Liams Last Post : white christmas ecomes a retailers and travel nightmare

Good Afternoon ,

 

Well , it looks increasingly likely that we will get a white Christmas but it is turning into a retailing and air Travel nightmare with more airports closing and more delays due to the extreme weather.

The markets are determined to end the year with a dose of Christmas cheer and determined to ignore any bad news. The irish Financials rallied today after the The European Commission has authorised under EU state aid rules emergency measures for three Irish banks. The worrying item is covered by FT alphaville saying that Anglo Irish Bank will furthermore receive a guarantee covering certain off-balance sheet liabilities (derivatives, clearing transactions and transactional arrangements) that will ensure that Anglo Irish Bank can continue its daily activities as a going concern. 

 

There was also the comments re After all, we had Friday's announcement of a EUR/GBP swap line between the ECB and the Bank of England, on behalf of the central bank of Ireland in order to meet potential liquidity needs from Irish banks.

The continuing concerns re Irish Banks liquidity is an ongoing source of concern but the markets appear to have shrugged it off as a risk factor in ireland or at least seem to worry for only short periods of time before the stocks recover.  Irish 10 year bond yields are back up at 8.87% … clearly someone is worried…

Anglo had an announcement themselves this morning that bond holders had agreed exchange 307 million euros ($404 million) of its so-called lower Tier 2 bonds due 2014 and 459.5 million euros of similarly ranked notes maturing 2016 at an 80 percent discount to par value.     The lender is convening bondholder meetings this week to insert clauses into the bonds' documentation giving it the right to repay the notes left outstanding at 1 cent per 1,000-euro face amount.

Not much corporate action in Ireland , markets mostly up. Aer Lingus down a tad as it is really exposed to the bad weather in the UK and Ireland with sevee disruptions looking likely to continue through the next while.

Have a good evening , I am off to santa with my  kids..

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.

 

 

 

 

Liams Last Post : markets rise on QE , Spain comes into focus now .

Good Afternoon ,

 

Liams Last post has been a bit sporadic because of marketing and client meeting commitments. The markets continue to grind higher as the liquidity injections from the FED feed into the US equity markets and the wave of liquidity is lifting all stocks.

 

Irish corporate news continues to be light , We have been marketing our view on CRH lately and the hold recommendation does seem about right given the challenges the stock faces and a background whereby the sector peers are turning more bullish about the inflection point being this quarter.

 

The clouds continue to gather for Spain , it is remarkable ..i continue to be fascinated . The sequence is copycat like. The Government talks austerity and reform , The central bank behaves cautiously. The Ratings agencies downgrade the outlook for the Banks , the banks fall , the bond yields rise , the ratings agencies downgrade the outlook for the Sovereign state, the banks fall , yields rise and a bond auction happens where coverage is paltry and so the contagion effect seeps into the psyche of the markets. Of course at this stage Spain has been joined by Belgium to face the scrutiny of the ratings agencies.

Ireland as a market game is done for the time being. The Bank subordinated debt holders now await their fate after the passage of the Bank Stabilisation bill which got railroaded through the Dail last night.

 

Have a good evening .

 

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.

 

 

 

 

Liams Last Post : markets off to the races , Euro problems recede , Aer Lingus takes off against my expectations..

Good Afternoon ,

 

Markets opened sharply higher this morning , very little corporate news, there seems to be more of a belief that a political solution to the European crisis may come about. The Germans are still resisting and but the pressure on Spain seems to be abating and the market has had a decent bounce.

 

Irish Financials are rallying also now that the Budget is almost out of the way.  Various components of the Budget are being voted on but comfortably passing so all quiet politically, The news of Fianna Fail infighting is hardly worth mentioning.

 

There is life in the Irish Financials on the back of Bank of Ireland announcing an exchange offer for the sub debt, This if successful will lead to a capital gain of eur750m which is   sizeable step on the road to raising the extra capital required by private means. AIB is also miraculously hanging in there still on the belief that the Govt will inject fresh equity at 50c per share. Not exactly a credible reason for the stock to trade at these levels as the govt could always change the terms….

 

The Construction sector continues to feature in the year end rally stakes as this dog of a sector has a long way to go to catch uup in relative performance terms. Grafton has also been a beneficiary of the rally in the UK merchants. I still like this one and would urge that it be bought here.

 

Aer Lingus has taken me by surprise , I thought that there was enough taken out of peoples pockets in the Budget to really knock confidence  but the market is reacitn to the travel tax news which is a positive.. Ironically it might encourage Ryanair to increase capacity inDublin which would increase competition rather than increase traffic. Better for the consumer. Not sure how it will play out for the carriers. The plight of Ireland has some punters thinking that the state will sell the stake to Ryanair. All I can say is having met the Department of Transport last year , I think that they may sell the stake but I don't think they will sell it to Ryanair under any circumstances as it goes against a pretty wel thought out public policy position re competition and international connectivity.

 

The oils are also in favour even the tiddlers , an interesting sector with lots of newsflow to continue for the next few months… watch this space.

 

Abbey had results this morning ,  a true deep value plc.  Guidance that the outlook is quite bleak would upset most people but Charles Gallagher is a notorious bear. The news that they are commencing the last phase of a project in Kilcoole outside Dublin is an interesting counterpoint to the bearishness. Abbey are saying that House prices have continued to fall slightly in the UK is not new news either but it seems like a relatively steady state now .

 

Fitch news about the latest down grade of Ireland was entirely expected , the news that they now consider the outlook to be stable probably does reflect an inflection point at the bottom of one hell of a long fall. Well hopefully we are at the bottom and not on another ledge…

 

Have a good evening.

 

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.

 

 

 

 

Liams Last Post : ECB bond buying forces short squeeze in Irish Bonds , US employment numbers disappoint , ICG sells Pride of Bilbao.

Good Afternoon ,

 

Markets opened higher this morning after the third straight triple digit gain day in the USA .European markets had rallied into the close yesterday on the back of strong buying of peripheral bonds by the ECB in decent sized euir100m tranches for the first time and four times bigger than previous forays into he market. This effectively triggered a short squeeze and the consequent rally which strengthened the Euro also. There was no big bang announcement from the ECB but they did put their money where their mouth was. As one commentator put it Jean Claude Trichet has finally learned the Bernanke's lesson on Central Banking: when all else fails, buy it all…

 

The rally in Spain and Portugal and for that matter Irish bonds was quick as the market had gotten quite oversold over the past couple of weeks and there was little resistance to the rally. My trip to London earlier on the week had affirmed that the consensus trade is short spain and so it was easy to trigger the pullback. What remains to be seen however is if this pullback is anything more than a technical retracement to previous support levels.

 

Irish Bonds quietly slipped under the 9% level and moved quickly to give up nearly 100bp of yield , A massive rally in the underlying price of Irish Sovereign paper. Spanish paper remained stubbornly above the 5% levels for 10 year paper.

The macro themes continue to dominate as the reporting season is very quiet now and from an Irish perspective we were scraping the bottom of the barrel looking at UK housebuilder Berkeley results to have anything to say this morning. Hard to get a real feel for the relevance of Berkeley to Grafton or Abbey. Berkeley specialises in the south of England ,and announced an 18.5% rise in half year profits to £61.6m. Managing director Rob Perrins said: Today's results, which show an increase in both earnings and sales reservations approaching 20%, demonstrate the underlying resilience of the housing market in London and the south east over the last six months. Overall this strong performance provides the board with confidence that Berkeley can outperform management's original expectations for the current year and is well placed for the following year.

ICG announced the sale of the Pride of Bilbao today. This had been on the cards for quite some time though the ICG management team had tried to steer the market to believe that this might just be re-chartered.  The total consideration for the sale is €37.7 million, payable in instalments over 5.75 years, up to September 2016. (The transaction is in the form of a bareboat /hire purchase agreement under which the vessel is chartered by ICG to St Peter Line and on payment of the final hire payment in September 2016, title passes to the charterers). Delivery is expected to take place in December 2010.  The transaction effectively brings ICG into a net cash position and the underlying conundrum posed some time ago by Eamon Rothwell the CEO remains to be resolved. This is a company now in a net cash position where the shareholders are geared so it probably moves the final solution to the corporate ownership or future of this one a step closer.

 

The Irish Market peaked at about 10am this morning and then fell like a stone dragged lower by CRH and Ryanair .

 

At 13:30 the US Nonfarm payroll data sparked a reversal in the markets with the all European markets dipping.. The U.S. economy added fewer jobs than expected in November and the unemployment rate rose to its highest level since April, underlining the continued weakness in the labour market 17 months into the recovery. Nonfarm payrolls rose by 39,000 last month as private-sector employers added only 50,000 jobs, the Labor Department said Friday. The October number was revised up slightly to show a 172,000 increase from a previous estimate of 151,000. The unemployment rate unexpectedly rose to 9.8% last month. The bad news within the numbers also contained news that Hourly earnings remained flat vs expectations of 0.2% increase.

 

New orders received by U.S. factories dropped 0.9 percent to a seasonally adjusted $420 billion in October, The Commerce Department said October's decline followed an upwardly revised 3 percent gain in September orders while August orders were flat. Economists surveyed by Reuters had predicted a slightly steeper 1 percent fall in October orders.

This afternoon Moody's continued their slow but steady demolition of Ireland saying that  the only six TRIPLE-A rated Irish bonds may be downgraded because they are backed by large numbers of Irish home loans. Credit ratings agency Moodys is considering the downgrade for the bonds from 'AAA' status, saying that the rating is unrealistic. If the bonds are downgraded, it essentially means that loans will be more difficult to secure. Subordinated bonds for Bank of Ireland, AIB and Irish Life & Permanent are also under review by Moody's with a view to being downgraded.

Moody's also warned that  that the severity of the recession here "will leave a lasting legacy on the performance of Irish residential mortgage loans". The agency has constructed a profile of the typical person most at risk of defaulting on their mortgage. They are more likely to be self-employed, have bought in 2006 or 2007, and not live in Dublin or Cork.

The good Old Oirish yes OIRISH Government confirmed that the provisional calendar for the houses scheduled the Christmas break to start on Thursday December 16, with TDs and Senators returning to duty on Wednesday January 19 – 35 days later.  So no rush to have that election then…a well earned rest after al the stress ….

Watch this for a laugh…or a cry… 

http://www.youtube.com/watch?v=nD2Vr7lb-D4&feature=player_embedded

Have a good whiteout weekend !

 

And I will leave you with this thought…..

  A driver is stuck in a major traffic jam just outside Dublin on the M50 motorway.
Nothing is moving.  Suddenly a Garda knocks on the window. The driver rolls down his window and asks, "What's going on?"
"Pensioners" have kidnapped Brian Cowen, Brian Lenihan & Mary Harney, and a bunch of Bankers.
They're asking for a €30 million ransom, otherwise they're going to douse them with petrol and set them on fire.
We're going from car to car taking up a collection."
The driver asks, "How much is everyone giving, on average?"
"About a litre."

 

http://www.bbc.co.uk/news/uk-scotland-11901718     nice sat photo of UK and Ireland this morning…

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.

 

 

 

 

Liams Last Post : Bailout rally was swift , short lived and followed by a european wide slide of bonds and equities alike

Good Afternoon ,

 

Well its all very amazing , the Grinch came and stole Christmas yesterday when the news of the IMF/EU deal was announced. On a cold snowy night , the population realised once and for all that all the talk about economy and banks has now become a very visible amount of  hard cash. The scale of the bailout was well leaked in advance , but there was some issues which caught the eye of the man in the street and that was the use of the full reserves of the NPRF to go towards bailing out the banks.

 

The good news though came with the news that the Regulators new pronouncements re Capital requirements were much better than the market had feared. On Friday a complete nationalisation of Bank of Ireland was a possibility or a haircut for bond holders which could possibly have given rise to the extinction of the rights of the equity holders. As it is the new capital requirement for bank of Ireland is just about 1bn less than anticipated and the news that Bank of Ireland management are going to try and raise as much of this from private sources with the state backing is pleasing.

 

And the equity market reaction ? a short rally first thing which gave way to a pull back across the board in all markets except the Irish financials.  Irish Life had a +58% get out of jail rally , Bank of Ireland a mere +15% rally and AIB which still trades on thin air if you ask me +3.8% . The scale of the fund raising at AIB is massive.  AIB is now required to raise an additional €5.265bn Core Tier 1 capital. Taking account of the capital AIB has still to raise under its capital plan, the bank has now to raise €9.765bn of Core Tier 1 capital by end-February 2011. 

 

The reaction of bond markets was hardly surprising with Irish 10 year yields blowing out to 9.27% but the game now in focus is Spain with yields now at 5.42%. This deal did not even put a sticking plaster on the markets worries about the Euro project .

 

European equities also had a tough day with the FTSE -2% , The Eurostoxx50 index -2.45% m, the CAAC 40 index in France down -2.5% and the DAX in Germany and the IBEX in Spain also down -2.2% highlights that this deal does not end the game but merely moves it onto the next high stakes countries.

 

The Corporate News in Ireland today came from Aryzta who affirmed their trading outlook and made positive noises about margin progression .The stock was +6% and Cove Energy who announced that their partners Anadarko had made a third major discovery in Mozambique.  

 

Have a good evening ,

 

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.

 

 

 

 

Liams Last Post : Central Bank Governor pours fuel on fire..

Good Afternoon ,

 

I have to say that for those of us who fondly remember the 4^th Quarter of 2008 this takes the biscuit.

 

Today we had the spectre of the Governor of the Central Bank casting doubts on the adequacy of the levels of Bank capital requirements in Ireland , this had a particularly damning impact on Bank of Ireland and Irish Life and Permanent. You have to wonder how someone in his position  could raise this spectre just months after the government backed a rights issue and the new regulator underscored his confidence with the capital adequacy of the Bank in the first place. Surely a person in this position of responsibility has at least a duty to not be doing solo runs re policy on a whim and that he should be working with all the authorities to provide a coherent framework for a solution and to provide calm. Instead he has poured fuel onto the fire.

 

Meanwhile the government in waiting as in Labour and Fine Gael have likewise seen their leaders indulge in party politics before the national interest.  I am looking forward to the election and but I am developing a rather long list of those who will not be getting my vote… This afternoon in the Dail the leader of Fine Gael just happened to have an idea to raise the pressure in the markets once more by asking the Taoiseach to assure the house that depositors savings are secure. Brilliant and constructive question eh ?  and a fantastic idea to press the nuclear option and seek an election before the budget. What are they hoping to achieve ? they wont be able to avoid the hard task of implementing the measures in the budget so best they get on with it , the numbers are stark and unavoidable.

 

Spain had a bond auction today which was poorly covered and less than the maximum which the Spanish government had hoped to sell as  the crisis rumbles along towards spain but and the bond markets are reacting with Spreads vs Germany reaching 233 bp , an all time high.

 

Its not about stocks this week , its about the future of the Euro and Ireland is front and centre with Portugal and Spain now feeling the heat. This afternoon  the IMF's Director Lipsky said that the fund has been in contact with Portugal. This itself will exacerbate the nerves tomorrow.

 

And of course to keep things on the boil there is a huge insider trading scandal breaking on wall street and of course the North Koreans have decided to start shooting at South Korea.

 

All good fun…

 

Have a good evening.

 

Am sure that the comedy show will continue on all the current affairs programmes this evening.   As for me , I  am going to the gym…

 

Have a good evening

 

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.

 

 

 

 

Liams Last Post : Bailout application triggers political turmoil , Financials tanking and Portugal moves into the crosshairs..

Good afternoon ,

 

Well it is afternoon and it is cold and dark and the news re the application by Ireland to be bailed out has been received in progressively more bearish manner as the day wore on. The cold fury of the population is now becoming apparent and the petty political muppetry is a sight to behold…

 

So what was achieved today ? a panic in the Irish financials with Bank of Ireland down -19% , Irish Life which had run up ahead of the bailout falling like a stone to 91c a fall of -25% and AIB which I don't understand only down -6%. Maybe the market was not watching the same comments from Brian Lenihan last night when he talked about re-assessing the capital requirements of the banks and he specifically mentioned AIB in the context of it having a small residual private shareholding. I thought that he was effectively giving the market the nod re its imminent nationalisation when he suggested that if it needs more Capital then it 'might have implications for the residual shareholders…'

 

Merrion launched a detailed note on CRH ,  a strong fundamental piece of work rolling out our forecasts to 2013. In the note we look at the reliance f CRH on the USA and individually look at the states where CRH operate from a budgetary and funding perspective and also from a demographic perspective. The conclusion is that CRH does find itself operating in states where the finances are not in great shape and the demographics are likewise unfavourable.  The market has also talked at length about the haemorrage of management from CRH's Oldcastle materials business to Summit Materials to follow Tom Hill. David has put together an powerful organogram which certainly highlights the challenge facing CRH. CRH has lost significant numbers of well placed senior and mid management in its organisation and this may explain why it is so quiet except for announcements of disposals such as the insulation business to Kingspan and today a small business for eur37m

 

The overall conclusion of the note is a HOLD recommendation. The Hold is based on a view that the stock after the recent rally is now looking fully valued relative to history and its peers and needs upgrades to keep going higher. The conclusion of the state by state analysis and our assessment of Europe is that there is little chance of upside surprise in the near term so hence the Hold.

 

Origin Enterprises had a re-assuring statement today which was kind of overlooked and Paddy Power did not react to the news that the Irish thoroughbred breeders association is looking for a 2% turnover tax. This is worrying as the timing of the calls for a higher tax may be met receptively now as the Government looks for all avenues to raise revenue. Paddy Power do anticipate a betting tax being introduced in Ireland.  When I spoke with Jack Massey last week he mentioned a 1% turnover tax. This would impact Paddy Power to the tune of 5m of EBIT and cost 9c of earnings.  This has not been factored into many brokers forecasts at this point as the tax has not been actually announced. Concern about this could and probably will weigh on Paddy Power for the next few weeks until we get some degree of certainty.

 

 

The bond markets were not pacified with Irish yields remaining above 8% yields and the portuguese now saying as loudly and about as credibly as the Brians did a few weeks ago that Ireland does not need a bailout. Even the spanish were heared practicing their No bailout refrain in the background.

 

And of course Hats off to Jackie Healy Rae and Michael Lowry for behaving lioek typical Irish Politicians and the Greens for actually behaving like Turkeys and voting on Saturday to seek to dissolve the government. All this before the Budget which raises the spectre of it not being passed. Yes a wonderful market outlook and definitely cedes all the negotiating power to the IMF and away from Dail Eireann. Well Done.

 

Have a good evening

 

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.

 

 

 

 

Liams Last Post : COrporate news a plenty , mostly ok, Ireland Negotiations continue...

Good Afternoon,

 

Today was a busy day for corporate results with United Drug , Paddy Power , Irish Life and  Greencore all with news.

 

United Drug numbers were in line , no great surprise and flat earnings in prospect for next year after the increased financing costs and the expense involved in building out the Medco JV. Longer term as this one grows away from Ireland and earnings growth resumes it might get a bit more exciting.

 

Paddy Power also upgraded their current year numbers on the back of strong trading and uk online customer acquisition growth. Ireland was mentioned as continuing to deteriorate. I do like this stock and their clear strategy. Also the fact that the management track record of managing the Irish business through the toughest of times successfully whilst growing and gaining scale in their international operations. The New South Wales court case loss was not such a big issue for the market today. looks like this will be appealed further. While the underlying performance is strong , the short term could see a headwind when the Irish government outlines their final plans for a turnover tax, Certainly Paddy Power are expecting it and so there is a liklihod that earnings will be flat next year as a result of the impact of this tax. Personally this is probably a very cautious view but 2010 had the world cup and favourable sports results.

 

Irish Life presented their story also today. Hard for them to be upbeat. The market looking at the increased exposure to the ECB and all the attendant fears. Irish Life are hostages to the wholesale markets which are closed so dependent entirely on the government guarantee for liquidity. Their plans to help improve their loan to deposit base are effectively impossible to execute with the current uncertainty.

 

Greencore and Northern foods announced an interesting equal merger of the two companies. The news sent both companies shares sky rocketing .Greencore had been really underperforming as the market wondered what it was going to forgiven the apparent real disappointment at the pace of their USA developments.  Some suggested that a counter bidder might emerge for Northern Foods. Northern Foods shareholders will receive 0.4479 of new Greencore Share for every Northern Foods Share held by them. The Synergies are expected to be approximately £40million per annum (c. £15millin from overhead cost savings, c. £20million from purchasing and supply chain improvements and c. £5million from financing and tax efficiencies) and is expected to be realised in three years. Letters of intent supporting the merger have been received by shareholders holding 30.29% of Greencore and 11.81% of Northern Food's existing share capital. Greencore and Northern Foods shareholders will, on a fully diluted basis hold approximately 50% of the enlarged share capital each. Overall the Groups expect that the merger will provide the ability to drive cost efficiencies and combine both their Foods complementary customer basis.

 

 And so on to our neighbours in the UK and their very nice chancellor George Osborne who has stood right up to the plate with unequivocal support for Ireland. Good On him.

In a sign of the tension gripping Ireland today, a hoaxer posing as an Irish television reporter nearly precipitated a crisis inside the embattled Irish coalition government today.

As members of the Dáil filed into parliament in Dublin's Kildare Street this morning, someone holding an RTE microphone asked them what they thought about the resignation of Irish health minister Mary Harney. This sparked rumours that the coalition's majority had been slashed to just two TD's.

However, the "reporter" was actually from RTE comedy show Republic of Telly, and Harney had not resigned. Alas, the jolly jape didn't go down well with MPs, or RTE's own political correspondent, who we understand has now filed an official complaint...

And so it goes on and the Irish people await the arrival of the IMF and EFSF delegation tomorrow. Meanwhile the Guardian Ireland correspondent writes Irish government sources said today that the size of the rescue package for Ireland's banking system has been underestimated because one of the Irish banks had undervalued the amount of money needed to save it.

They said the scale of the cash injection needed to shore up the Allied Irish Bank was even greater than what the financial institution had first told the government.  On the basis of this the AIB statement due on Friday may not be quite what he market was originally expecting…

Have a good evening,

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.

 

 

 

 

Liams Last Post : Markets waiting for bailout news , Kingspan marginally disappoints , Portugal joins in.

Good Afternoon ,

 

Markets are quiet today worrying about what to make of the Will they or wont they issue re Ireland. Yes there is no denying that talks are ongoing but the Irish government seems to be keen on any bailout going directly to the banks and not the state.  The other big issue for Ireland will be not ceding control over the 12.5% corporation tax rate. A decision that Ollie Rehn seems to keep re-iterating over and over again.  

 

The 10 year bond yield has continued its descent now down to 7.95 and a mere 540bp over Germany. It would appear that Ireland is now under pressure to accept a bailout.

 

Portugal too is under pressure from markets and the finance Minister made some remarkable comments today. "The risk is high because we are not facing only a national or country problem. It is the problems of Greece, Portugal and Ireland. This is not a problem of only this country."  "This has to do with the eurozone and the stability of the eurozone, and that is why contagion in this framework is more likely. It is not because markets consider we have similar situations. They are only similar in what concerns markets, but as I said they are very different. Markets look at these economies together because we are all in this together in the eurozone, but probably they could look different if we were not in the eurozone. Suppose we were not in the eurozone, the risk of the contagion could be lower."

 

But as Brian Cowen was incensed with the comments mad by Angela Merkel which ultimately ended up with the G5 statement on Friday then Portugal too threw some blame in the direction of Angela Merkel too.

 

He went on to say that the Portugese budget proposals were positively received by the markets, then things were reversed because of the uncertainty around the permanent mechanism for dealing with bail-outs," referring to the European summit on October 29, when plans for a rescue mechanism to succeed the existing European Financial Stability Facility were outlined in a Franco-German initiative.

The Corporate news was from Kingspan today who released an IMS covering July through to the end of September. Sales in Q3 increased by 15%, helped by a previously flagged strong Q2 order book. Kingspan's order run rate has slowed from the strong performance of Q2. The company has also seen resistance in their ability to pass through increases in steel and chemical prices to customers since the company reported its H1 numbers. This pressure on margins is likely to continue in to the future given "macro weakness" which will also affect volume levels. Kingspan saw net debt increase to €140m from €135.1m . Kingspan now expects a full year operating profit in the range of €62m-€65m which is slightly below our estimates of a €65.9m.  The IMS was a tad disappointing with consensus earnings likely to be revised down a little across a range of brokers. The overall valuation looking ahead to 2011 is not cheap either and as the multiple is anticipating a recovery the stock is likely to struggle here. Kingspan dropped -1.2% today.

 

Business conditions in the New York area deteriorated in November, as the New York Fed's Empire State manufacturing survey plummeted 27 points to -11.1, driven by a sharp drop in new orders. The release was far worse than economist expectations for a +15 reading and marks the first negative reading since July 2009. The shipments index also fell below zero.

 

Have a good evening

 

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.

 

 

 

 

Liams Last Post : Bond yields fall sharply on EU G5 statement and funding stories, BOI and Glanbia IMS pleasing, CRH explains itself

Good Afternoon ,

 

Well Ireland certainly has had a very interesting week and been in the news all week , for all the wrong reasons but there again much of those reasons were just to do with market prices and the snowball effect of rising Bond yields on the perception of the country and the ability of the state to access funds as well as the Irish Financials to do likewise.

 

Today helped by a statement made by the G5 Finance ministers which clarified that the German proposals on Private participation in future bailouts helped turn the tide on Irish bond yields which fell like a stone over the last week to hit 9% last night.  Yields rallied sharply today to close at 8.12% , a mere 560bp spread over Germany.

 

Bank of Ireland issued an IMS today , the initial reaction this morning was weak but that was a market wide issue on the back of a weak Chinese market close last night. The guidance was positive with improving operating profitability underlying and net interest margin which was also a tad better. It would appear that there was some surprise from international investors when Bank of Ireland noted that they had seen outflows from ratings sensitive deposits. This is hardly surprising .Personally I was comforted by the statement that retail deposits were stable. This is an area where we detected a degree of alarm on the part of retail clients over the last few days.

 

Glanbia re-iteration of their 20% growth guidance was pleasing today also.

 

CRH held an investor day in London. It would appear that little substantive and new emerged from it. n the US side, there continues to be a high level of uncertainty as to what will happen in 2011.  The european business highlight the importance of vertical integration with poland being the poster child for the crh model. Entering the country last but are now the only fully integrated company are now the most profitable. Albert sees a similiar economic development path for the ukraine. On the materials side, they want to keep exposure to solid mature economies in the netherlands, finland and switzerland while planning for emerging markets to come on stream later. Sees a return to mid teen ebit margins.

 

For products and distribution, the market for res and non res continues to shift to rmi from new build in europe. The geographic exposure for products is quite broad with no one country exceeding 24% of sales with the netherlands making up that percentage. Distribution has shifted some of the focus away from the netherlands to switzerland and, as a result of the bauking transaction,northern germany. Managing Director for the division seems to have a clear framework of where crh would like to get to, targetting some of the larger economies that have been avoided to an extent before. Would expect more development activity in south germany. On a medium term basis ebit margins are seen up over 50% from 08\09 levels but it will be slow given europes macro environment.

 

On emerging markets, its the most open that I have seen the company be about the space. They will stick with their historic way of entering a region ie. Buying a reserve backed asset, capex to bring it up a level and then integrate their plan for excellence. Sees huge growth in cement demand proxy for construction in india especially over the next 20 years. China is seen as being more volatile but longer term returning to current levels. The chinese market itself is difficult as pricing is very low with buildings materials seen as being underappreciated and a highly fragmented market. Crh is only seeing small single digit returns in china and considers itself best in class, so a difficult market. The yatai stake can be increased in 2013 which I think will happen.

 

So a busy enough day for news in Ireland culminating this afternoon with a reuters report saying that Ireland is in talks to Receive

Emergency Funding From EU.  Eurozone sources say assistance to Ireland does not foresee any debt restructuring or 'haircuts' for bond holders.

 

Not good news for taxpayers… but the market is taking it as good news and so the financials continued to rally into the close.

 

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.