Liams Last Post : Market feels like Glue...struggling and stuck...

Good Afternoon ,

 

A disappointing week in terms of performance , especially in Ireland, he Financials have had a tough time , there has been selling pressure triggered in part by the sterling weakness and despite the strong performance by wall street , there was no real follow through in to Ireland.

 

Wall street closes the week +1% , the Euro Stoxx 50 index +0.6%  , the FTSE index +0.83%  and Ireland down -2.5%

 

Friday evening as the markets drew to a close there were a number of large trades in Dublin at low and attractive prices for the buyers. The rumours were about a fund being liquidated though there was some speculation initially that this might have been related in some way to Liam Carroll though this seems to not be the case.

 

C&C Offtrade data was he highlight of the morning in Ireland ,  Magners volume and value performed in line (down 21%) on a month on month basis in this four week period, reflecting its flat pricing. Magners performance on the month outperformed Bulmers which declined 29.8% in volume terms. Magners Pear's distribution declined marginally but it increased as a % of total Magners sales to 13.4%.  The overall off trade market increased 2.6% yoy (decline of 15.3% mom) and total cider volumes increased 20.8% yoy and fell 11.5% mom. Within this, Magners volumes increased by 21.2% yoy and declined 21% mom. This follows a yoy increase of 12.9% in the previous four weeks (to 5 September) and 0.8% increase in the four weeks to 8 August.  Magners overall pricing (in sterling) fell by 11% yoy, versus a decrease of 8.1% in August. Magners pricing was essentially flat mom, the second month with no change.  Magners is now at an 8% price premium to Bulmers Original (11.7% last month). In April/May, Magners discount to Bulmers got as large as 13% which we believe was the main factor stimulating the strong volume growth recorded by Magners earlier in the year. Magners' share of the LAD was 1.08 % in the period, from 1.17% in the four weeks to Sep 5 and 1.29% in the four weeks to Aug 8. Magners' share of cider fell to 5.17 % versus 5.79% in August. This compares to Bulmers share of 4.7%. 

 

I wrote about the commodity dairy price pick up , here are the details  Cheddar Cheese prices received for US 40 pound Blocks averaged $1.37 per pound for the week ending October 10.  The price per pound increased 5.6 cents from the previous week.  The price for US 500 pound Barrels adjusted to 38 percent moisture averaged $1.39 per pound, up 4.7 cents from the previous week. Butter prices received for 25 kilogram and 68 pound boxes meeting USDA Grade AA standards averaged $1.23 per pound for the week ending October 10.  The U.S. price per pound increased 2.5 cents from the previous week. Nonfat Dry Milk prices received for bag, tote and tanker sales meeting USDA Extra Grade or USPH Grade A standards averaged $1.02 per pound for the week ending October 10.  The U.S. price per pound increased 0.5 cents from the previous week. Dry Whey prices received for bag, tote and tanker sales meeting USDA Extra Grade standards averaged 31.7 cents per pound for the week ending October 10.  The U.S. price per pound increased 1.6 cents from the previous week. The environment should be supportive for the Glanbia's and other Dairy commodity stocks.

Oil prices moved higher after US inventories data showed a larger-than-expected drop in petrol stocks last week, down 5.2m barrels, compared with a market forecast for an 800,000 barrels increase.  US crude stocks rose 400,000 barrels, below the consensus forecast for a 700,000 barrels increase.

Weakness in the US dollar helped to push gold higher too and of course Gold is being helped higher by those who fear that at some stage the liquidity driven stimulus packages may trigger inflation.

In Ireland we have Elan and Icon results to look forward toon the 21^st of October..

Elan Results are primarily geared to Tysabri so sales of this drug will drive quarterly performance. We expect weekly additions to grow and quarter end patient numbers of 46,300. We forecast adjusted EBITDA of $41.0m for the quarter and an EPS loss of 8c. PML, EDT projections and competitor MS drugs are likely to be focus of Q&A.Our Forecasts – Adjusted EBITDA $41.0m; EPS of - 8 cent We forecast Q3 revenue of $298.3m (up 12% yoy) driven predominantly by an 18% increase in Tysabri revenue. Gross margin is expected to expand slightly on the back of increased Tysabri leverage. SG&A is expected to reduce further (from 25% of sales to 22%) due to a continued focus on cost control. EBITDA (adjusted for stock comp; amortised revenue and other charges) is forecast to be $41.0m for the quarter (up from a $1.6m loss yoy and from +$19.1m in Q2 2009). Loss per share is expected to be 8c. We have made some minor adjustments in the current quarter to account for the J&J deal which closed on the 17th September, the impact will be more significant in Q4 and FY2010.

 

For Icon we are forecasting net revenue of $225m (consensus: $223m) broadly flat yoy and a 2% incremental qoq increase. Operating profit of $27.4m represents an operating margin of 12.2% (down from the 12.9% achieved in Q2 and accounting for costs associated with the Qualia acquisition in Q1 2009). There is the potential for out-performance on operating margin given the recent focus on cost control. This provides EPS of 36.3 cent (consensus: 34.3 cent – difference appears to be predominantly interest cost expectations) representing 4.9% yoy growth. New business and cancellations in peers results proved volatile in Q1 and Q2 2009, against which ICON came through relatively robustly. All the major competitors in the sector spoke of improved RFP flow at the time of Q2 reporting. The hope is that we will see this turn into improved new business wins and that the delays in signing contracts seen in the first half of the year eases. We forecast gross new business wins of $325m for the quarter (2.7% higher than the $317m in Q2) and a cancellation rate of 3% of starting backlog (c.$55m). This (depending of course on revenue performance) will provide a book-to-bill around 1.2x In line with Q1 and Q2. In our view gross new business momentum will be of more importance than the book-to-bill figure as it will be a clearer indication of whether the increasing volume of outstanding RFPs is starting to convert into backlog at a more "normal" pace than in H1.

Hope you 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.