Liams Last Post : Ryanair .. all things to all people

Good Afternoon ,

 

And so Ryanair took the stage today , delayed to take into aaccount the impact of the freezing weather and the disruption that it caused.

 

Michael O'Leary was inthe kind of form where he presented the company as all things to all men...  in the short term due to the collapse of the Boeing negotiations he will be generous and focus on returning cash to shareholders in a lumpy way. He was careful to steer a path away from saying that they would pay dividends in a meaningful way into the future and clearly there is a desire on the part of O'Leary to get back into growth mode , the question appears to be when rather than if...Surplus cash will be at least €1bn by Dec 2012 / Mar 2013 and it will look to return cash from that stage. Ryanair is to consult with shareholders on the preferred methods for cash distribution (special div, share buyback. Comments on current trading were that Q3 (to end Dec) was slightly better than it expected, although not to a material extent. Visibility for Q4 is still low, if there was a bias to guidance following Q3 it would be "slightly better".

 

We are not making any change to our forecasts for FY10. On FY11, we are adjusting our yield assumption to +3% (from flat) but will also be changing our fuel cost assumption from $680 per tonne to $730 per tonne, which leaves our FY11 EPS forecast largely at 15-16c.  

Ultimately Our view remains that as Ryanair's volume growth and cost reduction slow, the cyclicality of its earnings profile will increase further, regardless of whether it agrees a new fleet deal. This has implications for its valuation rating. Ryanair will have significant earnings capacity when yields and margins recover from current depressed levels. However, such earnings are likely to be afforded a materially lower multiple than Ryanair's historic rating. The timing and scale of a recovery in yield is still uncertain, while the benefit from a rising yield environment will likely be tempered by higher fuel costs. Therefore, we do not expect a meaningful improvement in profit per passenger until FY13, and anticipate that it will be FY14 or FY15 (when capacity growth flattens) before profit per passenger fully returns towards the levels seen in FY04-FY08. Therefore, we maintain our Hold recommendation

 

 

Elsewhere we saw some erratic movements in prices today and noted the large increase in volumes in UK insulation and materials distributor SIG and the rise of 5% in the Kingspan share price.

 

Elsewhere C&C fell by 4% with rumours taking in the poor numbers from Cosntellation brands and speculation about the impact of the snow in the UK on consumption of booze due to the cold keeping people at home .... 

 

Glanbia also fell back -3.5% today after its trading update yesterday.

 

Aer Lingus reacted negatively to the quashing of the rumour about Ryanair being about to launch a third bid. Ryanair said that they would not contemplate a bid unless the Government signalled that they would sell the stake. 

 

Crh continued to struggle  , I do think this one is range bound and we are getting close to time to buy it just for a trade within its range whatever about its genuine attractions as a recovery play from here. 

 

Another night of freezig fog and poor conditins in store . 

 

Time for me to head off too.

 

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.