liams Last Post : Markets in the Red, Tullow raises £1bn , Smurfit behaves , Greece worries and Caterpillar caution.

Good Afternoon,

 

It is a bit like a re-visit of the dark old days, markets sliding off on very low volumes , a tremendous amount of apathy around and yet stocks like Tullow oil today comfortably complete a £1bn sterling secondary placing to fund its development programme.

 

The Irish Financials reacted very negatively today , AIB dropping -1o.4% with Bank of Ireland and Irish Life both also dropping by about -5% 

In terms of the message , We were doing some reasonable business in CRH , no one disagreed with my view of the world or felt that we were not right to be positive but at the same time no one really rushed to buy the shares, CRH closed -3.3% today as the apathy on the buy side was not translating into any kind of selling pressure. 

 

FBD has been a miserable performer , and as a colleague pointed out  has now been down almost every day for the last 12 days. the stock surrendered -5.5% today.

 

Grafton has also fallen out of favour and is friendless with a -6% fall today. The outperformers were the food stocks which showed true defensive characteristics.

 

Smurfit Kappa and Mondi have both announced that they are in active negotiations over a potential transaction that would effectively be an asset swap. This would involve SKG acquiring Mondi's UK corrugated operations and Mondi acquiring SKG's European sack converting operations. SKG's sack operation is part of it specialty division and represents a relatively modest portion of the group – therefore, if this transaction is agreed, it will not be very significant in the context of the overall size of either group. That said, it would strengthen SKG's existing sizeable position in UK corrugated, while it would deepen Mondi's leading position in sacks in Europe (SKG would exit sack, a product where its position is arguably sub optimal). What is interesting about this possible transaction is that in a sector screaming for consolidation but which is capital constrained it represents consolidation moves for both parties through asset swap.  Smurfit continues to benefit from the pricing and discipline being shown by the sector and was only down -0.6%

 

Paddy Power has also cracked quietly and the stock trading now just below the Eur23 level looks like a very interesting level to get long.

 

The markets ar being spooked by Greece where a run on the Credit Default swaps got to 373 basis points. The Greek sovereign debt problem is really scaring the markets properly at this stage and positive revisions to German GDP expectations for 21010 were ignored by the market. In the USA the New home sales figures showed a slowdown and Caterpillar which reported earnings also unnerved the market with its guidance for 2010 though it said that sales would be up between 10% and 25% from 2009 levels.      Caterpillar said today that economies in North America, Europe and Japan are improving and more rapid rebounds are occurring in China and most developing countries. Caterpillar today said the U.S. economy will grow 3.5 percent which is an upgrade to its forecast of +3% that the company made in October.  Caterpillar said that Dealers had cut inventory levels during 2009 and went on to say that they expect no re-stocking in 2010 though underlying demand is picking up.  

 

As markets closed today , Ireland was down -2.3% , London down -1.1% and Europe also down by over -1% across the board with Spain falling by -2% and Greece down -3.9% highlighting the pressure on Greece right now.

 

I am off to London tomorrow, Lets hope markets improve from these depressed levels.

 

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 : Better markets , though quiet Aer Lingus strategy unveiled , Banks doe=wn grades and look forward to Tullow...

Good Afternoon

 

Another day where the markets trundled along struggling for direction. Markets opened today lower and recovered slowly through the day holding the levels and getting more confident as the day wore on helped by the German Ifo survey of business confidence which came in with a reading of 100.6 up from last monght and a rise for the tenth successive month.

 

In ireland today we were treated to the Aer Lingus investor day which we listened to with bated breath.  Ultimately Christoph Mueller told us a story about Aer Lingus which came as no surprise to anyone.  Aer Lingus is set to follow a hybrid strategy of a sort of Low cost airline offering a la carrte premium options and major city connectivity and so looks more like an upmarket Easyjet with a longhaul business which will offer interline connections to major carriers in the USA and BA in the UK. The whole plan looked a tad woolly and frankly in danger of still being all things to all people which is a recipe for cost slippage. The Cash numbers were a bit better than expected and at first the cash costs of the re-structuring looked lower but it emerged there will be further costs next year.  Frankly the strategy seems to be to husband the cash and to recognise that re-structuring to a cost base like Ryanair is not possible to achieve so hence the shift to the Hybrid model which frankly may make Aer Lingus more attractive to a flag carrier as a consolidation candidate overtime. 

 

The Tullow story is one to keep a very close eye on. This is essentially an Irish controlled company , there is a trading update tomorrow and the stock has retreated a fair bit with the uncertanty of the Ugandan governent approach the exercie of the pre emption rights by Tullow over the block being sold by Heritage.  The worry is that the Ugandan Goverment will favour ENI and interfere with the pre emption process. There was a press release today showing that Tullow and Heritage are engaged in the pre emption process and good new tomorrow could present a decent buying opportunity to get into thhis one. Tullow is one of the Merrrion preferred stocks for 2010.

 

Elsewhere the banks were inthe news with Standard and Poors revised opinion regarding economic and industry risk in Ireland and expectations regarding future credit losses. S&P cut counterparty credit ratings on BOI to 'A-/A-2', but removed them from CreditWatch negative. The stable outlook reflects their expectation that the government will remain highly supportive of BOI, BOI's core Irish banking franchise will remain materially intact, and it will raise significant equity capital in 2010, from the market or the government or both.

S&P said that BOI is set to benefit materially from the government's NAMA plan, which, from February 2010, will see BOI transfer up to EUR16 billion of its higher risk property- and construction-related loan exposures in exchange for a smaller amount of government-backed bonds. We expect this move to reduce uncertainty about future credit losses and improve BOI's liquidity. However, it will likely also trigger substantial realized losses, impairing capital. We expect that BOI will subsequently raise equity capital. Potential sources include liability management exercises, existing shareholders, and the Irish government.

 

Our view on this is that while there may be some technical negative implications and funding cost concerns it seems behind the curve. As we go through the recap process the ratings should reverse. In the interim there is still the government guarantee will cover liquidity risks.

 

Someone forwarded me the Elliott Wave newsletter which is radically bearish in its latest edition...calling for the biggest downwave ever for financial assets in an environment of runaway deflation and talks about major tops for both Gold and Silver...I hope he is wrong...however the proverbial taxi drivers are long of gold now....The Elliott wave theory newsletter calls for the market to top 'sometime in 2010'. I think that it is worth being ever watchful of stocks in this environment rather than being complacent and thedash for trash of last year has certainly put a good few stocks well ahead of their fundamentals.  

 

Watch this space...

 

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 : Just another manic Monday ?

Good Afternoon ,

Just another Manic monday ? ....

after two very poor -200 point days in the USA and a pick up in volume on the sell side and a pick up in the Vixx volatility index , European markets opened lower today , and remarkably rallied from their opening low points. Low conviction rally but not much selling pressure in Europe and across the board the markets rallied and crossed through into positive territory on the day peaking at midday. This story wa sidentical in irelan , Europe , the UK but the markets did not hold the levels and as the openin g of New York approached all the efforts at rallying failed and the markets slid back to close at pretty nuch their opening levels for the days whcih were close to the lows.

However there are bulls around iin the face of this eerie calm....and one person told me that falls of 5% within 5 days of making a 100 day high are usually followed by a bounce higher 90% of the time, within the following two weeks and this has happened 8 of 9 times since 1960 and the belief is that these swift falls without a failed rally, or some type of top pattern, rarely mark significant tops. The only failure identified was in 1979. Lets hope that the bulls win out.


In the meantime there is an uneasy calm...

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 : client lack of conviction apparent on marketing trip ..

Good Afternoon ,

 

I have been out of the office for the last couple of days so the last post has been absent. Maybe a good thing ???

 

Market sentiment has taken a battering this week and there was a feeling that this was coming , I wrote about the technical analyst calling for a trend reversal , the volumes have been very light so it does not seem that strange that the breakout was on the downside though there is equally not much conviction on the sell side either , more  a buyers strike. 

 

I was on the road pushing the Irish equity case for 2010 , I have been developing more conviction myself that there is a trade in the financials through the NAMA transfer process and that once this happens that there might be scope for some positive surprise in terms fo the absolute amounts of capital that Bank of Ireland and AIB need to raise being lower than forecasts or worst fears. The problem marketing this is that as an Irish broker who kind of has to find Irish stocks to like is that clients wont grant much credibility to an Irish broker hawking Irish stocks at this point in time. 

 

This is an opportunity though...as it allows those who choose to really do their homework to see that there is in fact value here and the tipping point may be close to hand as the Bulge bracket international brokers start to initiate coverage on the financials with a positive view. I encountered a polite if sceptical audience , I don't think that they were especially convicted about any of the other markets either so it probably was a good barometer of sentiment which is best described as lacklustre. 

 

CRH got a good hearing , seems to be on lots of radars again now but everyone seemed to hold Holcim or Heidelberg. The argument against CRH is familiar , that they raised money and the deals that they thought they might get to do never materialised so the sceptics say that they wont be able to deploy the cash to generate acceptable returns.  It remains to be seen how well CRH do but I suspect now that they ar back on the acquisition tail , that the tipping point in perception is also a step nearer , especially as earnings now look like they are past the inflection point. 

 

Still plenty of opportunities ... and Tullow in the thick of Ugandan politics continues to find oil...Go on you good thing..

 

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.

 

 

 

 

Liams Last Post : Markets See Saw , DCC management culture and controls endorsed. irish Life slides, Grafton slips , Skg climbs as Citi books massive loss in Q4

Good Afternoon ,

 

What went down , then came up... See saw is the best way to describe today. Markets weak at the opening across the board , flattened out mid morning , traded in a tight range then recovered the losses as fast as they were lost...

 

Still interesting the technical analysts are saying there is still the potential for the rally to give way , however sentiment sems robust and the market now seems to be stable with good equilibrium in share proves despitew the volatility that we ar seeing intra day , it is a far cry from the massive volatility that we had got used to last year.

 

Irish Life was the loser in Ireland today , -5.2% , does not appear to be much by way of new news, the stock is trading in its new for aafter the corporate re-organisation andthe staock had rallied ahead of that so maybe just a bit of profit taking. This market is still voaltole enough to give you several bites at any trade...

 

DCC was corporately exonerated today when the Inspector appointed by the Director of Corporate enforvecment published his report in to the affairs surrounding the sale of the DCC stake in Fyffes in the year 2000. The inspectors report concluded that the actions and behaviour of DCC plc, S&L Investments and Lotus Green between 1995 and 2000 in connection with the transactions under investigation measured up to the standards required by law. He added that reassurance can be taken from one of Irelands largest listed public companies having had a well developed culture of compliance, having maintained high corporate standards and having acted as a good corporate citizen. The Director of Corporate Enforcement confirmed that he does not intend to take any action arising out of the Report.  I have to say I am slightly surprised by the findings as the whole transaction certainly 'smelled wrong' at the time and there was certainly lingering doubts but for the record , the Inspector made the following findings about the behaviour of DCC

 

• the companies took their corporate responsibilities very seriously;
• the directors, officers and employees, from the then Chief Executive down, placed a high value on legal and regulatory compliance;
• the companies had good and effective corporate governance procedures and controls at board level;
• the officers and executive directors of the companies were qualified, competent, and careful individuals;
• DCC attracted and retained highly experienced and quality non-executive directors; and
• the companies took legal advice when it was appropriate to do so and followed such advice when it was proffered.

 

 

This is a remarkably strong endorsement of a corporate culture of a company , Reading the inspectors report though , I could not help develop my own personal impression that the Inspector had been charmed by the DCC team in his interviews as he tried to get to the bottom of the matter. The inspector ultimately puts the blame on a simple error of judgement on the part of Jim Flavin described as a ‘Costly error of appreciation’ on the part of the CEO.

 

Indeed there are sections of the report which make the Inspector seem like a cheerleader for DCC and for the culture of corporate governance in Ireland

 

On fundamentals rather than cheerleading ….DCC is one of our preferred stocks on the Merrion list , there is strong underlying momentum in the business and the management team under Tommy Breen as CEO can now go forward unencumbered by any further action arising from this matter.

 

Elsewhere the positive news in the paper sector continued with Mondi announcing a price rise and Mmurfit gained about 0.75%

 

Grafton was the weakest of the building materials stocks closing down -3% , CRH saw some decent interest in the buyside and held jsut above the 18.00 level.

 

Independent news and Media slipped down into the low 10 cents levels as the overhang of Bond holders shares continues to be sold. We think there is a play here but there is a technical tsunami of stock for the moment... 

 

At 5pm with the Dow Jones +0.75% , lets see if it holds these levels after absorbing thenews of the massive $7.6bn Citibank loss for the fourth Quarter as it exited the US government sponsored bailout. 

 

Have a good evening   

 

 

 

 

 

 

 

 

---

Disclaimer: www.merrion-capital.com/disclaimer

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 : Positive International view on the Irish Banks will boost interest. C&C slight upgrades post the IMS.

Good Afternoon

 

I may as well start with the most interesting thing I heard all day from a technical analyst who claimed that the price action o the Euro Stoxx 50 index this week signals a probable bearish trend reversal signal. Monday is the key test to see if the trend continues to reverse.  Watch out. It makes the usual sport of guessing where the Dow closes tonight all the more interesting.

 

Markets did drift across the board today despite the big boost from Intel which blew the consensus range of expectations away with the 40c eps number last night. Most European markets closed down about -1.5% today on thin enough volume. London was off only -0.8% but there again had lagged the rally earlier in the week.

 

Today was also interesting from an Irish perspective with major US broker Morgan Stanley initiating on the Irish financials with a positive bias. We have been arguing for some time in Merrion that the there is value in the Irish financials but there is low conviction still amongst investors. A revival of international broker interest will boost the interest in Ireland overall and can only be helpful. I am afraid that brokers in Ireland are likely to have been tarred with the brush of being always too optimistic about the future given that we essentially have to be... to believe in the future. There seems to be little that is very new in the report but it is supportive. 

 

It is noteworthy that there has been a fair bit of positive news about the Irish financials this week , the passage of the Bank of Ireland EGM to approve the participation in NAMA with news that there has been no change in valuations from earlier assumptions. 

 

Then we have had the news about Irish Life getting High court approval to re-structure itself to be in a position to split the Life and the Bank businesses.

 

And today we noted that AIB is benefitting from the strength in the share prices of the M&T and BZW holdings and this has increased the potential gains on disposal to c. €780m and €1.1B, respectively (a disposal of the Polish franchise would also release capital).  Sebastian estimates that exiting from Poland would free up about 2bn in capital plus the 780 from M+T  and this compares with our estimate that AIB needs to raise c.€4.4B of new equity to achieve an end 2010 equity tier I capital ratio of 8%.

 

C&C released an interim management statement today.the IMS indicated that the FY10 operating profit outcome for the core business (pre acquisitions) is expected to be at the top end of a €77m to €82m range, in line with previous guidance. We were forecasting €82.1m which we now reduce to €81.1m. This reduction allows for weaker cider volumes somewhat offset by an improving spirits performance. Offsetting the reduction in EBIT for the core business, we increase our forecast for the contribution from the acquired Tennent's business from €5.4m to €7.1m. The contribution from the Gaymers' acquisition (which is expected to close by the end of January) will be very small in FY10. we are increasing our FY10 operating profit forecast marginally from €88m to €88.7m, an increase of 0.8%. FY10 EPS moves from 20.7c to 20.9c. For FY11, our forecasts do not change although there is some change in the mix of contributions from the different divisions. Our FY11 EPS remains at 25.2c.
The recovery in cider volumes is slower than might have been forecast last summer. The GB market remains tough and the company has yet to display a strategy to return Magners to sustainable growth in the UK beyond the revenue synergies to Magners from the Tennent's and Gaymers' acquisitions. The ROI market is very challenging due to the difficult LAD market. However, the recent acquisitions give C&C distribution, product diversification and scale in both the on and off trade in GB and reduce C&C's reliance on any single product. On an EV/EBITDA basis, the stock is not cheap, trading at a sector multiple. However, on an EPS basis, it trades at 10.4x calendarised 2011 EPS, a 21% discount to the brewing/spirits sector and is also supported by a 7.7% free cash flow yield. Therefore, we retain our Buy recommendation.

 

Elsewhere CRH again came under pressure ... despite the positive newsflow recently. Aer Lingus continues to benefit from the progress that is being made in the negotiations with the Unions and the pilots especially.

 

Economics news was negative in the US this afternoon with the Michigan consumer sentiment index coming in at 72.8 vs expectations of 74 and a prior reading of 72.5. , The inflation numbers were in line to slightly better. Te market ignored the Empire State manufacturing index which came in with a reading of 15 vs 12 consensus and a prior reading of 2.5...

 

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.

 

 

 

 

Liams Last Post : Irish Life , Elan , Smurfit and Aer Lingus the stocks of note today.

Good Afternoon ,

 

The big mover today was Irish Life after the media reports about the completion subject to regulatory approval of the VIF securitisation of their life business. This should be no surprise but given the sharp falls inthe share price before christmas , signs of them achieving concrete things were always going to be welcomed by the market. the stock was up +5% today.

 

Elan and Icon have been super performers since the start of the year and Elan continues to go better as the market digested the implication sof the JC virus test talked about yesterday. Icon continues to find favour as well in the USA.

 

Smurfit shrugged off the news that a Spanish privately owned company is to build a 400k tonne recycled paper machine which wil test the ;discipline fo the palyers inthe industry. Saica is short paper themselves so they ar producing for their own use but they will either squeeze less effiient producers into taking downtime or prices will struggle if the market does not expand .... hmmm , anyway Smurfit was up 0.6% today.

 

Aer Lingus was up also , this one loks like it has captured a bit of interest with the investor day scheduled for the 26th of January in London (so they are serious about having something to say...) and the profit pgrade which tool the market completely by surprise last friday.

 

Paddy Power has recovered a bit having presented a broef opportunity to buy the shares at or below the Eur24 level for 2 days.

 

International markets also continued to be positive today up between 0.3% and 0.8% with London whihc had been weaker yesterday up +0.5% whereas the US is effectively flat +0.15%

 

Have a good evening

 

Liam

 

---

Disclaimer: www.merrion-capital.com/disclaimer

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 : News dominated by courts and re-structuring , markets ok though

Good Afternoon Markets looked weaker at the opening today but there was underlying strength and throughout the day there was a gradula move higher. Ireland closed +1.3% , recovering some of the ground lost in recent profit taking.

 

The news today was dominated by event outside the markets with former billionaire property guru Bernard McNamara having a judgement of Eur62m imposed against him after earlier this week the court was told he has no unencumbered assets and is "no longer a man of significant net worth".

 

The other news was that EPMG , formerly known as Riverdeep and run by Barry O'Callaghan is involved in financial re-structuring which effectively wipes out the equity of the investors. Media reports this afternoon suggest that a number of large loans wer taken out from Anglo Irish bank to invest in this business. Anglo of course would always have said their loans were fully collateralised and asset backed. Well the chickens are pretty much coming flocking home to roost on this old chestnut. It will come as cold comfort to investors that the EPMG statement said the re-structuring would have impact on the day to day running of the business.

 

SIG the UK based insulation and building materials distribution company issued a trading update which was received warmly by the market. The stock rose +10% after it said that earnings will not be less than consensus market expectations of £60m.

 

Elan continued to benefit today from the news mentioned yesterday about the Tsyabri sales and further how it might benefit from a test being brought to the market by Biogen to help detect the JC virus. This virus is carried by a high percentage of the population with being evident but there is a strong correlation between instances of PML and this virus.  Risk mitigating strategies involving tests for the JC virus will effectively broaden the potential for Tsyabri amongst the patient groups at less risk.

 

Aer Lingus came to a lower altitude this afternoon and closed down -2% despite the positive news from its perspective of the cutting by BMI of 33% of its services between Dublin and Heathrow.

 

Smurfit carried on its progress upwards carried on the back of the news from the leading industry magazine which was optimistic re price increases continuing in the face of rising demand for boxes.

 

Across the international markets the trading was positive today with the Dow up +0.35% at 5pm and the European markets up. The large cap Eurostoxx 50 index was up +1.3 % whereas the broader Eurostoxx 600 index was up just 0.25% , London was down 0.46% this afternoon

 

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 : LAcklustre Day , Bank of Ireland EGM holds no surprises , Tsyabri sales help Elan

Good Afternoon ,

 

Quick one today... Irish market -1.3% , All markets succumbed to bout of profit taking , Alcoa figures in the US also did not help Dow jones which at 5pm is down -0.4% and Beiersdorf is also missed earnings in Europe which is off -1.11%.

 

In Ireland there was little substantive newsflow in the morning , the the Bank of Ireland EGM was certainly closely watched. There were some figures in the Chairmans statement but these were consistent with previous statements.  The statement reiterates that BoI believes that the discount to book value that it receives should not be greater than the Finance Ministers 30% estimate. The statement indicated that while the regulatory capital position remains robust, market expectations have increased.  BoI will look to address the issue after they have further certainty on the EC restructuring requirements and the impact of NAMA.  They are exploring internal and external options with a view to identifying the best combination that will optimise the position of existing shareholders.  The statement adds the commitment to rebuilding shareholder value and returning to dividend payments over time. On our estimates, BoI needs to raise c.2.8B to rebuild its end F2011 (March) equity tier I capital ratio to 8%.  This is after including a 27% discount on transfers to NAMA within 8.3B of three year cumulative loan losses (F2009 F2011). We have a BUY rating on BoI and it is one of the Merrion preferred stocks for 2010.

 

There was some interesting and positive news for Elan. Biogen issued a statement this afternoon ahead of presenting at a healthcare conference in the US saying noted that at end December Tysabri commercial patient numbers were c. 48,200. This is slightly ahead of our forecasts of 47,500 patients at year end. We had been expecting a moderate slow down in recruitment due to the increased cases of PML reported over Q4, however weekly additions have remained broadly flat (100/week in the US and 115/week in ROW). This is a decent result for the drug and Elan has reacted slightly positively , up just +1.9%

 

A lacklustre day. 

 

Have a good evening.

 

Liam 

.

 

 

 

---

Disclaimer: www.merrion-capital.com/disclaimer

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 : Market up , Fyffes , Irish Life , C&C and ICON are the features

Good Afternoon

 

The snow has melted , the schools are to re-open and the year looks like it is about to finally takeoff in earnest...

 

The Irish equity market closed up almost 1% today despite giving away some of the gains in the afternoon. There was initial strength in the financials though that eased off and AIB and Bank of Ireland closed down between -1% and -2% with Irish Life manageing a small gain of just under 1%. There was some inportant news for Irish Life today and it was that the High court had sanctioned the the scheme of arrangement (the Scheme) pursuant to which Irish Life & Permanent Group Holdings p.l.c (NEW ILP)  will become the new holding company of the Irish Life & Permanent group. The Scheme will become effective after close of business on Friday 15 January 2010. 

It is expected that cancellation of the listing of the OLD ILP Shares on the Irish Official List and the UK Official List

will occur with effect from 6.30 a.m. and 8.00 a.m. respectively on Monday 18th January 2010, and that the issued ordinary shares of NEW ILP (the New ILP Shares) will be admitted to the Irish Official List and to trading on the main market for listed securities of the ISE by 6.30 a.m. on 18 January 2010 and to the UK Official List and to trading on the main market for listed securities of the LSE by 8.00 a.m. on 18 January 2010.

 

C&C closed up 3% on the back of John Dunsmore having an interview pubished in the Daily Telegraph. The interview was all flattery and the motives behind his decision to boost his profile is anyones guess.  It looked like more of a publicity stunt and settin himself up for the next gig than anything else. Yes this manaement team have generated a lot of value and been really busy with the deals but it remains to be seen how successful they will be in the longer term. I wish them well. Success stories are to be cherished. 

 

Fyffes popped out a trading update this morning...Fyffes issued an IMS this morning. For 2009, the company expects adjusted EBIT to be in the range of €20m-€21m. This compares to our adjusted EBIT forecast of €20.5m, which we will be leaving unchanged, and the company's prior guidance of €18m-€22m. The company stated that poor weather in December impacted performance at the end of the year. Without this weather impact, it appears that the operating profit result could have achieved, if not beaten, the top end of the guidance range. The 2010 company guidance does not include any benefit from the reduction in import duty. We do not include any benefit either at this stage until the timing of ratification is clearer. Fyffes continues to state that it expects to retain 20-25% of the benefit but the market supply/demand balance of fruit at the time the duty cut is ratified by the EU Council and Parliament will be an important factor. On cash, the company indicated that the balance at year-end will be approximately €37m, The stock is cheap, trading at 6.2x 2010 earnings, excluding the cash balance but we are going to stick with the Hold recommendation due to the forecast low rate of earnings growth for the forthcomng year of +2.6%.

 

And finally ICON peer Parexel ups guidance for the full year and expects respectable 1.25x book-to-bill. Parexel issued a financial update this afternoon due predominantly to the fact that restructuring charges that it expected to report in its Q2 (to end December, i.e. ICON's Q4) will now in part be pushed out into later quarters. It took the opportunity to update the market on its expectations for Q2 trading (due to be reported after the market closes on 25 January 2010). Q2 adjusted EPS guidance has been raised for the quarter from 19-21c to 21-23c, with revenue now expected to be $280-285m from previous guidance of $275-280m.  For the full year revenue guidance was raised to $1.115-1.145bn from $1.105-1.125bn, and adjusted EPS to $0.90-1.00 from $0.87-0.97. The revisions were driven by second quarter new business wins and foreign currency movements. The improved new business performance and upgrades to outlook (modest as they are - the full year upgrades may represent one or two large trial wins) however are encouraging and are suggestive that the difficult Q3 may have marked the nadir for the CRO sector. We have a BUY recommendation on ICON.

 

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: Aer Lingus takes off and C&C loses share...

Good Afternoon

 

Well the first week drags to a frozen close….

 

Today we had a pleasant surprise from Aer Lingus who announced that due to slightly higher yields achieved in H2 as a result of capacity cuts particularly on long-haul, that they will make a small profit in the second half. The small profit was a peasant surprise especially as the expectation had been for a further loss in the region of 17m to 20m for the second half. The overall loss for the year is still going to be a whopping 90m so the cost reduction programme which the market has been growing weary waiting for really needs to deliver. A loss of c.€90m for 2009 now suggests that the 2010 loss is likely to be in the €80-100m range before taking account of any savings that may arise from the cost restructuring plan which the company is seeking to implement. We will not formally review our 2010 forecasts until there greater clarity emerges on the cost cutting plan over the next month.

 

Aer Lingus confirmed that it is reducing capacity in its Gatwick base from five aircraft to three (a 40% reduction). Capacity cutting at this base is disappointing given it has a non-legacy cost base and is barometer for the prospects for Aer Lingus' ability to successfully develop non-Irish bases.  The rationale for the cuts is weak consumer and operating environment in the UK. The other bit of news was that two short-haul aircraft deliveries scheduled for Oct/Nov 2010 have been deferred (at no additional cost) to Apr/May 2011, which means Aer Lingus will not have to deploy the additional capacity until summer 2011 instead of the earlier and seasonally weaker winter 2010/11.

 

C&C was the other story of the day with the release of UK cider off trade data for the four weeks to 26 December 2009 which showed Magners volumes declined 18.4% y/y and increased 65.5% m/m. This performance follows two months of volumes declines (November -22% y/y and October -7.7% y/y). In contrast, Bulmers volumes increased 77% y/y and 123.8% m/m. In the last few two months, Magners average pricing has increased by 9.37% y/y in November and 4.84% y/y in December. Bulmers pricing in December fell 8.2% y/y and 14.3% m/m indicating significant discounting activity by Bulmers in the four week period. However, even allowing for this competitor behaviour, we believe Magners volume performance is disappointing in an important volume month for the industry.  The overall LAD market grew 7.9% y/y and the cider category increased 12.8% y/y. December is one of the most seasonally strong months of the year, hence the strong m/m volume growth rates. For this reason, we believe that annual growth rates are a more appropriate measure of individual brands' performance.  In value terms, Magners declined 14.4% y/y (increased 56.5% m/m). Bulmers value increased 64% y/y and 92.9% m/m.  

 

The US employment number initially scared the market with a -85k jobs vs expectations of no decline. There has been some further analysis suggesting that the very cold weather led to layoffs in the outdoor and construction related sectors and indeed job losses in this category is the highest in several years. The hours worked statistic remained constant which does lend some credence to the possibility that the economy is still on the turning point once the seasonal factors are stripped out. 

 

The unemployment rate in Ireland has also started to tick up again but gently with a further 3000 additions to live register. The seasonally adjusted Live Register figure rose by 3,300 in December to stand at 426,700 from November's total of 423,400. The unemployment rate remains constant at 12.5%.

 

Have a good and snowy 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.