Liams Last Post : Corporate news fest...CRH resilient despite the downgrades , no major surprises

Good Afternoon ,

 

Ireland is a small place with a handful of companies so it is always incredible to me as to why Grafton would choose at 5pm to send out notification of their intent to issue an IMS that would clash directly with the IMS of CRH.  I further wonder why DCC and Norkom would also choose to go head to head to complete the Five Irish companies bursting with news.

 

So CRH was the biggie , all eyes glued to that one first thing this morning , we had anticipated there might yet be just one more downgrade to earnings estimates  and indeed there was but the downgrades was -15% for this year and -14% for next year. Big percentages but compared to the earnings base where CRH have fallen from the numbers are not so big in absolute terms.  The conference call was somewhat uninspiring , the earnings revisions reflect the underlying 'moderation' of operational slowdown was not as much as we had hoped….ergo… it continued to fall faster than we or the company had anticipated…looking ahead , there will obviously not be the same level of one off re-structuring costs and interest charges will be lower due to debt reduction. We stick with the BUY on this one though management have had a very poor ability to predict the speed or the depth of the slowdown.

 

When the company had their rights issue , in order to bolster their balance sheet and leave them flexible when their peers got into trouble the earnings estimate for 2009 was Eur1.50 , it has now fallen to 84c …. The market was ahead of this one in terms of it being de-rated.

 

ICG looked ok today with strong cash generation and traffic figures which were resilient being the key.

 

Grafton was a story if resilience and stability , the rate of decline in sales has slowed markedly , there is operational leverage to any upturn but the market continues to struggle with what to do with the stock.  A couple of weeks ago , the statement of today would have been very well received , today the a market tried to rally , then it fell then it sort of strengthened to finish at 3.30 down -2.4% on the day.  

 

Norkom was upgraded after a decent set of numbers , a strong presentation by management , A strong cash generating performance some decent client wins. There are a coupel fo clouds on the horizon though with increased competitor activity from Actimize and the analyst noted that IBM had sought other partners in the USA rather than NOrkom. However this is well reflected in the share price.with a p/e multiple of  10.3x looks cheap ,. We have a valuation target of Eur2.20 for this one , compared to 1.20 current price…

 

The Banks were volatile and as the day wore on they sold off with the AIB/BOI twins closing with Identical Bid /Offer spreads… Truly the market cant differentiate them.  We do have our published preference for BOI over AIB and Irish life as the safer non NAMA play.   The banks were down  -9% for AIB , -9% for Bank of Ireland and -7% for Irish Life.  

 

McInerney had a trading statement too. It almost slipped by un noticed… Commentary on trading conditions remains broadly unchanged from the time of the EGM statement at the end of September, with poor trading conditions continuing. Sales in the Irish market remain flat and the prospect for any immediate change remains uncertain. In the UK, the market is stabilising, albeit at low levels. McInerney noted that certain Banking covenants that had previously been deferred will now be tested and it will now breach… OH OH … no wonder the IMS kind of popped out under the radar so to speak..

 

Smurfit tomorrow…. Their news of issuing a bond was well received and stock was up a tad.

 

European markets had a proverbial see saw ride today closing lower ultimately having three times been in positive territory. The FTSE rallied in the morning and then traded ina range gradually lower before closing just below yesterdays levels. And Wall street which had opened lower then rallied then gave up the gains is broadly flat … still upward bias here…and all the talk of the increasing risk and the VIX index has suddenly gone quiet…

 

Lets see what tomorrow has in Store , Have a good evening

 

Liam

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

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