Liams Last Post : 3 more companies underpin grounds for optimism from here...I.Life , Kerry, Grafton

Good Afternoon ,

 

September looms and today we had three company results from important bellwether Irish Companies…Grafton surprised on the upside suggesting a continuation of the positive trends in the UK merchanting indeed noting an acceleration of the improving like for like trends in the UK in July. They did mention that people were talking about a softness but they seemed confident . Ireland also showed a major shift as the rate of decline of merchanting sales has effectively stopped. Cash flow remains strong and with the cost having been taken out there is a lot of leverage if we are at an inflection point. That being said on the basis of 2010 numbers the stock does not look that cheap but that it to presume a steady state from here. I hope that we are indeed bumping along the bottom.

 

Irish Life too surprised on the upside with positive noises about the magnitude of loan losses and better than expected net interest margins. The story from here will be driven by the markets view about the potential of a merger with the EBS to shift the funding profile or loan to deposit ratio balance for the better. We estimate that it would improve the ration from 240bp to 200bp , still way out of whack but a significant move in the right direction. There is still on our estimates eur8.90 EV in the life business… yes that is eur8.90 per share… so if there is any way of solving the bank capital problem there is a lot of value to be unlocked here. In the meantime the stock is likely to continue to trade nervously as a play on Sovereign risk given the exposure to wholesale funding markets. Irish life was probably the biggest surprise as the company has had the most accident prone record until now of disappointing the market with some surprise negative.

 

Anglo reared its head from the great undead where is behaving like a vortex sucking the life out of every living creature on the island of Ireland…Seems to me that there is a shift of mood amongst politicians and suggestions from some international voices that at this stage with sovereign spreads discounting a worst case scenario that maybe the Anglo bond holders should take a haircut as their investment was not supposed to be risk free especially given that equity investors got wiped out.… this might even be a positive development as it would draw a finite line in the sand under Anglo. Officially it is not the case though… watch this space…

 

Kerry marked a welcome return to double digit growth with impressive results and margin expansion and an upgrade to guidance . Can't help thinking that the return to double digit growth is not a short term one off blip. There is substance behind this and conviction as to the future. Kerry should be a core holding now in European portfolio's and the stock is good value with acquisitions to come.

 

And so despite an appallingly weak international market when we came in to work this morning sentiment turned positive throughout the day…

 

Who knows what is in store in September..but if today's results are anything to go by it would give you some confidence that the talk of the double dip is just that and that there are some companies who are proving themselves and at some stage international investors will begin to recognise this value.

 

Hope you 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 : That was the week that was...all ok except for the CRH shocker...

Good Afternoon ,

 

Well that was the week that was …a positive start with reassuring numbers from Kingspan on Monday which assuaged some of the nerves going intot the crucial CRH numbers on Wednesday , followed by a decent Aer Lingus set of results and an absolute shocker from CRH which set the tone for the whole week…CRH and S&P downgrading Ireland put the nail into sentiment so the strong positive performance from Paddy Power and the upgrades which accompanied Glanbia were largely lost. FBD did ok too. Thursday was a day of respite and then today we had results from ICG and INM.

 

The ICG story is and continues to be a tale of patience with a strong NAV and strong cash flow and a fully invested business presenting an opportunity at some stage for significant unlocking of shareholder value. CEO Eamonn Rothwell was as cautious as ever but this is a buy it and tuck it away story with a big yield and succession of special dividends to come to placate the patience of the shareholders.

 

INM delivered their numbers and the ebullience has somewhat returned with CEO referring to the scale of the success at their efforts to pay down debt… He did not quite highlight that the paydown was as a result of the rights issue and debt /equity conversion.  It was ever thus but right now the stock is cheap on 6x EV/EBITDA and there is a distinct message of quiet optimism that advertising in Ireland is actually doing ok and picking up , Australia is ok though South Africa is soft. A speculative punt type o stock rather than a quality core holding…as long as you buy this one in the full knowledge of the management team track record.

 

Aer Lingus had to endure the somewhat surprising news that their franchise partner Aer Arann has sought examinership. The franchise arrangement known as Aer Lingus Regional involves 5 of Aer Arann's fleet of 13 planes. In my conversation with Aer Lingus , they did point out that when the business was launched they had said that they did not think that taking an equity stake in Aer Arann was in their best interests. We will see how the examinership unfolds as it might throw up some interesting opportunities…

 

And to close the week in the same manner as we started Rockwool who would be a peer of Kingspan released their half one numbers with an upgrade.

 

The scoreboard at the end of this week ? No bad news with the shock exception of CRH.

 

But at the end of the week at current prices….I have to say that CRH is at levels which it is worth hanging on and waiting for the recovery…I am as big a fan of Paddy Power as ever , Kingspan does not look particularly cheap but their business seems in good shape and so definitely one to look for opportunities as they have significant leverage to any recovery, Aer Lingus is definitely on the right trajectory and definitely a buy here and Glanbia too looks fine.  Even FBD was ok though no one really liked the non cash writedown of their Irish Hotels. Tullow delivered but is now caught up in Ugandan government wrangling re Heritage etc, I hope this will be ok…I have enough of it in my own pension fund to count,,,

 

Next week we get to hear from Kerry on Tuesday and this stock has been a cracking performer into the numbers so I wonder how much upside there is from here. Irish Life also on Tuesday and We all await news re the EBS and their capital plans and developments re their funding position…I hope they can comfort their weary shareholders…Grafton also vie for attention on Tuesday , I am intrigued about what they have to say, They have been making positive noises but the stock is range bound, Any sign of a slowdown in the UK will be taken badly here. Total Produce then announces results on Thursday. I suspect these will be uneventful but the stock is cheap and high yielding.albeit the stock is too small for any but the most dedicated small cap follower.

 

Have a good weekend.. my family returns this weekend from their summer soujourn and the kids go back to school on Monday.

 

Plenty to look forward to .  Have a good weekend and for my UK based friends , have a great long weekend too !

 

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 : Busiest results day in Dublin goes OK with upgrades and no disappointments,.

Good Afternoon ,

 

Well the big busy day passed off unlike yesterday without any disappointment and no downgrades. Paddy Power stormed home in the lead with the most confident performance , Glanbia also performed well . FBD is cheap and have a busy few days on the road meeting investors so is developing a following in the UK and Europe so definitely worth a look , we think it is cheap but they mixed the results up with a decent insurance result offset by the further noncash writedown on the Irish Hotels which impacted NAV.. The stock needs to see the NAV figure finally bottom out but we are very close now…and Tullow had good news about its Ugandan reserves but the stock fell back on news that the Heritage deal final approval had been delayed again.

 

The day was marked by a successin of brokers saying that it is too late to be a bear on CRH and obviously more than me was caught out on this one…the stock showed some signs of the floor holding today at the 11.85 level. Yield and the proximity to tangible values provides support while earnings measures still look tough.

 

Aer Lingus was up a tad on the back of the suspension of the work to rule ad the stock is definitely one to get involved in as soon as this issue starts to dissipate.   

 

The big news though was the S&P downgrade of Ireland to AA from –AA a move whch sparked outrage at the NTMA which has openly questioned the assumptions and methodology of S&P in their treatment of the NAMA valuations at zero.

 

Another tough day overall for markets again down about another 1%.

 

Quiet day in Dublin tomorrow with ICG and INM reporting on Friday.

 

I just see that Paddy Power has given up most of today's initial gains….now there is an opportunity to have a second bit at the cherry…I really do like this one and unlike CRH they have not disappointed..

 

I am away tomorrow but back on Friday

 

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: CRH -16% ouch , yes it was a falling knife... aerl performs but guides cautiously..

Good Afternoon ,

 

I have to say I wish I had stayed in bed today,,,,

 

CRH was a disaster , I am frankly shocked at how much of a downgrade there was in such a short space of time. I have never seen anything like it. The stock has been a dog for quite some time and I made a big mistake in assuming that the CRH management team would have erred on the side of caution with their July 7^th guidance and that also that given the performance of the stock and the sector in the lead up to the numbers that there was a probability that the poor news was overdone and more than discounted into the share price.  The stock tanked at the opening , tanked even more after the management presentation and as the scale of the miss sunk in and questions about the lack of visibility or poor communication and management credibility permeated the market the stock sunk even further.

 

Given that MLMN and VMC and HOLN and Wienerberger had all released numbers and all the issues were known about , surely it was reasonable to think that the CRH management would have built all these items into their guidance. If they have actually really got good systems and good communication internally and the business just collapsed in the last six weeks then it is a real worry of perhaps even bigger proportions than management credibility. Afterall the market will find a way of forcing change one way or another.

 

An interesting point on CRH though is that there is 63c of dividends to be paid (subject to this not being cut either…) between now and March of next year so the 5.3% absolute yield which annualises at 7.8% may begin to attract High Yield investors who look to pick up this yield and a stock that is now discounting a lot o bad news… just a thought..

 

Then mid afternoon the US existing hoemsales data came out showing a horribel -27% decline… and CRH fell to a daily decline of -17% Tis is being blamed on the expiry of a home buyers tax break but it is still a big number. At least the Michigan manufacturing index showed a skight improvement which took the panic away. I have to admit I have not heard such audible groans in this dealing room (to a economic number ) for quite a while.

 

I admit I was wrong on CRH but I have also been saying that the hedge against CRH was Smurft Kappa . If the double dip occurs and with the European recovery under threat , then surely SKG is now the most obvious stock to short..

 

Aer Lingus on the other hand have a much more interesting story , the official guidance was unchanged at 'No worse than breakeven@ but it is clear when you look through it and I met the management not onve but twice today that there is a political thing going on with the guidance as the Cost saving programme has run into some implementationdifficulties with staff who are now realising what they signed up for, AERL management are optimistic tha it can be resolved but are being appropriately cautious. In the meantime there has been a lot of improveents in the operations with the perormane of the Longhaul really truning around. They were also clear that there is no sign of recovery in Irish traffic but this maybe at a bottom. I suspect myself that there will be operating profit in the 20m to 30m range rather than breakeven and the current price represents an opportunity. When I spoke to the CEO after the presentation he was confident an told me that they wer on the right path with no major spikes in performance. Doing the right thing and everytie the company has spoken to the market since Christophe Mueller has taken over the story and operational performance has improved . I can only think this will play well to institutional investors abroad when they meet him . The stock has only one major problem and it is now liquidity with the Govt and Ryanair and the ESOT owning large blocks of stock so the daily volumes are  low.

 

Tomorrow is the key day in the results season in Dublin.with Paddy Power , Tullow , Glanbia and FBD numbers out.  I don't think there will be any negative surprises tomorrow…

 

Meanwhile the markets are spooked and nervous and overcome with nerves again… and I have just noticed that to cap it all that the markets are now pricing Ireland sovereign default risk at a higher level than Iceland… Thank you Anglo !

 

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 : Kingspan pleases and CRH and Aer Lingus tomorrow..

Good Afternoon ,

 

The market is like the weather changeable… By Friday the market had sucked the life out of a lot of people , stocks were going down on low volume ,  we were heading into the reporting season in Ireland with a sense of foreboding after the weakness across many stocks last week.

 

Monday however and Kingspan go against expectations and not only beats expectations but there are upgrades for 2010 in the order of 14% . We were perhaps lucky to not get into the middle of the pack and rush to cut our numbers. I won't claim it was because we were inspired but It has worked out well. It would appear that there may have been some expectations management in Kingspan with forecast revisions into the result which ultimately were better. The stock which was down -5% on Friday reversed the trend and rallied +9% at one stage before closing up just under 6%

 

Our view as articulated by my colleague Aisling is as follows…. The strong balance sheet combined with an improved trading outlook has enabled the company to reinstate the dividend. For the full year, we now forecast a dividend of 10c per share versus our previous forecast of 8c. For FY11, we expect the dividend to increase to 15 cent per share in the absence of a sizeable acquisition. It is clear that Kingspan has the appetite and the balance sheet to engage in M&A but the management indicated that vendors' expectations remained too high given the level of uncertainty both in the sector and at a macro level. Beyond maintenance capex, Kingspan has no need to invest in additional capacity for a number of years.  Overall, management's commentary was quietly confident but they did highlight their concerns around the raised access flooring division into FY11. While the stock has performed poorly in recent months (down 20% in the last three months), it still trades at 15.6x FY11 EPS and only a 4.8% FY11 free cash flow yield and a 2.7% dividend yield.

 

My view is that the Recommendation which is a hold as it reflects the uncertainty in general and a valuation which does not look very cheap but there is a lot of leverage to improvements in performance. I think it is time to begin thinking of the catalysts that could lead to this one being a strong buy. Certainly any pickup in UK office construction or any pickup in the Acess flooring division will be helpful and a decent sized acquisition would be a real signal to the market of increased management confidence.  The tone of the management presentation was assured and very forthright about the risks. I like this as it highlights their understanding of all the issues and that they have a set of expectations about how it will pan out,. The CEO was not bearish though he has a job to manage the access floor business through the next leg of the downturn.  

 

Tomorrow we look forward to CRH and Aer Lingus. CRH is still trading nervously and gave away most of the market related bounce of today into the close. Again the market has been very bearish about this one though some smart bears have been going neutral or even reversing their positions. I was surprised that the market is not differentiating between the Materials companies  at all given their identical recent performance so I remain optimistic that al the news that is likely to come out is already discounted. My guess for a closing price for CRH tomorrow in the Merrion (lose your mind ) sweep is eur14.70 by the way…

 

I look forward to seeing the Aer Lingus CEO tomorrow. Also , they have gotten into something of a winning habit with a developing track record of having something to please the market. I suspect that tomorrow wont be any different.

 

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 : Market at support levels , CRH a sector thing , Banks react to Long bond blowout. tough day...

 

Good Afternoon ,

 

Well what an end to the week, it is back to the bad old days and that's for sure…. With a big sell off in Ireland. One client pointed out to me how hard it is for the largest stock in the market to underperform yet CRH is trying its best..

 

One thing though and I hope it is a bull case.. the ISEQ is now back at support levels which have held six times in the past 18 months… so hopefully it bounces from these levels again.

 

I am afraid I was too early in thinking that the market would already have discounted the CMC and MLM reports and the newsflow from the rest of the sector into the CRH performance. At this point I am not sure what the market is exactly looking for but I can say that the issues are guidance for 2011 , any significant change of outlook for 2010. The Sector continues to be a dog and I had thought that there might be an opportunity to get a trading bounce. Instead the sector performance continues to tank and CRH is now down -12% since the trading update but -17% since the start of August. Indeed looking at CRH peers Holcim , Lafarge and Martin Marietta have pretty much performed exactly in line with each other and the exception is Vulcan which has underperformed by a further -% since the July update of CRH.

The market is not differentiating between quality of balance sheets or strategies etc or valuations. It is a sector thing but we do believe that CRH will find a floor at close to these levels.

 

CRH is now yielding 4.5% so a whole range of yield driven investors may soon start to look at this one.  The 20 year average yield on this stock is 2% ….however the stock did get to these levels of yield in 2008 and has traded in a yield range of about 3.5%

 

The Yield spread n the Irish 10 year bond jumped back to 304bp over bunds which says a lot about the state of how the world now views Ireland. I am afraid that the Irish financials are not going to be a pretty place as the Anglo uncertainty continues and hangs over the perception of Ireland inc. Not a pretty picture . Needless to say Irish Life and Permanent is the most exposed to funding concerns so the stock got hammered today losing -6%

 

Smurfit is a stock I have been bearish on and the market price is starting to react to the double dip concerns that it had blithely managed to ignore until now.

 

Busy week for ireland next week , Kingspan strts us off , they were sanguine at their pre close about theiur prospects. It will be interesting to see if they row back from this…more important perhaps than the numbers…

 

Hope you 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 : see saw day...still like CRH , some ryanair news , INM hit by APN , PWL wakes up

Good Afternoon ,

 

A typical up and down day today with Ireland opening lower , then rallying strongly into the US open which turned out to be the wrong direction , cue the capitulation towards the lows of the day and mid afternoon drifting with international market sentiment the market tracked better as the US clawed backs some of its losses.

 

We came in this morning to see APN results from Australia , the results look ok the commentary seemed fine but the market did not like these an the stock was down -8%  which in turn put pressure on INM who report themselves next week. INM closed down -2.3%

 

We published our formal expectations for the CRH results due next week. Our analyst concurs with my view that at these levels the stock offers significant value. The stock held firm despite the market volatility today. I am ever more convinced that there is at least a decent trade in the short term here and also good long term value. The same probably foes for the sector though as the entire sector seems to be behaving as one. I am happy to accept orders in any CRH look a like if that tickes your fancy either. Lafarge seems to be everyones alternative favourite right now.

 

Ryanair announced another new route , this time from Brussels to Larnaca , This is a consistent strategy now , a typical island tourist destination and it is also a longer than heretofore typical sector length.  The market is beginning to focus on the Ryanair special dividend which is due in September . The stock is on a very high short term yield ahead of it though the stock price will adjust for the divi when it happens. Ryanair have already indicated that they would not be averse to further special dividends if they don't do a fleet deal. The stock looks cheap now on past ratings but is has been de-rated over a long period.  The disposal by O 'Leary of his most recent block of stock is still hanging over the stock and it needs to be fully digested before it can push on. That being said I like the stock here.  

 

The Irish Times reported that the EBS building society will receive bids in days. Irish Life and Permanet and a host of private equity players are looking at this. Maybe it will trigger some interest in the other Irish financials . Bank of Ireland which has done its re-capitalisation remains our preferred stock.

 

Smurft Kappa continued to creep better…. Back into taking profits territory…??

 

Cove Energy which was the sublect of more news releases and multiple interpretations of its news yesterday put out yet another release this morning  after the two releases by Anadarko. This mornings announcement carried a very positive spin dressed up in geologist language. The stock drifted throughout the day closing back at the lows of yesterday.  One to watch , plenty of volume , plenty of rumours…keep watching this one.

 

Aryzta was mentioned in dispatches as being one of the MSCI re-balancing stocks where passive cashflow into the stock should create demand for about 170,000 shares , not huge but it will focus attention on the stock.

 

Origin enterprises reacted yesterday to the fertiliser consolidation bid by BHP for Potash. The stock is cheap and I discussed it yesterday.

 

Paddy  Power jumped +3% today. It has results next week. The news today was that the British Horseracing authority wer going to cancel 15o minor race meetings in the uk to generate better prize funds for the remainder. Story received a mixed reception , William Hill was down, Ladbrokes was up. It is not a sector play , this is a fundamental longterm growth play. I think the management ar very clever. I don't think there will be any disappintent with the results next week. I think that this oen will go and go .. It is the Ryaaor of the Bookmaking industry , a lower margin stryctre which gives them flexibility to steal market share against the incumbents and their branding and product offering is market leading. It is on a roll.

 

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: Bettermarket , sticking neck out and saying CRH is a buy , Bond auction success.

Good Afternoon ,

 

A brighter day in Ireland , the NTMA successfully got away the bond auction today though I hear that International institutions may have been advised to short the Irish 10 year last week ahead of the auction so they effectively were able to over it back at a better price today… either way the optics were positive and the auction was a success.  This helped underpin a rally in the Irish financials who had been subject of constant pressure for the past week on decent volume.  Bank of Ireland was +5.8% as was AIB and Irish Life continued to struggle but ended marginally higher.

 

I sent out my thoughts on CRH . I do think the stock is on balance a buy here ahead of their interims on Tuesday.  The stock looks oversold , I don't think that we will see much good news rather that the bad news is priced in and I would be shocked if there is further downgrades after the downgrades we have already got in early July.   This would be the effective deathknell to management credibility which is at a low at this point.

 

The cyclicals rallied so Smurfit also joined in and rallied +3.5% . I am not changing my mind here that it is a big macro call and that I think that the risk reward here is to be out of it and into the likes of CRH.

 

Ryanair was on the up and up helped by the announcement of a new internal Spanish route.  Aer Lingus took off (Ha !) as the news about the strike being cancelled in Heathrow was well received.

 

I watched Greencore CEO Patrick Coveney having his dinner in a burger joint in Dublin last night but I could not make any judgement on the body language or the earnestness of the conversation. The stock price though is telling you that the market is at best bored to tears with this story especially the disappointment of the USA strategy. However the valuation is low and the yield is high so it is likely to just hang around here for a while. The stock has not convincingly broken up to new levels since the placing of the Liam Carroll stake by my former colleagues at ABN (RBS) in December. It does look oversold too so probably not a good time to lose patience with it.

 

The wheat price rally also looks like this was a storm in a tea cup although the amount of wheat which is going to be harvested relative to initial forecasts is down sharply.The Wheat ETF was down -3.5% today  to the 2.42 level which is a support level and levels which were trading in October and November 2009.

 

Origin enterprises has begun to perform , it is cheap and was sort of overlooked for a long time , the stock was up +5% today , I do like this one but it is tightly held. The level of gearing at Aryzta probably brings the timing of a disposal by Aryzta of their stake that much closer… this is not the view of my colleague Sam who has been adamant that the high Return on Capital employed characteristics of Origin and the role this metric plays in the Compensation formula for Aryzta executives meant it would never be sold. The stake is being diluted overtime though as Aryzta grows bigger so I think this is a factor in the market having a closer look at origin.

 

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 taking double dip to heart ,CRH on the drift , Smurfit more to go and Financials beaten up.

Good Afternoon ,

 

And so it is that the double dip sentiment takes hold again and markets go into retreat having had a cosy July to reflect back on. The only problem with July was that the rally was on low volumes and with low  conviction. It is definitely the silly season certainly in Ireland we have a hiatus of corporate news flow for this week before we get into the news season again.

 

The forthcoming news season is likely to be dominated by weakening outlook statements and companies revising downwards their expectations of growth commensurate with the downgrading of official economic growth forecasts. Some stocks are well ahead of the curve in this regard and in particular the construction stocks across the board in Europe the UK and the USA have been reflecting the changing expectations with analysts forecasts already being cut ahead of reports.

 

Many people have commented that I seem to be wracked in terms of a strong opinion on CRH. It is true that the perceptions of the recovery have shifted negatively very quickly and with it CRH has drifted from one trading range into a new lower bound.  I think that we are close to a absolute bottom in the stock and as the sector is so heavily oversold there might be room for a trading bounce depending on your view on the market. Otherwise I do think that the stock should be watched carefully for evidence that the stock is fully discounting future downgrades. The trading bear call I made at eur16.30 has worked beautifully I egret to say so now the question is whether to close in the position. We are close , maybe not today and maybe we have to wait through CRH 's own reporting in the next few weeks but taking a medium term view I believe it has to be right to be ready to buy it back close to these levels.

 

Smurfit is the stock I find hardest to square off with them guiding the market towards an upgrade in EBITDA while the rest of the world sees a slowing environment. It is a macro call. I think that this stock has the greatest capacity to disappoint from managements guidance and even with the recent pull back , there is more downside from here.

 

Ireland's financials have been hit again with continuing fears about sovereign issues so the imminent NTMA bond issue will need to be a success. FT alphaville did not help today with the Funding cliff article.

 

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.