Liams Last Post : Bailout rally was swift , short lived and followed by a european wide slide of bonds and equities alike

Good Afternoon ,

 

Well its all very amazing , the Grinch came and stole Christmas yesterday when the news of the IMF/EU deal was announced. On a cold snowy night , the population realised once and for all that all the talk about economy and banks has now become a very visible amount of  hard cash. The scale of the bailout was well leaked in advance , but there was some issues which caught the eye of the man in the street and that was the use of the full reserves of the NPRF to go towards bailing out the banks.

 

The good news though came with the news that the Regulators new pronouncements re Capital requirements were much better than the market had feared. On Friday a complete nationalisation of Bank of Ireland was a possibility or a haircut for bond holders which could possibly have given rise to the extinction of the rights of the equity holders. As it is the new capital requirement for bank of Ireland is just about 1bn less than anticipated and the news that Bank of Ireland management are going to try and raise as much of this from private sources with the state backing is pleasing.

 

And the equity market reaction ? a short rally first thing which gave way to a pull back across the board in all markets except the Irish financials.  Irish Life had a +58% get out of jail rally , Bank of Ireland a mere +15% rally and AIB which still trades on thin air if you ask me +3.8% . The scale of the fund raising at AIB is massive.  AIB is now required to raise an additional €5.265bn Core Tier 1 capital. Taking account of the capital AIB has still to raise under its capital plan, the bank has now to raise €9.765bn of Core Tier 1 capital by end-February 2011. 

 

The reaction of bond markets was hardly surprising with Irish 10 year yields blowing out to 9.27% but the game now in focus is Spain with yields now at 5.42%. This deal did not even put a sticking plaster on the markets worries about the Euro project .

 

European equities also had a tough day with the FTSE -2% , The Eurostoxx50 index -2.45% m, the CAAC 40 index in France down -2.5% and the DAX in Germany and the IBEX in Spain also down -2.2% highlights that this deal does not end the game but merely moves it onto the next high stakes countries.

 

The Corporate News in Ireland today came from Aryzta who affirmed their trading outlook and made positive noises about margin progression .The stock was +6% and Cove Energy who announced that their partners Anadarko had made a third major discovery in Mozambique.  

 

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 : Central Bank Governor pours fuel on fire..

Good Afternoon ,

 

I have to say that for those of us who fondly remember the 4^th Quarter of 2008 this takes the biscuit.

 

Today we had the spectre of the Governor of the Central Bank casting doubts on the adequacy of the levels of Bank capital requirements in Ireland , this had a particularly damning impact on Bank of Ireland and Irish Life and Permanent. You have to wonder how someone in his position  could raise this spectre just months after the government backed a rights issue and the new regulator underscored his confidence with the capital adequacy of the Bank in the first place. Surely a person in this position of responsibility has at least a duty to not be doing solo runs re policy on a whim and that he should be working with all the authorities to provide a coherent framework for a solution and to provide calm. Instead he has poured fuel onto the fire.

 

Meanwhile the government in waiting as in Labour and Fine Gael have likewise seen their leaders indulge in party politics before the national interest.  I am looking forward to the election and but I am developing a rather long list of those who will not be getting my vote… This afternoon in the Dail the leader of Fine Gael just happened to have an idea to raise the pressure in the markets once more by asking the Taoiseach to assure the house that depositors savings are secure. Brilliant and constructive question eh ?  and a fantastic idea to press the nuclear option and seek an election before the budget. What are they hoping to achieve ? they wont be able to avoid the hard task of implementing the measures in the budget so best they get on with it , the numbers are stark and unavoidable.

 

Spain had a bond auction today which was poorly covered and less than the maximum which the Spanish government had hoped to sell as  the crisis rumbles along towards spain but and the bond markets are reacting with Spreads vs Germany reaching 233 bp , an all time high.

 

Its not about stocks this week , its about the future of the Euro and Ireland is front and centre with Portugal and Spain now feeling the heat. This afternoon  the IMF's Director Lipsky said that the fund has been in contact with Portugal. This itself will exacerbate the nerves tomorrow.

 

And of course to keep things on the boil there is a huge insider trading scandal breaking on wall street and of course the North Koreans have decided to start shooting at South Korea.

 

All good fun…

 

Have a good evening.

 

Am sure that the comedy show will continue on all the current affairs programmes this evening.   As for me , I  am going to the gym…

 

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 : Bailout application triggers political turmoil , Financials tanking and Portugal moves into the crosshairs..

Good afternoon ,

 

Well it is afternoon and it is cold and dark and the news re the application by Ireland to be bailed out has been received in progressively more bearish manner as the day wore on. The cold fury of the population is now becoming apparent and the petty political muppetry is a sight to behold…

 

So what was achieved today ? a panic in the Irish financials with Bank of Ireland down -19% , Irish Life which had run up ahead of the bailout falling like a stone to 91c a fall of -25% and AIB which I don't understand only down -6%. Maybe the market was not watching the same comments from Brian Lenihan last night when he talked about re-assessing the capital requirements of the banks and he specifically mentioned AIB in the context of it having a small residual private shareholding. I thought that he was effectively giving the market the nod re its imminent nationalisation when he suggested that if it needs more Capital then it 'might have implications for the residual shareholders…'

 

Merrion launched a detailed note on CRH ,  a strong fundamental piece of work rolling out our forecasts to 2013. In the note we look at the reliance f CRH on the USA and individually look at the states where CRH operate from a budgetary and funding perspective and also from a demographic perspective. The conclusion is that CRH does find itself operating in states where the finances are not in great shape and the demographics are likewise unfavourable.  The market has also talked at length about the haemorrage of management from CRH's Oldcastle materials business to Summit Materials to follow Tom Hill. David has put together an powerful organogram which certainly highlights the challenge facing CRH. CRH has lost significant numbers of well placed senior and mid management in its organisation and this may explain why it is so quiet except for announcements of disposals such as the insulation business to Kingspan and today a small business for eur37m

 

The overall conclusion of the note is a HOLD recommendation. The Hold is based on a view that the stock after the recent rally is now looking fully valued relative to history and its peers and needs upgrades to keep going higher. The conclusion of the state by state analysis and our assessment of Europe is that there is little chance of upside surprise in the near term so hence the Hold.

 

Origin Enterprises had a re-assuring statement today which was kind of overlooked and Paddy Power did not react to the news that the Irish thoroughbred breeders association is looking for a 2% turnover tax. This is worrying as the timing of the calls for a higher tax may be met receptively now as the Government looks for all avenues to raise revenue. Paddy Power do anticipate a betting tax being introduced in Ireland.  When I spoke with Jack Massey last week he mentioned a 1% turnover tax. This would impact Paddy Power to the tune of 5m of EBIT and cost 9c of earnings.  This has not been factored into many brokers forecasts at this point as the tax has not been actually announced. Concern about this could and probably will weigh on Paddy Power for the next few weeks until we get some degree of certainty.

 

 

The bond markets were not pacified with Irish yields remaining above 8% yields and the portuguese now saying as loudly and about as credibly as the Brians did a few weeks ago that Ireland does not need a bailout. Even the spanish were heared practicing their No bailout refrain in the background.

 

And of course Hats off to Jackie Healy Rae and Michael Lowry for behaving lioek typical Irish Politicians and the Greens for actually behaving like Turkeys and voting on Saturday to seek to dissolve the government. All this before the Budget which raises the spectre of it not being passed. Yes a wonderful market outlook and definitely cedes all the negotiating power to the IMF and away from Dail Eireann. Well Done.

 

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 : COrporate news a plenty , mostly ok, Ireland Negotiations continue...

Good Afternoon,

 

Today was a busy day for corporate results with United Drug , Paddy Power , Irish Life and  Greencore all with news.

 

United Drug numbers were in line , no great surprise and flat earnings in prospect for next year after the increased financing costs and the expense involved in building out the Medco JV. Longer term as this one grows away from Ireland and earnings growth resumes it might get a bit more exciting.

 

Paddy Power also upgraded their current year numbers on the back of strong trading and uk online customer acquisition growth. Ireland was mentioned as continuing to deteriorate. I do like this stock and their clear strategy. Also the fact that the management track record of managing the Irish business through the toughest of times successfully whilst growing and gaining scale in their international operations. The New South Wales court case loss was not such a big issue for the market today. looks like this will be appealed further. While the underlying performance is strong , the short term could see a headwind when the Irish government outlines their final plans for a turnover tax, Certainly Paddy Power are expecting it and so there is a liklihod that earnings will be flat next year as a result of the impact of this tax. Personally this is probably a very cautious view but 2010 had the world cup and favourable sports results.

 

Irish Life presented their story also today. Hard for them to be upbeat. The market looking at the increased exposure to the ECB and all the attendant fears. Irish Life are hostages to the wholesale markets which are closed so dependent entirely on the government guarantee for liquidity. Their plans to help improve their loan to deposit base are effectively impossible to execute with the current uncertainty.

 

Greencore and Northern foods announced an interesting equal merger of the two companies. The news sent both companies shares sky rocketing .Greencore had been really underperforming as the market wondered what it was going to forgiven the apparent real disappointment at the pace of their USA developments.  Some suggested that a counter bidder might emerge for Northern Foods. Northern Foods shareholders will receive 0.4479 of new Greencore Share for every Northern Foods Share held by them. The Synergies are expected to be approximately £40million per annum (c. £15millin from overhead cost savings, c. £20million from purchasing and supply chain improvements and c. £5million from financing and tax efficiencies) and is expected to be realised in three years. Letters of intent supporting the merger have been received by shareholders holding 30.29% of Greencore and 11.81% of Northern Food's existing share capital. Greencore and Northern Foods shareholders will, on a fully diluted basis hold approximately 50% of the enlarged share capital each. Overall the Groups expect that the merger will provide the ability to drive cost efficiencies and combine both their Foods complementary customer basis.

 

 And so on to our neighbours in the UK and their very nice chancellor George Osborne who has stood right up to the plate with unequivocal support for Ireland. Good On him.

In a sign of the tension gripping Ireland today, a hoaxer posing as an Irish television reporter nearly precipitated a crisis inside the embattled Irish coalition government today.

As members of the Dáil filed into parliament in Dublin's Kildare Street this morning, someone holding an RTE microphone asked them what they thought about the resignation of Irish health minister Mary Harney. This sparked rumours that the coalition's majority had been slashed to just two TD's.

However, the "reporter" was actually from RTE comedy show Republic of Telly, and Harney had not resigned. Alas, the jolly jape didn't go down well with MPs, or RTE's own political correspondent, who we understand has now filed an official complaint...

And so it goes on and the Irish people await the arrival of the IMF and EFSF delegation tomorrow. Meanwhile the Guardian Ireland correspondent writes Irish government sources said today that the size of the rescue package for Ireland's banking system has been underestimated because one of the Irish banks had undervalued the amount of money needed to save it.

They said the scale of the cash injection needed to shore up the Allied Irish Bank was even greater than what the financial institution had first told the government.  On the basis of this the AIB statement due on Friday may not be quite what he market was originally expecting…

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 waiting for bailout news , Kingspan marginally disappoints , Portugal joins in.

Good Afternoon ,

 

Markets are quiet today worrying about what to make of the Will they or wont they issue re Ireland. Yes there is no denying that talks are ongoing but the Irish government seems to be keen on any bailout going directly to the banks and not the state.  The other big issue for Ireland will be not ceding control over the 12.5% corporation tax rate. A decision that Ollie Rehn seems to keep re-iterating over and over again.  

 

The 10 year bond yield has continued its descent now down to 7.95 and a mere 540bp over Germany. It would appear that Ireland is now under pressure to accept a bailout.

 

Portugal too is under pressure from markets and the finance Minister made some remarkable comments today. "The risk is high because we are not facing only a national or country problem. It is the problems of Greece, Portugal and Ireland. This is not a problem of only this country."  "This has to do with the eurozone and the stability of the eurozone, and that is why contagion in this framework is more likely. It is not because markets consider we have similar situations. They are only similar in what concerns markets, but as I said they are very different. Markets look at these economies together because we are all in this together in the eurozone, but probably they could look different if we were not in the eurozone. Suppose we were not in the eurozone, the risk of the contagion could be lower."

 

But as Brian Cowen was incensed with the comments mad by Angela Merkel which ultimately ended up with the G5 statement on Friday then Portugal too threw some blame in the direction of Angela Merkel too.

 

He went on to say that the Portugese budget proposals were positively received by the markets, then things were reversed because of the uncertainty around the permanent mechanism for dealing with bail-outs," referring to the European summit on October 29, when plans for a rescue mechanism to succeed the existing European Financial Stability Facility were outlined in a Franco-German initiative.

The Corporate news was from Kingspan today who released an IMS covering July through to the end of September. Sales in Q3 increased by 15%, helped by a previously flagged strong Q2 order book. Kingspan's order run rate has slowed from the strong performance of Q2. The company has also seen resistance in their ability to pass through increases in steel and chemical prices to customers since the company reported its H1 numbers. This pressure on margins is likely to continue in to the future given "macro weakness" which will also affect volume levels. Kingspan saw net debt increase to €140m from €135.1m . Kingspan now expects a full year operating profit in the range of €62m-€65m which is slightly below our estimates of a €65.9m.  The IMS was a tad disappointing with consensus earnings likely to be revised down a little across a range of brokers. The overall valuation looking ahead to 2011 is not cheap either and as the multiple is anticipating a recovery the stock is likely to struggle here. Kingspan dropped -1.2% today.

 

Business conditions in the New York area deteriorated in November, as the New York Fed's Empire State manufacturing survey plummeted 27 points to -11.1, driven by a sharp drop in new orders. The release was far worse than economist expectations for a +15 reading and marks the first negative reading since July 2009. The shipments index also fell below zero.

 

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 : Bond yields fall sharply on EU G5 statement and funding stories, BOI and Glanbia IMS pleasing, CRH explains itself

Good Afternoon ,

 

Well Ireland certainly has had a very interesting week and been in the news all week , for all the wrong reasons but there again much of those reasons were just to do with market prices and the snowball effect of rising Bond yields on the perception of the country and the ability of the state to access funds as well as the Irish Financials to do likewise.

 

Today helped by a statement made by the G5 Finance ministers which clarified that the German proposals on Private participation in future bailouts helped turn the tide on Irish bond yields which fell like a stone over the last week to hit 9% last night.  Yields rallied sharply today to close at 8.12% , a mere 560bp spread over Germany.

 

Bank of Ireland issued an IMS today , the initial reaction this morning was weak but that was a market wide issue on the back of a weak Chinese market close last night. The guidance was positive with improving operating profitability underlying and net interest margin which was also a tad better. It would appear that there was some surprise from international investors when Bank of Ireland noted that they had seen outflows from ratings sensitive deposits. This is hardly surprising .Personally I was comforted by the statement that retail deposits were stable. This is an area where we detected a degree of alarm on the part of retail clients over the last few days.

 

Glanbia re-iteration of their 20% growth guidance was pleasing today also.

 

CRH held an investor day in London. It would appear that little substantive and new emerged from it. n the US side, there continues to be a high level of uncertainty as to what will happen in 2011.  The european business highlight the importance of vertical integration with poland being the poster child for the crh model. Entering the country last but are now the only fully integrated company are now the most profitable. Albert sees a similiar economic development path for the ukraine. On the materials side, they want to keep exposure to solid mature economies in the netherlands, finland and switzerland while planning for emerging markets to come on stream later. Sees a return to mid teen ebit margins.

 

For products and distribution, the market for res and non res continues to shift to rmi from new build in europe. The geographic exposure for products is quite broad with no one country exceeding 24% of sales with the netherlands making up that percentage. Distribution has shifted some of the focus away from the netherlands to switzerland and, as a result of the bauking transaction,northern germany. Managing Director for the division seems to have a clear framework of where crh would like to get to, targetting some of the larger economies that have been avoided to an extent before. Would expect more development activity in south germany. On a medium term basis ebit margins are seen up over 50% from 08\09 levels but it will be slow given europes macro environment.

 

On emerging markets, its the most open that I have seen the company be about the space. They will stick with their historic way of entering a region ie. Buying a reserve backed asset, capex to bring it up a level and then integrate their plan for excellence. Sees huge growth in cement demand proxy for construction in india especially over the next 20 years. China is seen as being more volatile but longer term returning to current levels. The chinese market itself is difficult as pricing is very low with buildings materials seen as being underappreciated and a highly fragmented market. Crh is only seeing small single digit returns in china and considers itself best in class, so a difficult market. The yatai stake can be increased in 2013 which I think will happen.

 

So a busy enough day for news in Ireland culminating this afternoon with a reuters report saying that Ireland is in talks to Receive

Emergency Funding From EU.  Eurozone sources say assistance to Ireland does not foresee any debt restructuring or 'haircuts' for bond holders.

 

Not good news for taxpayers… but the market is taking it as good news and so the financials continued to rally into the close.

 

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 : a bleak day for bonds again.. and some profit taking in equities ...

Good Afternoon ,

 

Today we saw generally weaker markets with a mixture of Irish Bond spreads gone wild and the 10 year now trading at 8.62% ... and commentators suggsting that there is no liklihood in the short term that these yields will come in. Goldman Sachs Chief Strategist again saying that there is a rising probability that Ireland will need help from the ESFS fund ( andi know some of you think this stands for the European Science fiction society) . The bond market rout represents a run on the country and a short trade into the budget and the bye elections. it is a packed one way trade and there is no obvious trigger inthe next few weeks to turn sentiment so there is no one likely to stand up to the plate and take on t he market. Certainly no one local...Patrick Honohan made some comments about Bond yields not staying where they are and his comments took only seconds to be tweeted on Zero Hedge withthe addendum that they are not going to be lower... gives an indication of where sentiment is ...

 

The continued fall out on the bond spreads had little further impact on Bank prices already decimated in the last couple of weeks.

 

The corporate news relaeases continued on a positive vein today with Smurfit Kappa and Tullow. Tullow had an IMS which added little new reaal info but no bad news so the stock drifted initially then rallied into the close to finish +1.26%

 

SKG reported numbers which were ok, the market still is having problems grappling with the bullish tone of the statements and the somewhat rising EBITDA but also no serious dent being made in the overall levels of debt paydown. Jam tomorrow as always and yet the market cant quite make up its mind which direction to play this definitively.

 

CRH showed signs of being tired post the recent strng rally. Indeed the entire European building materials ssector looks a bit tired and toppy and susceptible to a bout of profit taking. I would be more bullish longer term for the sector and all the companies suggested this quarter is the rela inflection point so I would be watchful for entry opportunities if there is profit taking.

 

There was also some big moves in the dollar this afternoon and silver prices were down sharply again all after the recent big moves.

 

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 : Morgan Kelly depresses , Bond yields rise again wih financials tanking. Tomorrow brings DCC and CRH.

Good Afternoon ,

 

The storm in Irish financial markets continues and this one is now such a tempest that it is in danger of bringing down the whole system.

 

The Financials stocks are now very weak reacting to the Bond market paralysis. The Budget pronouncements have done little to assuage investor fears and as Bond yields soar so too does the markets fears about the Banks access to funding. Irish Life is the number one geared play to funding markets and the stock has fallen by 60% in a week. The value destruction and the loss of confidence is enormous. Banks of Ireland also has been hammered but closed only down -4.25% at 39c after being down -13% at one stage.  AIB is trading at 27c an enormous discount to the price level at which the government has agreed to subscribe for shares.

 

I can only refer you to Morgan Kellys article in the Irish Times as perhaps the single most depressing thing I have ever read. Of course the bears are in the ascendancy now and there is absolutely no mention in the article about businesses which are re-structuring , re-shaping their proposition and increasingly competitive. Not everyone is a loser and there are some great companies whose track records at management during these toughest times are clear.

http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400.html  If you thought the bank bailout was bad, wait until the mortgage defaults hit home

Tomorrow we get news from CRH and we await to see news about aggregates deliveries, and pricing and European Cement pricing with bated breath. Lets hope it is positive news showing trading performance at least in line with sector trends.

DCC report on their seasonally quietest period. The consensus of for eps of 52c , the fears were that the winter would be warner thaan last year but last nights storm and the sudden cold will give people confidence that a multi year big freeze may be imminent. Also the news I wrote about and highlighted last week about the prospects for the Xbox Kinect may help drive the stock depending on their own comments.

With Bond yields near 8%  I 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 : Bond yields soar as Irish Sovereign fears rocket....CRH peers report inthe USA and INM re-assure with IMS

Good Afternoon

 

7.45% yield on Irish 10 year bond yields says it all about the markets faith in Ireland. The Failure of AIB to be able to find a buyer for its UK assets has led to an increased tension in bond markets. The markets took no notice of  the NAMA statement saying that it made a Eur6m profit in Q2 and that 29% of acquired loans are performing at the end of June.  The market was focussed on sovereign fears again as well as the news that the Government tax take is down -5.4% in the yearand that with the resignation of a TD a general election looms ever nearer as consunmer sentiment continues to fall. The winter is here , the evenings have gotten dark and there looks to be no good news anywhere on the Horizon.   

 

Vulcan Materials reported earnings last night which the market reacted positively to today with the stock up +9.7%. Vulcan were confident about the prospectd of a recovery and said that trailing aggregates shipments have been increasing since February despite the strike in Illinois which saw the headline shipment rate decrease.  Vulcan pointed out that Highway awards in their states outpaced other states.

 

Martin Marietta reported Q3 results today with the company declaring themselves pleased to report their second consecutive quarter of aggregates volume growth.

 

Martin Marietta commnents were reasonably optimistic in tone saying heritage aggregates product line pricing decreased 3.1%. Previously reported pricing trends continued in the third quarter. First, a higher percentage of shipments of base stone, which is used in both road  construction and energy sector activity and has a lower average selling price compared with clean stone, contributed to negative period-to-period comparison of selling price. Second, pricing on Stimulus-related projects was 10% lower than our company average. MLM estimate that the impact of these factors negatively affected aggregate pricing by 160 basis points and expect this pricing pressure to ease as end-markets continue to either recover or reach levels of sustained stability. However, competitive pricing pressure exists and opportunities to increase pricing will return one product and one

region at a time.

 

From a CRH perspective … the market took fright that CRH aggregate volumes continued to decline when their sector peers recovered last quarter. A second quarter of sector wide recovery now puts more and more pressure on CRH with their IMS due next week.

 

This afternoon INM released an Interim management statement. The stock has been quite weak of late so the news was definitely re-assuring. That being said the market reaction was muted and the stock still closed down -0.3%

 

INM said that for the year-to-date  to end  of October 2010,  INM's year-on-year  underlying revenue trends are marginally  better than those for  the six months to  30th June 2010. The continuing  sluggishness in  property  and recruitment advertising  is as  expected, though  both have  shown a  marginal improvement on  first half  trends.  Display and  Retail advertising  -  which account for over 60% of publishing advertising - continue to follow first-half trends. Newsprint prices have  increased by c. 10%  since July 1st in  European markets and INM's South African operations have experienced inflationary  cost increases, however operating costs remain control and year-to-date operating  costs, in like-for-like terms, are in line with 2009.  Group Operating Profit Before Exceptional Items continues to be well ahead (>20%) of last year,  and the  underlying year-to-date  like-for-like* Operating  Profit Before Exceptional Items is approx. 10% ahead of the same period in 2009.INM re-affirmed their expectation for the full year results to be within the range of Market consensus forecasts for 2010 which is in the range €220 million  to €225 million.

 

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 : Ryanair slips on an upgrade , Markets focussed on QE and this week.

Good Afternoon ,

 

 

The day began with Ryanair reporting another very good set of quarterly numbers and with the numbers came an upgrade to guidance as well as what is now the regular dose of caution re future earnings visibility. The market was not impressed with the upgraded guidance.  The market is grappling with the evolution of the Ryanair strategy in the absence of a fresh aircraft deal with a significant slowdown in the rate of Passenger growth. Without a fresh aircraft deal , the fleet size will grow by about 20 aircraft in each of the next two years with total passenger numbers rising from a year end target of 73.5m to o85m over the next two years.

Ryanair delivered a 17% increase in half year Net Profit to €452m .Average fares rose by 12% to €44 in line with a 12% sector length increase as new routes and bases at Faro, Malaga and Malta performed well. Airport unit costs fell-3% during the half year.  Unit costs increased by 13% primarily due to the 12% growth in sector length and higher fuel costs.  Non Fuel Unit costs rose by 4%, however sector length adjusted they fell by 8%.  Ryanair are now 90% hedged for fuel for FY11 at $730 per tonne and 60% hedged for FY12 at $760 per tonne.  Dollar cover is now 60% hedged for FY12 at €/$ 1.35 versus €/$ 1.40 for FY11. Cash on hand at Sept 30^th, rose by €212m to €3.026bln pre the payment of the €500m one-off special dividend. The Outlook statement was typically cautious as Ryanair always say they have little visibility on Quarterly yields.  However based on Q3 forward bookings Ryanair did upgrade guidance  and suggested that winter (H2) yields will be slightly better than previously forecast. Ryanair now expect the full year yield increase to be at the upper end of the +5% to +10% range previously guided, i.e. close to 10% and full year Net Profit will exceed the upper end of the previous forecast range (€350m to €375m) and will now finish (subject to Q4 yields) within a range of €380m to €400m. 

The stock fell by -4% at one stage and settled down with a loss for the day of -3.6%. I believe that the stock had had a decent run into the numbers and it was no surprise to see some ground surrendered today. The pullback does provide a window of opportunity to add to positions. I personally believe that the next period will see surprisingly strong yield performance from Ryanair as the larger airports compete for Ryanair business and their traffic flows. Ryanair also know that they can achieve higher yields at key major airports which will sustain the growth of profitability.  There was no mention of any new aircraft fleet order  despite the occasional rumours during the quarter that one was imminent.  In terms of valuation I believe that a P/E multiple of about 10x is not expensive for Ryanair and I continue to think this should be bought.

AIB held its EGM to approve as expected the sale of its stake in M&T .  The new chairman did have some news that it is to put on hold plans to put up for sale plans to sell its UK businesses after failing to get a satisfactory offer.

U.S. stocks saw early gains after the The ISM said its index of factory activity rose to 56.9% in October from 54.4% in September.The consensus was for the ISM to decline to 54.0%.

The US mid-term elections is on Tuesday, followed by the FOMC meeting on Wednesday. $500 bn seems to be about the consensus for the much expected Quantitative Easing programme of Treasury purchases in this tranche though there are expectations that there may be several more tranches over time.

There are central bank meetings in Japan , Australian and the UK as well as the ECB this week regardless of the FOMC decision.  The BOE, ECB and BOJ are all scheduled to meet soon after the FOMC. The market is focussed on the FOMC and the reaction is eagerly anticipated…

Have a good evening

Liam

 

 

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Liam Boggan

　

Merrion Stockbrokers

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