Liams Last Post : Bond yields go over 7% , AIB new low , C&C rallies , US economy strengthening.

Good Afternoon ,

 

Thanks Brian for the understatement of the year…Brian Cowen mentioning that there is turbulence in bond markets. Irish 10 year bonds closing at 7.01% yield having been higher in the course of the day and a 450bp spread vs German bonds. Hmmm it has not gone away…

 

British Airways had decent results this morning that beat consensus but the stock fell -3.5% this in the course of the day. Ryanair fell -1.5% on news that the OFT in the UK is to probe the airlines shareholding in Aer Lingus. Aer Lingus welcomed this decision as it increases the pressure on Ryanair to dispose of the stake. This however is contrary to Ryanair CEO recently expressed intentions.  

 

The Financials were all weaker today , AIB fell to a new low of 34c which certainly did not help sentiment at all towards the rest of the financials.

 

Ex Ireland US GDP grew at 2% in line with forecasts and the news was well received as was the household expenditure component which grew by +2.6% and is showing signs of acceleration.  Euro-area consumer prices rose 1.9 % in October from a year earlier after increasing 1.8 % in September. This inflation report is an initial estimate with a detailed breakdown due on November 16^th. The unemployment rate was 10.1 % in September, the highest since July 1998,

 

Barton Biggs managing partner of New York-based Traxis Partners LLC, said in an interview with Betty Liu on Bloomberg Television's "In the Loop." U.S. stocks may rise 10 percent should the Federal Reserve signal quantitative easing next week, and emerging markets, while halfway to a bubble, will probably

keep gaining,  Biggs said that the conventional wisdom is that the markets are going to probably sell off after the election and after the Fed's

quantitative easing announcement but he thinks that Investors may in fact get a "surprise" with "another 10 percent rally after the announcement."  Food for thought.

 

 C&C went on a little run today and gained nearly 4.7%

 

 A busier week looms next week with Ryanair Q2 numbers on November 1^st and Kerry IMS next thursday and the market will focus on CRH again with their IMS due on November 9^th and DCC interim results also due that day. Smurfit Kappa Q3 is due on the 10^th.   We get back to some newsflow after a sort of hiatus for the last few weeks.

 

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 : Govt announce 15bn 'adjustment', CEMEX pricing pressure continues

Good Afternoon ,

 

And first the Bad news….For some time the Irish Government has made clear that the target is to reduce the deficit to 3% of GDP by the year 2014, this afternoon the Government has revealed that the adjustment involved will be €15 billion. The Government statement went on to say that the key reasons for the significant increase from the figure announced in Budget 2010 are lower growth prospects both at home and abroad and higher debt interest costs. The purpose of the Four Year Plan for Budgets and Economic Growth is to chart a credible way forward for this country. The size of the adjustment for 2011 and the distribution over the remaining years will be announced in the Four Year Plan. The Plan will contain targets for growth and strategies for the achievement of those targets. The Government realises that the expenditure adjustments and revenue raising measures that must now be introduced will have an impact on the living standards of citizens. But it is neither credible nor realistic to delay these measures. To do so would further undermine confidence in our ability to meet our obligations and responsibilities and delay a return to sustainable growth and full employment in our economy…. And so the population awaits with bated breath to hear how the 'adjustment' actually be implemented.

This news coupled with the news of NAMA making such a huge percentage profit on one of its loans makes for an interesting counterpoint. Even  if NAMA made some profit over time then the taxpayer would be happy. Whether the taxpayer is being taken for a complete ride at this point is another question though for the crucial point is that each Euro that NAMA underpays for Assets is a Euro that goes straight into the sums that make up this eur15bn adjustment.

There wa little consequential corporate news again in Ireland though CEMEX Q3 results provided sober reading in the light of the comments and trends that CRH pointed to at the time of their last profit warning. CEMEX have their own issues which include a requirement to issue equity to curb a sharp escalation in their fuinancing costs but the read across for CRH was bearish . Q3 showed sequential quarterly basis Cement and Ready mix volumes in the USA were down , Aggregates volumes were up but pricing in all sectors was lower. In Europe Cement , Ready mix and Aggregates volumes were up but prices were down.Still CEMEX suggested that Q4 would mark the inflection point in earnings across al their geographies. This has to be seen to be believed as the pressure clearly continues. So no trigger for a change of heart to a more positive tack for dear old CRH yet. We keep waiting…

.UK GDP figures were released this morning which showed Q3 grew by 0.8% with UK construction rising by 0.4% which was somewhat re-assuring for the construction related stocks such as Grafton and Kingspan. The market took the positive surprise negatively though as it suggests that a further round of Quantitative Easing is likely to be postponed for the time being.

The US Case Schiller House price index showed house process continuing to drop by -0.2% in August.

And in the USA history was made with a negative Yield auction for inflation bonds for the first time ever. The Treasury Department auctioned off 5-year Treasury Inflation Protected Securities, or TIPS, at a negative 0.55% yield on Monday. That marked the first time ever that those bonds were auctioned at a yield below zero. Demand for those Treasuries means bond traders are banking on the Federal Reserve's success at boosting inflation over the next five years. The Fed has said it plans to implement another round of quantitative easing.

Sloppy market ,

Have a good evening

Liam

 

Quiet drifty day ,

 

 

 

 

 

 

___________________________________________

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 drift on little news , Irish Life in the shakeup for the EBS.

Good Afternoon ,

 

The valley period for news in Ireland continued today.

 

The amazing price Jump of CRH was not held and the stock gave up -2% during trading today. The stock is still 80c higher than it was during the early part of the week.

 

The Betfair IPO was a big success but had no follow on impact on Paddy Power today. Paddy Power has looked a tad overbought this week and has struggled in terms of upward momentum.

 

There was some re-assuring news for Tullow shareholders today as press reports this morning indicated that CNOOC and Ghana NPC have recently made a joint bid of $5B for Kosmos' assets offshore Ghana. This would top the $4B ExxonMobil bid that was previously blocked by the Ghanaian government.  Kosmos' assets in Ghana differ somewhat from those held by Tullow but the reported bid gives us comfort in our estimate of the value of Tullow's Ghanaian assets.  For Jubilee we currently have a c.$4.4B value in our net asset value for Tullow (£11.04p/share) while risked exploration upside complements this.

 

The Department of the environment also released the findings of a study relating to unfinished or ghpst housing estates. The official estimates of 33 – 43,000 completed and commenced vacant houses is somewhat lower than prior estimates of some commentators (up to 345,000 empty homes were reported in some stories earlier this year. This may serve to underpin sentiment somewhat that the problem while big is not as dramatic as guestimated.

 

Irish Life and the consortium led by Cardinal Asset management and Wilbur Ross were officially named as the short listed bidders for the EBS building society. It is likely that Irish Life will be involved in the final resolution to the EBS even if the Cardinal consortium wins the bid. The market may move to looking at the prospects for Irish Life to proceed with its own fund raising to bolster its balance sheet if it feels that it may take part in a transaction to separate out the Bank component. 

 

At the close in Dubklin the Eurostoxx 600 index is down -0.3% , The Dow Jones is down -0.23% and the ISEQ is down -1.1% reflecting the pullback in the price of CRH after the suspicious closing price of yesterday.

 

It's the Bank Holiday weekend… Have great one

 

Talk Tuesday

 

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 : Another Day when the bears were squeezed ...

Good Afternoon ,

 

Another day where the bears have been squeezed …

 

The day started off with bad news of a watery hole for Tullow. The stock reacted negatively , it was a potentially high impact drilling but Sebastian had risked the potential result to have had to only take our  NAV down by 12p , the upside however was estimated to be 68p so not great news. The next news from Tullow will be the results from the Mercury well off shore Sierra Leone where Tullow have a 10% stake. Anadarko are the operator here. News is expected by end of November and then we look to further news from the Ghana and Uganda drilling over the next few quarters It will be busy newsflow wise so the market will have plenty to anticipate.

 

Paddy Power peer William Hill released a strong IMS statement for Q3  in which Group net revenue and Group EBIT increased by 22% and 64%, respectively on a yoy basis. Group net debt stood at £501.3m at the end of September.  William Hill online continues to perform well driven by increases in revenue and a gross win margin (8.9%) from Sportsbook. In the company's retail channel,  William Hill's OTC gross win margin came in at 18.2%; above the company's indicated range of 17-18%. On outlook, the company notes that since the end of September, there has been a continuation of Q3 trends and the company now expects to deliver an operating profit "around the top of the current range of forecasts" for the full year. The bookmaker is cautious looking in to 2011 given the recent public expenditure cuts in the UK and also the planned VAT increase, in what is considered a "challenging economic environment".

 

ICON rose this afternoon after a set of numbers which were disappointing but where the disappointment had been largely built into the price which has been on the slide for the last month. Clearly ICON have a management challenge to turn around the performance of the Central Lab business which is loss making at an operational level as well as incurring re-structuring charges. It would seem that the order book wins are pleasing but it was acknowledged by ICON that it is taking longer to convert orders to Revenue. I personally remain somewhat cautious of the company as it explains that it is investing ahead of its clients transitioning to new business models. This seems a tad woolly. I am however a believer in ICON longer term it has just been a frustrating experience to invest knowing that the business parameters are still moving around and there is little certainty yet. The volume in the stock today is very large which suggests that there is decent size interest on the buy side as well as a number of frustrated shareholders choosing to exit.

 

Then Anglo Irish Bank announced that it is inviting all holders of the Sub Debt to exchange any or all of their Existing Notes for new euro-denominated Floating Rate Notes due 2011. Just under €1.6 billion in sub debt (and $200MM in other sub debt) will be converted into around €300 million of new debt paying 3 Month Euribor (which has recently been surging)+ 3.75%. Bondholders, or opt for a cash alternative, have until November 19 to make a decision. If they will agree to booking an 80% loss…

 

Think that's probably enough news for tonight…

 

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 look toppy but oils in favour.

 

Good Afternoon ,

 

The Last post returns after a short hiatus , fatigue with non stop news about Budget cuts and austerity measures etc. I did the Barcvelon triathlon at the weekend and can recommend it to beginners and experienced triathletes alike. A lovely city and a fantastic course. There is nothing like some sunshine to raise your spirits.

 

Markets are still proving resilient though we are now getting into the US reporting season and while the majority of companies who have reported so far have beaten expectations it is clear that we are at a phase of he market where the technicals look tired and good news is now provoking profit taking. Better to travel than arrive and all that.

 

Corporate news in Ireland is thin on the Ground. Cove was probably the biggest story this morning ans it was re-assuring to see affirmatory remarks and supportive ocmments from Anadarko after the debacle that accompanied the last Cove announcement. Barquentine could be in  excess of +5 Tcf, enabling Cove and Anadarko to begin evaluating a potential LNG development

for the 2 discoveries which are just 2 ½ miles apart. Barquentine could potentially become part of a mega-development in that area.

Tullow was also in the news re Uganda with the tax dispute that had delayed the deal. Tullow has been working with Uganda officials to allow the Total and CNOOC deals to close and to delink the issue from an ongoing dispute between Uganda and Heritage Oil over capital gains taxes.  In July, Heritage sold its half of stakes in blocks 1 and 3A in the Lake Albert basin to Tullow for up to $1.45 billion, but Heritage declined to pay a 30% capital gains tax on the transaction. In the wake of the dispute, the Uganda government withheld its endorsement of the deal, preventing Tullow from bringing in new partners. Tullow has already paid $1 billion to Heritage for the purchase. A third of the $405 million in disputed tax has been paid to the Ugandan authorities, and the remainder is in an independently administered escrow account.Tullow has drafted a memorandum of understanding to delink Tullow's plans to divest to Total and CNOOC from the Heritage tax dispute. President Museveni gave his preliminary approval to the memorandum out of concern the delay was negatively impacting the plans of CNOOC and Total. This still needs final approval but Tullow shareholders will breathe a sigh of relief.

Petroneft has a successful $43m placing with institutional investors ·      Gross  proceeds of  US$43 million  raised at  STG£0.43 per  share in a placing  with  international  institutional investors. Funds will  be used  to finance an  accelerated exploration  programme business development and general corporate overhead. 2010/11  Exploration  programme  with potential  to  more  than  double existing 2P reserves. Petroneft said they are on course to achieve year end  2010 production target of 4,000 bopd  by early December, rising to approximately 12,000 bopd by the end of 2012

The interview that Michael O'Leary gave to a German newspaper had no impact on the share price today of either it or Aer Lingus.  "The Government is broke now, it has to sell its holdings. In the end, it will sell Aer Lingus as well," O'Leary said in an interview published in daily Frankfurter Allgemeine Zeitung  today.

 

The US Materials sector and CRH were sibject to overnight downgrades by a European broker and by Citigroup. CRH closed -1% at 11.75. Elsewhere Volume was quite light as the German Zew survey  also did little to boost confidence today.

 

Goldman Sachs quarterly profit falling by 40% is the headline grabber of the afternoon. Goldman sachs did however beat expectations and the stock was up about 3% at 5pm in Dublin. Coca cola was up slightly as prifits rose by 8% year on year.

 

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 up , Aerl trades better and AIB sells M&T

Good Afternoon ,

 

Good to see markets continue to rally this afternoon after the strong performance from the USA last night. My Colleague Ross published his piece calling for near terms consolidation and it is hard to argue on the face of it with his thesis. Markets have undoubtedly been playing the re-flation trade and lots of stocks are now looking a bit toppy.

In Ireland there is some news from AIB as the Government positions itself to takeover as the largest shareholder by a country mile with the announcement that the Chairman Dan O'Connor is to stand down immediately. Dan is somewhat unfortunate having been appointed after the crisis began but now the government wants a clean out. AIB have a particularly aggressive corporate reputation and have taken a different and by all accounts a more confrontational path in their dealings with the department of finance up to now. Well the piper gets to call the tune and this time Brian Lenihan is not going to be bullied. AIB essentially forced the appointment of Colm Doherty.  AIB announced the appointment of Jim O'Hara, former general manager of Intel Ireland, and Catherine Woods, from JP Morgan Securities as non-executive directors with immediate effect.

The news just out though is more significant and that is AIB has completed the public offering and the sale of its stake in M&T Bank. The process was an offering of contingent mandatorily exchangeable notes ("Notes")  exchangeable  (subject  to  AIB shareholder approval for  the shares of  common stock of M&T Bank Corporation ("M&T")  ("M&T Shares") currently owned by AIB.  AIB sold 26,700,000 Notes at US$77.50 per Note. This is as expected news but good to be done nonetheless.

Aer Lingus succumbed to a bout of profit taking after its strong recent run and gave up todays gains to close -2.18% down after the market digested paragraph two of the trading update which said that at this time, forward revenues indicate that December and  the first quarter of 2011  appear much weaker than anticipated, however, the Group is not yet able to  determine whether this reflects the recent trend towards later bookings or an underlying softness in demand. The market had initially reacted strongly to the tone of the first paragraph where it said that trading in the third quarter, and in the month of September in particular, has been stronger than expected,  primarily as a result  of improved yields  (with growth in line with the second quarter of 2010). Forward revenues suggest that October and November will also be ahead of expectations.

Ryanair never to be out done announced the closure of their Marseille base and that they may open new routes from Stansted in London.  

CRH traded in large volume in the US last night about 10x the average daily volume and closed down -3.4% , there was no news and the stock traded better in Dublin and London today. The sector in Europe had a good day and CRH rallied +0.25% off the closing price in Dublin last night.

Across the market almost all stocks caught the mood and Paddy Power crossed above the eur28 level

 

The FTSE 100 Index  +1.5 %, to 5,747.35 at the 4:30 p.m. close in London, the highest level since April 26. The FTSE All-Share Index rose 1.5 percent and Ireland's ISEQ Index climbed 0.7 percent.  The markets took further impetus from the FED notes that suggested that the FED will launch the much anticipated Quantitave easing programme.  Meanwhile Bloomberg reported that China is to put more reserves into Gold which triggered a rush to a new record spot price of  $1,367.65

 

 

 

 

 

 

 

 

 

___________________________________________

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 : Ireland equities defy the ratings agencies and rally.

Good Afternoon ,

 

Amazingly Markets seem to have tired of the Irish sovereign debt story for the time being …. There was no reaction in the equity market to the news that Fitch had downgraded Ireland by another notch. Interestingly the markets did not panic either in reaction to the comments by Matthew Elderfield that a liquidity management exercise is not off the agenda in relation to Anglo and Irish nationwide Senior bonds. A liquidity management exercise is a tender to buy the stock at market value which is a discount to par. I think that the real world understands that somehow the irish tax payer does not have the resources to front up and pay back all the money which was blown and the guys who bought the bonds from Anglo and Irish Nationwide were duped themselves by the silky tongued investment thesis woven by the Anglo management and the famous Michael Fingleton of Irish Nationwide. The scale of the problem is so huge that I believe that the average investor now recognises that Burden sharing is the most equitable solution and I get the impression that while the state has no wish to default , that some form of burden sharing that takes some of the pressure off will be very well received in equity markets. There is a real politik moment approaching and I have no idea how it is resolved given the legal status of the Bond holders and the Depositors.

 

My Colleague Sebastian made some good points though when he suggested that If the Senior Bnd holders take a haircut perhaps in return for an extended duration and acceptance of new paper that Ireland will just pay a higher rate for longer.  This according to Sebastian is the point the pro defaulters are missing –the solution does nothing to address the structural deficit except puts the duration off for some time .  Plus Ireland could forever be labelled a defaulter...

 

In terms of the market the news that AIB is to place the M&T stake did see the stock give up -3% whereas Bank of Ireland and Irish Life continue to track better.  You know my preferences here…

 

Fitch down graded CRH bond rating last night but this news was absorbed well as the stock recovered +3.4% today. The larger EUroipena materials stocks also had good days with Lafarge +3.4% and St.Gobain +2.3%

 

EasyJet Plc triggered a run in the airline sector after it reported full-year profits which were ahead of guidance with lower-than-expected losses from the Icelandic ash cloud.  Revenue  per seat increased about 6 %. Ryanair was +1.4% and Aer Lingus whise Impact cabin crew served strike notice closed effectively flat after outperforming the airline sector significant ly over the last few weeks.

 

Good that the world is in more bullish form… even shrugging off poor US employment data today.

 

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 : Ireland Bails out Europe ... in the golf !!!

Good afternoon ,

 

Ireland Bails out Europe is the best quote of the day !!!  (in the Ryder Cup for thise who managed to live in a bubble throughout the day )

 

The ISEQ Index responded to the gallant efforts of the golfers and the epic win by the Belmont Under ( soccer team which takes them to joint leadership position in the SDFL league ) not to mention Leionster showing Munster what sheer hunger and a decent game plan can do to turn the underdog position into a fifth win in a row.  A great weekend for sport.

 

As for the market , the consensus still is that the markets look short term toppy but any weakness is steradily being bought these days so hard to take money off the table with conviction.

 

In Ireland there looks to be a bit of status quo, CRH seems to have found a level at the eur12 level . Bank of Ireland looks ok here and AIB is proving remarkably resilient at these levels.

 

The Ryanair traffic stats were received positively this afternoon.

 

Not much news or volume … market has weathered a lot of bad economic news in Ireland and prioven resilient , maybe we might just bounce back from here.

 

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.