Markets live chat transcript for the chat ending at 11:46 on 2 May 2007. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM: Good morning. Welcome to Markets Live – Alphavile’s daily markets commentary.
PM: Neil Hume is with me
PM: Lot’s to chat about today
PM: Once Neil get’s his box booted up
PM: I can see he’s got blue on his screen, which is promising
PM: Next he’s gong to try and fire up this inter web thing
PM: And then there’s Lotus Notes
PM: Sorry — I’m jumping ahead
PM: In anticipation
PM: He’s in Notes ….
PM: Now he’s swearing a bit
PM: He’s on the web
PM: He’s intro Alphaville
PM: Lotus Notes still loading
PM: Jeeeeeeeeeeeeeeeeeeeezzzz
PM: 
PM: Ok he;s in and
PM: FROZEN!!!!!!!!!!
NH: i am. 10 mins to boot up. must be a record
PM: 
Hooray
PM: Let’s get on with it
PM: We’re going to jump straight in here.
PM: Let’s do Pearson.
NH: Get it out of the way.
PM: No I don’t think so – we cant not talk about Pearson.
NH: No… for those living in a tin box we should say that it emerged late yesterday that Rupert Murdoch’s News Corporation has made a $5bn bid for Dow Jones, the publisher of the Wall Street Journal
PM: Yep, its not as tho we’re navel gazing media types or anything.
NH: Murdoch’s bid price – $60 was WAY over the market price, which stood at $36.
NH: Set the sector alight – every old media asset was suddenly back in favour yesterday afternoon. Pearson spiked 4.6% to trade above 900p
PM: Quick declaration – I’m in the saye scheme … at 637p
PM: So what’s the follow through today.?
NH: Well no follow thru – the opposite, actually.
NH: Pearson stock down 22p at 879.5p currently.
PM: So people realising that they got carried away yesterday – Dow Jones is a special asset that Murdoch is willing to pay a special price for?
NH: Well the Financial Times, owned by Pearson, is a special asset as well
PM: Of course, and there has been speculation for years that Murdoch would be a buyer if the Great Dame became a seller.
NH: That’s Marjorie Scardino, Pearson chief executive.
PM: So what? Pearson stock has come back because people think if Murdoch is buying the WSJ then he won’t want us?
NH: Well it’s more complex than that – people are worried about increased competition and they are trying to read through on valuation terms from the Dow Jones price – and coming up with various results
NH: Here’s some stuff from Dresdner Kleinwort
PM: Oh, don’t bring them into – Usman Ghazi and team at DK. They’ve been trying to get us sold for ages.
NH: Well they are still at it
NH: They cross reading – using the 2.1 x sale ratio on the Dow deal and then guessing that Murdoch might eventually pay up to 2.7x sales – puts a valuation on the FT of between £921m and £1.1bn
PM: 
NH: Also they are saying:
NH: We met Robin Freestone, FD of Pearson last night who reaffirmed that there was no sentimental attachment to the Financial Times or any other asset at Pearson and that they
would be prepared to sell it if the right asset price was on offer. So what is the right price for The FT publishing group?
PM: But look, those valuations are rubbish. When you look at our web oprerations, that’s attributing a negative value to the paper – and that cant be right, certainly with its new sharper look.
PM: And anyway, FT Alphaville alone is a worth a billion.
NH: Maybe … if we floated it in Shenzhen
NH: And had it quoted in Zim dollars
NH: Anyway, its been rather upbeat 24 hours for the Murdoch clan.
NH: We’ve got numbers from BskyB this morning
NH: and the shares are FLYING
PM: Yes, BskyB is the biggest riser in the FTSE 100 this morning
PM: really is flying
PM: Price up 42p at 626.5
NH: that’s a gain of 7.3%
NH: that follows strong third quarter figures
PM: Very strong Q3 figures
PM: Seven per cent move on the back of those
PM: What are the hights of the Q3s Neil??
NH: everything
PM: Well, what’s impressed analysts most?
NH: everything
NH: all the key metrics look to be well ahead of expectations
PM: Ok, give us some details
NH: OK
NH: Sky enjoyed the highest Q3 gross additions for six years and churn was no worse than feared.
NH: Broadband on track.
NH: 9-month EBITA emerged at £557m, comfortably ahead consensus at £537m.
PM: Any analyst comment?
NH: hang on a minute
NH: this is from Bear Stearns
NH: Maintain Outperform
NH: These results support the thesis that Sky\’s triple-play (\’See, Speak,
Surf\’) is a strong product at very competitive prices and that this will drive sub accelerated
growth with BSkyB having reached an inflection point. Total sales across all products amounted
to 1.2m, double last year. Despite the estimated £15m of higher cost associated with an
acceleration in subscriber growth, the group is also seeing a pick-up in underlying pay-TV yoy
EBITA growth from 1% in H1 to 8% in Q3. We maintain our Outperform rating and price target
of 680p.
PM: Ok, thanks for that
PM: Before we turn to the wider market … just pickup on couple of comments below …
PM: Thanks Ronaldo. We’ve been practicing our speeder start for 6 months now
PM: And Retail Punter – no, sorry, no fresh news. But I PROMISE to call my guy later today
PM: OK — Neil — the wider market?
NH: well. the FTSE 100 continues to yo-yo around
NH: this morning we find the blue chip index up 43.3 points at 6,462.9
NH: The main impetus for rise came from Wall Street, which rallied in to the close last night
NH: That said, mining stocks are in demand this morning and that has also helped London
NH: Lonmin is leading the mining sector higher
NH: it shares are currently up 187p at £35.07 after the half-year results impressed
NH: well, profits were down on the same period last year, but importantly the company maintained full year earnings guidance.
NH: the rest of the sector seems to have been buoyed by the copper price which hit $8,000 a tonne in early trading
PM: Ah, i know what you are going to bring up now
NH: Shire?
PM: Yep
PM: Actually i was looking at that earlier — well down, but recovered since
NH: they have
NH: the early weakness was promopted by confirmation of your story last night about a $1bn convertible bond issue
NH: Company says it is refinancing its bank facilities through the bond
NH: expire in 2013 and the strike price will be set a premium of between 45% and 50% of today’s VWAP price
PM: Thats volume weighted average price
NH: it is
NH: wonder why they took this route??
PM: Probably will save them money — debt markets are sooo welcoming at the mo
NH: between 2-5/8% and 3-1/8%
PM: Semi- annual — 6 monthljy
NH: even so that seems cheaper than you could borrow at the bank
PM: So you’ve got your answer .,..
NH: which is more than I got from Shire and its PR advisers last night
PM: Really?
NH: yeah, put the usual checking calls but no one called me back
NH: actually I tell a lie, they called back this morning
PM: How timely!
NH: and to think of the fees these PR companies charge
PM:
NH: mind you Shire were no better, their corporate comms people did not have the courtesy to phone back either
PM: I am afraid we are seeing more and more of this
PM: the PR tactic seems to be ignore calls when a hack is on to something
PM: 
PM: 
PM: Its all because of the FSA market abuse rules
NH: I know, its very sad
NH: the traditional relationship between the press and corporates is breaking down
PM: On that subject — albeit at the extreme end ….
PM: how’s BP stock this morning, following the resignation of Lord Browne yesterday?
NH: up 3p at 566p
NH: move is just in line with the market
PM: I couldn’t believe just how nasty and homophobic the Mail’s coverage was this morning. Made me want to vomit.
NH: Hmm. Tend to agree. All these allegations are just so petty.
NH: I noticed you put a little Markets Live promo post up earlier – and you said we were going to be making some revelations about journalists’ private lives.
NH: Who’s that – people from the Mail or Mail on Sunday.
PM: No, you!
NH: Eh?
PM: FACT: Neil Hume used his computer at work to order a Tesco’s shop online, citing the spurious excuse that his wife was seven months pregnant. The computer was owned by Pearson, which is a publicly listed company.
PM: FACT: Neil Hume allowed his three year old son Morgan to play Brick on his Pearson-owned Blackberry for THREE HOURS – his excuse being that he was driving back from Northampton at the time and was trying to keep the kid quiet in the back of the car. With the Blackberry’s battery consequently run down, Hume then proceeded to recharge the device on company property
PM: FACT: Neil Hume LIED to FT admin boss Martin Nielsen when claiming that his Blackberry had fallen in the bath when in fact Hume had drowned the device when he spilt a Martini on it.
NH: it was actually a bannna that did the damage to my Blackberry
PM:
PM: FACT: Neil Hume CHEATED his employer last month when he claimed £80 for “lunch with a contact.” In fact this was not a lunch. There was NO FOOD involved. Hume was DRINKING with four brokers and he LOST the spoof for the bill.
PM: FACT: Neil Hume REVEALLED damaging internal information when he discussed the state of the FT’s technology with the chief executive of a medium-sized investment bank. “It’s just crap,” Hume is alleged to have said at a secret lunch in St James’ arranged by a friend who used to be in journalism. Hume vehemently denies this.
NH: Well, I am not denying that last one
PM: It’s HUBRIS Neil. It’s LIES.
PM: Your glittering career is in ruins
PM: Anyway — back to the market
PM: Any other features out there?
NH: on the speculative tack
NH: rumours of a private equity bid for Abbot Group
NH: oil field services company. in the FTSE 250
PM: ??
NH: shares up 7.25p at 272p
PM: That’s a rise of 2.7% — what do you make of it?
NH: not sure.
NH: what makes me slightly sceptical is that a director dealt yesterday
PM: That would make me very sceptical — unless of course the PE interest is at a v v early stage
NH: Isla Smith, a non-exec, bought 10,000 shares at 269p
NH: moving. also talk of stakebuilding in CRH
PM: Now, this sounds more interesting — Irish building materials
NH: the rumours is that JP McManus and John Magnier are building a position on the quiet
PM: The Coolmore Mafia
NH: yep
PM: Interesting — but v raw information
NH: it is
PM: Thanks for Daire
PM: Any other features out there
NH: Next shares up 53p at £23.92
NH: The vibe from the retail industry is that sales at Next are strong at the moment
PM: What — isnt everybody flocking to PG’s Top Shop
NH: apparently not.
NH: seems it has benefited from the recent hot weather
NH: anyway we could get further details on just how good trading is later this week
PM: Why’s that?
NH: Next are on an investor roadshow and I suppose the first thing fund managers are going to ask is “how strong is current trading?”
NH: If like-for-likes are back in positive territory, these shares have further to run
PM: Tell me about Partygaming — come back a good way, no?
PM: This was above 50p very recently
NH: they were
NH: and this morning’s Q1 trading update has come as something of a surprise
NH: although the company has signed up 234,000 new players in the first quarter of 2007, it has cost them a lot of money to do so
PM: I see — having to pay fees to affiliate companies that a referring players
NH: and they players in Europe seem to be spending less money that the ones in the US
PM: Hmmm — thanks for that
PM: From gaming — lets go to the playstation sort
PM: What’s happening with Game group??
PM: Price up 10p — at 164.5p — that’s a rise of 6.5%
NH: shares are the biggest rise in the FTSE 250 this morning
NH: market has responded well the acquisition of GameStation for $150m from Blockbuster
NH: actually I should have known something was up at Game Group
NH: was supposed to be having lunch with their FD and he mysteriously cancelled at the last minute
PM: 
NH: and now we know why
PM: Any analyst comment on this deal??
NH: yeah. they reckon Game has got its rival on the cheap and there should be big synergies
NH: this is from KBC Peel Hunt
NH: The acquisition of Game Station looks sensible and is likely to generate a return of c.15%. The retail brand will be maintained because of its reputation as a serious games specialist and costs and efficiencies improved (particularly central and supply chain) to generate c. £7m of synergy benefit. Forecasts are unchanged for the current year but are likely to rise by £5-6m next (post interest acquisition).
NH: Given Game’s 25% UK market share, the acquisition may be referred to the Competition Commission. Our forecasts show strong growth this year given the hardware cycle and we expect PBT of £40m to give EPS of 8p. This represents growth of over 25% with high double-digit expansion likely for the next two years. Consequently the 19x PER looks reasonable, particularly given the prospect of outperformance in this buoyant games market.
PM: Before we wrap up today some sad news
NH: shares in Carter & Carter, the vocational training group, have been suspended this morning
NH: this follows news that founder and chief executive Phillip Carter was on a board a helicopter that has gone missing
NH: the helicopter was on its way back from last night’s Champions League clash between Liverpool and Chelsea
NH: Phillip was a big Chelesa fan in fact he was a vice president of the club. I think his links with the club date back to the Matthew Harding era
PM: Are there any more details?
NH: not yet. all very sad.
NH: Carter & Carter shares have enjoyed a meteoric rise since they came to market at 235p in February 2005
NH: were suspended at £12.35
NH: Phillip was recently named entrepreneur of the year at the PLC awards
NH: This is formal citation
NH: The award of the title Entrepreneur of the Year recognises the skill with which Mr Carter has handled the transition from running the company as a private entity to taking it onto the public market, where scrutiny is searching and stronger management systems are needed.
NH: He has managed the change without letting these new constraints quench the entrepreneurial flame that inspired him to start his own business in the first place. The award of the title Entrepreneur of the Year recognises the skill with which Mr Carter has handled the transition from running the company as a private entity to taking it onto the public market, where scrutiny is searching and stronger management systems are needed. He has managed the change without letting these new constraints quench the entrepreneurial flame that inspired him to start his own business in the first place.
PM: Thanks for that
PM: We will leave it there for today. Thanks for joining us.
NH: bye. and all that stuff on expenses, blackberrys and IT systems was a joke.
NH: none of it was true.
NH: Paul was merely trying to highlight the absurdity of the Lord Browne stuff
PM: Bye
NH: bye