Good Afternon ,
Screens dribbling blood red all day today….all markets down …. Irish Sentiment impacted by the Thief of St.Denis with his very own version of two touch football….oh sorry was that two handed football. At least Paddy Power refunded all the losing bets , including the lunatics who had bet on Ireland winning the world cup outright…the only amusing conversations today were about the calls for a replay…
FBD , Kerry and Greencore and C&C were the stocks in the news in
FBD the General insurer released an IMS guiding Operating EPS will be ahead of the analyst average of 86c while our forecast is 103.5c which is at the top end of a wide range of forecasts. The key to FBD is where the NAV bottoms out and while indicators suggest that the NON irish stuff on their balance sheet may be in markets which are tightening, the market will want comfort on what the actual NAV will be. The operational side seems fine with the rate of premium decline in H2 has slowed relative to H1 (down 9% at at the interim stage). It looks like we will trim our numbers for the gross written premium figure by c.€5m (to a full year decline of 7% from 5%). We expect this to be offset in part by a slightly better claims experience than we have in our figures. This stock is cheap though and while it may take the NAV to b revealed to trigger a rally, it is cheap enough to be building a holding at these prices. Give or take, it is 1x book, 7x earnings and at or near the bottom of the earnings cycle. The market did react very positively initially but in the course of a weak overall markets environment, the stock surrendered the initial 11% gain to close up +3% . Allowing a decent second bite at this one.
Mid morning , Greencore who have been linked to unsolicited bids for their Malt business actually announced that they have managed to agree the sale of their water business tio Highland Spring in
C&C were up next this morning with ac Neilsen ontrade data which showed Volume growth in August and September slipping back into negative territory after two months of positive growth in July and August. In the last four months of on trade data, C&C volumes have broadly stabilised (+3.4%. +5.3%, -1.5%, -2.96%) when compared to the y/y declines of 25-35% through 2008. This stabilisation has been achieved through the y/y growth of Magner's Draught and the success of Pear in 2009. The challenge now for the company is to develop a strategy to grow volumes in the on trade. Distribution was broadly flat at 60/61%, with draught distribution up to 10% from 9% and pear distribution at 21% (23% in Aug, 20% in July). Bulmers' distribution remained flat at 49/50% over the period.
Kerry issued an IMS this afternoon (1.35pm) covering the ten months to end October. The company reiterated guidance provided at the time of H1 results of "upper end of the range of 160-165" in line with our forecasts of 164.2c. Reported revenue is down 6% (a disimprovement from H1 where it was down 4%). The commentary in relation to this referred to currency fluctuation, lower pricing and discontinued businesses. Overall, we expect to be adjusting our revenue downwards and margin expectations upwards for the full year but will expect to be around the same EPS level. Strong performance from US Ingredients in terms of volume growth for the quarter is encouraging. The company reported that good progress had been made with the integration of Breeo and that the company is performing in line with expectations. The stock is trading at a discount to international peers but increasing confidence that the Kerry US ingredients strategy may lead to an acceleration of earnings growth could trigger a re-rating of this one from here.
Irish Life still continues to bleed heavily having puncture their own credibility with their IMS. As it was put to me eloquently, You cant expect the market to forgive you for not mentioning an area of concern and then having a warning about it. And it is as simple as that… and so the stock fell yet another -6.9% today to go back to the low of yesterday… We are happy to retain the Eur5.95 price target but while sentiment remains as negative as it is , it also provides a potential value opportunity for the patient.
At 5pm today , most European and
Have a good evening
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
Tel.: 353-1-2404171
Mob:353-87-2313505
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