Liams Last Post : A better day , Cyclicals and construction in Vogue in Ireland

Good Afternoon ,

 

European markets opened strongly this morning after the performance of the US on Fridaynight , Sentiment improved today though markets have been range trading in quite narrow ranges for some time...

 

CRH , which I had pointed out had been a massive underperformer jumped +3.5% today and outperformed its peer which were also up but within a range of 1.5% to 3% , so maybe just maybe it is begining to show some relative strength. 

Grafton is still consolidating at theselevels , I have to admit I am getting more comfortable with this one at these levels but would like to turn more aggressively positive if it dipped down towards the EUr3.00 level. 

 

It was the cyclicals who returned to favour but the market was overall better so it was just degrees of performance with Smurfit also coming in for support and closing +3.3%. Smurfit was reacting to the news RISI reports that Spanish containerboard producer Europac has announced it plans to raise kraftliner prices by 60 per tonne effective January 1. It previously raised kraftliner prices by 60 per tonne from September 1. Europac notes that the shortage of kraftliner production in Europe and declining imports from the US have decreased stocks considerably.

 

The foods which had been an area of safe refuge in the past week also benefitted late inthe day as Kerry which had been down -1% at one stage closed the day +0.6% 

 

Irish Life is still struggling , I do think that the current price levels are attractive though so am encouraging clients to use the weakness as a buying opportunity. The absence of the third force proposition , the capital hole and the increase in Commercial property writedowns is the issue though but we are resolute in our belief that the stock is worth eur 6.00 so it has to be attractive here. 

 

AIB and Bank of Ireland benefitted from a generally more supportive environment though AIB closed +2.1% and Bank of Ireland +0.6%

 

Tullow was off about 0.5% despite the prce fall of -4.6% from its former Ugandan partner Heritage in the news of their disposal of their stakes in Uganda to ENI. The Tullow price is resilient at these levels despite the fact that on conservative valuations it looks expensive. The market is prepare to take a view of the porpsects of the Tullow acreage and prospects and wait for reserves to be proved up over time.

 

Aer Lingus reacted to the notie of the London investor day with an element of bemusement .... the stock was up 0.89% , the market awaits news from the management and the outcome of theor engagement with the Unions at the labour Relations comission. THe market need to know this management can deliver , the previous CEO Dermot Mannion cost saving plan was a coup for the Unions who negotiated some cost savings with a long payback . THis time , it has to be quick , all achieved in one go and cant be seen as a sop to the Unions...

 

ICG jumped +3.8% better probably helped by the media story at the weekend that the emergence of a trade buyer was becoming more likely in the aftermath of the placing of the Carroll stake,.

 

The Greencore price was flat on the day , despite the media stories about an imminent placing of the shares of Liam Carroll and the news of the disposal of the Water business and the interest in the Malt business which if disposed of would provide the capital for Greencore management to execute their USA growth strategy. I like the notion of what Greencore are planning to do. I am aware of the success of the European retailers and the rapid growth of private label in the USA but I am just not so sure that Greencore have any defensible long term unique selling point to be successful in the USA. This is heresy for some who think that Greencore can do no wrong but first they have to make the divestments and then re-invest through acquisitions. The stock is not expensive though so while the Jury is out on their ability to execute their USA strategy, if they can , then there is also significant upside to the sharepirce from these levels.

 

Across Europe markets were well up today , THe DJ Eurostoxx 50 index was up +2.2% , the Dow Jones +1.3% , and London +2% whereas Ireland was +1.4% .

 

Have a good Evening

 

Liam

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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