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

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