Good Afternoon ,
A see saw day , markets closed higher after an unsure day , no doubt the underlying momentum is still positive , The market is still buying the cyclicals and certainly in Ireland the food stocks which are Irelands defensives are lagging.
Independent News and media announced that they had succeeded in a standstill agreement , strikes me that the bond holders may not have really wanted to pull the trigger on this but that the company has not got the money to repay so we are at a real standstill. The stock fell -11% today as the market began to realise that a happy ending for the equity holders may not be around the corner and that the O’Reilly family have lost Waterford Wedgwood already this year.
Further supportive news for CRH US operations came this afternoon when Lowes the US DIY / Lightside building materials company released nubers at the top end of the trading range. Despite reporting Comparable store sales for the first quarter declining 6.6 percent the company made some positive noises about a stabilisation…The CEO said in the statement that “In recent weeks we have seen consumer confidence improve, housing turnover show signs of a bottom in certain markets, and home prices slow their decline," "These are all positive signs for the stabilization and ultimate recovery of home improvement industry sales, but since many of these variables remain at or near historic lows, we will continue to plan conservatively and manage expenses appropriately. Lowe's remains focused on positioning the company for the future while maximizing opportunities presented today."
This was enough to turn CRH around today and it closed up +0.11% after being down a couple of percent initially.
Tomorrow we have both Bank of Ireland and DCC with results.
On Bank of Ireland , our forecast for F2009 adjusted EPS is 13.2c, compared to 150.3c in F2008. The key driver of the reduction in earnings is €1.4B of loan loss provisions, as well as €75m of losses on available-for-sale securities. BoI is expected to take €300m of goodwill impairment charges on its US investment management assets. Additionally, restructuring charges of c. €90m are to be included in F2009. The Government guarantee charge is expected to be c. €58m in H2 F2009. The Government capital injection of €3.5B of preferred shares adds 3% to the core tier I capital ratio. On credit quality, our cumulative loan loss expectation of c. €6B for F2009-F2011 is in line with management’s stress case scenario. Our view remains that it is premature to consider BoI investable until greater certainty emerges about potential losses to be crystallised on transfer of assets to NAMA. We estimate that an average discount of 17% (20% on development loans and 10% on investment exposures) would result in a pro forma tangible book value per share (including dilution from government warrants) of 65c. We have a HOLD rating on BoI. (Analyst: Sebastian Orsi)
Following IL&P’s interim management statement and analyst conference call on Friday our overall view on IL&P is unchanged. The capital position is tighter than historically but capital generation in the life business is expected to offset losses in the bank franchise. The potential to release capital through a VIF securitisation is an additional buffer that management retains, although this carries execution risk. In the near term, we expect funding conditions for the bank to be the key driver of the share price given the high relative reliance on wholesale funding. Should international credit markets continue to ease open, IL&P will benefit significantly. With the stock trading on 0.27X 2009F embedded value per share (now €9.61 from €10.08 reflecting forecast revisions), significant risks are discounted in the share price. We are maintaining our BUY rating on IL&P.
On DCC : We are forecasting operating profit of €173.8m (+4% yoy) and adjusted EPS of 164.8c (-0.2% yoy), in line management guidance provided in February’s IMS. Focus will be on outlook for the energy and IT divisions for the coming year, results of the Strategic Review and commentary on the company’s appetite for acquisitions. BUY
DCC is due to release preliminary results for the year to March 2009 on Tomorrow. We are forecasting full year operating profits of €173.8m, up 4% yoy, which is a robust performance considering the c.16% depreciation in the sterling translation rate the group has faced this year (over 70% of operating profits are GBP). In the Energy division, we are forecasting operating profit of €93.6m, up 26% yoy, due to synergy benefits from acquisitions and the cold winter in Britain and Ireland helping to offset the impact of weaker sterling. In the IT divison, we are forecasting operating profit of €38.6m, down 4% yoy, with the first full-year contribution of Banque Magnetique (acq. Nov. 2007) along with growth from consoles/games partially offsetting weaker demand across the rest of the division and sterling weakness. In Healthcare, we are forecasting operating profit of €19.1m (-19% yoy) due to reduced healthcare spending and weaker GBP. In Food & Beverage, we are forecasting operating profit of €12.2m, -20% yoy, while in Environmental, we are forecasting operating profit of €10.3m (-27% yoy) – full segmental analysis provided in Table 3. The company noted in its IMS in February that the Energy and IT divisions performed well in constant currency terms during the third quarter, while the Healthcare and Environmental performances were behind expectations, with Food and Beverage profits declining.
With over 70% of group operating profits denominated in sterling, the company remains vulnerable to further GBP depreciation. However, the defensive nature of the businesses that DCC operates, as well as its 9.0x FY’10 EPS valuation, continues to make it an attractive investment in the current climate. BUY.
Lets see what tomorrow brings
Have a good evening
Liam
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Disclaimer: www.merrion-capital.com/disclaimer
Monday, May 18, 2009
Thursday, May 14, 2009
Liams Last post : Kingspan stabilising ? Paddy Power racing
Good Afternoon ,
Kingspan and Paddy Power provided the news to kick start our day in Ireland.
Paddy Power lace their statements with lots of cautious words but reading through them the message is clear. This business is going from strength to strength and is obviously being able to successfully diversify away from a much weaker Irish economy. Paddy Despite challenging economic conditions and adverse impacts on profits from less favourable sporting results and weaker sterling, 2008 was another strong year for Paddy Power. The statement went on to say that the Group is facing additional headwinds, as has already been reflected in market expectations. In this context, the Board is satisfied with progress and momentum in the year to date and remains comfortable with the consensus market forecast for 20009
Paddy Power also announced today that it has acquired 51% of Sportsbet, the Australian online and telephone operator, for initial consideration of €27.2m (6.2x EV/EBITDA) and a maximum consideration of €32.8m depending on performance over calendar 2009 (6.7x proforma). Paddy Power also has a call option to buy the rest of the business in either 2012 or 2013 for between 5 and 7x EBITDA, depending on EBITDA levels. Equity claw-back provisions are also part of the deal depending on performance over the coming years. We view the acquisition as a good strategic move for the company as Australian’s have a relatively high propensity to gamble and regulations are relatively favourable. We expect the acquisition to add c.3% to our EPS number in 2009 and c.5% in 2010 and expect to make additional upgrades due to performance in the underlying business.
Kingspan was the other story , management flagged that the rates of decline in its business is beginning to moderate it did not say it had reached bottom or had stabilised and management was clear that it is not seeing any greenshoots of recovery. That said, management is more confident of what it sees as a bottom level for the business and that it is now closer to that level. Also, it appears that the level of uncertainty to its outlook has eased so the possible level of variance around its expectations has declined. Essentially, the company has seen a consistent level of stability over the past six months in the target project pipeline that it tracks, which followed a period of significant attrition in the pipeline. This gives management a sense of what core level of business is sustainable based on what its customers are confident to progress with in the challenging economic environment. However, the run-rate in business has not fallen to that base level yet, which is why management continue to expect a further contraction in sales in the near term. Our thoughts on forecasts are that we are leaving our 2009 forecasts (EPS of 18c) unchanged. For 2010 we now expect a flat EPS performance at 18c (previously 24c). This reflects a weaker yoy performance in 2010 in access floors, and the rest of the group maintaining the H2 2009 run-rate in activity through 2010 (seasonally adjusted), which implies a lower H1 on H1, offset by the benefit from the incremental impact of cost savings and modestly lower interest charges. Previously, we had expected cost savings would allow growth with flat LFL group sales.
The price opened is down -4% initially but rallied steadily throughout the day to close +4% having been up as high as 9% at one point. And with forecasts hardening for next year at the low end of the range and the market taking what is in reality still poor news so well . However kingspan were amongst the first of the companies to actually tell it straight in December 2007 and the question is whether their pipeline indicator is now telling an accurate tale. If it is , this stock could move very strongly.
Tullow was subject of some more speculation on the news on Kosmos selling their stake in the Jubilee field offshore Ghana in which Tullow has a c. 30% interest. As Sebastian Orsi our Tullow expert pointed out the key thing for Tullow would be more certainty around value. $3B would be a big price, more than 2X what we have in forecasts of NAV for Tullow for a similar proportion of phases I and II. The Kosmos sort of valuation would add over £1/share to our £6.54 estimate ($50/bbl oil assumed) for Tullow. The other likely news items for Tullow is Ngassa, a 600m bbl prospect in Uganda in which Tullow owns 100% interest and which is nearing target depths with a result anticipated in June. Success would add over £1/share to NAV estimates. Also a Potential sell down of interest in Uganda. As the reserve base is proved up, now c. 1B bbls, Tullow will be looking to sell down its high interest to a partner that could bring finance and expertise. Again, this would provide more certainty around value.
Irish Continental Group also released an interim management statement which notes that in the seasonally less busy first four months of the year EBITDA fell by €4.2m to €8m from €12.2m. This compares with our estimate of an €8m reduction over the full year. Turnover fell by 25%, partly offset by a 24% fall in non-depreciation operating costs. In the ferry division Ro-Ro freight volumes were down by 23% yoy in the first four months, with car volumes 5% lower yoy. The car business performed well over Easter (+28%) but the pricing was described as extremely competititive. The rates of freight volume deceline ytd are somewhat higher than we expected, and with yields likely to be under more pressure than we expected, this is likely to offset the benefit of better than expected cost management. This creates downward pressure on our 2009 forecasts, as our current forecast of an €8m fall in profits is unlikely to be sufficiently cautious. Our initial estimate is that we will reduce our profit projections by €3-5m, compared to current forecasts of €58m EBITDA, €34m EBIT and €45m free cash flow. Cash generation characteristics remain quite strong (net debt has been reduced by €11m ytd) and notwithstanding more cautious profit projections free cash flow of €40-42m would represent a 15-16% yield of the current market cap, with the company remaining well positioned to improve profitability when economic activity recovers.
We saw a bit of a rebound in the financials today ,tomorrow is the big day for Irish Life. Don’t be expecting any good news , will be interesting to see how the market reacts to their statement.
Have a good evening,
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
Kingspan and Paddy Power provided the news to kick start our day in Ireland.
Paddy Power lace their statements with lots of cautious words but reading through them the message is clear. This business is going from strength to strength and is obviously being able to successfully diversify away from a much weaker Irish economy. Paddy Despite challenging economic conditions and adverse impacts on profits from less favourable sporting results and weaker sterling, 2008 was another strong year for Paddy Power. The statement went on to say that the Group is facing additional headwinds, as has already been reflected in market expectations. In this context, the Board is satisfied with progress and momentum in the year to date and remains comfortable with the consensus market forecast for 20009
Paddy Power also announced today that it has acquired 51% of Sportsbet, the Australian online and telephone operator, for initial consideration of €27.2m (6.2x EV/EBITDA) and a maximum consideration of €32.8m depending on performance over calendar 2009 (6.7x proforma). Paddy Power also has a call option to buy the rest of the business in either 2012 or 2013 for between 5 and 7x EBITDA, depending on EBITDA levels. Equity claw-back provisions are also part of the deal depending on performance over the coming years. We view the acquisition as a good strategic move for the company as Australian’s have a relatively high propensity to gamble and regulations are relatively favourable. We expect the acquisition to add c.3% to our EPS number in 2009 and c.5% in 2010 and expect to make additional upgrades due to performance in the underlying business.
Kingspan was the other story , management flagged that the rates of decline in its business is beginning to moderate it did not say it had reached bottom or had stabilised and management was clear that it is not seeing any greenshoots of recovery. That said, management is more confident of what it sees as a bottom level for the business and that it is now closer to that level. Also, it appears that the level of uncertainty to its outlook has eased so the possible level of variance around its expectations has declined. Essentially, the company has seen a consistent level of stability over the past six months in the target project pipeline that it tracks, which followed a period of significant attrition in the pipeline. This gives management a sense of what core level of business is sustainable based on what its customers are confident to progress with in the challenging economic environment. However, the run-rate in business has not fallen to that base level yet, which is why management continue to expect a further contraction in sales in the near term. Our thoughts on forecasts are that we are leaving our 2009 forecasts (EPS of 18c) unchanged. For 2010 we now expect a flat EPS performance at 18c (previously 24c). This reflects a weaker yoy performance in 2010 in access floors, and the rest of the group maintaining the H2 2009 run-rate in activity through 2010 (seasonally adjusted), which implies a lower H1 on H1, offset by the benefit from the incremental impact of cost savings and modestly lower interest charges. Previously, we had expected cost savings would allow growth with flat LFL group sales.
The price opened is down -4% initially but rallied steadily throughout the day to close +4% having been up as high as 9% at one point. And with forecasts hardening for next year at the low end of the range and the market taking what is in reality still poor news so well . However kingspan were amongst the first of the companies to actually tell it straight in December 2007 and the question is whether their pipeline indicator is now telling an accurate tale. If it is , this stock could move very strongly.
Tullow was subject of some more speculation on the news on Kosmos selling their stake in the Jubilee field offshore Ghana in which Tullow has a c. 30% interest. As Sebastian Orsi our Tullow expert pointed out the key thing for Tullow would be more certainty around value. $3B would be a big price, more than 2X what we have in forecasts of NAV for Tullow for a similar proportion of phases I and II. The Kosmos sort of valuation would add over £1/share to our £6.54 estimate ($50/bbl oil assumed) for Tullow. The other likely news items for Tullow is Ngassa, a 600m bbl prospect in Uganda in which Tullow owns 100% interest and which is nearing target depths with a result anticipated in June. Success would add over £1/share to NAV estimates. Also a Potential sell down of interest in Uganda. As the reserve base is proved up, now c. 1B bbls, Tullow will be looking to sell down its high interest to a partner that could bring finance and expertise. Again, this would provide more certainty around value.
Irish Continental Group also released an interim management statement which notes that in the seasonally less busy first four months of the year EBITDA fell by €4.2m to €8m from €12.2m. This compares with our estimate of an €8m reduction over the full year. Turnover fell by 25%, partly offset by a 24% fall in non-depreciation operating costs. In the ferry division Ro-Ro freight volumes were down by 23% yoy in the first four months, with car volumes 5% lower yoy. The car business performed well over Easter (+28%) but the pricing was described as extremely competititive. The rates of freight volume deceline ytd are somewhat higher than we expected, and with yields likely to be under more pressure than we expected, this is likely to offset the benefit of better than expected cost management. This creates downward pressure on our 2009 forecasts, as our current forecast of an €8m fall in profits is unlikely to be sufficiently cautious. Our initial estimate is that we will reduce our profit projections by €3-5m, compared to current forecasts of €58m EBITDA, €34m EBIT and €45m free cash flow. Cash generation characteristics remain quite strong (net debt has been reduced by €11m ytd) and notwithstanding more cautious profit projections free cash flow of €40-42m would represent a 15-16% yield of the current market cap, with the company remaining well positioned to improve profitability when economic activity recovers.
We saw a bit of a rebound in the financials today ,tomorrow is the big day for Irish Life. Don’t be expecting any good news , will be interesting to see how the market reacts to their statement.
Have a good evening,
Liam
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Disclaimer: www.merrion-capital.com/disclaimer
Monday, May 11, 2009
Liams Last Post: Profit taking,Smurfit rallies,C&C tomorrow
Good Afternoon ,
The start of a new week and the markets are in profit taking mode.
I am still quite bullish but you have to be careful with entry points as the intraday movements are still very Large.
The ISEQ index gave up 3% today driven by CRH which is testing below the 18 .00 level this afternoon. I suspect that the stock will find decent support near these levels.
Kingspan AGM is on Thursday , this stock has had one hell of a run , looks overbought in the short term and it is hard to believe that the statement wont trigger a bout of profit taking here which may allow some of the shorts to cover their positions and allow more long funds to begin to build positions.
Grafton fell -5% today as Travis Perkins IMS statement said that its performance in the first four months of the year has been ‘ahead of the Board’s expectations’ in markets that have continued to slow down. Revenue in the period fell by 13.6% in total and by 14.4% on a like-for-like (LFL) basis. Merchanting revenue fell by 19.0% LFL and by 18.4% in total, evenly balanced between general and specialist merchanting. The LFL decline over March & April (-18.4%) was similar to January & February. (This LFL performance would not be inconsistent with Grafton’s ytd LFL sales in UK merchanting). Retail sales in the first 18 weeks declined by 1.9% with LFL down by 3.6% . Travis launched a 7 for 10 rights issue at 365p (a discount of 38.5% to TERP and of 51.6% to Friday’s closing price) to raise £300m. The proceeds will be used to reduce net debt.
The Banks which had been very strong last week also slipped with Bank of Ireland which looked well over cooked in the short term giving back most performance today down -10.6% , AIB which fell -4% today looks more interesting to me at this point based on the research that my colleague Sebastian Orsi published ahead of the announcement that AIB was going to seek to raise 1.5bn of fresh capital. Based on the Ministers statement supporting AIB decision to raise fresh capital and that Bank of Ireland needs none , it would appear that Sebastian was on the mark when he modelled a 20% haircut for assets that will go into NAMA as this is broadly the haircut which solves the equation for the capital question. My colleague when he modelled the numbers also said that the Tangible Book value post writeoffs of Bank of Ireland would be approximately 60c and in the case of AIB Eur2.02. On this analysis, AIB is definitely more attractive than Bank of Ireland though there is a risk here as AIB still have to do the fundraising. (See Merrion note dated April 16th from Sebastian Orsi)
Irish Life was up 1.4% today despite the pullback in the other Banks.
In the foods Greencore which had rebounded sharply also traded down -6.7% today and Glanbia fell -6%
Smurfit continued to rally and today rose +5% , helped by speculation that the company may be in talks with their banks re their covenants. On the conference call on Friday afternoon management said that the Visibility in markets is poor, conditions continue to be very challenging and the outlook is uncertain. On demand, management noted that the rates of decline eased as the quarter progressed, and there had been some indications that demand was starting to stabilise at a low level – however, management was careful not to definitively call a bottom and was clear that it was too early to talk about greenshoots. It said there was no material signs of re-stocking activity by its customers.
C&C have numbers tomorrow , We expect FY09 results to be in line with previous guidance. EPS of 21.4c, a decline of 33.5%, reflects sharp volume declines in the cider business in ROI and UK as well as ongoing margin pressure. The company’s outlook for FY10 will be the key focus; we expect no change in the previous EBIT guidance of €77-82m. Within the results, we will focus on (i) recent trading patterns in ROI, which we expect to remain difficult in FY10 (ii) the progress of pear in both Ireland and GB since the March launch (iii) the roll-out of draught in the UK market and the conversion of distribution into sales (iv) ongoing destocking in the spirits & liqueurs division (v) further cost takeout initiatives in addition to the plan already announced in March and (vi) update on C&C’s plans for A&P spend beyond the 10% reduction announced for FY10 in March. Of key interest will be the update the company provides to its FY10 outlook. In March, C&C stated that it was targeting operating profit in the range of €77-82m, assuming stabilised cider volumes. We currently forecast €74m for FY10. Our forecast includes an 11% decline in ROI volumes in FY10 and 4.7% decline for Magners in GB. We also expect a revenue decline in the spirits division of 2% due to destocking as reported by industry peers. With the crucial summer trading months still to come through and the pear launch at an early stage, we expect C&C management to re-iterate its previous guidance. The success of pear and the roll-out of draught are crucial to management’s goal of stabilising volumes in GB this fiscal year.
Have a good evening ,
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
The start of a new week and the markets are in profit taking mode.
I am still quite bullish but you have to be careful with entry points as the intraday movements are still very Large.
The ISEQ index gave up 3% today driven by CRH which is testing below the 18 .00 level this afternoon. I suspect that the stock will find decent support near these levels.
Kingspan AGM is on Thursday , this stock has had one hell of a run , looks overbought in the short term and it is hard to believe that the statement wont trigger a bout of profit taking here which may allow some of the shorts to cover their positions and allow more long funds to begin to build positions.
Grafton fell -5% today as Travis Perkins IMS statement said that its performance in the first four months of the year has been ‘ahead of the Board’s expectations’ in markets that have continued to slow down. Revenue in the period fell by 13.6% in total and by 14.4% on a like-for-like (LFL) basis. Merchanting revenue fell by 19.0% LFL and by 18.4% in total, evenly balanced between general and specialist merchanting. The LFL decline over March & April (-18.4%) was similar to January & February. (This LFL performance would not be inconsistent with Grafton’s ytd LFL sales in UK merchanting). Retail sales in the first 18 weeks declined by 1.9% with LFL down by 3.6% . Travis launched a 7 for 10 rights issue at 365p (a discount of 38.5% to TERP and of 51.6% to Friday’s closing price) to raise £300m. The proceeds will be used to reduce net debt.
The Banks which had been very strong last week also slipped with Bank of Ireland which looked well over cooked in the short term giving back most performance today down -10.6% , AIB which fell -4% today looks more interesting to me at this point based on the research that my colleague Sebastian Orsi published ahead of the announcement that AIB was going to seek to raise 1.5bn of fresh capital. Based on the Ministers statement supporting AIB decision to raise fresh capital and that Bank of Ireland needs none , it would appear that Sebastian was on the mark when he modelled a 20% haircut for assets that will go into NAMA as this is broadly the haircut which solves the equation for the capital question. My colleague when he modelled the numbers also said that the Tangible Book value post writeoffs of Bank of Ireland would be approximately 60c and in the case of AIB Eur2.02. On this analysis, AIB is definitely more attractive than Bank of Ireland though there is a risk here as AIB still have to do the fundraising. (See Merrion note dated April 16th from Sebastian Orsi)
Irish Life was up 1.4% today despite the pullback in the other Banks.
In the foods Greencore which had rebounded sharply also traded down -6.7% today and Glanbia fell -6%
Smurfit continued to rally and today rose +5% , helped by speculation that the company may be in talks with their banks re their covenants. On the conference call on Friday afternoon management said that the Visibility in markets is poor, conditions continue to be very challenging and the outlook is uncertain. On demand, management noted that the rates of decline eased as the quarter progressed, and there had been some indications that demand was starting to stabilise at a low level – however, management was careful not to definitively call a bottom and was clear that it was too early to talk about greenshoots. It said there was no material signs of re-stocking activity by its customers.
C&C have numbers tomorrow , We expect FY09 results to be in line with previous guidance. EPS of 21.4c, a decline of 33.5%, reflects sharp volume declines in the cider business in ROI and UK as well as ongoing margin pressure. The company’s outlook for FY10 will be the key focus; we expect no change in the previous EBIT guidance of €77-82m. Within the results, we will focus on (i) recent trading patterns in ROI, which we expect to remain difficult in FY10 (ii) the progress of pear in both Ireland and GB since the March launch (iii) the roll-out of draught in the UK market and the conversion of distribution into sales (iv) ongoing destocking in the spirits & liqueurs division (v) further cost takeout initiatives in addition to the plan already announced in March and (vi) update on C&C’s plans for A&P spend beyond the 10% reduction announced for FY10 in March. Of key interest will be the update the company provides to its FY10 outlook. In March, C&C stated that it was targeting operating profit in the range of €77-82m, assuming stabilised cider volumes. We currently forecast €74m for FY10. Our forecast includes an 11% decline in ROI volumes in FY10 and 4.7% decline for Magners in GB. We also expect a revenue decline in the spirits division of 2% due to destocking as reported by industry peers. With the crucial summer trading months still to come through and the pear launch at an early stage, we expect C&C management to re-iterate its previous guidance. The success of pear and the roll-out of draught are crucial to management’s goal of stabilising volumes in GB this fiscal year.
Have a good evening ,
Liam
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Disclaimer: www.merrion-capital.com/disclaimer
Friday, May 8, 2009
Liams Last Post:short strong week, Market strong appetite for Beta
Good Afternoon ,
Well another eventful week in the markets draws to a close , a short week , market a bit more volatile and after the strong recent run certainly a bit more two way but each pull back is being bought which is a very healthy sign. The market is definitely looking ok with increasing institutional interest in Ireland across the range of stocks , Seeing institutional interest in the Irish Financials for the first time in many months. However day trading these can be lethal with hue intra day volatility.
CRH is also very volatile but I think that at these levels the stock looks comfortable. In terms of Risk and reward the bias is definitely to the upside despite the further cuts to forecasts this week. In July 2007, CRH traded at just under 18x peak earning's forecasts where it is now trading at just over 12x our revised reduced earnings numbers. It strokes me that with the strength of the CRH balance sheet , and the bullish noises being made by their US peers , that any sign of a stabilisation could lead to a re-rating of the stock. Europe is the key area of concern for CRH at this point so the market will be looking very keenly at trends here.
Smurfit numbers were the news this morning in Ireland this morning and while the stock retreated a few percent first thing , the market took the lack of guidance and the lack of any debt paydown in its stride and the stock rallied after the conference call to close +9.4% at 2.91. A massive move . 300% rally from the low point with absolutely no evidence of anything but continued deterioration in the underlying market conditions. On the conference call Smurfit management were asked twice about whether they ar in Discussion with banks which they evaded saying they were not going to front run any conversations and said that they are always in talks with their banks. Any news about covenant re-negotiation would be taken very positively as would news of an equity offering to bolster the balance sheet.
Independent News and media rallied a further 15.5% today. If there is any read across from theis to the other highly leveraged companies whose businesses are imploding then these stocks under maximum pressure are the ones to own. This market wants beta and risk. It might not be a sensible strategy to play these in size but it is noteworthy that these are the stocks that are the ones leading the rally.
At 5pm Wall street is up 1.3% as the stress test results from the Banks were as was effectively leaked with ten banks needing to raise $74bn.
London closed +1.4% and European markets rallied +2.3%
Have a good weekend.
Liam
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Disclaimer: www.merrion-capital.com/disclaimer
Well another eventful week in the markets draws to a close , a short week , market a bit more volatile and after the strong recent run certainly a bit more two way but each pull back is being bought which is a very healthy sign. The market is definitely looking ok with increasing institutional interest in Ireland across the range of stocks , Seeing institutional interest in the Irish Financials for the first time in many months. However day trading these can be lethal with hue intra day volatility.
CRH is also very volatile but I think that at these levels the stock looks comfortable. In terms of Risk and reward the bias is definitely to the upside despite the further cuts to forecasts this week. In July 2007, CRH traded at just under 18x peak earning's forecasts where it is now trading at just over 12x our revised reduced earnings numbers. It strokes me that with the strength of the CRH balance sheet , and the bullish noises being made by their US peers , that any sign of a stabilisation could lead to a re-rating of the stock. Europe is the key area of concern for CRH at this point so the market will be looking very keenly at trends here.
Smurfit numbers were the news this morning in Ireland this morning and while the stock retreated a few percent first thing , the market took the lack of guidance and the lack of any debt paydown in its stride and the stock rallied after the conference call to close +9.4% at 2.91. A massive move . 300% rally from the low point with absolutely no evidence of anything but continued deterioration in the underlying market conditions. On the conference call Smurfit management were asked twice about whether they ar in Discussion with banks which they evaded saying they were not going to front run any conversations and said that they are always in talks with their banks. Any news about covenant re-negotiation would be taken very positively as would news of an equity offering to bolster the balance sheet.
Independent News and media rallied a further 15.5% today. If there is any read across from theis to the other highly leveraged companies whose businesses are imploding then these stocks under maximum pressure are the ones to own. This market wants beta and risk. It might not be a sensible strategy to play these in size but it is noteworthy that these are the stocks that are the ones leading the rally.
At 5pm Wall street is up 1.3% as the stress test results from the Banks were as was effectively leaked with ten banks needing to raise $74bn.
London closed +1.4% and European markets rallied +2.3%
Have a good weekend.
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
Thursday, May 7, 2009
Liams Last Post : Its a rate of change thing...Still bullish
Good Afternoon ,
This is all about the rate of change of change. What is clear now from multiple companies results is that the rate of slowdown is slowing and this is what the market is now focussed on.
A prime example of this is in the paper sector. This Morning we saw Mondi note that the difficult trading conditions experienced in late 2008 continued in Q1. Underlying operating profit for Q1 is indicated to be similar to Q4 but significantly below a year earlier. Versus Q4, there was an improved result in Europe & International Mondi commented that trading in the Corugated Business ‘remains extremely challenging’, with weak demand continuing to cause price pressure. In Q1 its average recycled containerboard price was 33% lower yoy and at end-Q1 was down 10% ytd, as were its virgin containerboard prices. It notes that despite some evidence that the rapid destocking which started in Q4 08 is ending there remains a high level of economic uncertainty which will continue to create challenges for the remainder of 2009. Also in the sector , SAICA the Spanish containerboard company announced that it is taking two capacity decisions in relation to its French containerboard mill: (i) a planned project to add a new containerboard machine at the site is being suspended, and (ii) an older machine at the mill is to be shut with production to be consolidated onto another recently upgraded machine in the same mill.
So net net in a difficult environment , the packaging companies are cutting costs , shelving plans to add capacity and taking either downtime or capacity out which helps get us nearer to an inflection point. These stocks have been running hard over the past few weeks , All conventional analysis would suggest that they should be avoided but the market is looking at the possibility of the inflection point getting closer and so is moving in advance as the leverage if the inflection does come will be large.
Tomorrow we get Smurfit Kappa numbers. Our Q1 €190m EBITDA forecast compares with €257m a year earlier (-26% yoy) and represents a sequential contraction of €6m (-3%) from the €196m EBITDA reported in Q4. Expected net interest cost is expected to be flat yoy but lower than Q4 2008 reflecting lower variable rates and slightly lower debt levels. We expect little further net debt paydown in Q1 (c.€20m to €3,165m), due to the traditional seasonal H1 build in working capital and because capex which reduce as the year progresses rather than being flat each quarter. The H1 working capital build may be lower than normal given reduced demand and prices. We will be looking for updates on: whether the rate of demand decline has changed, and whether European containerboard prices are still under pressure; Also how quickly the softness in European recycled containerboard pricing is feeding into corrugated box pricing; and management’s view on potential capacity additions in European containerboard. The strengthening dollar is positive in terms of US kraftliner import competition; falling recycled fibre costs and energy costs are helpful. However the key here is simple and Investors are concerned over the scale of the impact on the company from the economic downturn and the 12% gross capacity additions planned for the European containerboard industry in 2009/10. In particular, we expect the downward pressure on EBITDA will erode much of the company’s comfort room over its net debt to EBITDA covenant limit. Addressing such concerns is key to improving the low equity valuation.
The ECB delivered its much anticipated rate cut to 1% today, ECB President Trichet at the press conference said stressed that the ECB had not decided that 1% was the lowest rate possible which is interesting and was unexpected. The ECB made an announcement on unconventional policies also but most commentators were disappointed by the relatively small scale of the announcement that the ECB will buy only around €60bn of covered (or collateralised) bonds. Firm details will be announced until next month.
Continuing my theme of a slowing rate of negative change too there was further noteworthy news today… The US initial jobless claims unexpectedly fell by 34,000 last week, Labor Department data showed today, while a four-week average of new claims declined for a fourth straight week. Initial claims dropped to a seasonally adjusted 601,000 in the week ended May 2 from a revised 635,000 the prior week, the Labor Department said. It was the lowest reading since late January….
Back in Dublin the Minister for Finance Mr Lenihan said it was very encouraging that his Budget had received warm praise from the Commission, the European Central Bank and the other European countries. Glad that he is happy with the job he is doing . If I was him I would be more worried about potential anarchy in the streets as the ministers and TD’s continue to find it difficult to cut the perks they enjoy.
At 5pm , the S&P bank sector index is down 5% as nerves set in ahead of the release of the US banks stress test results due this evening. Earlier confidence inspired by Comments by US Treasury Secretary Timothy Geithner suggesting that no US bank subjected to stress testing, was facing the risk of insolvency as dissipated now. The rally in the US banks last night inspired a stron initial rally in Dublin but this gave way in the afternoon. Bank of Ireland was up +12% at the close having been up +22% at the high of today. AIB was down -2.6% having been up 6% and Irish Life closed up 7.8%.
CRH continued to succumb to the profit taking whch set in yesterday. I have to say it is starting to look very interesting now but today it is down -7%. This helped trigger some profit taking in Grafton -3.8% and Kingspan -3.4%.
.Ryanair looked like it was taking off (pun) yesterday but landed again down -8.5% .
The rally is maturing , there are opportunities but there are also those happy now to begin to take some profits. Time to get selective.
Smurfit tomorrow and lets see how much capital the US banks really need ?
Have good evening
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
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.
This is all about the rate of change of change. What is clear now from multiple companies results is that the rate of slowdown is slowing and this is what the market is now focussed on.
A prime example of this is in the paper sector. This Morning we saw Mondi note that the difficult trading conditions experienced in late 2008 continued in Q1. Underlying operating profit for Q1 is indicated to be similar to Q4 but significantly below a year earlier. Versus Q4, there was an improved result in Europe & International Mondi commented that trading in the Corugated Business ‘remains extremely challenging’, with weak demand continuing to cause price pressure. In Q1 its average recycled containerboard price was 33% lower yoy and at end-Q1 was down 10% ytd, as were its virgin containerboard prices. It notes that despite some evidence that the rapid destocking which started in Q4 08 is ending there remains a high level of economic uncertainty which will continue to create challenges for the remainder of 2009. Also in the sector , SAICA the Spanish containerboard company announced that it is taking two capacity decisions in relation to its French containerboard mill: (i) a planned project to add a new containerboard machine at the site is being suspended, and (ii) an older machine at the mill is to be shut with production to be consolidated onto another recently upgraded machine in the same mill.
So net net in a difficult environment , the packaging companies are cutting costs , shelving plans to add capacity and taking either downtime or capacity out which helps get us nearer to an inflection point. These stocks have been running hard over the past few weeks , All conventional analysis would suggest that they should be avoided but the market is looking at the possibility of the inflection point getting closer and so is moving in advance as the leverage if the inflection does come will be large.
Tomorrow we get Smurfit Kappa numbers. Our Q1 €190m EBITDA forecast compares with €257m a year earlier (-26% yoy) and represents a sequential contraction of €6m (-3%) from the €196m EBITDA reported in Q4. Expected net interest cost is expected to be flat yoy but lower than Q4 2008 reflecting lower variable rates and slightly lower debt levels. We expect little further net debt paydown in Q1 (c.€20m to €3,165m), due to the traditional seasonal H1 build in working capital and because capex which reduce as the year progresses rather than being flat each quarter. The H1 working capital build may be lower than normal given reduced demand and prices. We will be looking for updates on: whether the rate of demand decline has changed, and whether European containerboard prices are still under pressure; Also how quickly the softness in European recycled containerboard pricing is feeding into corrugated box pricing; and management’s view on potential capacity additions in European containerboard. The strengthening dollar is positive in terms of US kraftliner import competition; falling recycled fibre costs and energy costs are helpful. However the key here is simple and Investors are concerned over the scale of the impact on the company from the economic downturn and the 12% gross capacity additions planned for the European containerboard industry in 2009/10. In particular, we expect the downward pressure on EBITDA will erode much of the company’s comfort room over its net debt to EBITDA covenant limit. Addressing such concerns is key to improving the low equity valuation.
The ECB delivered its much anticipated rate cut to 1% today, ECB President Trichet at the press conference said stressed that the ECB had not decided that 1% was the lowest rate possible which is interesting and was unexpected. The ECB made an announcement on unconventional policies also but most commentators were disappointed by the relatively small scale of the announcement that the ECB will buy only around €60bn of covered (or collateralised) bonds. Firm details will be announced until next month.
Continuing my theme of a slowing rate of negative change too there was further noteworthy news today… The US initial jobless claims unexpectedly fell by 34,000 last week, Labor Department data showed today, while a four-week average of new claims declined for a fourth straight week. Initial claims dropped to a seasonally adjusted 601,000 in the week ended May 2 from a revised 635,000 the prior week, the Labor Department said. It was the lowest reading since late January….
Back in Dublin the Minister for Finance Mr Lenihan said it was very encouraging that his Budget had received warm praise from the Commission, the European Central Bank and the other European countries. Glad that he is happy with the job he is doing . If I was him I would be more worried about potential anarchy in the streets as the ministers and TD’s continue to find it difficult to cut the perks they enjoy.
At 5pm , the S&P bank sector index is down 5% as nerves set in ahead of the release of the US banks stress test results due this evening. Earlier confidence inspired by Comments by US Treasury Secretary Timothy Geithner suggesting that no US bank subjected to stress testing, was facing the risk of insolvency as dissipated now. The rally in the US banks last night inspired a stron initial rally in Dublin but this gave way in the afternoon. Bank of Ireland was up +12% at the close having been up +22% at the high of today. AIB was down -2.6% having been up 6% and Irish Life closed up 7.8%.
CRH continued to succumb to the profit taking whch set in yesterday. I have to say it is starting to look very interesting now but today it is down -7%. This helped trigger some profit taking in Grafton -3.8% and Kingspan -3.4%.
.Ryanair looked like it was taking off (pun) yesterday but landed again down -8.5% .
The rally is maturing , there are opportunities but there are also those happy now to begin to take some profits. Time to get selective.
Smurfit tomorrow and lets see how much capital the US banks really need ?
Have good evening
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
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, May 6, 2009
Liams Last Post : CRH warns on H1, the Banks charge , Paddy Power comes into focus
Good Afternoon ,
After the strong run in CRH ahead of the trading update the news that the company ultimately released was on the disappointing side with a downgrade to earnings. Interesting though that the group has just give up ground to where it was 3 trading days ago with a -8% decline on the day. We are likely to be downgrading H1 and full-year forecasts (but not H2) – our initial guess is by a low-mid single digit percent of our underlying full-year estimates. (H1 traditionally accounts for circa one third of full-year profits)
CRH’s AGM update this morning noted that H1 is going to be even weaker than previously expected, but the company remains cautiously upbeat that the rate of underperformance in H2 will moderate (effectively an unchanged H2 outlook). Weak weather in January & February had already been flagged as exacerbating weak underlying demand, but unfavourable weather trends have since continued leading to a lower than normal seasonal demand pick-up in Q2 to date. The company now expects that the H1 profit decline will be sharper than it previously expected. H2 is unlikely to be able to catch up for the greater than previously expected shortfall in H1, so the H1 impact is likely to feed through to full-year forecasts.. Acquistion activity year to date was c.€0.3bn, but excluding the c.€225m Yatai deal which was agreed in early 2008, but not closed until early 2009 activity was quite low at c.€100m or less (the prior year figure was €1.2bn, of which c.€240m was on small-mid sized deals). Deal opportuities are still not expected to pick-up until H2. We have a BUY recommendation on CRH.
One stock which was suddenly a focus of attention today was Paddy Power. The stock was up 6% today and we look forward to their AGM statement next Thursday. Irish retail is obviously tough at present (we are forecasting 10% LFL decline in amounts staked) but they have been doing well on cost reduction - further detail on this is progressing will be of interest. Commentary from peers to date has been relatively good on performance ytd, particularly in online gaming. Football also seems to be making up for some of the bad weather and horse racing cancellations earlier in the year. Also of interest for the sector is talk that Congressman Barney Frank is introducing an amendment to the Online Gaming Legislation in the US (possibly today). We expect that Paddy Power would adopt a wait and see approach if the US legislation was amended- they won't be jumping into the US market immediately. It will be good for all stocks in the sector though.
The Banks continue to be strong and continue to stir debate about haircuts and imminent disasters . I think the market has finally taken to heart that the Government statement that it does not want to nationalise the banks and that therefore NAMA ultimately has to deal the loans at valuations which play to the political fudge and so the banks run and run.AIB was +14% , Bank of Ireland +26% today and it looks like the momentum is growing here…
The pull back today has eased the pain for those who had hoped the rally would reverse and allowed some get out of short positions which had turned sour.
There is a bit more two way flow now though but the stocks which had lagged are more likely to gap up if anyone tries to buy a serious block. CRH was joined in the profit taking group by Kingspan who surrendered -3.6% and Grafton was barely down at the close.
Elan gave up 4% today as the market still awaits the outcome of the Citibank led strategic review. I have to say I think the pullback in the stock probably provides an opportunity to trade the stock on the longside ahead of the review announcement which is imminent .
United Drug issued H1 results this morning. Reported revenue was €850.9m, 2.4% ahead of our forecast of €830.7m. EBITA was €33.6m, in line with our €33.7m forecast. Adjusted Net Income was 3.8% behind our forecast at €24.8m due to a higher than expected interest expense (€5m versus expected €3.7m). Adjusted EPS was 10.63 cent compared to our forecasts of 10.92 cent (our understanding is that our forecasts were around the mid point of market expectations). The Healthcare Supply Chain business delivered revenue of €717.5m (down 3.9% yoy but 3.8% ahead of our forecast of €691.5m); operating margins of 3.42% (down 20bps from H1 2008, but ahead of our 3.18%). This division has faced a number of specific difficulties in H1 including a scheduled Irish generic drug pricing reduction, a similar reduction in Northern Ireland and a significant slowdown in spend on Medical & Scientific equipment in both the ROI and the UK. On a positive note, the pre-wholesale business remains robust; Packaging and Speciality Services reported revenue of €56.7m (up 35% yoy but 19% behind our expectations of €70.2m); EBITA of €2.37m was 56% behind our expectations reflecting an operating margin of 4.19% (versus 10.41% in H1 2008 and our forecast of 7.7%). As previously announced, delays in the newly acquired US business, Sharp, had impacted on expected revenue in the period, as too had the loss of a large contract in the UK. The company noted that the other European packaging businesses are seeing good demand and that MASTA (the vaccines provider in the UK) has seen poor travel vaccine volumes offset by higher demand for flu vaccines. Contract Sales and Marketing reported revenue of €76.6m (up 36% yoy and 11% ahead of our forecasts); EBITA for this division was €6.7m (against our forecasts of €6.4m) with margins slightly behind our forecasts of 9.2% at 8.7% (down 47 bps yoy). The company is seeing strong demand across its operations and new business wins during the period from Novartis, Lundbeck and NAPP. Cross selling into its newly acquired businesses is already providing a benefit. On outlook, the company reiterated its guidance that it expects pre-tax profits at least in line with 2008. Most of the issues reported in these results have been highlighted previously. We are alarmed by the level of decline in Packaging but comforted to a degree by a level of resilience in the Healthcare Supply Chain division. We note that headwinds remain for the business (not least the imminent HSE drug payment review). Our current forecast is for EPS of 22.9 cent for FY 2009. We have a Hold recommendation on United Drug.
Holcim and Lafarge also released figures today , Lafarge in line but Holcim figures were below expectations even though emerging markets did relatively well. The massive EBIT margin deterioration (-580bp) is a big surprise to the market this morning.
The Airlines were up today with Aer Lingus playing s game of catchup and rallied 1.7% to 65 c at the close having flattered a bit higher earlier. Ryanair moved up to the 3.56 level +6% today.
European markets were stronger today +1.25% with the Dow Jones up 0.55% ahead of the Bank Stress Test numbers and the Jobs figures today which showed a decline in the rate of job losses with -491k job losses a positive surprise for the market which was expecting a figure of -695k.
Have a good evening
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
Merrion Stockbrokers Limited (registration no. 307878) is a limited liability company whose registered office is at Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.
After the strong run in CRH ahead of the trading update the news that the company ultimately released was on the disappointing side with a downgrade to earnings. Interesting though that the group has just give up ground to where it was 3 trading days ago with a -8% decline on the day. We are likely to be downgrading H1 and full-year forecasts (but not H2) – our initial guess is by a low-mid single digit percent of our underlying full-year estimates. (H1 traditionally accounts for circa one third of full-year profits)
CRH’s AGM update this morning noted that H1 is going to be even weaker than previously expected, but the company remains cautiously upbeat that the rate of underperformance in H2 will moderate (effectively an unchanged H2 outlook). Weak weather in January & February had already been flagged as exacerbating weak underlying demand, but unfavourable weather trends have since continued leading to a lower than normal seasonal demand pick-up in Q2 to date. The company now expects that the H1 profit decline will be sharper than it previously expected. H2 is unlikely to be able to catch up for the greater than previously expected shortfall in H1, so the H1 impact is likely to feed through to full-year forecasts.. Acquistion activity year to date was c.€0.3bn, but excluding the c.€225m Yatai deal which was agreed in early 2008, but not closed until early 2009 activity was quite low at c.€100m or less (the prior year figure was €1.2bn, of which c.€240m was on small-mid sized deals). Deal opportuities are still not expected to pick-up until H2. We have a BUY recommendation on CRH.
One stock which was suddenly a focus of attention today was Paddy Power. The stock was up 6% today and we look forward to their AGM statement next Thursday. Irish retail is obviously tough at present (we are forecasting 10% LFL decline in amounts staked) but they have been doing well on cost reduction - further detail on this is progressing will be of interest. Commentary from peers to date has been relatively good on performance ytd, particularly in online gaming. Football also seems to be making up for some of the bad weather and horse racing cancellations earlier in the year. Also of interest for the sector is talk that Congressman Barney Frank is introducing an amendment to the Online Gaming Legislation in the US (possibly today). We expect that Paddy Power would adopt a wait and see approach if the US legislation was amended- they won't be jumping into the US market immediately. It will be good for all stocks in the sector though.
The Banks continue to be strong and continue to stir debate about haircuts and imminent disasters . I think the market has finally taken to heart that the Government statement that it does not want to nationalise the banks and that therefore NAMA ultimately has to deal the loans at valuations which play to the political fudge and so the banks run and run.AIB was +14% , Bank of Ireland +26% today and it looks like the momentum is growing here…
The pull back today has eased the pain for those who had hoped the rally would reverse and allowed some get out of short positions which had turned sour.
There is a bit more two way flow now though but the stocks which had lagged are more likely to gap up if anyone tries to buy a serious block. CRH was joined in the profit taking group by Kingspan who surrendered -3.6% and Grafton was barely down at the close.
Elan gave up 4% today as the market still awaits the outcome of the Citibank led strategic review. I have to say I think the pullback in the stock probably provides an opportunity to trade the stock on the longside ahead of the review announcement which is imminent .
United Drug issued H1 results this morning. Reported revenue was €850.9m, 2.4% ahead of our forecast of €830.7m. EBITA was €33.6m, in line with our €33.7m forecast. Adjusted Net Income was 3.8% behind our forecast at €24.8m due to a higher than expected interest expense (€5m versus expected €3.7m). Adjusted EPS was 10.63 cent compared to our forecasts of 10.92 cent (our understanding is that our forecasts were around the mid point of market expectations). The Healthcare Supply Chain business delivered revenue of €717.5m (down 3.9% yoy but 3.8% ahead of our forecast of €691.5m); operating margins of 3.42% (down 20bps from H1 2008, but ahead of our 3.18%). This division has faced a number of specific difficulties in H1 including a scheduled Irish generic drug pricing reduction, a similar reduction in Northern Ireland and a significant slowdown in spend on Medical & Scientific equipment in both the ROI and the UK. On a positive note, the pre-wholesale business remains robust; Packaging and Speciality Services reported revenue of €56.7m (up 35% yoy but 19% behind our expectations of €70.2m); EBITA of €2.37m was 56% behind our expectations reflecting an operating margin of 4.19% (versus 10.41% in H1 2008 and our forecast of 7.7%). As previously announced, delays in the newly acquired US business, Sharp, had impacted on expected revenue in the period, as too had the loss of a large contract in the UK. The company noted that the other European packaging businesses are seeing good demand and that MASTA (the vaccines provider in the UK) has seen poor travel vaccine volumes offset by higher demand for flu vaccines. Contract Sales and Marketing reported revenue of €76.6m (up 36% yoy and 11% ahead of our forecasts); EBITA for this division was €6.7m (against our forecasts of €6.4m) with margins slightly behind our forecasts of 9.2% at 8.7% (down 47 bps yoy). The company is seeing strong demand across its operations and new business wins during the period from Novartis, Lundbeck and NAPP. Cross selling into its newly acquired businesses is already providing a benefit. On outlook, the company reiterated its guidance that it expects pre-tax profits at least in line with 2008. Most of the issues reported in these results have been highlighted previously. We are alarmed by the level of decline in Packaging but comforted to a degree by a level of resilience in the Healthcare Supply Chain division. We note that headwinds remain for the business (not least the imminent HSE drug payment review). Our current forecast is for EPS of 22.9 cent for FY 2009. We have a Hold recommendation on United Drug.
Holcim and Lafarge also released figures today , Lafarge in line but Holcim figures were below expectations even though emerging markets did relatively well. The massive EBIT margin deterioration (-580bp) is a big surprise to the market this morning.
The Airlines were up today with Aer Lingus playing s game of catchup and rallied 1.7% to 65 c at the close having flattered a bit higher earlier. Ryanair moved up to the 3.56 level +6% today.
European markets were stronger today +1.25% with the Dow Jones up 0.55% ahead of the Bank Stress Test numbers and the Jobs figures today which showed a decline in the rate of job losses with -491k job losses a positive surprise for the market which was expecting a figure of -695k.
Have a good evening
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
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, May 5, 2009
Liams Last Post : Ireland remains strong Martin Marietta sets tone for Building materials
Good Afternoon ,
Another strong day from Ireland today the process were strong today but reflecting a catchup as the Irish market trading on Xetra was closed yesterday, the Banks were strong , Bank of Ireland particularly strong today +21% dragging AIB +8% and Irish life +9% along with it.
The building materials sector continued to be very strong today also with CRH being very strong earlier + 6% at the peak before closing 2% higher on Thursdays close.
Vulcan materials had a bad earnings miss last night but were more sanguine about the second half of the year. Martin Marietta had results before the US open today and again while they missed earnings teir guidance for the year was unequivocally bullish. Martin Marietta 2009 guidance of net earnings per diluted share, excluding the effect of the economic stimulus plan, is in the range of $3.70 to $4.15. Martin Marietta expect incremental aggregates volume of 8 million to 10 million tons and net earnings per diluted share of $0.50 to $0.75 for 2009 from the economic stimulus plan. Martin Marietta expect to be able to update guidance for the year as the company gains further clarity about the impact of the economic stimulus plan. "Specifically, we see aggregates volumes to range from down 9% to 12%, excluding the effect of the economic stimulus plan. The rate of price increase for the aggregates product line is expected to be in a range from 4% to 6%. Our Specialty Products segment is expected to contribute $30 million to $32 million in
pretax earnings compared with $28 million in 2008," The fine tuning of
their previous guidance coupled with being explicit about the incremental benefits they anticipate from the stimulus plan is one of the most positive statements I have seen from any company thus far as we look for signs of a turnaround in the USA.
Elan was subject to speculation about a bid from Lundbeck, We don't really believe that Lundbeck will bid (Famous last words) but there definitely seems to be some news imminent and the market is anticipating this will be positive. Elan shareholders are awaiting news of a strategic review so any number of options could be on the table.
The Airlines were quiet today with Ryanair +2% and Aer Lingus +1.6% ,
CRH AGM tomorrow will be interesting as well as results from Lafarge and Holcim.
Have a good evening
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
Another strong day from Ireland today the process were strong today but reflecting a catchup as the Irish market trading on Xetra was closed yesterday, the Banks were strong , Bank of Ireland particularly strong today +21% dragging AIB +8% and Irish life +9% along with it.
The building materials sector continued to be very strong today also with CRH being very strong earlier + 6% at the peak before closing 2% higher on Thursdays close.
Vulcan materials had a bad earnings miss last night but were more sanguine about the second half of the year. Martin Marietta had results before the US open today and again while they missed earnings teir guidance for the year was unequivocally bullish. Martin Marietta 2009 guidance of net earnings per diluted share, excluding the effect of the economic stimulus plan, is in the range of $3.70 to $4.15. Martin Marietta expect incremental aggregates volume of 8 million to 10 million tons and net earnings per diluted share of $0.50 to $0.75 for 2009 from the economic stimulus plan. Martin Marietta expect to be able to update guidance for the year as the company gains further clarity about the impact of the economic stimulus plan. "Specifically, we see aggregates volumes to range from down 9% to 12%, excluding the effect of the economic stimulus plan. The rate of price increase for the aggregates product line is expected to be in a range from 4% to 6%. Our Specialty Products segment is expected to contribute $30 million to $32 million in
pretax earnings compared with $28 million in 2008," The fine tuning of
their previous guidance coupled with being explicit about the incremental benefits they anticipate from the stimulus plan is one of the most positive statements I have seen from any company thus far as we look for signs of a turnaround in the USA.
Elan was subject to speculation about a bid from Lundbeck, We don't really believe that Lundbeck will bid (Famous last words) but there definitely seems to be some news imminent and the market is anticipating this will be positive. Elan shareholders are awaiting news of a strategic review so any number of options could be on the table.
The Airlines were quiet today with Ryanair +2% and Aer Lingus +1.6% ,
CRH AGM tomorrow will be interesting as well as results from Lafarge and Holcim.
Have a good evening
Liam
---------------------------------------------------------------
Disclaimer: www.merrion-capital.com/disclaimer
Friday, May 1, 2009
Liams Last Post : Mayday holidays dry up volumes , newsflow light , C&C pleasant surprise
Good Afternoon ,
Mayday Mayday Mayday… what to do now… many have abandoned ship early for the weekend and split for sunnier more interesting places…. How could you ? when all the excitement is at home…
Surprisingly we now find that the Irish equity market is in positive territory year to date +11.9% , Europe is close to positive territory , the Nasdaq index is +9% though the Dow Jones is down -7% and the FTSE is down just -4%.
European major markets were closed for the Mayday bank holiday , Ireland and UK are closed on Monday so the impetus to trade today was muted.
The ISEQ index was closed today as the Index is run off the stocks which trade on the German Xetra platform. CRH succumbed to a bout of London based profit taking as were a lot of the stocks early this morning but there was no cnviction behind the mark down and most prices had recovered a lot of the losses as the day wore on.
The Irish news of note this morning was the relaease of Cider Off trade data by AC Neilsen .It was greeted very positively and the stock jumped +7.5%. It is amazing how suddenly people are getting excited about this one again. In a period where the overall LAD was boosted by Easter (LAD volumes up 15.5%), Magners volumes increased by 2.4% mom and 48% yoy. This follows yoy increases of 32.6% in March (data revised downwards slightly in this report from that released 4 weeks ago) and 6.7% in February in the off trade segment. Value (in £) grew 8% yoy vs 12.3% growth in March. Magners volume/value gap yoy has narrowed from the March data, indicating an easing of promotional activity. Magners’ share of the LAD was 1.26% in the four weeks to Apr 18, from 1.34% in the four weeks to Mar 21 and 0.92% in the four weeks to Feb 21.
If Cash levels are as high as being reported at Long only investment funds and the fast leveraged money has gone from the game , then this rally could be sustained as the cash is slowly invested into the market with everyone actually investing despite simultaneously protesting that they are looking for a pullback before getting involved.
As we head for 5pm , Wall street is getting over the delay in the Banks Stress test release to afternoon of May 7th.
In Ireland all eyes are on Croke Park and the sell out of Croke Park ahead of the big game tomorrow. C’mon Leinster….
Have a great weekend ,
Enjoy the break ,
Liam
Disclaimer : www.merrion-capital.com/disclaimer.html
Mayday Mayday Mayday… what to do now… many have abandoned ship early for the weekend and split for sunnier more interesting places…. How could you ? when all the excitement is at home…
Surprisingly we now find that the Irish equity market is in positive territory year to date +11.9% , Europe is close to positive territory , the Nasdaq index is +9% though the Dow Jones is down -7% and the FTSE is down just -4%.
European major markets were closed for the Mayday bank holiday , Ireland and UK are closed on Monday so the impetus to trade today was muted.
The ISEQ index was closed today as the Index is run off the stocks which trade on the German Xetra platform. CRH succumbed to a bout of London based profit taking as were a lot of the stocks early this morning but there was no cnviction behind the mark down and most prices had recovered a lot of the losses as the day wore on.
The Irish news of note this morning was the relaease of Cider Off trade data by AC Neilsen .It was greeted very positively and the stock jumped +7.5%. It is amazing how suddenly people are getting excited about this one again. In a period where the overall LAD was boosted by Easter (LAD volumes up 15.5%), Magners volumes increased by 2.4% mom and 48% yoy. This follows yoy increases of 32.6% in March (data revised downwards slightly in this report from that released 4 weeks ago) and 6.7% in February in the off trade segment. Value (in £) grew 8% yoy vs 12.3% growth in March. Magners volume/value gap yoy has narrowed from the March data, indicating an easing of promotional activity. Magners’ share of the LAD was 1.26% in the four weeks to Apr 18, from 1.34% in the four weeks to Mar 21 and 0.92% in the four weeks to Feb 21.
If Cash levels are as high as being reported at Long only investment funds and the fast leveraged money has gone from the game , then this rally could be sustained as the cash is slowly invested into the market with everyone actually investing despite simultaneously protesting that they are looking for a pullback before getting involved.
As we head for 5pm , Wall street is getting over the delay in the Banks Stress test release to afternoon of May 7th.
In Ireland all eyes are on Croke Park and the sell out of Croke Park ahead of the big game tomorrow. C’mon Leinster….
Have a great weekend ,
Enjoy the break ,
Liam
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