Good Evening ,
Markets have achieved positive performances for the week and almost recovered al the losses from the lows of the past month…
The cyclicals have come roaring back into favour or rather the underperformers because in truth some food and supposedly defensive stocks have behave in a very volatile fashion through the period also.
It is not true to say that the nerves have goe away but the market is telling us for the first time in ages that on balance it is good to buy the dips again. This strategy was a disastrous strategy to have followed in 2008 and memories are still painful. Even those who have been buying the dips have always tried thus far to get out of stocks at the top end of their trading ranges which has merely re-inforced those ranges.
The Aer Lingus agm update is the news of the day…Aer Lingus stated that in April & May, trading was ahead of 2009, reflecting an increase in unit revenue performance and lower costs (both fuel and non-fuel). Load factor in the two month period increased y/y according to the statement but is not quantified. These months were also impacted by the 18 days of flight disruptions due to volcanic ash. No update was provided on the cost of these disruptions, which Aer Lingus estimated in its May IMS would be approximately €20m.
In terms of the summer months, Aer Lingus states that it is "satisfied" with the forward booking profile in long haul but that it is seeing a "modest decrease in the short haul booking profile for the summer months compared to 2009". However, it does say that it continues to achieve higher yields in short haul versus last year. On 4 May, the company commented that Q2 bookings were broadly equivalent to 2009 but were being achieved at higher yields, with long haul ahead y/y both in terms of yield and load factor. At that stage, it said it had limited visibility on H2 bookings.
Overall, Aer Lingus reiterates the comment it made in its May IMS that it is appropriate to remain cautious on the 2010 full year performance. We forecast an operating loss of €8m for FY10 (before the impact of the €20m volcanic ash related cost). This equates to an adjusted EPS of 0.75c per share (reported loss per share of 3.01c). For FY11, we expect Aer Lingus to achieve an operating profit of €30m and adjusted EPS of 6.42c. While we will review these forecasts after today's statement, we do not expect any material changes. We reiterate our Buy recommendation.
Other news of note today is the Irish Finance Minister confirmed yesterday that he is seeking an extension of the new bank guarantee scheme until the end of the year. The initial blanket guarantee is to expire at the end of September and banks have a significant amount of funding that will mature then. The replacement scheme covers new issue funding. As outlined by the EC, it is expected that guarantee charges will increase and those banks relying too heavily upon guarantees for funding may be required to submit viability plans.
Allied Irish Banks is also beginning to look interesting now as the pieces of their funding jigsaw begin to emerge. Note I am not saying it is a buy , It ,ay be a punt as to buy it you have to make assumptions aplenty…whereas you can now buy Bank of Ireland with the funding done.
Smurfit Group continued its rapid upward trajectory as the Brazilian company, Klabin, has announced price increases of €60 per tonne for kraftliner, white top liner and sack kraft in
Paul Krugman waded into the dabate again today suggesting that there is no basic economic logic behind enforcing austerity measure on already weak economies and it achieves nothing except a show of force.
Krugman argues that in
German deficit hawkery seems more sincere. But it still has nothing to do with fiscal realism. Instead, it's about moralizing and posturing. Germans tend to think of running deficits as being morally wrong, while balancing budgets is considered virtuous, never mind the circumstances or economic logic. "The last few hours were a singular show of strength," declared Angela Merkel, the German chancellor, after a special cabinet meeting agreed on the austerity plan. And showing strength — or what is perceived as strength — is what it's all about.
There will, of course, be a price for this posturing. Only part of that price will fall on
But German politicians seem determined to prove their strength by imposing suffering — and politicians around the world are following their lead.
An interesting viewpoint but one that looks unlikely to garner any sympathy particularly with the Germans who got their own commuppance today in the world cup.
Tonight it is the turn of the English. Lord knows I have tried to get my head around becoming an England supporter and I will again tonight , I was thrilled at the Mexican performance against France but really I do wish the English team well and will continue to do so until the first commentator makes some jingoistic remark then I will revert to type….
Have a great weekend
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
Tel.: 353-1-2404171
Mob:353-87-2313505
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