Good Afternoon ,
Well Anthony Bolton called the return of the Bull Market again today but this time the market was in the mood to listen….
The markets were strong all day , amazingly the Eurostoxx600 index is heading for its largest ever monthly gain and has erased the year to date declines. The Eurostoxx index has climbed 14% in April. The clients I have met last week all had portfolios which they said were too defensive in nature and that they were looking for opportunities to move to a more aggressive posture. This is interesting as coupled with a clear lack of selling pressure there is only one way for the market to go. Anthony Bolton described his view in terms of there being a strong negative consensus and high cash positions as being the right ingredients to bet against the consensus. So typically the bull run does not suit many players and so the pressure mounts as the market continues to rally.
In Ireland today the INM’s results were the big news as was the news that they have not succeeded in re-financing the bond which is due for maturity on May 18th. We’ll be revising our earnings forecasts for 2009 down toward normalised EPS of 5.4c compared to 12.6c in 2008 At operating profit level, our prelim estimate is c. €194m compared to revised guidance of €200 to €230m.
The key concern remains the refinancing of the debt. Management indicated this morning that it is looking at a more comprehensive solution than just refinancing the €200m bond due in May. This is encouraging given significant maturities of bank lines in 2010. Management has called for a conference call with bondholders (of the €200m bond) tomorrow to discuss a standstill agreement. The company is conducting an auction of none core assets such as Verivox and Cashcade, the proceeds of which will be used to pay down debt. News flow on debt refinancing could be a positive catalyst for the share price. However, there is significant uncertainty re. the terms and what the company profile and outlook will be afterward.
Glanbia issued a downward revision to guidance for the full year from current consensus of 36-37cent to 30-32cent citing a further decline in global Ingredients markets and the impact this will have on the Irish Ingredients business. At the time of the company’s results the company had guided that it would breakeven in the current year in this division. However, further declines in commodity prices and the inability to pass through further input cost reductions to a farming sector already under pressure has meant that the division is likely to make a “significant” loss in the current year. The company also notes a significant decline in the profitability of its agribusiness division as a result of the reduction in farmers incomes in 2009. Our understanding is that performance in the other parts of the business is good with demand for product from the US Ingredients operations JV particularly strong (albeit at reduced prices), and the nutritionals businesses continuing to perform through the current downturn. Our forecast prior to this announcement was for EPS of 33.8cent for 2009.
The most interesting news of the afternoon though was the surprise announcement that AIB management team have succumbed to the government desire for change of management. The Chairman , CEO and FD all will retire. And presumably walk off into the sunset with their heads held high with nice pension packages. Good Luck to them.
At 5pm , as we end the month on a high note , Wall Street is up 0.75% , Europe was up 1.7% , the ISEQ was up again strongly driven by CRH , the ISEQ closed up +4.9% today and CRH was up +6.7% today.
Sunny evening , Mayday tomorrow .
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.
Thursday, April 30, 2009
Wednesday, April 29, 2009
Liams Last Post : Markets rebound Bad news priced in..
Good Afternoon ,
Markets rebounded today after the few days of a pullback, the ISEQ index was up over 4% today , Europe +2.3% , Likewise London New York at 5pm up about 2%.
News in Ireland was dominated by the Interim management statement from Grafton and the ESRI Spring economic commentary. In both cases the news was depressing but in to a large extent already anticipated by the market.
The news that Grafton’s Irish merchanting business has seen turnover decline by -45% was shocking to see in print but the market largely shrugged its shoulders and the Grafton closed down -3.4% after initially being down closer to 6%. What was clear was that there was no rush to sell the stock.
The ESRI spring economic commentary was equally depressing and more depressing reading than the PWC economic research forecast. There is a race to the bottom now in economic forecasting. You wont get any publicity unless you are incrementally more bearish than the previous report so ESRI forecast -9.2% GNP contraction raising the ante on the -8.7% of the PWC report.
CRH was the big winner after an international house upgraded the stock , it rallied +5.7% , Kingspan continued to rally +4% though Grafton as already mentioned was down today after its strong run. Elan was up 5% today ahead of the presentations on AAB-001 to the American Academy of Neurologists meeting and Elan were taling up the efficacy of Tsyabri. I noted that the market seems to be ignoring the very strong results for the Novartis MS drug FTY720 which is an Oral MS drug where Novartis said that 80%-83% of patients were relapse free compared to Avonex at 69%. I thought this would be bearish for Elan…
The Airline sector shrugged off the impact of Swine Flu despite the news that a young child had died in the USA. There is a growing consensus that the condition is more dangerous to the poor and infirm and immuno compromised and otherwise that the impact is a bad flu but no more than that. The Airline sector rallied across Europe today with Aer Lingus rallying from yesterdays lows +5.4% to 59c and Ryanair +5.7% and the three major flag carriers all up between 4% and 6% also.
Tomorrow we look forward to seeing the outcome to the Independent newspaper negotiations with its bond holders. Expect trading to have been very difficult.
Irish Continental group was the big casualty today as the Moonduster consortium announced that they will not now proceed with a full bid for the group., The stock was down -23.7% at 10.10.
Today marks the 100th day in office for President Obama , he was getting mixed reviews today populist and Popular but criticised as ineffectual by some.
The Irish trade surplus hit a seven year high of €3.7 billion in February. External trade data from the Central Statistics Office (CSO) shows that the value of exports declined 3 per cent year-on-year with computer equipment falling 22 per cent and edible products down 34 per cent. Exports of medical and pharmaceutical products rose 15 per cent in January. Imports fell 28 per cent in the year to January with the number of road vehicles brought into the country down -71% with. Iron and steel imports were -43% reflecting the slowdown in the construction sector.
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 rebounded today after the few days of a pullback, the ISEQ index was up over 4% today , Europe +2.3% , Likewise London New York at 5pm up about 2%.
News in Ireland was dominated by the Interim management statement from Grafton and the ESRI Spring economic commentary. In both cases the news was depressing but in to a large extent already anticipated by the market.
The news that Grafton’s Irish merchanting business has seen turnover decline by -45% was shocking to see in print but the market largely shrugged its shoulders and the Grafton closed down -3.4% after initially being down closer to 6%. What was clear was that there was no rush to sell the stock.
The ESRI spring economic commentary was equally depressing and more depressing reading than the PWC economic research forecast. There is a race to the bottom now in economic forecasting. You wont get any publicity unless you are incrementally more bearish than the previous report so ESRI forecast -9.2% GNP contraction raising the ante on the -8.7% of the PWC report.
CRH was the big winner after an international house upgraded the stock , it rallied +5.7% , Kingspan continued to rally +4% though Grafton as already mentioned was down today after its strong run. Elan was up 5% today ahead of the presentations on AAB-001 to the American Academy of Neurologists meeting and Elan were taling up the efficacy of Tsyabri. I noted that the market seems to be ignoring the very strong results for the Novartis MS drug FTY720 which is an Oral MS drug where Novartis said that 80%-83% of patients were relapse free compared to Avonex at 69%. I thought this would be bearish for Elan…
The Airline sector shrugged off the impact of Swine Flu despite the news that a young child had died in the USA. There is a growing consensus that the condition is more dangerous to the poor and infirm and immuno compromised and otherwise that the impact is a bad flu but no more than that. The Airline sector rallied across Europe today with Aer Lingus rallying from yesterdays lows +5.4% to 59c and Ryanair +5.7% and the three major flag carriers all up between 4% and 6% also.
Tomorrow we look forward to seeing the outcome to the Independent newspaper negotiations with its bond holders. Expect trading to have been very difficult.
Irish Continental group was the big casualty today as the Moonduster consortium announced that they will not now proceed with a full bid for the group., The stock was down -23.7% at 10.10.
Today marks the 100th day in office for President Obama , he was getting mixed reviews today populist and Popular but criticised as ineffectual by some.
The Irish trade surplus hit a seven year high of €3.7 billion in February. External trade data from the Central Statistics Office (CSO) shows that the value of exports declined 3 per cent year-on-year with computer equipment falling 22 per cent and edible products down 34 per cent. Exports of medical and pharmaceutical products rose 15 per cent in January. Imports fell 28 per cent in the year to January with the number of road vehicles brought into the country down -71% with. Iron and steel imports were -43% reflecting the slowdown in the construction sector.
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, April 28, 2009
Liams Last Post: Aer Lingus Dives, ICON performs , US Bank Worries and mixed Economic Stats keep markets lower.
Good Afternoon ,
Markets opened lower snd stayed lower today despite efforts to generate a rally this afternoon after the release of the US Confidence index which showed a sharp jump month on Month. Wall Street opened lower , rallied to test positive territory but gave up as the worries about the Banks overwhelmed positive news such as IBM raising its dividend by 10%.
Ireland was all about Aer Lingus and ICON today.
Aer Lingus fell 20% today after it issued a negative Q1 IMS update this morning, with the yield and profit outlook deteriorating significantly since the start of March. The deterioration in March yields was much greater than the impact of the timing of Easter, and greater than we expected. Short-haul average fare fell by 23.6%in March compared to -1.6% in Jan & Feb, while long-haul average fare fell by 25.7% in March compared to -14% in Jan & Feb. The deterioration in March more reflected the underlying need to increase discounting and promotions than the impact from the moving of Easter back into April. More importantly, demand continues to need a strong level of promotional activity. We now expect that yoy yield declines will be in the low 20%’s, compared to our previous estimate of -17% yoy. Assuming a 21-22% yield decline, our operating loss projection increases to €100-110m from €60m previously. The increased loss will reduce our forecast end-2009 net cash balance to c.€350m from €400m. The IMS also confirmed that Aer Lingus is reviewing its fleet size, and in particular that it is in active discussions with Airbus over its long-haul delivery schedule – a reduction in its long-haul fleet deliveries would materially reduce capex and is necessary now to help protect the company's net cash position. We have a BUY recommendation on Aer Lingus.
The Banks also were under pressure in Ireland today with AIB down -10% and BOI down -6%. Irish Life on the contrary rose by 6.7% AIB announced that it is raising an incremental €1B of government guaranteed bonds with a maturity before the end of September 2010 (the expiry of the Irish government guarantee which is to be modified to cover new term debt issues). AIB is reported to be paying 185 bps over mid swaps compared to 65 bps when it last raised funds under the program in November.
Icon reported Q1 net revenue was $219.8m (slightly behind our expectations of $221.6m), EPS came in at 35c compared to our forecast of 34.6c. Book to bill was 1.21x (we forecasted 1.17x) , with net new business wins of $265m (down 28.2% yoy, but up 5.8% from Q4 2008) – commentary suggested that “business activity, which was slow to develop early in the quarter, finished strongly…”. The company reiterated guidance, but pointed towards the lower end of the previous range of $1.40-1.52 for the full year (a positive outlook given the 20% downgrade cautious commentary from PPD last week). The company also announced the purchase of a 100 bed phase 1 unit in the US which will have a dilutive effect of 4-6c in the current year. We will look to reduce our forecasts to c.$1.42 (pre dilution) and to c. $1.36 post dilution. At $15.95 the stock is now trading on 10.8x reduced earnings expectations vs PPD’s current multiple of 13.9x 2009F EPS multiple.. On a longer term view we remain BUYERS and think the current levels provide an attractive entry point.
The Building materials stocks across Europe were down today with the exception of CRH which managed a 0.3% gain. Grafton fell -4.8% and Kingspan fell byt only -2.2% continuing to be very resilient.
Elsewhere Smurfit Kappa retreated by just under -1% Ryanair fell by -6% as the Swine fever pandemic worries continued.
In the USA , the financial sector was lower today after comments from Elizabeth Warren, who chairs the US Congressional Oversight Panel for the Troubled Asset Relief Program. She said the adverse Scenario Stress test of the health of the 19 largest U.S. banks is “disturbingly close” to current economic conditions. Warren said that while the test may be rigorous the government’s recent document describing the test’s methodology lacked critical details, She said, ideally, Federal Reserve on should would have provided enough detail to allow outsiders to run their own version of the stress test on the largest banks. The US government plans to release the results of the tests on May 4. Ms. Warren also said the public needs details on how rigorous the stress tests really were because the macroeconomic assumptions involving unemployment were not that much more severe than current conditions. Ms. Warren said in order for the stress tests to be taken seriously, the government needs to prove they were robust. “The stress tests will make a terrific contribution if they are tough and transparent,” Ms. Warren said. “If they are not, they will be useless.” Ms. Warren said there is a concern that the government would have to conduct another stress test if the economy in the next few months hits the conditions outlined in the adverse economic scenario.
Michael O’Leary was in the news again , on the one hand saying that Ryanair will not bid a third time for Aer Lingus but that it also had no plans to dispose of the stake. In a slightly more outrageous tone he commented on the Swine Flu crisis saying that it is a tragedy only for people living in slums in Asia or Mexico," he said. "But will the honeymoon couple from Edinburgh die? No. A couple of Strepsils (a brand of throat lozenges) will do the job."
The key economic statistics today were a bit mixed. The US S&P Case-Shiller 20-city home price index fell 18.6% year over year in February. Fifteen of 20 major metropolitan areas posted price declines of more than 10% from a year earlier with the Sun Belt continuing to be hit hardest. Nationally,US home prices are at levels similar to the third quarter of 2003. There was some deceleration in the rate of decline in some of the markets
The U.S. consumer confidence index jumped to 39.2 in April from 26.9 in March, the Conference Board reported Tuesday. The 12.3 point gain in the index was the fourth-largest ever in the 32-year history of the survey. Economists were expecting the index to rise about five points to 30.5. The expectations index is now back at levels seen at the time of investment bank Lehman Brothers' collapse last September.
At 5pm , Wall Street is down about -0.25% and Ireland , European and UK markets are all down between -1% and -1.5%
Having been marketing and meeting many clinets over the past week , the pullback is being prayed for by those whose portfolios have been too defensive and underperformed into the recent rally. This is the opportunity which has been awaited... I got the impression that many institutions were awaiting a pullback to become a bit more aggressive in their portfolio posture.
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.
Markets opened lower snd stayed lower today despite efforts to generate a rally this afternoon after the release of the US Confidence index which showed a sharp jump month on Month. Wall Street opened lower , rallied to test positive territory but gave up as the worries about the Banks overwhelmed positive news such as IBM raising its dividend by 10%.
Ireland was all about Aer Lingus and ICON today.
Aer Lingus fell 20% today after it issued a negative Q1 IMS update this morning, with the yield and profit outlook deteriorating significantly since the start of March. The deterioration in March yields was much greater than the impact of the timing of Easter, and greater than we expected. Short-haul average fare fell by 23.6%in March compared to -1.6% in Jan & Feb, while long-haul average fare fell by 25.7% in March compared to -14% in Jan & Feb. The deterioration in March more reflected the underlying need to increase discounting and promotions than the impact from the moving of Easter back into April. More importantly, demand continues to need a strong level of promotional activity. We now expect that yoy yield declines will be in the low 20%’s, compared to our previous estimate of -17% yoy. Assuming a 21-22% yield decline, our operating loss projection increases to €100-110m from €60m previously. The increased loss will reduce our forecast end-2009 net cash balance to c.€350m from €400m. The IMS also confirmed that Aer Lingus is reviewing its fleet size, and in particular that it is in active discussions with Airbus over its long-haul delivery schedule – a reduction in its long-haul fleet deliveries would materially reduce capex and is necessary now to help protect the company's net cash position. We have a BUY recommendation on Aer Lingus.
The Banks also were under pressure in Ireland today with AIB down -10% and BOI down -6%. Irish Life on the contrary rose by 6.7% AIB announced that it is raising an incremental €1B of government guaranteed bonds with a maturity before the end of September 2010 (the expiry of the Irish government guarantee which is to be modified to cover new term debt issues). AIB is reported to be paying 185 bps over mid swaps compared to 65 bps when it last raised funds under the program in November.
Icon reported Q1 net revenue was $219.8m (slightly behind our expectations of $221.6m), EPS came in at 35c compared to our forecast of 34.6c. Book to bill was 1.21x (we forecasted 1.17x) , with net new business wins of $265m (down 28.2% yoy, but up 5.8% from Q4 2008) – commentary suggested that “business activity, which was slow to develop early in the quarter, finished strongly…”. The company reiterated guidance, but pointed towards the lower end of the previous range of $1.40-1.52 for the full year (a positive outlook given the 20% downgrade cautious commentary from PPD last week). The company also announced the purchase of a 100 bed phase 1 unit in the US which will have a dilutive effect of 4-6c in the current year. We will look to reduce our forecasts to c.$1.42 (pre dilution) and to c. $1.36 post dilution. At $15.95 the stock is now trading on 10.8x reduced earnings expectations vs PPD’s current multiple of 13.9x 2009F EPS multiple.. On a longer term view we remain BUYERS and think the current levels provide an attractive entry point.
The Building materials stocks across Europe were down today with the exception of CRH which managed a 0.3% gain. Grafton fell -4.8% and Kingspan fell byt only -2.2% continuing to be very resilient.
Elsewhere Smurfit Kappa retreated by just under -1% Ryanair fell by -6% as the Swine fever pandemic worries continued.
In the USA , the financial sector was lower today after comments from Elizabeth Warren, who chairs the US Congressional Oversight Panel for the Troubled Asset Relief Program. She said the adverse Scenario Stress test of the health of the 19 largest U.S. banks is “disturbingly close” to current economic conditions. Warren said that while the test may be rigorous the government’s recent document describing the test’s methodology lacked critical details, She said, ideally, Federal Reserve on should would have provided enough detail to allow outsiders to run their own version of the stress test on the largest banks. The US government plans to release the results of the tests on May 4. Ms. Warren also said the public needs details on how rigorous the stress tests really were because the macroeconomic assumptions involving unemployment were not that much more severe than current conditions. Ms. Warren said in order for the stress tests to be taken seriously, the government needs to prove they were robust. “The stress tests will make a terrific contribution if they are tough and transparent,” Ms. Warren said. “If they are not, they will be useless.” Ms. Warren said there is a concern that the government would have to conduct another stress test if the economy in the next few months hits the conditions outlined in the adverse economic scenario.
Michael O’Leary was in the news again , on the one hand saying that Ryanair will not bid a third time for Aer Lingus but that it also had no plans to dispose of the stake. In a slightly more outrageous tone he commented on the Swine Flu crisis saying that it is a tragedy only for people living in slums in Asia or Mexico," he said. "But will the honeymoon couple from Edinburgh die? No. A couple of Strepsils (a brand of throat lozenges) will do the job."
The key economic statistics today were a bit mixed. The US S&P Case-Shiller 20-city home price index fell 18.6% year over year in February. Fifteen of 20 major metropolitan areas posted price declines of more than 10% from a year earlier with the Sun Belt continuing to be hit hardest. Nationally,US home prices are at levels similar to the third quarter of 2003. There was some deceleration in the rate of decline in some of the markets
The U.S. consumer confidence index jumped to 39.2 in April from 26.9 in March, the Conference Board reported Tuesday. The 12.3 point gain in the index was the fourth-largest ever in the 32-year history of the survey. Economists were expecting the index to rise about five points to 30.5. The expectations index is now back at levels seen at the time of investment bank Lehman Brothers' collapse last September.
At 5pm , Wall Street is down about -0.25% and Ireland , European and UK markets are all down between -1% and -1.5%
Having been marketing and meeting many clinets over the past week , the pullback is being prayed for by those whose portfolios have been too defensive and underperformed into the recent rally. This is the opportunity which has been awaited... I got the impression that many institutions were awaiting a pullback to become a bit more aggressive in their portfolio posture.
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.
Monday, April 27, 2009
Liams Last post : Swine Flu,Crashing developer..yet mkts ok
Good Afternoon
Interesting day, markets all opened lower but rallied through the day to finish marginally up. The big stories of the day in Ireland unfolded this afternoon when Developer Paddy Kelly had a judgement registered against him in the commercial court today. Kelly who last year was awarded a life time achievement award in the US has become the highest profile of the Golden circle of Irish Developers to face the reality of the end of the celtic Tiger era. The Irish Times this afternoon reported that Kelly failed to turn up at the Commercial Court today and was not represented when Bank of Ireland secured judgment against him requiring repayment of loans of €3.4 million.
PwC this afternoon published a report saying the economy will contract -8.7% this year and with remarkable insight at this stage of the game went on to say that due to the scale of the anticipated budget deficit, an upturn is likely to be export-led. As this will rely on economic recovery elsewhere, the outlook for the Irish economy will remain negative until well into 2010.” Tell us something we don’t know.
Minister for Finance Brian Lenihan speaking At the Irish League of Credit Unions conference in Killarney on Saturday has said the recent budgetary steps taken in imposing the pensions levy and raising taxes had impressed and “amazed” other European countries. Mr Lenihan said other European governments would not have been able to impose the kind of pain the Government had. Mr Lenihan said there would be “riots” in France, were the pension levy on public servants to be introduced in that country. Mr Lenihan also spoke of the warm praise in the British press recently for the Government’s decisive action, and criticism of the British chancellor for not moving faster in the recent budget there. As we know it is all very well to dole out the pain now but this government which is completely identified with the politics of croney capitalism and had been in the pocket o the property developers will have its own day of reckoning soon and particularly if the government find it technically too difficult to stop paying themselves the pensions they receive while in office. Ministers need to lead by example and the Governments moral authority to govern continues to be eroded as they fail to take hits themselves and they wonder why the bus drivers and nurses are considering or taking industrial action ?
The Airline stocks succumbed to worries about the Swine flu epidemic though it is early days yet to guess in its impact.
Ryanair fell -4.3% and Aer Lingus fell -5.2% while BA fell -7.75% and Air France fell -6.5%.
This afternoon the World Health Organization said it plans to raise its pandemic alert to an unprecedented level today, saying that swine flu is spreading across North America. An increase above level 3 on the WHO’s six-step alert system would be the first since the United Nations agency adopted the current pandemic risk scale in 2005. The agency’s guidelines say the goal of a level 4 alert is “containment of the new virus within a limited area or delay of its spread, Level 5 would be “a strong signal that a pandemic is imminent. This morning Spain became the first country in Europe to confirm a case of the H1N1 virus when a man who returned from a trip to Mexico last week was found to be infected. Two people in Scotland and a Canadian woman in Manchester are being tested for the virus today. No deaths have occurred outside Mexico from the new strain flu but 20 cases have been identified in the United States and six in Canada. Possible cases are being checked as far afield as Europe, Israel and New Zealand.
The heavily indebted stocks did suffer a bit of profit taking but have continued to remarkably well. Kingspan continued to be resilient and rose +1.4% despite its late cycle nature . This is somewhat a surprise to see it perform with Grafton which has much earlier cycle exposure.
At 17:15pm , ICON is up 10% in the US ahead of its results tomorrow. We wait to see how they guide after the PPD and Kendle warnings of last week.
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, markets all opened lower but rallied through the day to finish marginally up. The big stories of the day in Ireland unfolded this afternoon when Developer Paddy Kelly had a judgement registered against him in the commercial court today. Kelly who last year was awarded a life time achievement award in the US has become the highest profile of the Golden circle of Irish Developers to face the reality of the end of the celtic Tiger era. The Irish Times this afternoon reported that Kelly failed to turn up at the Commercial Court today and was not represented when Bank of Ireland secured judgment against him requiring repayment of loans of €3.4 million.
PwC this afternoon published a report saying the economy will contract -8.7% this year and with remarkable insight at this stage of the game went on to say that due to the scale of the anticipated budget deficit, an upturn is likely to be export-led. As this will rely on economic recovery elsewhere, the outlook for the Irish economy will remain negative until well into 2010.” Tell us something we don’t know.
Minister for Finance Brian Lenihan speaking At the Irish League of Credit Unions conference in Killarney on Saturday has said the recent budgetary steps taken in imposing the pensions levy and raising taxes had impressed and “amazed” other European countries. Mr Lenihan said other European governments would not have been able to impose the kind of pain the Government had. Mr Lenihan said there would be “riots” in France, were the pension levy on public servants to be introduced in that country. Mr Lenihan also spoke of the warm praise in the British press recently for the Government’s decisive action, and criticism of the British chancellor for not moving faster in the recent budget there. As we know it is all very well to dole out the pain now but this government which is completely identified with the politics of croney capitalism and had been in the pocket o the property developers will have its own day of reckoning soon and particularly if the government find it technically too difficult to stop paying themselves the pensions they receive while in office. Ministers need to lead by example and the Governments moral authority to govern continues to be eroded as they fail to take hits themselves and they wonder why the bus drivers and nurses are considering or taking industrial action ?
The Airline stocks succumbed to worries about the Swine flu epidemic though it is early days yet to guess in its impact.
Ryanair fell -4.3% and Aer Lingus fell -5.2% while BA fell -7.75% and Air France fell -6.5%.
This afternoon the World Health Organization said it plans to raise its pandemic alert to an unprecedented level today, saying that swine flu is spreading across North America. An increase above level 3 on the WHO’s six-step alert system would be the first since the United Nations agency adopted the current pandemic risk scale in 2005. The agency’s guidelines say the goal of a level 4 alert is “containment of the new virus within a limited area or delay of its spread, Level 5 would be “a strong signal that a pandemic is imminent. This morning Spain became the first country in Europe to confirm a case of the H1N1 virus when a man who returned from a trip to Mexico last week was found to be infected. Two people in Scotland and a Canadian woman in Manchester are being tested for the virus today. No deaths have occurred outside Mexico from the new strain flu but 20 cases have been identified in the United States and six in Canada. Possible cases are being checked as far afield as Europe, Israel and New Zealand.
The heavily indebted stocks did suffer a bit of profit taking but have continued to remarkably well. Kingspan continued to be resilient and rose +1.4% despite its late cycle nature . This is somewhat a surprise to see it perform with Grafton which has much earlier cycle exposure.
At 17:15pm , ICON is up 10% in the US ahead of its results tomorrow. We wait to see how they guide after the PPD and Kendle warnings of last week.
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, April 22, 2009
Liams Last Post : News for the Bears , resilience for the Bulls
Good Afternoon ,
I have been accused of losing my niche and that my kast post is more fun to read when I am being a bear .
Today I will try and soothe the angry bears by providing some bear material but I have to say I am becoming increasingly bullish on the prospects for the market in Ireland and the market is finding the floor I was hoping for.
The market opened a little lower range traded to the upside for the morning then with the opening of Wall Street , markets spiked higher and closed just off the highs of the day.
So the bear news ….We had a meeting with Dave McCarthy, FD of IL&P yesterday. The main highlight was his bearishness about the weak trading environment in both the bank and life business. The capital position/generation outlook is weakening as credit quality declines sharply in the bank. The difficult funding environment for the bank is not a surprise but limits strategic options. Overall, our earnings forecasts for both the life and bank franchises are at risk of further downgrades for 2009 and 2010. Our key concern is that the group's capital buffers will be eroded. IL&P's relatively stronger capital position becomes less significant as the bank franchise funding weakens and the group's strategic options are increasingly subject to political ends. One of the most worrying things mentioned was the fact that Deposits were still flowing out and traditional UK Insurers who would have been big depositors in Ireland are simply keeping their funds on Deposit in their home market. The outflow of funds and the reliance on ECB funding means that Irish Life is as reliant on state backing as AIB and BOI though for different reasons (Funding not capital)
And another Irish Stock fell victim to the rapid deterioration of conditions in the Pharma Industry. ICON at 5.15pm is now down -18% having been as low as -25% down on the day . The fall follows the profit warning from PPD , the largest player in the CRO industry (Outsourced Clinical Trials). .PPD noted "unprecedented cancellation levels, significant rescheduling of existing backlog and lower than expected authorisations". Following on from Kendle's profit warning yesterday, the high levels of cancellations seen in these results must be a concern for the sector as a whole although we note, without the one large cancellation reported, the cancellation rate would have been 23% which is in line with PPD's average rate. PPD reduced their earnings guidance by 20%.
Both Kendle and PPD saw an elevated level of cancellations in the quarter. Kendle reporting a 43% cancellation rate, PPD a 37% cancellation rate (although 14% related to one large biotech contract). Our forecasts have assumed an increase in cancellation levels to an average of 18% for the year (up from c.12% in 2008). This may prove to be a little low given the reports we have to date. Following Kendle’s results we had assumed ICON would have been unconcerned with their current expectations for the full year due to Kendle’s relative size (about 50% of ICON’s revenue). Following PPD’s results, management is likely to have more to consider, in terms of the competitive environment that may ensue over the next few quarters as a result of the decline in PPD’s new business. We would be concerned that the expectations of a tougher trading environment may lead ICON management to lower expectations for the full year at the time of Q1 results. Given that management set reasonable expectations for 2009 in January (given the issues the company encountered towards the end of 2008), our best guess for such a downgrade would be setting the mid point at the current low end of the range which is $1.40 which would be a c.4.1% downgrade. Sentiment towards the sector has been ravaged over the last few days so the market is imputing a much more bearish scenario than a 4% downgrade.
Elsewhere the banks slowly have recovered from the sharp declines over the last few days. Interesting levels methinks…
The food stocks are struggling suggesting some sector rotation to the more cyclical stocks. INM which has announced the second postponement of their results and is in pressured negotiations with bond holders has rallied 9% today. Takes faith to believe that the Bond holders will rollover from their very strong relative position.
Elan reported Q1 results this morning. Reported revenue of $242.9m was 7% below our expectations primarily on weaker than expected EDT revenues of $59.7m versus our forecasted $78m. The company reported an adjusted EBITDA loss of $6m. Adjusted loss per share of 22 cent was larger than our anticipated 12 cent loss. This was a 14% yoy decline in EDT revenue. The company noted that EDT in Q1 2008 benefited from milestone payments associated with approval of Luvox Cr and Zanaflex. EBITDA in the EDT business declined $4.1m to $20.7m yoy. The other major miss on the revenue side was in Azactam where a 29% decline in yoy revenue was attributed to drug shortages. No update was provided on the strategic review, except that it was ongoing and that it would “communicate … progress at the appropriate time”.
Still Sunny , Hang in there …..
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.
I have been accused of losing my niche and that my kast post is more fun to read when I am being a bear .
Today I will try and soothe the angry bears by providing some bear material but I have to say I am becoming increasingly bullish on the prospects for the market in Ireland and the market is finding the floor I was hoping for.
The market opened a little lower range traded to the upside for the morning then with the opening of Wall Street , markets spiked higher and closed just off the highs of the day.
So the bear news ….We had a meeting with Dave McCarthy, FD of IL&P yesterday. The main highlight was his bearishness about the weak trading environment in both the bank and life business. The capital position/generation outlook is weakening as credit quality declines sharply in the bank. The difficult funding environment for the bank is not a surprise but limits strategic options. Overall, our earnings forecasts for both the life and bank franchises are at risk of further downgrades for 2009 and 2010. Our key concern is that the group's capital buffers will be eroded. IL&P's relatively stronger capital position becomes less significant as the bank franchise funding weakens and the group's strategic options are increasingly subject to political ends. One of the most worrying things mentioned was the fact that Deposits were still flowing out and traditional UK Insurers who would have been big depositors in Ireland are simply keeping their funds on Deposit in their home market. The outflow of funds and the reliance on ECB funding means that Irish Life is as reliant on state backing as AIB and BOI though for different reasons (Funding not capital)
And another Irish Stock fell victim to the rapid deterioration of conditions in the Pharma Industry. ICON at 5.15pm is now down -18% having been as low as -25% down on the day . The fall follows the profit warning from PPD , the largest player in the CRO industry (Outsourced Clinical Trials). .PPD noted "unprecedented cancellation levels, significant rescheduling of existing backlog and lower than expected authorisations". Following on from Kendle's profit warning yesterday, the high levels of cancellations seen in these results must be a concern for the sector as a whole although we note, without the one large cancellation reported, the cancellation rate would have been 23% which is in line with PPD's average rate. PPD reduced their earnings guidance by 20%.
Both Kendle and PPD saw an elevated level of cancellations in the quarter. Kendle reporting a 43% cancellation rate, PPD a 37% cancellation rate (although 14% related to one large biotech contract). Our forecasts have assumed an increase in cancellation levels to an average of 18% for the year (up from c.12% in 2008). This may prove to be a little low given the reports we have to date. Following Kendle’s results we had assumed ICON would have been unconcerned with their current expectations for the full year due to Kendle’s relative size (about 50% of ICON’s revenue). Following PPD’s results, management is likely to have more to consider, in terms of the competitive environment that may ensue over the next few quarters as a result of the decline in PPD’s new business. We would be concerned that the expectations of a tougher trading environment may lead ICON management to lower expectations for the full year at the time of Q1 results. Given that management set reasonable expectations for 2009 in January (given the issues the company encountered towards the end of 2008), our best guess for such a downgrade would be setting the mid point at the current low end of the range which is $1.40 which would be a c.4.1% downgrade. Sentiment towards the sector has been ravaged over the last few days so the market is imputing a much more bearish scenario than a 4% downgrade.
Elsewhere the banks slowly have recovered from the sharp declines over the last few days. Interesting levels methinks…
The food stocks are struggling suggesting some sector rotation to the more cyclical stocks. INM which has announced the second postponement of their results and is in pressured negotiations with bond holders has rallied 9% today. Takes faith to believe that the Bond holders will rollover from their very strong relative position.
Elan reported Q1 results this morning. Reported revenue of $242.9m was 7% below our expectations primarily on weaker than expected EDT revenues of $59.7m versus our forecasted $78m. The company reported an adjusted EBITDA loss of $6m. Adjusted loss per share of 22 cent was larger than our anticipated 12 cent loss. This was a 14% yoy decline in EDT revenue. The company noted that EDT in Q1 2008 benefited from milestone payments associated with approval of Luvox Cr and Zanaflex. EBITDA in the EDT business declined $4.1m to $20.7m yoy. The other major miss on the revenue side was in Azactam where a 29% decline in yoy revenue was attributed to drug shortages. No update was provided on the strategic review, except that it was ongoing and that it would “communicate … progress at the appropriate time”.
Still Sunny , Hang in there …..
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, April 20, 2009
Liams Last Post : Bank Moves maybe an opportunity
Good Afternoon,
It is the first day back after the Easter break and after the short week last week. I have to say maybe it is the weather which is sunnier that is making me slightly perkier in humour and in outlook about the market but I think that for the first time in months that we may be past the point of the bottom for the time being.
I am struck by the ISEQ index , and by the fact that even the newsflow on the banks whether it is credible or not would appear to have turned more positively in favour of existing holders of their equity. The Announcement by AIB this morning was greeted positively by the market which is somewhat ironic as the management credibility here has been absolutely shot to bits given the comments before Christmas by CEO Eugene Sheehy that AIB would rather die than accept fresh equity and suddenly they have a need for Eur5bn ? Staggering However despite this , markets have long since stopped believing utterances from desperate management teams and imputed their own numbers Simply at this stage , it appears to me that a political solution to the Irish Banking crisis is
being brought about. In reality it is fraught with dangers everywhere but the Minister seems determined that the Banks will remain as PLC’s .
The key question from an equity investors perspective is what is the level of capital that the Government and Financial markets comfortably accept at the end of the process and arising from there how do we get to that point.
This to me is where I agree with one aspect at least with the economists who wrote the open letter to the Irish times about NAMA. The economists argued that the NAMA option was not the correct one. What we know is that the Minister has decided on his chosen course of action and it is to use this vehicle.
The solution to the equation of how the banks get to survive without being nationalised is becoming clearer. Obviously the Minister and the department have let this figure of the required level of capital post NAMA transfers be known to the Banks and AIB failed the stress test hence needs the extra 1.5bn of capital. Bank of Ireland according to the Minister does not require further capital. So the Minister must have some clear view as to the reality of the loan books at each of the institutions. The price that NAMA will ‘pay’ for the toxic assets is the number which balances the equation and the risk then passes onto the state for the next five years with the State option to Levy the banks a real promises but not one that a present equity investor will pay much attention to (Maybe they should …)
So if in the case of Bank of Ireland there is no further dilution then this must be by definition good news and AIB must rapidly get with the programme in terms of raising the capital they require. They have some options including disposal of M&T , maybe Poland and certainly redeeming existing outstanding debt at a discount to help before issuing fresh equity.
I think the market will reflect on these developments and the banks may yet have a decent bounce from these levels.
Elsewhere markets are struggling today , I ad been suggesting that there was a degree of over bought levels having been reached with scopd for profit taking , I am not surprised to see the pull back , I do hopr the markets find support at the technical support levels and then I think that we can build a way forward from here.
The real economy is not getting any brighter yet and the UK budget will be interesting to watch on Wednesday but I do think there is some clarity arising.
The New York Times Deal book announced last week that according to figure from Statestreet , the rally in the US was led by significant inflows of cash into the market which has to be a positive sign. Ireland could be a surprise performer on the upside from here. W have seen some huge perventage bounces from low levels , Lets hope it finds a base from here ,
Enjoy the Sunshine ,
Have a good evening
Liam
It is the first day back after the Easter break and after the short week last week. I have to say maybe it is the weather which is sunnier that is making me slightly perkier in humour and in outlook about the market but I think that for the first time in months that we may be past the point of the bottom for the time being.
I am struck by the ISEQ index , and by the fact that even the newsflow on the banks whether it is credible or not would appear to have turned more positively in favour of existing holders of their equity. The Announcement by AIB this morning was greeted positively by the market which is somewhat ironic as the management credibility here has been absolutely shot to bits given the comments before Christmas by CEO Eugene Sheehy that AIB would rather die than accept fresh equity and suddenly they have a need for Eur5bn ? Staggering However despite this , markets have long since stopped believing utterances from desperate management teams and imputed their own numbers Simply at this stage , it appears to me that a political solution to the Irish Banking crisis is
being brought about. In reality it is fraught with dangers everywhere but the Minister seems determined that the Banks will remain as PLC’s .
The key question from an equity investors perspective is what is the level of capital that the Government and Financial markets comfortably accept at the end of the process and arising from there how do we get to that point.
This to me is where I agree with one aspect at least with the economists who wrote the open letter to the Irish times about NAMA. The economists argued that the NAMA option was not the correct one. What we know is that the Minister has decided on his chosen course of action and it is to use this vehicle.
The solution to the equation of how the banks get to survive without being nationalised is becoming clearer. Obviously the Minister and the department have let this figure of the required level of capital post NAMA transfers be known to the Banks and AIB failed the stress test hence needs the extra 1.5bn of capital. Bank of Ireland according to the Minister does not require further capital. So the Minister must have some clear view as to the reality of the loan books at each of the institutions. The price that NAMA will ‘pay’ for the toxic assets is the number which balances the equation and the risk then passes onto the state for the next five years with the State option to Levy the banks a real promises but not one that a present equity investor will pay much attention to (Maybe they should …)
So if in the case of Bank of Ireland there is no further dilution then this must be by definition good news and AIB must rapidly get with the programme in terms of raising the capital they require. They have some options including disposal of M&T , maybe Poland and certainly redeeming existing outstanding debt at a discount to help before issuing fresh equity.
I think the market will reflect on these developments and the banks may yet have a decent bounce from these levels.
Elsewhere markets are struggling today , I ad been suggesting that there was a degree of over bought levels having been reached with scopd for profit taking , I am not surprised to see the pull back , I do hopr the markets find support at the technical support levels and then I think that we can build a way forward from here.
The real economy is not getting any brighter yet and the UK budget will be interesting to watch on Wednesday but I do think there is some clarity arising.
The New York Times Deal book announced last week that according to figure from Statestreet , the rally in the US was led by significant inflows of cash into the market which has to be a positive sign. Ireland could be a surprise performer on the upside from here. W have seen some huge perventage bounces from low levels , Lets hope it finds a base from here ,
Enjoy the Sunshine ,
Have a good evening
Liam
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