responsibility for addressing possible systemic risks with one authority, Gold futures fell to around $900. The dollar declined against the yen and the euro.
In Ireland the Central Bank head John Hurley addressed the joint Joint Oireachtas Committee on Economic Regulatory affairs. It is worth reproducing his comments on Ireland. The exceptionally unfavourable global economic and financial conditions are making our Irelands own already very difficult domestic economic situation worse. Ireland is now experiencing an unprecedented contraction in output, which is set to persist this year and next. While the initial downturn in activity was driven by the sharp decline in the Irish property and construction sectors, this has now broadened out into a marked weakening of domestic demand, which is being significantly amplified by the contraction in export demand as a result of the movement into recession of all our main trading partners. Reflecting the scale and speed of developments, Irish economic performance has deteriorated markedly – the contraction in activity has deepened significantly, there has been a sharp rise in unemployment and a rapid deterioration in the fiscal position. With the global recession deepening and domestic demand exceptionally weak, the overall outlook for growth has continued to deteriorate in recent months. Based on what is currently known, our latest unpublished estimates suggest that GDP will fall by over 6 per cent this year, with a broadly similar fall likely in the level of employment. This is likely to result in an unemployment rate averaging over 11 per cent for the year. However, risks to this outlook remain to the downside.
No one should be in any doubt about the seriousness of the global situation, which is not easing, and the seriousness of our own difficulties. We face significant challenges and it is critical for present and future generations that we work together now to confront them. If we do so, our economy will recover and has the potential to grow solidly again in the medium term. Our economy’s strengths are important in this respect. We still have favourable demographic trends, there is the capacity for a rebound in productivity growth, the Irish labour market continues to be more flexible than most and at the start of the crisis public debt as a percentage of GDP was low.
Markets are strong today , The Irish Are wining in cheltenham today !
We are meeting C&C new management now. Gotta fly ,
Have a good evening…
Liam
The Iseq index took its cue form Cheltenham this afternoon after basically ignoring the strong European and UK markets for most of the morning., The rally in Ireland co-incided witht the start of the first race in Cheltenham . The Dow Jones Industrial Average was higher by about 261 points. Gains were paced by shares of Citigroup which jumped 28% as the beleaguered giant said it was profitable during the first two months of the year, defying forecasts of losses. The news from an email distributed by Citi CEO sparked life in the US financials sector. Elsewhere in the US the Oil price rallied towards $50 per bbl and resources and materials stocks also rallied sharply. THe tech sector also recorded a sharp rally after the recent steep falls.
Ben Bernanke the FED chairman also managed to give some comfort to the market which has taken most of his recent pronouncements badly. Today he said that said it was important to address the valuation of illiquid assets. He said that he wouldn't support suspension of "mark to market" rules. The Fed chairman also signaled it isn't too early to consider longer-term reforms including putting responsibility for addressing possible systemic risks with one authority, Gold futures fell to around $900. The dollar declined against the yen and the euro.
In Ireland the Central Bank head John Hurley addressed the joint Joint Oireachtas Committee on Economic Regulatory affairs. It is worth reproducing his comments on Ireland. The exceptionally unfavourable global economic and financial conditions are making our Irelands own already very difficult domestic economic situation worse. Ireland is now experiencing an unprecedented contraction in output, which is set to persist this year and next. While the initial downturn in activity was driven by the sharp decline in the Irish property and construction sectors, this has now broadened out into a marked weakening of domestic demand, which is being significantly amplified by the contraction in export demand as a result of the movement into recession of all our main trading partners. Reflecting the scale and speed of developments, Irish economic performance has deteriorated markedly – the contraction in activity has deepened significantly, there has been a sharp rise in unemployment and a rapid deterioration in the fiscal position. With the global recession deepening and domestic demand exceptionally weak, the overall outlook for growth has continued to deteriorate in recent months. Based on what is currently known, our latest unpublished estimates suggest that GDP will fall by over 6 per cent this year, with a broadly similar fall likely in the level of employment. This is likely to result in an unemployment rate averaging over 11 per cent for the year. However, risks to this outlook remain to the downside.
No one should be in any doubt about the seriousness of the global situation, which is not easing, and the seriousness of our own difficulties. We face significant challenges and it is critical for present and future generations that we work together now to confront them. If we do so, our economy will recover and has the potential to grow solidly again in the medium term. Our economy’s strengths are important in this respect. We still have favourable demographic trends, there is the capacity for a rebound in productivity growth, the Irish labour market continues to be more flexible than most and at the start of the crisis public debt as a percentage of GDP was low.
Markets are strong today , The Irish Are wining in cheltenham today !
We are meeting C&C new management now. Gotta fly ,
Have a good evening…
Liam
Monday, March 9, 2009
Liams Last Post : Certain inevitability about the slide
Good Afternoon
Here we go again , Ireland starts the week with a steady decline interrupted briefly at lunchtime when the US market opened strongly.
The week started quietly , even the usual cheltenham week enthusiasm seems lacklustre. It was a sleepy day today for sure.
CRH is the driver of the ISEQ index these days so as CRH and the other major stocks in the sector declined the ISEQ was on a one way track lower.
I do think as discussed last week that CRH has bullet proofed itself and the issue leaves it in a very stron position to control its own destiny. There wa always however going to be a period of technical weakness as the cash demands from CRH itself not to mention the other stocks in the sector drained any new buying interest and indeed with some institutions undoubtedly funding the takeup of their rights by selling some of the ordinaries the stock was bound to pull back. The Pullback does however present an opportunity to get onboard at an attractive price and anyone who is not already long the stock and who thinks they might get some stock from the rump may be disappointd. I think I would be looking to buy CRH at around these levels.
ICON has continued to struggle as the latest mega merger in the Large Pharma sector impacts on sentiment with fears of a reduction in the number of clinical trials that are likely to be outsourced. With the Wave of Pharma mergers onlybeginning , it would seem to me that ICON may drift for a while here on sentiment alone.
The financials survived another day with AIB +12% Bank of Ireland +13.5% but Irish Life down -11% today.
We had results from Aryzta and Origin today. Looks Like Origin was boosted by the strong performance of Massstock and the company is guiding to a range of earnings growth of about 4% for the full year. Aryzta CEO described himself as a newsreader rather than a weather forecaster when refusing to give any guidance. His comment that the rate of decline in Ireland is no longer continueeeeeing ! lets hope so. Otherwise the Aryzta numbers were good and looks like some small upgrades to come there.
Smurfit looks on track to keep its date with the previous low of below a Euro with a further decline of -4.7%
Ryanair has been volatile but with the stock now trading below 2.90 , it does look attractive here.
C&C is inching its way higher and closed at 1.185 , Tullow was the highlight with news of successful find in Tweneboa .
Europe closed down -0.5% and London closed down -0.6% , but at 5pm Wall street is -1%having tried to go better after the opening.
Plus ca Change..
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.
Here we go again , Ireland starts the week with a steady decline interrupted briefly at lunchtime when the US market opened strongly.
The week started quietly , even the usual cheltenham week enthusiasm seems lacklustre. It was a sleepy day today for sure.
CRH is the driver of the ISEQ index these days so as CRH and the other major stocks in the sector declined the ISEQ was on a one way track lower.
I do think as discussed last week that CRH has bullet proofed itself and the issue leaves it in a very stron position to control its own destiny. There wa always however going to be a period of technical weakness as the cash demands from CRH itself not to mention the other stocks in the sector drained any new buying interest and indeed with some institutions undoubtedly funding the takeup of their rights by selling some of the ordinaries the stock was bound to pull back. The Pullback does however present an opportunity to get onboard at an attractive price and anyone who is not already long the stock and who thinks they might get some stock from the rump may be disappointd. I think I would be looking to buy CRH at around these levels.
ICON has continued to struggle as the latest mega merger in the Large Pharma sector impacts on sentiment with fears of a reduction in the number of clinical trials that are likely to be outsourced. With the Wave of Pharma mergers onlybeginning , it would seem to me that ICON may drift for a while here on sentiment alone.
The financials survived another day with AIB +12% Bank of Ireland +13.5% but Irish Life down -11% today.
We had results from Aryzta and Origin today. Looks Like Origin was boosted by the strong performance of Massstock and the company is guiding to a range of earnings growth of about 4% for the full year. Aryzta CEO described himself as a newsreader rather than a weather forecaster when refusing to give any guidance. His comment that the rate of decline in Ireland is no longer continueeeeeing ! lets hope so. Otherwise the Aryzta numbers were good and looks like some small upgrades to come there.
Smurfit looks on track to keep its date with the previous low of below a Euro with a further decline of -4.7%
Ryanair has been volatile but with the stock now trading below 2.90 , it does look attractive here.
C&C is inching its way higher and closed at 1.185 , Tullow was the highlight with news of successful find in Tweneboa .
Europe closed down -0.5% and London closed down -0.6% , but at 5pm Wall street is -1%having tried to go better after the opening.
Plus ca Change..
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.
Friday, March 6, 2009
Liams Last Post : Bank of ireland +48% ,10 will buy a paper !
Good Afternoon ,
The slide continues with no sign of abating , this week differed a tad from last week in so far as the highpoint for the ISEQ was Wednesday rather than Monday but the low point for the week is the close on Friday. The ISEQ close at 1939 is the lowest level now since mid 1993.
This was a week where the results season in Ireland went pretty much according to plan with no major surprises in any way. No one was expecting riveting good news but there was definitely a sense that while an upturn might be a long way away, that there was harmony between expectations and reality and share prices are finding it somewhat harder to fall now that they are pushing against tangible book value or defensible valuation metrics.
The banking crisis in the US and the raft of very weak economic statistics has led to another major leg down in the US market which is trading at the low of the week as we speak and Europe has had a turgid week with of results with analysts cutting forecasts across the board. I personally still get the sense that European analyst expectations are too high and that there is a degree of optimism which has not been beaten ot the analysts despite the rapid fall in European share prices.
I was looking forward to today , thought I would get a pleasant surprise in terms of performance but even after the initial brighter opening , it did not take long before the markets gave away all the initial optimism. There was a bout of hope around lunchtime but that too was thwarted after a rally based on hope rather than any real expectation. And towards the end of the day the realisation that the pull downwards is inexorable.
I am not sure I have the heart to even look at share prices today. The banks put on a valiant effort with AIB +26%, Bank of Ireland +48% at 18.5c. ( and in the Insomnia coffee index stakes , after todays rally it only requires 17.6 Bank of Ireland shares to buy a Grande Skinny Latte. Perhaps the best comparison this season is to say that it only requires 2.7 Bank of Ireland shares to buy a price reduced (50c) cadburys Crème Egg. I have a mate who has a senior role in Bank Of Ireland, was telling me not so long ago that a colleague had told him that he would buy more Bank of Ireland shares if they fell below the price of the Irish Times but within 3 months not only has it fallen below his level but 10 Bank of Ireland shares are required to buy one Irish Times.
Outside the financials CRH continued to suffer from profit taking after the initial strong run and now with Sellers selling the ordinaries to fund the takeup of their rights and some further pressure on the sector after Wolseley too announced its £1bn placing and rights issue.
Elan continues to get walloped , a trend which has accelerated , it is down -9% today. And ICON is also down -11%
Total produce did ok again , it is just so cheap.
Ryanair fell -2% as did Easyjet but Air Berlin was down -4.5% . Smurfit was down -6.3% after Hugo Chaves seized forestry lands from them in Venezuela.
Independent News and Media was down a further -3.8%
And so it goes on….
Have a good weekend….
Liam
The slide continues with no sign of abating , this week differed a tad from last week in so far as the highpoint for the ISEQ was Wednesday rather than Monday but the low point for the week is the close on Friday. The ISEQ close at 1939 is the lowest level now since mid 1993.
This was a week where the results season in Ireland went pretty much according to plan with no major surprises in any way. No one was expecting riveting good news but there was definitely a sense that while an upturn might be a long way away, that there was harmony between expectations and reality and share prices are finding it somewhat harder to fall now that they are pushing against tangible book value or defensible valuation metrics.
The banking crisis in the US and the raft of very weak economic statistics has led to another major leg down in the US market which is trading at the low of the week as we speak and Europe has had a turgid week with of results with analysts cutting forecasts across the board. I personally still get the sense that European analyst expectations are too high and that there is a degree of optimism which has not been beaten ot the analysts despite the rapid fall in European share prices.
I was looking forward to today , thought I would get a pleasant surprise in terms of performance but even after the initial brighter opening , it did not take long before the markets gave away all the initial optimism. There was a bout of hope around lunchtime but that too was thwarted after a rally based on hope rather than any real expectation. And towards the end of the day the realisation that the pull downwards is inexorable.
I am not sure I have the heart to even look at share prices today. The banks put on a valiant effort with AIB +26%, Bank of Ireland +48% at 18.5c. ( and in the Insomnia coffee index stakes , after todays rally it only requires 17.6 Bank of Ireland shares to buy a Grande Skinny Latte. Perhaps the best comparison this season is to say that it only requires 2.7 Bank of Ireland shares to buy a price reduced (50c) cadburys Crème Egg. I have a mate who has a senior role in Bank Of Ireland, was telling me not so long ago that a colleague had told him that he would buy more Bank of Ireland shares if they fell below the price of the Irish Times but within 3 months not only has it fallen below his level but 10 Bank of Ireland shares are required to buy one Irish Times.
Outside the financials CRH continued to suffer from profit taking after the initial strong run and now with Sellers selling the ordinaries to fund the takeup of their rights and some further pressure on the sector after Wolseley too announced its £1bn placing and rights issue.
Elan continues to get walloped , a trend which has accelerated , it is down -9% today. And ICON is also down -11%
Total produce did ok again , it is just so cheap.
Ryanair fell -2% as did Easyjet but Air Berlin was down -4.5% . Smurfit was down -6.3% after Hugo Chaves seized forestry lands from them in Venezuela.
Independent News and Media was down a further -3.8%
And so it goes on….
Have a good weekend….
Liam
Thursday, March 5, 2009
Liams Last Post : Yesterdays star , todays prey...
Good Afternoon,
Talk about a familiar pattern , , not terribly scientific either but last Wednesday the market broke out of the down cycle for a single day before resuming the downtrend with a vengeance. Today is no different after a strong rally yesterday we get the pull back today.
Two expected rate cuts by the BOE and the ECB did nothing for the market in terms of helping sentiment and not even talk of further cuts and quantitative easing is helping. Surprised that the authorities are not able to massage the markets with any message to offer respite against this tide of panic and ever deteriorating sentiment.
The Irish financials slide towards oblivion with Bank of Ireland falling below 12c per share down -24.9% and AIB now below 28c. -18% Irish Life slipped after its recent rally and fell -10%
CRH fell prey to both profit taking after its very strong +14% rally yesterday with the technical disposal of the ADR holders rights into the market triggering the -18% fall in the nil paids with the ordinaries falling by -7.5%
Almost everything down today , the notable exceptions being Total Produce the exceptionally cheap fruit and Veg distributor who reported earnings in line with expectations , raised the dividend and talked about a sharebuyback. THe stock rallied +21% off very low levels. This one is trading on about 3x earnings and yielding 9%... Fyffes the Total produce sister company rallied by +21% also.
Greencore also rallied today after Premier Foods raised money in a placing and said trading was in line with expectations.
The usual suspects which were up yesterday were down today.. Smurfit -11% , Ryanair -3.7% , Aer Lingus –6%. DCC-2% and Paddy Power which had a strong few days down -0.8%.Elan -5% and the ICON ADR -2.6%
Norkom approaches its cash value per share and closed -5.6% down on thin volume after the initial fall.
I have to say though that despite the nauseating rallies and falls in the market , and I am now becoming convinced that this results season is marking perhaps the turn in relative performance for the Irish market with a selection of companies now separating themselves into a distinct group offering interesting propsects for investors prepared to take a view looking for absoute performance but I am convinced that there is scope in ireland for definite relative performance.
The stocks on my mind that are attractive are : CRH , Ryanair and Paddy Power as core holdings woth strong balance sheets and industry dominating chaacteristics. The others are Irish Life , Grafton , C&C , Kerry, Total Produce and Glanbia ,Aer Lingus ,DCC , Norkom and Tullow.
A mixture of market caps and industries…. And a variety of different reasons for liking each of them and one characteristic is that none of them are overly reliant on Ireland for their earnings. As someone pointed out yesterday , the CRH rights issue took the focus away from the financials with AIB , the largest of the financials now ranked number 15 in the ISEQ weightings below Kingspan in 14th place.
At the close in Europe , Wall street is down -2.8% . the FTSE is down -3.2% and the Eurostoxx 600 index down -3.6% , onward and downward….
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.
Talk about a familiar pattern , , not terribly scientific either but last Wednesday the market broke out of the down cycle for a single day before resuming the downtrend with a vengeance. Today is no different after a strong rally yesterday we get the pull back today.
Two expected rate cuts by the BOE and the ECB did nothing for the market in terms of helping sentiment and not even talk of further cuts and quantitative easing is helping. Surprised that the authorities are not able to massage the markets with any message to offer respite against this tide of panic and ever deteriorating sentiment.
The Irish financials slide towards oblivion with Bank of Ireland falling below 12c per share down -24.9% and AIB now below 28c. -18% Irish Life slipped after its recent rally and fell -10%
CRH fell prey to both profit taking after its very strong +14% rally yesterday with the technical disposal of the ADR holders rights into the market triggering the -18% fall in the nil paids with the ordinaries falling by -7.5%
Almost everything down today , the notable exceptions being Total Produce the exceptionally cheap fruit and Veg distributor who reported earnings in line with expectations , raised the dividend and talked about a sharebuyback. THe stock rallied +21% off very low levels. This one is trading on about 3x earnings and yielding 9%... Fyffes the Total produce sister company rallied by +21% also.
Greencore also rallied today after Premier Foods raised money in a placing and said trading was in line with expectations.
The usual suspects which were up yesterday were down today.. Smurfit -11% , Ryanair -3.7% , Aer Lingus –6%. DCC-2% and Paddy Power which had a strong few days down -0.8%.Elan -5% and the ICON ADR -2.6%
Norkom approaches its cash value per share and closed -5.6% down on thin volume after the initial fall.
I have to say though that despite the nauseating rallies and falls in the market , and I am now becoming convinced that this results season is marking perhaps the turn in relative performance for the Irish market with a selection of companies now separating themselves into a distinct group offering interesting propsects for investors prepared to take a view looking for absoute performance but I am convinced that there is scope in ireland for definite relative performance.
The stocks on my mind that are attractive are : CRH , Ryanair and Paddy Power as core holdings woth strong balance sheets and industry dominating chaacteristics. The others are Irish Life , Grafton , C&C , Kerry, Total Produce and Glanbia ,Aer Lingus ,DCC , Norkom and Tullow.
A mixture of market caps and industries…. And a variety of different reasons for liking each of them and one characteristic is that none of them are overly reliant on Ireland for their earnings. As someone pointed out yesterday , the CRH rights issue took the focus away from the financials with AIB , the largest of the financials now ranked number 15 in the ISEQ weightings below Kingspan in 14th place.
At the close in Europe , Wall street is down -2.8% . the FTSE is down -3.2% and the Eurostoxx 600 index down -3.6% , onward and downward….
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, March 4, 2009
Liams Last Post : Results strongly received , Ireland on up
Good Afternoon ,
Well the results season is in full flow now , today we had numbers from Irish Life and Permanent and Glanbia and FBD
Our views on Irish Life & Permanent post the results are consistent with our prior view. The key points we note are the significant earnings forecast reductions given credit quality outlook , that funding remains concern although ECB usage has moderated since year end. The Capital position looks resilient. Even with bank losses we expect the group capital position should improve in 2009 given life capital generation. Furthermore, while they may be higher cost, the group retains options to release capital in the life business. This is in sharp contrast to its Irish peers where losses are eroding the capital ratios. As such, the risk of dilution appears lower. On an Embedded Value basis, the end 2008 book value ex intangibles (software at this point rather than goodwill) is c. €9.50 share. If management can continue to fund the bank through the continuing dislocation in credit markets, the risk of dilution seems significantly lower than for its Irish peers, consistent with our prior view. While acquisitions are less likely in the current environment, IL&P’s franchises would look attractive for a corporate/financial player with a funding advantage. Irish Life results were received positively and the stock closed +27% today.
Glanbia reported adjusted EPS of 35.86c which was up 18.5% yoy and slightly ahead of our expectation of 35.4c. The group's Ingredients division reported operating profit of €82.5m, which was broadly in line with our forecast of €82.8m and 3.0% down yoy. The division was impacted by a poor performance from the Irish ingredients business, with lower margins as the prices paid for milk lagged the global diary price. On outlook, the group states that it expects a strong performance from the Nutritionals business, due to a full year contribution from Optimum and investment in innovation. In its US Ingredients business the group notes good domestic demand for Cheese. However, lower prices for cheese and whey will make the environment more challenging year on year and a lower performance is expected (we would note our forecasts already incorporate this). In Irish Ingredients, the outlook in FY09 is quite difficult due to the pricing imbalance, and the group expects this business to breakeven (we had previously forecast margins of 2.0%). The Consumer Foods business noted a particular slow down in the last few months of the year as the economic downturn had its effects on consumer spending. The outlook for this division is described as “satisfactory” with an emphasis on cost management. Agribusiness & Property outlook is expected to be “extremely challenging” with farm incomes reduced dramatically. On outlook, the group stated that based on current market conditions it now expects FY09 earnings to be in the range of low to mid single digit growth (previously managment guided for double digit). We are likely to reduce our numbers. The key driver of the downgrade is the Irish Ingredients business which is now expected to only breakeven in the current year given the imbalance between raw material and selling prices.
Glanbia results were also well received and the stock was up+15%
CRH was the subject of much debate here as we had previously thought that the probability of them going for a rights issue was low. Got that wrong... but typical of CRH management to tap the market early and position themselves for future opportunities. CRH’s presentations yesterday outlined a very tough outlook for trading in 2009. Volume demand continues to weaken and is the key challenge. Pricing remains relatively resilient, with positive trends continuing in materials and softening in elements of the products and distribution divisions. Margins continue to be impacted by the operational leverage of the sales reduction and to some extent at the gross margin level where pricing pressure exists. Margin pressure is partly offset by significant and ongoing cost savings initiatives and by easing raw material costs (particularly energy related costs). Europe continues to deteriorate further with the weakness continues across the board, though some regions are proving relatively resilient (infrastructure in Switzerland and Poland). In the US, the stimulus package is a positive for public construction (and already feeding through to contract leads), residential continues to be weak, and non-residential demand will fall off over the year as the backlog winds down. Overall, trading is weaker than we had assumed (more so in Europe than in the US) but not radically.
More important now than the results is the Rights issue and Management estimates that the €1.24bn rights issue adds c.€2.5bn to its previous acquisition firepower of €1.5bn (for 2009 and 2010 combined) giving a total of c.€4bn. The challenge for management is to acquire at valuations even lower than it is issuing equity at. We are encouraged that management are also aware of this, and that they are focussed on only buying quality assets that are very complementary and so give immediate integration potential, so returns can be driven by synergies rather than depending on market recovery. Management also stressed than it is a buyers market and that valuations are far from the bottom and that they still don’t see themselves making any large moves before late 2009 and through 2010. CRH is at an attractive valuation with CRH’s EV at sub enterprise value and the revised 2009f P/E is less than 10x, before allowing for any upside from investment in acquisitions. We had thought that Management might not issue stock at these depressed levels but they have and balance sheet is now strengthened and the company which was one of the strongest stocks in the sector probably becomes the strongest from here and is in an enviable position to take advantage of the likely flow of opportunities to buy assets at attractive prices.
CRH stock traded ex rights today and staged a strong rally +14.5% and this fed through to positive sentiment across the market in general with Travis Perkins +7% and Grafton +10% and kingspan +7%
FBD which we don’t officially cover released results which were initially very disappointing to the market but the market rallied from the weakest point where it was -16% to close only -5.6% lower.
C&C continued to strengthen after the presentation yesterday and the stock was up +9.2%. Paddy Power which is on the road with a good story also did well and rallied +4.7%
The Irish Government confirmed yesterday that it will implement a mini Budget before month end to address the worsening fiscal position. Both higher taxes and spending cuts are probable. Projected tax revenue (based on the exchequer returns published yesterday) is now likely to fall approx €2.5/3.0bn short of the revised projection of €37bn detailed in January. The exchequer returns showed that overall tax revenue fell by 24% for Jan-Feb 2009 vs. 2008. While property related taxes continued to show sharp declines, corporation tax declined by 37%, VAT by 17% and income tax by 7.4%. The exchequer deficit worsened to €2.08bn vs. €124.8m in the same two months of 2008.
An interesting day , lots of news , some downgrades but strong rallies… Food for thought . Companies are doing ok here in tough conditions and the smart one are positioning themselves for the future.
Wall Street rallying after a horrendous few days. Last Wednesday was also the high point of the week , it would be nice if the market picked up from here and took everyone by surprise… It would be good to have something to look forward to after a period of uncertainty …
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 results season is in full flow now , today we had numbers from Irish Life and Permanent and Glanbia and FBD
Our views on Irish Life & Permanent post the results are consistent with our prior view. The key points we note are the significant earnings forecast reductions given credit quality outlook , that funding remains concern although ECB usage has moderated since year end. The Capital position looks resilient. Even with bank losses we expect the group capital position should improve in 2009 given life capital generation. Furthermore, while they may be higher cost, the group retains options to release capital in the life business. This is in sharp contrast to its Irish peers where losses are eroding the capital ratios. As such, the risk of dilution appears lower. On an Embedded Value basis, the end 2008 book value ex intangibles (software at this point rather than goodwill) is c. €9.50 share. If management can continue to fund the bank through the continuing dislocation in credit markets, the risk of dilution seems significantly lower than for its Irish peers, consistent with our prior view. While acquisitions are less likely in the current environment, IL&P’s franchises would look attractive for a corporate/financial player with a funding advantage. Irish Life results were received positively and the stock closed +27% today.
Glanbia reported adjusted EPS of 35.86c which was up 18.5% yoy and slightly ahead of our expectation of 35.4c. The group's Ingredients division reported operating profit of €82.5m, which was broadly in line with our forecast of €82.8m and 3.0% down yoy. The division was impacted by a poor performance from the Irish ingredients business, with lower margins as the prices paid for milk lagged the global diary price. On outlook, the group states that it expects a strong performance from the Nutritionals business, due to a full year contribution from Optimum and investment in innovation. In its US Ingredients business the group notes good domestic demand for Cheese. However, lower prices for cheese and whey will make the environment more challenging year on year and a lower performance is expected (we would note our forecasts already incorporate this). In Irish Ingredients, the outlook in FY09 is quite difficult due to the pricing imbalance, and the group expects this business to breakeven (we had previously forecast margins of 2.0%). The Consumer Foods business noted a particular slow down in the last few months of the year as the economic downturn had its effects on consumer spending. The outlook for this division is described as “satisfactory” with an emphasis on cost management. Agribusiness & Property outlook is expected to be “extremely challenging” with farm incomes reduced dramatically. On outlook, the group stated that based on current market conditions it now expects FY09 earnings to be in the range of low to mid single digit growth (previously managment guided for double digit). We are likely to reduce our numbers. The key driver of the downgrade is the Irish Ingredients business which is now expected to only breakeven in the current year given the imbalance between raw material and selling prices.
Glanbia results were also well received and the stock was up+15%
CRH was the subject of much debate here as we had previously thought that the probability of them going for a rights issue was low. Got that wrong... but typical of CRH management to tap the market early and position themselves for future opportunities. CRH’s presentations yesterday outlined a very tough outlook for trading in 2009. Volume demand continues to weaken and is the key challenge. Pricing remains relatively resilient, with positive trends continuing in materials and softening in elements of the products and distribution divisions. Margins continue to be impacted by the operational leverage of the sales reduction and to some extent at the gross margin level where pricing pressure exists. Margin pressure is partly offset by significant and ongoing cost savings initiatives and by easing raw material costs (particularly energy related costs). Europe continues to deteriorate further with the weakness continues across the board, though some regions are proving relatively resilient (infrastructure in Switzerland and Poland). In the US, the stimulus package is a positive for public construction (and already feeding through to contract leads), residential continues to be weak, and non-residential demand will fall off over the year as the backlog winds down. Overall, trading is weaker than we had assumed (more so in Europe than in the US) but not radically.
More important now than the results is the Rights issue and Management estimates that the €1.24bn rights issue adds c.€2.5bn to its previous acquisition firepower of €1.5bn (for 2009 and 2010 combined) giving a total of c.€4bn. The challenge for management is to acquire at valuations even lower than it is issuing equity at. We are encouraged that management are also aware of this, and that they are focussed on only buying quality assets that are very complementary and so give immediate integration potential, so returns can be driven by synergies rather than depending on market recovery. Management also stressed than it is a buyers market and that valuations are far from the bottom and that they still don’t see themselves making any large moves before late 2009 and through 2010. CRH is at an attractive valuation with CRH’s EV at sub enterprise value and the revised 2009f P/E is less than 10x, before allowing for any upside from investment in acquisitions. We had thought that Management might not issue stock at these depressed levels but they have and balance sheet is now strengthened and the company which was one of the strongest stocks in the sector probably becomes the strongest from here and is in an enviable position to take advantage of the likely flow of opportunities to buy assets at attractive prices.
CRH stock traded ex rights today and staged a strong rally +14.5% and this fed through to positive sentiment across the market in general with Travis Perkins +7% and Grafton +10% and kingspan +7%
FBD which we don’t officially cover released results which were initially very disappointing to the market but the market rallied from the weakest point where it was -16% to close only -5.6% lower.
C&C continued to strengthen after the presentation yesterday and the stock was up +9.2%. Paddy Power which is on the road with a good story also did well and rallied +4.7%
The Irish Government confirmed yesterday that it will implement a mini Budget before month end to address the worsening fiscal position. Both higher taxes and spending cuts are probable. Projected tax revenue (based on the exchequer returns published yesterday) is now likely to fall approx €2.5/3.0bn short of the revised projection of €37bn detailed in January. The exchequer returns showed that overall tax revenue fell by 24% for Jan-Feb 2009 vs. 2008. While property related taxes continued to show sharp declines, corporation tax declined by 37%, VAT by 17% and income tax by 7.4%. The exchequer deficit worsened to €2.08bn vs. €124.8m in the same two months of 2008.
An interesting day , lots of news , some downgrades but strong rallies… Food for thought . Companies are doing ok here in tough conditions and the smart one are positioning themselves for the future.
Wall Street rallying after a horrendous few days. Last Wednesday was also the high point of the week , it would be nice if the market picked up from here and took everyone by surprise… It would be good to have something to look forward to after a period of uncertainty …
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, March 3, 2009
Liams Last Post: CRH the star ,C&C gives hope, markets down
Good Afternoon ,
Well what a day , We came in expecting a bloodbath , were surprised at the resilience of markets initially and even though the market held up through lunchtime , it would appear that there is no end to it getting dragged down. Confused and uncertain is the tone at the close of business with more bearish sentiment appearing all the time. Just a little bit of stability and calm would go such a long way , the constant whipsawing is tough...
Results from CRH for 2008 results broadly in line with expectations – pretax profits were €1.628bn versus our expectation of €1.624bn (company guidance was in excess of €1.6bn), and down 14.5% from 2007. The key feature is the launch of a fully underwritten 2 for 7 rights issue from the company to raise €1.24bn. The issue price is €8.40 / share. The equity issue is to strengthen the company’s ability to take advantage of a large number of acquisition opportunities that management expect to arise over the next 6-18 months. Management state that raising equity is advance of transacting tactically strengthens their negotiating position as potential vendors will know that CRH would be able to close a deal quickly. While we agree with the principle of an ‘offensive’ equity funding to take advantage of acquisition opportunities that represent good fits at low multiples of cyclically depressed profits, the timing is not ideal in our view – (i) the issue will be dilutive until deals start being transacted, (ii) issuing equity at a discount to share price valuation that already represents a low multiple compounds the dilution, raising the hurdle for the potential acquisitions to become net accretive, and (iii) some investors may be concerned that raising equity pre-emptively may tempt management to transact acquisitions prematurely. On the dilution, we estimate that the rights issue will dilute our previous EPS forecast for 2009 by c.16% to c.€1.55 from €1.84 and our previous 2010 EPS forecast by c.20% to c.€1.65 from €2.06, before investment is made in acquisitions. Therefore, management will have to ensure the delivery of sufficient scale of quality acquisitions at attractive multiples for the equity issue to become accretive over the medium to longer.
The performance of the stock today has been tremendous , it would appear that there were a number of funds which found themselves underweight the stock and were persuaded by the opportunity to take up underwriting and close their weightings back to neutral to drive the stock higher during the day.
C&C released a preclose trading statement this morning in which it stated that adjusted operating profit for FY08/09 will be €90m, which is in line with guidance given in its IMS on January 16th. (our forecasts €89.7m). The group states that revenue is expected to decline 13% and operating margin is expected to decline 3.5% percentage points. Performance across its division in FY08/09 appears in line with expectations. The group will also see a hedging gain of €15m. It will be writing down €11.0m due to excessive stocks and the Clonmel facility will be written down by €130m (will reduce annual depreciation by €8.0m in FY09/10). Net debt at year end was 2.1X EBITDA. The group also announced that it will pay a final dividend of 3c, bringing the full year to 9c, and its initial objective is to sustain an annual dividend of 6c per share. On costs, its reorganization and restructuring is expected to lead to cost savings of €5.0m in FY09/10.
On outlook, the group states that forecasting consumer behavior is difficult in the current environment, with market conditions in both Ireland and GB, getting worse if anything. The group is targeting FY09/10 operating profit within (below) €5m the underlying €82m in FY08/09 (this is adjusted for currency and adds back the depreciation charge). Our current forecasts for FY09/10 are for adjusted operating profit of €66.1m (however this excludes the reduced depreciation charge and the €5m from cost re-organisation.
The presentation that C&C new management team gave was encouraging , the team appear sensible and armed with plenty of experience from their time running Scottish and Newcastle so their plan looks reasonable. It is the first time in a long time that C&C have had anything to say which has been vaguely positive and the stock bounced by 11% on the news. This could yet be one of the surprise performers for 2008.
After the really weak performance by Wall street last night , the market proved to be reasonably resilient today. AIB took til this afternoon to turn negative and closed down -4%. Smurfit kappa was the surprise of the day closing up 11% on thin volume.
Ryanair also shed 4% today to 2.83 along with the whole airline sector.
Independent News and Media fell yet again this time down another 3.7% and DCC which has been drifting also got close to the 10.00 level at 10.22 down -0.8%,
As for the financials , Bank of Ireland slipped below 20c to 19.9c , an inexorable slow sinking….Irish Life was brighter again but closed only +5% despite having been 11% higher at one stage.
Overall markets remain as weak as ever, Ireland closed down -0.8% as CRH proved to be so resilient today. London closed down -3% and Europe did better down only -1.8%. The Dow Jones at 5pm is at 6730 -0.5% and no one knows where it is going next… Never have so many known so little with such low conviction….and company after company across the world warns about profits , cuts it outlook or looks for a bailout.
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 what a day , We came in expecting a bloodbath , were surprised at the resilience of markets initially and even though the market held up through lunchtime , it would appear that there is no end to it getting dragged down. Confused and uncertain is the tone at the close of business with more bearish sentiment appearing all the time. Just a little bit of stability and calm would go such a long way , the constant whipsawing is tough...
Results from CRH for 2008 results broadly in line with expectations – pretax profits were €1.628bn versus our expectation of €1.624bn (company guidance was in excess of €1.6bn), and down 14.5% from 2007. The key feature is the launch of a fully underwritten 2 for 7 rights issue from the company to raise €1.24bn. The issue price is €8.40 / share. The equity issue is to strengthen the company’s ability to take advantage of a large number of acquisition opportunities that management expect to arise over the next 6-18 months. Management state that raising equity is advance of transacting tactically strengthens their negotiating position as potential vendors will know that CRH would be able to close a deal quickly. While we agree with the principle of an ‘offensive’ equity funding to take advantage of acquisition opportunities that represent good fits at low multiples of cyclically depressed profits, the timing is not ideal in our view – (i) the issue will be dilutive until deals start being transacted, (ii) issuing equity at a discount to share price valuation that already represents a low multiple compounds the dilution, raising the hurdle for the potential acquisitions to become net accretive, and (iii) some investors may be concerned that raising equity pre-emptively may tempt management to transact acquisitions prematurely. On the dilution, we estimate that the rights issue will dilute our previous EPS forecast for 2009 by c.16% to c.€1.55 from €1.84 and our previous 2010 EPS forecast by c.20% to c.€1.65 from €2.06, before investment is made in acquisitions. Therefore, management will have to ensure the delivery of sufficient scale of quality acquisitions at attractive multiples for the equity issue to become accretive over the medium to longer.
The performance of the stock today has been tremendous , it would appear that there were a number of funds which found themselves underweight the stock and were persuaded by the opportunity to take up underwriting and close their weightings back to neutral to drive the stock higher during the day.
C&C released a preclose trading statement this morning in which it stated that adjusted operating profit for FY08/09 will be €90m, which is in line with guidance given in its IMS on January 16th. (our forecasts €89.7m). The group states that revenue is expected to decline 13% and operating margin is expected to decline 3.5% percentage points. Performance across its division in FY08/09 appears in line with expectations. The group will also see a hedging gain of €15m. It will be writing down €11.0m due to excessive stocks and the Clonmel facility will be written down by €130m (will reduce annual depreciation by €8.0m in FY09/10). Net debt at year end was 2.1X EBITDA. The group also announced that it will pay a final dividend of 3c, bringing the full year to 9c, and its initial objective is to sustain an annual dividend of 6c per share. On costs, its reorganization and restructuring is expected to lead to cost savings of €5.0m in FY09/10.
On outlook, the group states that forecasting consumer behavior is difficult in the current environment, with market conditions in both Ireland and GB, getting worse if anything. The group is targeting FY09/10 operating profit within (below) €5m the underlying €82m in FY08/09 (this is adjusted for currency and adds back the depreciation charge). Our current forecasts for FY09/10 are for adjusted operating profit of €66.1m (however this excludes the reduced depreciation charge and the €5m from cost re-organisation.
The presentation that C&C new management team gave was encouraging , the team appear sensible and armed with plenty of experience from their time running Scottish and Newcastle so their plan looks reasonable. It is the first time in a long time that C&C have had anything to say which has been vaguely positive and the stock bounced by 11% on the news. This could yet be one of the surprise performers for 2008.
After the really weak performance by Wall street last night , the market proved to be reasonably resilient today. AIB took til this afternoon to turn negative and closed down -4%. Smurfit kappa was the surprise of the day closing up 11% on thin volume.
Ryanair also shed 4% today to 2.83 along with the whole airline sector.
Independent News and Media fell yet again this time down another 3.7% and DCC which has been drifting also got close to the 10.00 level at 10.22 down -0.8%,
As for the financials , Bank of Ireland slipped below 20c to 19.9c , an inexorable slow sinking….Irish Life was brighter again but closed only +5% despite having been 11% higher at one stage.
Overall markets remain as weak as ever, Ireland closed down -0.8% as CRH proved to be so resilient today. London closed down -3% and Europe did better down only -1.8%. The Dow Jones at 5pm is at 6730 -0.5% and no one knows where it is going next… Never have so many known so little with such low conviction….and company after company across the world warns about profits , cuts it outlook or looks for a bailout.
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, March 2, 2009
Liams Last Post : At least Ireland won...downward as ever
Good Afternoon ,
Can only Hope that March is better than it looks now....
Whatever happened over the weekend the bright spot was definitely the match result even if it was scrappy , after that little to say but the world has gone pear shaped again…A bit of respite and calm and re-assurance would be good so that we can build again. Seems like everyone losing their nerve and the real panic is starting now.
Busy day for corporate results in Ireland with results from AIB , Paddy Power and Kingspan.
There were no major surprises in any case , everyone has known about AIB and the key highlights from my point of view is that they now have in management’s stress scenario, which admittedly is looking more the base case that impaired loans continue to increase to €17.5B in 2011 (13.5% of the current loan book). Loan loss provisions in the stress scenario are increased by €1B p.a. in 2009 and 2010. Our concerns here are that the implied incremental loss content within incremental impaired loans seems low (€2B of incremental losses on incremental impaired loans of €8B). Furthermore, in the stress scenario, AIB’s core tier I capital ratio (their assumptions) falls to 5.9% including the government prefs (€3.5B) which is only c. €2.7B above the regulatory minimum of 4%
In terms of read through for the other Irish banks, AIB’s increase in Irish mortgage arrears (30 day + at 148 bps, from 36 bps end 2007 and 63 bps interim 2008), is a concern for IL&P. AIB’s 2008 provisions include 16 bps for Irish residential mortgages and they are indicating 43 to 54 bps for 2009 in their base case scenario. Our 2009 forecasts for IL&P include Irish mortgage loan loss provisions at 15 bps. Going to 50 bps reduces forecast pbt by c. €100m and would reduce our capital forecast by 35 bps (bank equity tier I forecast goes to c. 5.4% end 2009).
As For Kingspan the top line environment will be very difficult in 2009, and management were under no illusions here. Sales trends deteriorated in H2 of 2009 with acceleration in the rate of sales decline. The yoy decline in order books is dramatic – the current order book in Insulated Panels in UK, Ireland & Benelux is down 28% yoy, and is down 33% in CEE, while in Access Floors it is down 19% in North America and down by 6% in Europe. Order levels continued to decline materially in the first two months of the year, and lead indicators are weak for the units. Visibility is poor and there no indication of when markets will start to stabilise. Based on order trends, organic group sales are likely to be down in the order of 25-28% (our estimate) in 2009. We expect to be reducing our EPS forecast for 2009 to c.15-18c from 27c. Our EBIT forecast reduces to €50-52m (from €77m previously expected and €157m in 2008) due to an increase in the expected decline in sales. In terms of yoy movement, the major factors are the operational gearing impact of the expected 2009 sales decline and the impact on margins from price pressure and historic cost raw material stocks, partly offset by cost savings. Net interest costs (€16m) and tax charges are likely to be to be more favourable than previously assumed. This implies 2009 EBITDA / interest cover of c.6x and net debt / EBITDA of no greater than 2.5x. Assuming stable sales in 2010, the incremental impact of cost savings and lower interest charges suggests a yoy improvement in EPS to the 20-25c range.
Following Paddy Power’s results and management presentation this morning we have made small revisions to our FY09 forecasts. We are now forecasting FY09 EBIT of €49.4m and adjusted EPS of 94.8c which compare to our previous expectations of €46.9m and 91.9c respectively. Our forecasts are now based on a £/€ rate of 0.90 compared to 0.94 previously. In addition, we make modest changes to our underlying growth assumptions across the group’s business. In the group’s online business, we are now forecasting FY09 operating profit of €35.3m, compared to €32.1m previously. In terms of the sportsbook, we still believe average amounts staked are likely to come under pressure in the current year and we leave our forecast for an underlying decline in average stakes unchanged at -15%. In addition, incorporating 0.90 £/€ implies a 22% reported decline in average stakes in online sportsbetting. On bet volumes, with the strong performance noted during the first two months of 2009, along with strong active user growth, we have increased our bet volume growth forecast to 20% for FY09 (15% previously). We have left our FY09 gaming gross win forecasts unchanged at 4% on a reported basis. Irish retail produced operating profit of €28.3m in FY08, which was broadly in line with expectations. The weaker Irish consumer environment, as expected, started to impact the group in H208 and we believe this will continue into 2009. The group stated that in the year to date, retail amounts staked are down 5% in constant currency, which we believe implies a c10% fall in LFL in Irish retail and we believe this level of decline is likely to continue throughout 2009. Following our changes Paddy Power is trading on an FY09 PE rating of 12.0x, which we do not believe is overly compelling given the risks that still remain with its divisions, particularly those that are Irish consumer facing. The strong balance sheet (FY09 year end cash of €90m), and dividend yield of 4.7% may offer support at current levels.
Tomorrow we have CRH results and C&C trading update to look forward to.
Markets are in a terrible state with The ISEQ index opening up the batting for March with a -4.5% decline , Europe fell -4.7% and the FTSE -5.3% with the Dow at 5pm at 6835 -3.2% ,
AIB closed up +13% today after its recent very weak few days. Elan got battered down -10% today , Icon -7.2% , Glanbia -8% , Greencore -5.5% Bank of Ireland fell -15% , irieh Life was +17% in Dublin at 74c., CRH fell -4% and Kingspan fell -4.2% as did kerry -4.3% and amd Smurfit -7.4%
INM fell -7% and McInerney fell -25% .
Why today ? Maybe Buffet saying the US economy is a shambles ? maybe HSBC after it said it plans to raise £12.5bn in a rights issue… Any way no good news… Welcome to March , the bears are already here.
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.
Can only Hope that March is better than it looks now....
Whatever happened over the weekend the bright spot was definitely the match result even if it was scrappy , after that little to say but the world has gone pear shaped again…A bit of respite and calm and re-assurance would be good so that we can build again. Seems like everyone losing their nerve and the real panic is starting now.
Busy day for corporate results in Ireland with results from AIB , Paddy Power and Kingspan.
There were no major surprises in any case , everyone has known about AIB and the key highlights from my point of view is that they now have in management’s stress scenario, which admittedly is looking more the base case that impaired loans continue to increase to €17.5B in 2011 (13.5% of the current loan book). Loan loss provisions in the stress scenario are increased by €1B p.a. in 2009 and 2010. Our concerns here are that the implied incremental loss content within incremental impaired loans seems low (€2B of incremental losses on incremental impaired loans of €8B). Furthermore, in the stress scenario, AIB’s core tier I capital ratio (their assumptions) falls to 5.9% including the government prefs (€3.5B) which is only c. €2.7B above the regulatory minimum of 4%
In terms of read through for the other Irish banks, AIB’s increase in Irish mortgage arrears (30 day + at 148 bps, from 36 bps end 2007 and 63 bps interim 2008), is a concern for IL&P. AIB’s 2008 provisions include 16 bps for Irish residential mortgages and they are indicating 43 to 54 bps for 2009 in their base case scenario. Our 2009 forecasts for IL&P include Irish mortgage loan loss provisions at 15 bps. Going to 50 bps reduces forecast pbt by c. €100m and would reduce our capital forecast by 35 bps (bank equity tier I forecast goes to c. 5.4% end 2009).
As For Kingspan the top line environment will be very difficult in 2009, and management were under no illusions here. Sales trends deteriorated in H2 of 2009 with acceleration in the rate of sales decline. The yoy decline in order books is dramatic – the current order book in Insulated Panels in UK, Ireland & Benelux is down 28% yoy, and is down 33% in CEE, while in Access Floors it is down 19% in North America and down by 6% in Europe. Order levels continued to decline materially in the first two months of the year, and lead indicators are weak for the units. Visibility is poor and there no indication of when markets will start to stabilise. Based on order trends, organic group sales are likely to be down in the order of 25-28% (our estimate) in 2009. We expect to be reducing our EPS forecast for 2009 to c.15-18c from 27c. Our EBIT forecast reduces to €50-52m (from €77m previously expected and €157m in 2008) due to an increase in the expected decline in sales. In terms of yoy movement, the major factors are the operational gearing impact of the expected 2009 sales decline and the impact on margins from price pressure and historic cost raw material stocks, partly offset by cost savings. Net interest costs (€16m) and tax charges are likely to be to be more favourable than previously assumed. This implies 2009 EBITDA / interest cover of c.6x and net debt / EBITDA of no greater than 2.5x. Assuming stable sales in 2010, the incremental impact of cost savings and lower interest charges suggests a yoy improvement in EPS to the 20-25c range.
Following Paddy Power’s results and management presentation this morning we have made small revisions to our FY09 forecasts. We are now forecasting FY09 EBIT of €49.4m and adjusted EPS of 94.8c which compare to our previous expectations of €46.9m and 91.9c respectively. Our forecasts are now based on a £/€ rate of 0.90 compared to 0.94 previously. In addition, we make modest changes to our underlying growth assumptions across the group’s business. In the group’s online business, we are now forecasting FY09 operating profit of €35.3m, compared to €32.1m previously. In terms of the sportsbook, we still believe average amounts staked are likely to come under pressure in the current year and we leave our forecast for an underlying decline in average stakes unchanged at -15%. In addition, incorporating 0.90 £/€ implies a 22% reported decline in average stakes in online sportsbetting. On bet volumes, with the strong performance noted during the first two months of 2009, along with strong active user growth, we have increased our bet volume growth forecast to 20% for FY09 (15% previously). We have left our FY09 gaming gross win forecasts unchanged at 4% on a reported basis. Irish retail produced operating profit of €28.3m in FY08, which was broadly in line with expectations. The weaker Irish consumer environment, as expected, started to impact the group in H208 and we believe this will continue into 2009. The group stated that in the year to date, retail amounts staked are down 5% in constant currency, which we believe implies a c10% fall in LFL in Irish retail and we believe this level of decline is likely to continue throughout 2009. Following our changes Paddy Power is trading on an FY09 PE rating of 12.0x, which we do not believe is overly compelling given the risks that still remain with its divisions, particularly those that are Irish consumer facing. The strong balance sheet (FY09 year end cash of €90m), and dividend yield of 4.7% may offer support at current levels.
Tomorrow we have CRH results and C&C trading update to look forward to.
Markets are in a terrible state with The ISEQ index opening up the batting for March with a -4.5% decline , Europe fell -4.7% and the FTSE -5.3% with the Dow at 5pm at 6835 -3.2% ,
AIB closed up +13% today after its recent very weak few days. Elan got battered down -10% today , Icon -7.2% , Glanbia -8% , Greencore -5.5% Bank of Ireland fell -15% , irieh Life was +17% in Dublin at 74c., CRH fell -4% and Kingspan fell -4.2% as did kerry -4.3% and amd Smurfit -7.4%
INM fell -7% and McInerney fell -25% .
Why today ? Maybe Buffet saying the US economy is a shambles ? maybe HSBC after it said it plans to raise £12.5bn in a rights issue… Any way no good news… Welcome to March , the bears are already here.
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.
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