Liams Last Post : Q3 ends strongly positive , Q4 opportunities still in Ireland...

Good Afternoon ,

 

Well the Q3 draws to a close with a surprise economic number from the USA which served to give the market a fright and remind us how fragile the market sentiment actually is . That being said the immediate sell off was soon halted with th down down -1.3% and at time of writing the market has already climbed back to a loss of only -0.75%

 

 During ht e quarter the bull ru continued ad piled excruciating pressure on many portfolio managers some of whom not only underperformed last year but are underperforming this  The typical story I have heard is one of PM's facing into the fourth quarter with asset allocation decidions towards equities being made and a portfolio which is if anything still to defensive.

 

In my time in Irish equities , there are times when you may as well set yourself on fire in order to capture attention and there are other times when a diligent analyst with spreadsheets may convince a PM to buy a stock.  The market has been in a very tight range for the last couple of weeks looking fr direction but just before it entered that mode , I certainly noted a certain amount of the 'Gimme a Name ' Syndrome which occurs when desperate men are driven to search for any name that might add some sex and violence to their portfolio.

 

The Dow was up +14.4% , Europe +10.6% , London +20.6% and Ireland +23.8%

 

I had been saying during the quarter that there was value in Ireland and it is slowly being recognised. Still lots of opportunities , some stocks such as CRH continue to be deeply unpopular and are yet to have their day. The Banks future performance needs some clarity about NAMA ,and we will be on tenterhooks awaiting the decision of a small group of Green party members whose decision may be based on their view on cycle lanes rather than what is good for the country…or the market. Expect plenty of volatility here… I note the absence of any loud leadership noises from the leaders of the Green Part canvassing support for the NAMA legislation which they helped shape.   

 

In the fourth Quarter we may hear about the future of the short selling ban… what an interesting moment to potentially free the banks to the true views of the market…

 

I leave you to ponder the topic I have been writing about for the past couple of weeks , the market hiatus , the narrow range and the lack of liquidity…This came about as the consensus seemed to be calling for a pull back… Sure the market pulled back, driven by a buyer strike rather than selling pressure…. Tomorrow is the start of Q4 , did the number today tell us anything that we don't know ? no… does it mean that rates are likely to remain low for longer  ? Yes and the fears about the speed of drainage of the massive liquidity injections into the market are probably misplaced as with numbers this weak , then this liquidity is bound to be left in the system for longer.

 

 And as for Ireland, we have had economic stats showing that the rate of economic collapse has slowed and today that the Unemployment rate has steadied at 12.3% which is also very interesting news… no signs of a recovery but maybe we are at the bottom…and the bottom is hopefully not so deep as initially feared.

 

This story is not over yet…the games are just beginning ….

 

My favourite stocks from here : CRH , PaddyPower , Grafton ,  Kerry , Origin ,Total Produce , Paddy Power ….

 

I think it is going higher…. Get ready….

 

Have a good evening

 

Liam

 

 

 

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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.

 

 

 

 

Liams Last Post : Rangebound markets , underlying still ok...INM plan revealed

Good Afternoon ,

 

Well the long awaited next steps in the Independent News and Media saga wee unveiled today It is not clear whether the agreement with the ad hoc group of bondholders will be accepted by the majority or Denis O'Brien but the proposal involves a 46% dilution with the equitisation of bonds and then a subsequent rights issue to raise Eur94m. These numbers are all within the ballpark of what had been speculated but the market reacted badly  The Banks appear to be supporting this solution. But Denis O'Brien has yet to declare his hand. Bondholders are to accept  723m shares in return for writing off €123m of the €200m bond that fell due in May. The balance owed to Bond holders along with unpaid interest, will be paid with a deep discounted €94m rights issue at 5c that the banks will underwrite.

 

The markets were again range bound but the profit taking impetus seems to have turned to just an absence of aggressive buyers with sellers looking to have sort of dried up.

 

Not much more to say….tight ranges in thin volume,,, one of those days…

 

September drags to a weary end…

 

Have a good evening…

 

 

Liam

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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.

 

 

 

 

Liams Last Post : Aryzta and Origin both cautious , Market in brighter mood though..

Good Afternoon,

 

Well another week that looked as if it was starting in the same vein as last week, markets weak in Asia and a weak low key opening in Europe , the market looked weak , but it was a mark down rather than a sell off and the lack of selling which was a feature of the drift last week led to a rather quick reversal of fortunes. Volumes were light all day.

 

Aryzta reported results this morning , The strong EPS performance was driven by an impressive margin improvement in H2 2009 – Food Europe's EBITA margin expanded 150bps for the full year (160bps in H2) which was attributed to both the benefit from taking manufacturing in-house at the new Grangecastle facility in Dublin (management indicated the amount of product manufactured in-house for the ROI/UK market had expanded from 1/3 of the total to 2/3) as well as reduced overhead benefits accruing from the IAWS/Hiestand merger. We assume also that reduced input costs would have benefited in the current year. Interestingly, management steered away from guiding improvements in the annual margin for 2010 (despite the higher exit run rate) which may indicate that some of the H2 SG&A benefit is not sustainable on an ongoing basis.

 

Management was cautious on outlook, noting the declining sales growth levels across both European and North American food businesses. By our calculations the Q4 organic run rate was -7% in Food Europe and had slowed to 8.2% in North America (having been 16.6% in H1). Furthermore, management indicated that sales in FY2010 YTD were considerably behind the same time in FY2009 and they did not appear optimistic on an imminent pick up in consumer demand. Interestingly, they noted that the demand for the company's products was relatively price inelastic, driven more by consumer sentiment as the price of the products was small relative to the overall spend on food. This suggests to us that the company will look to sustain margin levels at the expense of driving volume. With the current levels of in-sourced production still below full capacity this is a viable strategy. However if volumes continue to decline we would expect that price will become more of an issue to maximise utilisation rates.  

 

Looking out to FY2010 it would appear to be a similar tale to H2 2009. The top line will decline in Europe and growth will slow in the US which will be offset by margin enhancement through a higher percentage of in-sourced production and reduced overhead. We now forecast a 4.2% revenue decline in Food Europe (assuming ROI stabilises to some degree; UK consumer declines further and European markets remain broadly flat), and a 2.3% revenue decline in the US (as the benefit from the Subway contract unwinds). Continued focus on cost control and in-sourcing provides FY margin enhancement of c.20bps in both the US and Europe. Factoring in our reduced EBITA forecast of €68.5m for Origin we arrive at adjusted EPS of 225.7 cent for FY2010. This is slightly above management's "guidance". Our forecasts assume average sterling FX of £0.92/euro and US$1.46/euro. At this stage of the year we regard these EPS forecasts as reasonable and not necessarily "low-balled".

 

Origin which is 71.8% owned by Aryzta also reported today. Origin issued full year results this morning. Adjusted EPS of 36.2 cent (representing 7% yoy growth) were ahead of our expectations of 34.8 cent. Revenue of €1,504m was 3.3% ahead of our forecasts due primarily to us assuming a larger component from marine proteins (which was consolidated up until February when the JV with Austevoll was consummated). EBITA of €75.7m was 5.7% ahead of our forecasts but EBIT plus JVs was 1.1% ahead at €76.1m (which accounts for our assumptions on the marine protein business - we had higher JV contribution and lower group EBITA). The previously announced write down in the value of development property in Cork led to an exceptional charge of €103.6m (net of tax) leading to a net loss for the year of €60.1m. Adjusting for exceptionals and amortisation the company reported net income of €49.7m. Net debt at the end of the period was €153m ahead of our €105m on higher cash tax charges and on the cost of the two agronomy based acquisition announced in H2. The company announced a dividend of 8c per share for the year.

 

On outlook whilst noting its strength in agronomy, the company remains cautious, particularly on demand for agri-inputs in the ROI and on sustaining the current levels of profitability in the food business. The company stated that "[b]ased on existing market conditions the Group anticipates that adjusted diluted EPS for the current business for 2010 will be lower than ... 2009." In discussion with management they are guiding an EPS decline of 5-10% for FY2010, although they note that profits are 70% H2 weighted and as such visibility in that period is limited at present. With 55% of profits arising out of sterling related businesses (a -3.5c impact on EPS in FY2009), the strength or weakness of sterling has a significant impact on profitability with every 1p move impacting operating profit by c€350K. The company has indicated that the guidance provided is based on an exchange rate of £0.90/€. We have reduced our forecasts for FY2010 to reflect this cautiousness and now forecast EPS of 34.1c (-5.6% yoy and a 6.4% reduction from our previous forecasts). The company is guiding FY2010 cash generation of €25-30m

 

 

The weekend press continued to discuss the INM ongoing saga. INM has announced an extension of its standstill agreement with its Bank lenders and Bondholders has been extended until October 30th from September 25th. The extension is to facilitate the "continuation of ongoing and constructive discussions between all stakeholders in relation to the Group's financial restructuring". The announcement notes that the Banks and Bondholders have both confirmed their consent to the disposal of the South African Outdoor advertising unit on the terms previously announced. Newswires quote an emailed statement from the company this morning that its board will be meeting today to review "various restructuring proposals" and that it "has not made any final determination on any proposal". This follows a press report on Sunday which stated that Denis O'Brien is exploring legal action against the board of INM in the expectation that the board meeting (on Monday) will reject his restructuring plan for the Group. According to the article, the board must decide between the company's and O'Brien's plans and a spokesperson for O'Brien is quoted as saying that "The company has clearly take a decision to reject Denis O'Brien's offer….This decision has clearly been taken by the O'Reilly's without holding a board meeting. Once again, this ignores good corporate governance". 

 

Anyway , A better evening , better tone to markets…

 

Have a good evening ,

 

Liam

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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.

 

 

 

 

Liams Last Post : -4% in ireland thanks to CRH , -2% average for Europe.

Good Afternoon ,

The week that was , was not much of a week , little news , markets wak fr choice but remarkably resilient. 2 way push pull of  mixed economic data , a bit of profit taking , and institutions with cash on the side and Fund managers under pressure to perform as we get ever closer to the start of the final quarter.

 

Time for the men to be separated from the boys in terms of performance and the pressure is building.

 

Ireland may hold some of the keys to offer performance opportunities in to the fourth quarter and the economic news which showed the Irish economy not as badly performing as expected has not quite been absorbed into the public consciousness yet.

 

Today was especially typical of the market . Wall street close down -0.4% last night , the Pre market futures indicated a stronger opening and yet immediately the cash markets opened across Europe stocks got marked down , but not by much…then at 08.20am , the markets reversed and some buyers emerged and the market began a short lived rally.  The rally did take hold as at midday before peaking and falling straight back towards the lows.

 

The Eurostoxx index index traded in a really tight range today of between the index levels of 238 and 241. to highlight the tightness of the range..

 

 The economic data today from the USA included Durable goods orders and New home sales in the USA , both of which came in lower than was expected. The Michigan Confidence index though did surprise on the upside but again between the various indicators failed to give a clear steer to the market and at 5pm Wall Street is down -0.14%.

 

Next week in Ireland we have Aryzta numbers on Monday / we are forecasting Group revenue of €3,178m equating to yoy growth of +1.4%. Group EBITA including JVs is expected to be €278.0m (+5.9%) and adjusted FY EPS of €2.16 (+6.7%). On outlook, we expect pricing pressure across the Foods businesses and particularly in the UK/ROI and Europe and the ability to drive further cost efficiencies throughout the business will be key for FY2010.  Of particular interest will be the trajectory of demand in the North American and European food businesses. We expect top line declines in the UK and ROI and flat revenue in Europe for FY2010 with concerns that smaller retail customers are continuing to close or being absorbed by larger symbol groups. This is changing the power dynamics between Aryzta and its customers and as such we would expect prices and margins to come under pressure through 2010. To offset this expected decline the company will need to continue to drive operational efficiencies and any indication as to how much further savings are available to the business will be key to our outlook for 2010 earnings.

 

Origin Enterprises which is 71.8% owned by Aryzta will also report. We forecast adjusted EPS of 34.8c (+2.2% yoy) on a 3.0% revenue decline to €1,459m and EBITA of €71.6m (+1%). On outlook, we will be interested in commentary on demand trends for agronomy services as well as for feed and fertiliser in an environment where farm incomes within the ROI and the UK are continuing to come under pressure. Our focus for the results and the conference call will be on continuing demand for agronomy services and indications whether farmers in the UK are still willing to pay for the yield boosting services provided by Masstock as farm incomes come under greater pressure. We will also note with interest any commentary on the company's Polish and Ukrainian operations where we see opportunities for considerable growth into the medium term. Our expectation is that the current depressed income situation will lead to an acceleration in herd number reductions in both the UK and ROI and commentary in relation to this will be of import to next year's forecasts for feed and fertilizer demand.

 

I hope you have a lovely weekend , I am cycling to Wexford tomorrow as part of a charity cycle , A mere 140k , will keep my mind off the market for a few hours..

 

Have a good Evening

 

 Liam

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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.

 

 

 

 

Liams Last Post : Hiatus over... and down she goes dragged by sterling and the fed...

 

Good Afternoon ,

 

Well , I should have known really when for tow days the market see sawed without achieving any ground that this might trigger a pull back. As I learned many years ago in the fruit market , when it is not going up anymore , it usually has only one way to go… the question here is how sharp the pullback is. Yesterday we saw the first sell off to the close in Wall street in quite some time after the Fed commentary that accompanied their decision to hold rates unchanged.  European markets reacted to this nervously today and the rally from the low mid morning gave way to a sharp pullback in the Afternoon.

 

The Banks in Ireland were a bit all over the place today Down and up and down again …Bank of Ireland which was presenting at a conference came in for some late selling to drive it to a closing retreat for the day of -6% . Irish Life also fell -5.8% , it too presented at the same conference with a well know other Dublin broker….

 

AIB broke fresh ground since the financial crisis began and successfully closed a €1 billion 3 year Senior Unsecured Unguaranteed Bond Issue. Significantly, this was the first Senior Unsecured Unguaranteed Bond Issue from any Irish bank since the Government Guarantee was introduced in September 2008. The deal was priced at a spread over mid-swaps of 250 basis points with in excess of 230 international investors reflecting a well diversified geographic profile and was oversubscribed by 2.9 times. According to the statement from AIB themselves. In our view this is pretty significant as its senior debt and not covered bonds so more expensive than the recent issue from Bank of Ireland but doesn't eat into liquidity pool.

 

Selling pressure continues n CRH and it has come back to the Eur19 level. Grafton dealt in decent volume but was stable at the 3.60 level. This one has already pulled back by -16% in the last week so should be resilient in weak markets and should bounce if the markets recover.

 

Weakness in Sterling relative to the Euro was responsible for some of the weakness today. Kingspan which has significant sterling exposure fell -3.1% today , it as been a stellar performer

 

Ryanair held its AGM today, the CEO reiterated previous profit guidance that FY10 net income (excl. exceptional items) would be at the lower end of the €200-300m range (we forecast €248m). In terms of specific factors within the business there were two slight changes relative to previous comments. The CEO stated that FY10 yields would fall by approximately 20%. This compares with previous guidance of at or even slightly worse than minus 20% (we have -21% in our model). However, passenger volume guidance was slightly trimmed to 66m from 67m, due to likely capacity adjustments this winter. Given that 1m incremental winter passengers would be at relatively weak yields that is likely to account for the even slightly worse than -20% not being mentioned in the yield guidance this time. Looking at both together, our conclusion is that demand remains weak, with much promotional activity necessary – as a result winter capacity is being trimmed somewhat from earlier plans, with yields still likely to fall by c.20%.

 On our forecasts, we remain comfortable with our forecasts (FY10: €248m net income, 16.7c EPS), with slightly better yields offset by slightly lower volumes compared to the existing assumptions in our model. However, we note that the consensus EPS estimate of 23.3c (c.€345m) is well above both our forecasts and company guidance. We see no basis to expect that yield trends over the rest of the year will be materially better than guided by the company.

 

The Ryanair price reacted very positively initially but did drift off as the day wore on to close -3.9% down.

 

Paddy Power also gave up -3.4% today and is back to the 21.00 level , still just out of overbought territory but getting back to buying territory again. Would like to ben picking this one up at or just below eur20.00

 

At 5pm ., Wall street which tried to rally then slumped is hanging around the 9700 level down 0.5%  , no doubt the close here will set the tone to end the week.

 

Liam

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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.

 

 

 

 

Liams Last Post : See Saw little news , little progress...

Good Afternoon ,

 

Up and down and up and down and ultimately getting nowhere at the end of the day. European market indices traded within a range to close just above yesterdays closing levels . Once again very little news to give the markets much direction.

 

DCC fell -2.7% helped downwards by the news from Game Group has reported results for the half year to end July. Total group sales fell 7% (LFL down 16.3%) in H1 with sales in the 33 weeks to 19 Sep 2009 down 8.8% and LFLs down 16.6%. Pre owned sales grew 12.3% and now account for 25.7% of total sales (21.3% in 2008).  The Group expects the installed base of 3rd generation consoles to continue to build as recent price reductions on Xbox Elite and Sony's Playstation 3 are helping to stimulate demand. Game also says that there is a broad and exciting line up of software products scheduled for all consoles in the run up to Christmas. The Chairman of Game goes on to say that "we remain optimistic for the key Christmas selling period".

The news that two UK builders announced rights issues today was the highlight on the news front. Redrow is seeking to raise £150m through a 13 for 14 rights issue at 105p (a 55% discount to yesterday's close). Redrow will use £15m (10%) of the proceeds to acquire land assets and employees from Harrow Estates. Barratt Developments is looking to raise £720m, with £545m through a 1.3 for 1 rights issue at 100p (a 37.8% discount to TERP) and £175m through a placing at 240p (a 10.6% discount to yesterday's close). Barratt also reported results for the year to end June, reporting that after experiencing a deteriorating market in H1, it was able to maintain price levels and increase reservation rates in H2, "with these encouraging trends continuing through the summer and into the autumn". These equity raising address two of the relatively more indebted balance sheets in the sector and so further reduces financial risk in the sector, which together with reduced unsold stock levels will underpin supply discipline in new housing in the UK.

In Ireland we have the Ryanair AGM tomorrow. There is a possibility that the company will not say anything about trading as there is an investor day on Friday week and they may prefer to discuss trading at that stage. The stock has had a strong run and it looks overbought but that being said it is less overbought looking than some of its peers even Aer Lingus is more technically overbought on Relative Strength index calculations.

 

In Ireland the Financials rebounded with Irish life restoring most of its last weeks losses at this point and also a bit of nibbling in AIB and BOI too after the pullback. CRH has traded back to Early Friday morning levels before the big squeeze. We may see some short closing soon from those who sold stock into the auction on Friday.

 

Grafton looks interesting , it got whacked last week on the index changes stuff and looks interesting here as a trade , it is down over -10% since last week and is underperforming Travis Perkins now by a significant factor.

 

Glanbia continues to find favour as it appears to react with a lag to the price of US cheddar cheese on the CME. More investigations to check out why or if this observation holds true over a prolonged period but so far so good. Glanbia could get back towards the Eur3.00 to follow the Cheddar Block price.   

 

Wall Street which opened lower has crept back to flat in terms of performance.

 

Lets see what tomorrow holds , mid week hiatus…

 

Have a good evening.

 

Liam

 

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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.

 

 

 

 

Liams Last Post : Another quiet day , rally fizzled out on little news and low volume.

Good Afternoon ,

 

Another quiet day , newsflow is light in Ireland and the Europe today , with the news that will ot surprise anyone that Net Emigration from Ireland outweighed immigration for the first time since 1995. The question is who the hell are the 57000 brave souls who have taken the opportunity to move here at this point in the cycle. Optimists lets call them. For the record only 65000 people have left according to the CSO. I presume there is no real way to tell the numbers of Europeans who came and left over the past few years though.

 

Today was a story of markets rallying in Oreland after a weak and quiet day yesterday only to give up ground to close just above yesterdays closing levels. There was further weakness in the Construction stocks today with Grafton falling -4% at one stage. It has significantly underperformed Travis Perkins recently and looks close to oversold at these levels.  

 

CRH gave up ground to close at 19.63 down -2.1% .Glanbia continued its rebound on very thin volume and Aer Lingus has crept up to 80c with the market looking ahead with a degree of expectation to the re-structuring announcement that is due in the next few weeks.

 

INM also rebounded despite the FT having an almost identical story as the Irish weekend press but the FT suggested a Eur100m rights issue and the same 46% level of dilution. The standstill agreement ends this Friday and it is more likely there will be an announcement before then.  

 

Yes a quiet day… not much conviction in the rally but there again there was not much conviction in the sell off either , still continue to believe that this market will go higher.  

 

 Have a good evening ,

 

Liam

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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.

 

 

 

 

Liams Last Post: anti climax day , profit and opportunities,

Good Afternoon ,

A bit of an anti climax day , Ireland succumbed to the same profit taking which afflicted all markets , The ISEQ index the standout underperformer today as CRH gave back a chuk of the exceptional gains it had in the closing auction on Friday. CRH closed at the eur20 level.

The Banks also had little news to push them positively today , the weekend press being full of stories about how the Green Part remain uneasy about NAMA and how Bank of Ireland is on the verge of shelving its plans to launch a rights issue later this year to buy back €1.5bn of government preference shares. Buying back these shares would reduce the state's warrants from 25% to 15%. According to the article, the bank believes the move could be too rushed and risky given the uncertainties that still surround the sector. By the time the bank releases its interim numbers in early November, the Nama legislation may still not have been passed and the bank also has to finalise its business plan to submit to the EU (as part of its receipt of state capital). There was also suggestions that BOI are wary about the shortage of institutional investors on the share register and this would prolong a marketing campaign to sell new shares.

INM fell by -13% today , making it interesting here…. if the media has it right , INM is expected to agree to a debt-equity swap for the bondholders this week, which will result in the bondholders owning 46% of the company. Because the shares are not being issued for cash, the transaction does not require shareholder approval. A follow up rights issue for €60m according to 'sources' will then be launched to raise cash from shareholders which together with €20m of the proceeds from asset disposals will pay off the remaining sum due on the bond. Under these proposals, Sir Anthony O'Reilly's shareholding would fall to 15%, while Denis O'Brien's shareholding would fall to 14% according to the press at the weekend. Bondholders as a new shareholder group may lean towards the O'Reilly side, due to the stance O'Brien has taken towards them in recent negotiations, and therefore this should be enough to defeat Mr. O'Brien's resolutions. Looking at the consensus numbers and assuming the number of shares in Issue rises to 1.5bn from the current 840m , the 2010 consensus earnings estimate of 7c pre dilution should fall to ballpark 3.8c using rough numbers…So based on a closing price today of 27c , the stock is trading on about 7x earnings which for a media company is potentially cheap… Watch this space … these are back of the envelope calculations but I thought it might be interesting to at least have a go at looking through the dilution impact…..

The construction sector got a thump this afternoon with Grafton giving away nearly -6% to 5.75 and Kingspan falling -4.3%. C&C ended its roadshow last Thursday in the uk and so is probably ripe for some profit taking as the story played very well to the Uk institutional community who were happy to get long.

DCC has slipped below the 18 level , -2.35% on low volume…

Paddy Power has gone up though against the trend closing +3% at 21.52… Those who say this one is expensive may learn that a company which looks expensive but which is growing very quickly by offering high levels of customer satisfaction and which has less than 1% market share in the UK betting office market may not be that expensive in a couple of years, This is a well managed secular growth stock. One to average into and take the long view from here.

Its Monday , the market had looked over bought , this pull back helps bring us closer to buying levels again.

I am a determined bull of this market now…and another few percent pullback should be seen as an opportunity to chase some performance.

Have a good evening

---

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.

Liams Last Post ... the week that the NAMA lifted all banks and CRH ground its way into the index

Good Afternoon ,

 

The week of NAMA and CRH and from my point of view another very interesting trip to meet clients in the UK.

 

Nama was greeted with te type of relief rally which few had thought possible some time ago. Now the hard part begins , the attempts to get the piece of legialation passed. I have to say I sniggered at the Sinn Fein proposal to have a referendum on the subject but when I think that the Green party foot soldiers…get to vote on it with their own unrepresentative referendum , I do slightly despair….and maybe a full referendum might not be such a stupid idea as I first thought…Lets hope the tree huggers go with it….as there is no credible alternative on the table to NAMA and even Fine Gael have stopped pushing their other solution when the former leadership came out in favour of NAMA.

 

On Tuesday I wrote that AIB was the standout underperformer and that on a trade it might take off. I have to say that I did not think that the move would be so sharp but it goes to show that there is pent up demand here. Thee are lots of risks to the process still and the legislation has only been introduced but sentiment is definitely better in Ireland than it has been for almost a year.

 

The second trip to the UK confirmed the find of the trip from the previous week. That is that Institutions are underperforming their benchmarks , that there is a lot of money looking to be put to work and that the pressure is on for the last weeks of this quarter and the final quarter to drive to a positive performance at least in line with benchmarks. There will be down days like today , which is inevitable as so many stocks are so overbought after the sustained rally if the last couple of weeks. The down days are the days to top up holdings as selling pressure is not there now.

 

This afternoon CRH finally went into the Eurostoxx 50 Index. The stock was volatile all day , it looked like there was not much demand. Maybe naive on my part but I was sort of shocked to see the bid for 14m shares in the closing auction. The stock closed in Dublin at 20.70 and 20.25 in the corresponding London auction.  From all the commentary leading up to this , it looks like the consensus guestimate of demand for CRH by index tracking funds would be in the range of 25 to 27m shares. Most of this got dealt in the auctions and the balance must have been bought in advance.

 

Irish Life fell 10% today as it exited from a FTSE world index but it went back into the Eurostoxx 600 index. This might be an interesting trading opportunity first thing on Monday…

 

Anyway , it is Friday , it is 5pm , it has been an interesting week…

 

Have a good weekend…

 

Liam  

 

  

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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.

 

 

 

 

Liams Last Post : Nama may bring perception change ...AIB ?

Good Afternoon

The day before NAMA and I really get the impression that the news wont
be a surprise and that we will have been through the details of all this
so much that it will be a bit of a damp squibb news wise. Perceptions
though are harder to pin down and tomorrow could be one of these days
when suddenly the mists become clearer and we realise that the problem
loans will now be a problem for the taxpayer to worry about and that the
banks merely have a capital hole to plug to satisfy the markets and to
be in a position to fulfil their obligations under the state guarantee
and the NAMA arrangement to begin to provide liquidity back into the
Irish financial system.

AIB is the stand out underperformer , the Bank has been slow off the
mark in addressing or finding solutions to its problems , time and time
again this year the management of AIB have been left trailing behind the
newer fleet footed management team at BOI. The ratio chart of the two
banks which over the long terms tends to regress to a mean has swung
quickly away from AIB. Maybe tomorrow just for a trade , AIB will be
seen as the place to go to look for the leveraged trade o NAMA. AIB
certainly has had a lot of questions but simply as of tomorrow it will
be confirmed exactly how much capital they need and they then have the
option to dispose of the stake in M&T or Poland should they choose.
Either way , the market seems determined to take the Nama news in its
stride and also determined to interpret the outlook positively.

There may also be a fresh look taken at Ireland by some international
institutions who got badly burned but who may come back and realise that
there are some quality names which have been a bit quiet and could come
in for a bit of attention as they have lagged the high beta (trash )
rally...DCC , Paddy Power have been quiet but could rally from here....
CRH weighting in the Eurostoxx 50 index is expected to be announced
tomorrow...funny but the unpopularity of the stock continues to be the
feature and there are those lining up to short the stock into the
auction tomorrow before the Stock goes into the index on the basis that
the recent performance will be given away after the index buying is
completed. At some stage though it is going to be right to nbe long CRH
, I think the time is coming .. I would only short it as a trade but I
am not covinced this is the right trade... I think it will surpruise
positively at some stage and the crowded trade is to be negative on the
stock so it could move sharply the pther way.

Investors in Elan have been learning that they consider $115m to be
immaterial... at least that is what they used to describe the clause
with J&J up to the time when they were forced to accept a $115m lower
investment for the sae stake from J&J. The market knew this ahead of
time so the price of Elan has rallied after its recent fall and it looks
interesting here although there was an announcement of a further two
cases of PML reported.

Have a good evening

Liam

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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.