Liams Last Post : Just when the bears seemed to be getting the upper hand...

Good Afternoon ,

 

Markets are funny things , just as soon as you begin regretting trying to be positive as there is still so much negativity and propensity for individual bits of data to cause markets to take fright along comes a day which simply catches you by surprise. The markets moved to discount the weaker jobs data in favour of taking a more optimistic view of the ISM data which came in with a strong reading of 56.3 vs expectations of a drop to the 52 level.

 

One of the features of the newsflow over the past few weeks has been the increasing amount of corporate activity which is always an interesting phenomenon. I even mention the Summit Materials deals in aggregates in the USA and the Breedon aggregates in the UK to highlight the activity in the US and UK.  The big deals in the news of course ar the Sanofi bid for Genzyme and the Dell bid for 3Par as it seeks to gazump HP. Burger King also is seen as a target and in London the market was abuzz with ruours re AT&T possibly bidding for C&W.

 

CRH escaped the ultimate denouement of being evicted from the eurostoxx 50 index and as the markets turned more positive we saw CRH stage a +5.2% rally which was roughly in line with the European sector. Lafarge was +5.3% Holcim +3.2% and Grafton was also +5% today continuing to react to the somewhat surprising bullish tome to their outlook statement of yesterday. SIG was even amongst the winners , I know some anxious holders of this who have had their patience wear thin. It has always looked so cheap , maybe a takeover candidate in the making itself at this stage ?  Kingspan was +3.6% today not including the 18.5c dividend so a strong performance there too.

 

Paddy Power was +3.5% today , You know I am a huge fan of this one and a core Holding in any European portfolio. PWL was ex Div today.

 

Kerry is looking a bit over bought here but the management team are about to go on the road and certainly in terms of conviction and momentum this one will command attention. The P/E multiple looks cheap relative to Givaudan with Kerry trading on 13.5x 2010 and 12.3x 2011 multiples compared to Givaudan on 17.3x 2010 and 14.6x 2011. It is not so cheap on EV/EBITDA multiples but I it looks ok here. I do believe that any opportunity to buy stock on any weak or quiet day is worth pursuing as a strategy, I do believe it is a core holding for European portfolio's.

 

Ryanair shrugged off the concerns about the introduction of the German departure tax which really is somewhat of a surprise. Just shows the mood of the market today, Germany has been one of the big growth markets for Ryanair and Ryanair have been clear about their views on the implications for traffic growth in countries which have introduced this tax. However the tax is proving popular with Governments and Ryanair just have to live with it. The German Finance Minister said the new tax will take effect immediately with €8 for short Haul, €25 for Medium, €45 for long haul passengers. The original plan had been to levy the tax at two rates 13 euro's for short flights and 26 euros for  longer ones so maybe the 8 euros is a better than expected outcome. The tax will not affect freight flights, transit passengers or private flights and it will next be reviewed in 2012. Ryanair  & Lufthansa will be most exposed to the tax.

 

Smurfit I have to hold my hand up and say is my bear play…was also up +6.6% today , always going to bite when markets rally but it is the most geared play to the downside and likewise to the upside if that is the direction of the macro picture ….if and when we get a clear direction….

 

We have  tweaked our forecasts for Grafton post the results , We now expect revenue of €2025m for 2010, increasing to €2075m in 2011. Previously we had forecasted sales of €2046m in 2010 and €2148m in 2011.We expect an adjusted EPS of 17c in 2010, increasing to 22.3c in 2011. The decline in revenue forecasts is due to reduced expectations of sales growth in the UK and Ireland but for profitability purposes, the decline is countered by a significantly reduced interest cost in both years.

 

Irish Life rallied also today again despite the storm of angry Anglo news and heightened awareness amongst all international investors about the magnitude of the losses which the Irish taxpayer is having to shoulder.

   

 

 

 

___________________________________________

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.