Good Afternoon ,
Well , I have to say that I am surprised , I could see nothing on the horizon that was going to transform the sentiment the way it has come around in the past week. I had been a bull of the market , I had been surprised at the price action for the five or six weeks from mid September to the end of October and when I saw the buyers who had considerable firepower getting gradually filled I turned bearish just on time for the worst of the pullback. What I am surprised at more than anything was the way the markets tested the lows , and did not hang around for very long before rallying again. The markets are all being driven by the
Aer Lingus had a trading update today, the market reacted positively to the news that Q3 yields were a bit better than the H1 experience but more importantly the market took the news that Aer Lingus had sought and received expressions of interest in the sales and leaseback of some aircraft well. The news indicates that management are focussed on delivering savings and it signals to the Unions that unless there is progress that there will be job cuts arising from the fleet shrinkage. The stock was up nearly 20% at one stage before easing back to close +10% on the day.
The Irish banks reacted to the improving sentiment and were up about 5% driven by sentiment and ignoring the scare stories in the media from the weekend. I think that the market has a view about how NAMA will work and the Bank of Ireland management team have been making a decent impression on the road as they meet investors.
CRH has an interim management statement tomorrow , a crucial day for the stock and while there is the possibility of downgrade , I think this is very much expected and unless it is a disaster , I can see the stock potentially having a decent run from here. Any news re acquisitions would be taken positively also.
Grafton still looks a tad worrying to me , it fell like a stone , rallied like a phoenix and singularly failed to hold the gains with any conviction. Looks like the 3.40 level is new top for it in the near term with a range of 3.00 to 3.40 being the likely bounds of the trading range.
DCC results are tomorrow. We expect H1 operating profit to decline by 14% yoy to €51.9m and adjusted EPS to fall by 12% yoy to 48.4c, with weaker sterling having a meaningful impact on reported numbers. H1 traditionally accounts for only 1/3 of annual profits, therefore the main focus will be on outlook for the Energy and IT divisions and the company's current appetite for acquisitions. Key Focus Will be on Outlook for Energy and IT Divisions and Acquisition Strategy Given H1 profits traditionally account for only 1/3 of full-year profits, the key area of focus will be on the outlook – particularly for the Energy and IT divisions as these represent c.75% of group operating profits. We will be looking for commentary on the impact of the relatively mild October this year as well as any visibility on IT retailer stocking trends ahead of the busy Christmas period. Also of interest will be an update on the company's present appetite for acquisitions – net debt in March stood at €91m which should result in the company being able to step up its acquisition spend over the coming years
Smurfit has results coming up this week too and the stock is rallying ahead of them also.
Wall street looks like it has decided the only way is up… and at 5pm the Dow is up 1.6%
Have a good evening ,
Liam
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Liam Boggan
Merrion Stockbrokers
Tel.: 353-1-2404171
Mob:353-87-2313505
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