Markets live chat transcript for the chat ending at 12:12 on 18 Oct 2007. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM: Welcome to Markets Live, FT Alphaville’s daily markets commentary
PM: Neil Hume is with me
PM: All over the shop – as ever.
PM: Actually Neil is on the phone
NH: just off
PM: Do get some comments up — and we will try and answer them
NH: been news gathering this morning
PM: Not just out congratuting yourself on S&N then
NH: no no
NH: trying to get some more info on this VT Group story
PM: Ok — the one you put in the paper this morning?
NH: we were picking up pretty strong bid rumours on this company yesterday
PM: who are the names in the frame
NH: well we have managed narrow it down to two
NH: BAE Systems and Babcock
NH: Babcock makes the most sense, but serious market punters are adamant its BAE
PM: aren’t BAE and VT Group already up to something?
NH: they are
NH: merging their ship building businesses
NH: which basically frees up VT Group to focuses on its support services business
PM: What does that do?
NH: Outsourcing work for the MOD
NH: runs big training contracts, that sort of thing
PM: any idea of price?
NH: something above 700p is what we are hearing
PM: and where are they trading at the moment??
NH: up 14.5p at 630.5p.
NH: trouble is if the bid comes from Babcock it is likely to be in shares
PM: Why?
NH: because the companies are of a similar size
NH: think Babcock has a market cap of £1.3bn
NH: and VT £1bn
NH: and not only would it be a bold move but it would also be somewhat ironic
PM: Why?
NH: well BAE and VT Group tried to bid for Babcock a couple of years ago
PM: i remember that — think we might have had a hand in releasing the news
PM: so the tables would be turned
NH: yep
PM: so, do you think anyone had made an approach for VT Group as yet– still waiting….
NH: no.
NH: but that could soon change, now that things have been smoked out so to speak
NH: several other papers were running with this story as well this morning
PM: Hmmm — that’s true
PM: any analyst comment?
NH: yep this just in from Kaupthing
NH: Rumours regarding a Babcock/VT Group combination have circled for several months but management refuse to be drawn on the subject, including during a Kaupthing sales presentation on 17th September. At that time, management stressed that they wanted the DML integration process to be complete (scheduled for summer 2008) before considering major transactions and would therefore focus on small bolt-ons, especially in nuclear, in the short term.
PM: Sounds like there could be something in this
NH: yep and from what I have been hearing the approach could be made sooner rather than later
PM: VT shares currently up 14p at 630p on this
NH: hang on, got some comment from Numis Securities
NH: Bid speculation has apparently alighted on VT with Serco, BAE and Lockheed Martin as
possible predators. Simply, VT is the lead UK defence outsourcing company with the added
attraction of operations in the US, and in growth UK sectors such as Communications and
Education. All this still trades at a significant discount to its support service peers.
NH: Our valuation of VT has not changed since May. Applying the traditional discounts to the
support service sector derives a value of 660p. Remove those discounts pushes the value to
762p and assuming that targeted cost savings in the shipbuilding jv are achieved the value is at
least 800p – perhaps a level that a bid would have to be pitched – if one were to transpire.
NH: News flow expected in the near future includes the signing of the FSTA (tanker), MFTS (Flying
Training) and Lewisham which would increase the order book to c£8bn or 7x sales (F). Interim
results are on 13th November.
NH: A bid likely? Quite complex for the bidder with the shipbuilding JV just in place and not many
identifiable cost synergies. A bid would be a strategic move into the high level outsourcing
market rather than an immediate earnings enhancing exercise. The MoD would also take a
great interest- remember DML.
Our positive recommendation is predicated on the business, its prospects and valuation- not bid
speculation. That said such speculation does highlight the upside share price potential.
PM: Ok — thanks for all that
PM: 
NH: Ok some questions about DSG below
NH: another poor statement from the company this morning
PM: what’s the damage this morning??
NH: stock has been off 9% at 125.1p
NH: now down 8.7p at 127.3p
PM: big fall
NH: it is. DSG shares on course to close at their lowest level in four years
PM: So what’s sparked the selling??
NH: half year trading update
NH: company are guiding profits lower
NH: 3%
PM: By how much?
NH: And while that does not sound much, every time DSG’s reports another 3-5% seems to come off forecasts
PM: Why’s that?
NH: well, the reason the company are giving today is Italy and PC world
NH: Company have been saying for a year and half that they would be able to fix their operations in Italy
NH: but there is no evidence of that in today’s statement
NH: in fact the company are warning that they might have to make acquisitions in Italy
PM: I bet that has not gone down well
NH: No
NH: Company also saying it plans to maintain the 8.9p dividend, but hopes of 5% growth have vanished
NH: also there has been a margin squeeze at PC World
NH: it seems that competition from the internet is really starting to bite
NH: which is worrying a lot people
PM: Go on go on
NH: they think DSG could be another Jessops
PM: 
NH: which as we all know is fighting for survival
PM: that’s an extreme statement!
NH: it is
NH: the impression I can from brokers is that value funds are wary of buying into DSG because it could be another Jessops
NH: and even some of the company’s biggest fans are starting to throw in the towel
PM: Such as?
PM: Dont tell me Nick Bubb of Pali international has gone cold on the stock?
NH: you can read my mind
NH: he has had a buy rating on DSG for longer than I can remember
NH: but even he has had to downgrade this morning
NH: His is not recommending investors sell the shares
NH: but he no longer thinks they are buy
NH: Here’s his note
NH: The market had been softened up for bad news from today’s pre-close update about PC World and Italy, but even so the news is disappointing, with the profit impact even worse than feared (eg a £20m H1 hit to PC World from over-stocking). Italy has seen LFL sales well over 10% down in the last 8 weeks, despite very soft comps, though they claim to be holding market share…
NH: Overall H1 profits will be well down from £70m (rather than flat) and that leaves at lot to do in H2, notwithstanding the increased weighting of profits to H2. I’m cutting another 4% off full-year from £318m to £305m clean (11.4p)
NH: The new CEO arrives in early Dec but there’s little he can do to shift things in the short-term, so the shares look like dead money. Given the bad news about PC World and Italy, I’m cutting SOTP from 190p to 170p and taking a 15% discount to that suggests 145p as fair value (a c6.5% yield). Moving from Buy to Neutral
NH: Implications? Kesa has a small business in Italy, but France is 80% of the group and the freehold property and cash flows suggests good upside: stick to a Buy on Kesa and 325p target and it looks a good switch today from DSG. Home Retail? Argos doesn’t sell PC’s/laptops…
PM: looks like the new CEO at DSG has a lot of work to do
PM: But some things out of his control
NH: such as???
PM: Microsoft Vista
PM: The new Windows is just useless — we’ve got one of network machines at home using it — and it drives me mad
PM: Seriously — try it out. It is the most confusing software I have ever come across
PM: So people are holding off upgrading their computing kit — unless they go the Apple route of course
PM: And you dont go to PC world to buy Apple
NH: certainly not
PM: You go to NY
NH: $2 pound lovely!
PM: Any more analyst comment on Dixons
PM: Sorry DSG or what ever it is called this week
NH: well there is loads around this morning
NH: but i want to go back to a Morgan Stanley report that came out a month ago
NH: which set out the challenges facing the new DSG CEO
NH: hang on, will just fish the note out
PM: Sorry must of missed that one
NH: gives you an idea of the problems the company might be facing
NH: Downgrading our price target to 135p and our rating
to Underweight. Although we see this is an early call
we believe that DSGi shares are likely to perform very
poorly in 2008. We therefore downgrade our 12-month
price target to 135p and our rating to Underweight
NH: Dividend appears unsustainable and could be cut
next summer. We expect DSGI’s new CEO to set out
his strategy for the business at some point during Q2
2008. We think it will be more radical than the market
currently anticipates and believe it is very likely to
include a cut in the dividend.
NH: DSGi much more sickly than most investors realise.
DSGi’s profit densities have been declining for a
decade. If current trends continue, profitability will
disappear altogether within ten years. Moreover DSGi is
not as cash generative as most investors perceive: if
leases were capitalized on the balance sheet the
group’s cash position would be worsening each year.
NH: Radical surgery required. Whilst the current ‘sticking
plaster’ approach might prove sustainable for another
two or three years, it offers little prospect of DSGi
recovering. We believe that the group needs radical
surgery (for example merging Currys and PC World into
a single format) to return it to long-term health
NH: . The risk
for shareholders in 2008 is that the new CEO might
agree with us, but the long term the risk is if he doesn’t.
An early call. Fears about the forthcoming UK
consumer downturn means we see little upside to the
DSGi share price between now and Christmas. Equally,
however, we see little downside whilst investors
continue to see the current dividend as sustainable. We
expect confidence to erode on this in 2008, not 2007.
PM: Hmm. Cheery. Thanks for that
PM:
PM: How’s the wider market doing — it was up earlier!
NH: down 5.1 points at 6,672.6
NH: been see-sawing around
NH: v mixed picture out there
PM: Oh — you know what!
NH: what
PM: We went thru an entire session yesterday with mentioning the……
PM: the…..
PM: Eric
PM: We were distracted by the S&N stuff and forgot all about the former bank
PM: But then Eric only moved 5% yesterday
NH: what are you on about???
PM: Oh, Goodness!
PM: Not Eric — ELVIS!!!!!
NH: ahhhh
NH: Northern Rock
PM: Sorry
NH: Helen reckons it was the first time since early Sept that we had no mentioned the Crockett
NH: which incidently is down 2.5p at 204.5p
PM: So its a crock Elvis
PM:
NH: apart from DSG, property sector also weighing on the wider market today
PM: Why is that?
NH: big downgrade from Cazenove
NH: and this is interesting because Cazenove are broker to so many property companies
NH: and their analyst, Miranda Cockburn, is highly rated
PM: So what is she saying?
NH: well her note looks at whether it is time to good back into the property sector, which has fallen a long way this year
NH: fact – The UK FTSE Real Estate sector has fallen by 29% year to date
PM: and her conclusion is?
NH: that there is a further downside to come
NH: and that’s because she reckons asset prices are falling
NH: here’s some highlights from the note
NH: Despite the sector having underperformed the FTSE All Share by 33% year to date, we see the potential for significant NAV
downgrades over the next six months as the severity of the underlying property market correction is captured in the NAVs.
NH: Assuming a 15% discount to a more realistic level of NAVs, this suggests further price downside of around 5-10% against
a relatively strong underlying equity market, and therefore we downgrade our sector recommendation to UNDERWEIGHT
from Neutral.
NH: We are making the following recommendation changes; British Land from Outperform to IN LINE, Land Securities from
Outperform to IN LINE, Shaftesbury from Outperform to IN LINE, Warner Estate from In Line to UNDERPERFORM, Capital &
Regional from In Line to UNDERPERFORM, Grainger from In Line to UNDERPERFORM, DTZ from Outperform to IN LINE,
Ishaan from In Line to OUTPERFORM and Songbird from In Line to UNDERPERFORM
PM: She downgraded everything!
PM: Big call to shout SELL when the sector has already fallen by more than a quarter already this year
NH: pretty bearish isn’t it??
PM: anything else worth pasting from the note
NH: will have a look
NH: here we go
NH: Our current NAV forecasts are only showing very limited capital declines, partly because we hope that the quality of the portfolios held by the quoted property sector and the management teams will be able to offset some of the anticipated market decline. We are also waiting for the September 2007 results, after which we expect to make further market and company downgrades. Therefore, we highlight various scenarios for the 10 largest REITs, our worst-case Scenario 5 showing a yield expansion of around 100bps offset to a degree by rental growth and development surpluses
NH: This results in NAVs to December 2008/March 2009 declining by, on average, 11% (vs our current base case average of +1%) from the last reported NAV, and implies that the shares currently trade at around an 11% discount, not the 24% to current NAV forecasts.
If it does appear that this Scenario 5 is unfolding, we believe that near term there will be little support for the sector and would expect the discount to move closer to 15%+, which implies average falls in share prices of 5-10%.
PM: Standby for Scenario Five then
NH: yep, get those tins hats on
PM: Hard hats for the property sector
NH: of course
PM:
PM: Should go to some of the other questions below
PM: ABX index…
PM: just got to take BSB’s and jezzman’s guidance on this
PM: Credit spreads widening again — a warning of doom ahead in the equity market?
PM: Was in August — might be again. Tomorrow is the big anniversary
NH: just digesting the comment from BSB
PM: Hmm. He’s not impressed is he?
PM: I’m sure there are also example of excellent service as well
NH: no. but the point i take from his post is that DSG are having to cut already wafer thin margins to compete with the net
NH: i mean you just don’t need to go into a story to buy a PC
NH: not like buying a suit
PM: bsb — assuming you are bucketshopboy — taken our hint at shortening your name??
PM: Cheyne — just dont know. intriguing development.
PM: And barclays 23a exception in the US — intriguing also. got to admit was not aware of that
PM: Should be a cue for Shiny Bob Diamond to jump up again and tell us all how well BarCap are doing
NH: actually Barclays were in at ABN Amro for dinner last night
NH: no hard feelings obviously
PM: Were they? any idea of what they were saying
NH: yep, got the desk notes from ABN here
PM: That’s guidance to the sales desk in the bank
NH: yep
NH: Barclays (Hold). Cautiously optimistic senior mgmt dinner last night: strong
reiteration there are no black holes. Concn: 69p FY07F EPS on track, implying 9x
PE; but Barc has most geared earnings & balance sheet. (+)ves:
NH: 1) Very strong BGI, Wealth & Int’l Retail (16% group PBT)
2) no structural change to risk mgt processes since summer
3) BarCap credit products & ABS are weak, but other 68% revenues are strong
4) Clear near term improvement in UK unsecured credit quality.
(-)ves:
1) Credit market to remain difficult for some time, esp ABS; primary volumes are
5-10% “normal”; 3 mth LIBOR may stay elevated until post yr end b/s date;
2) expect more prescriptive liquidity rules, so higher funding costs
3) UK bank revenues remain difficult, with ongoing regulatory drag; and some
deterioration to come in mid market corporate asset quality (esp comm
property & leverage)
* Readthru’s for the other UK banks: -ve readthru for capital market funding
(mortgage banks & HBOS); +ve for UK unsecured bad debts (Lloyds).
NH: Detail:
4 (+)ves:
1) Stand out drivers are BGI, where summer investment performance was extremely
good relative to peers and Exchange Traded Funds continue outstanding (9% group
PBT); Wealth, which benefits from repositioning aligned to BarCap & BGI (4%
group PBT); and Int’l Retail, where continued high investment and resulting
revenues as maximise brand, products & mgt expertise (3% group PBT).
NH: 2) No structural change to risk mgt processes since summer, ie they’ve performed
ok in a v difficult mkt
3) BarCap credit & ABS products are weak, but other 68% revenue still strong,
esp commodities (13% revs) and rates (18% revs). Reiterate m-t 15-20% PBT growth
ambition for IBIM (BarCap, BGI, Wealth), though not necessarily for every
consecutive period.
4) Clear near term improvement in UK unsecured credit trends, consistent with
monthly credit card securitisation data
NH: Final point:
BarCap reduced its subprime mortgage warehousing facilities by 50% H107, so
avoided material hits there. They are still carrying unsold leveraged finance
inventory, but comfortable with credit quality and sufficient capital to do so -
though year end capital ratios will likely be lower than previously expected.
PM: So there you go bsb — NO BLACK HOLES — do you hear!
PM: just say thanks to Sam for putting up some stuff on Cheyne
PM: Sam has had to do the 6am Cut over the past fortnight
PM: We’re going to make Helen do it for the next three weeks
NH: so she has no social life!
PM: I think she’ll manage somehow — let readers in on a secret….
PM: We do the 6am Cut from the far east — Gwen does it in Tokyo
PM: Sam/Helen swan off to Hong Kong so they can prepare it in daylight hours
NH: that’s cheating
PM: Tough life, eh?
PM: Muggins here has to stay in London and keep the truck on the road
PM: We should move on — but note that bsb’s Fed letter is worth reading.
PM: We can’t paste, otherwise would have done so
NH: http://www.federalreserve.gov/boarddocs/legalint/FederalReserveAct/2007/20071011/20071011.pdf
NH: that’s the link
NH: thanks to BSB for that
PM:
PM: Right I suppose we had better take a look at Scottish & Newcastle
NH: OK
NH: up 7p at 763p
PM: So still ticking higher — people not put off by S&N’s frosty reception yesterday?
NH: nor the fact that the Carlsberg/Heinken offer is likely to come in below 750p
PM: Hmm — people really are betting on cross-sector consolidation here
NH: they are
PM: S&N is just a trigger
PM: We’re a bit full of S&N
NH: couple of intereting points I have picked up
NH: one is that Carlsberg were staggered by the price reaction yesterday
NH: they thought a lot of the speculation would be in the price
NH: and were certainly not expecting a 20% move
PM: True — I remember SAB sources saying that they though a deal was one quid to expensive when S&N were trading at 5.50
NH: yeah and people expecting a bid at 800p should remember that values S&N at 20 times earnings
PM: Which might be arguable for the EM business — but not Brown Ale in the UK surely
NH: and fizzy fosters
NH: the other point I picked up was that in yesterday’s statement there was no mention about S&N’s Indian and Chinese assets
NH: now, these were both highlighted by SAB sources as being of great interest
PM: Certainly — especially in India where people were talking about building something close to monopoly status in terms of the local beer market
NH: quite a significant omission my sources are telling me
NH: could mean one of two things
NH: that there are pre-emption rights in India and China
NH: that would allow S&N’s local partners to buy them out in the event of a bid
NH: or
PM: Okay……
PM: Do you think there could be a third consortium member in the offering????????
NH: i reckon there could be
PM: 
NH: suppose Carlsberg approached SAB and said
NH: “don’t counter bid and you can have these assets”
PM: that’s very interesting idea
PM: You should be in corporate finance Neil
NH: needs more work on the shoot clauses in India and China
NH: of course the wider picture is how, InBve and Anheuser Busch respond
NH: InBev might move for Anheuser now
NH: and Anheuser could move for S&N
NH: got a bit of analyst comment
NH: not many people followinig this
NH: hearing all the big investment banks are scrambling around trying to get on this ticket
NH: so far, Lehman are looking after SAB
NH: Deutsche and UBS advising S&N
NH: and Credit Suisse helping Heinken
NH: u can bet your bottom dollar that Merrill, Caz, Goldman and Morgan Stanley are trying to convince counter bidders to make a move
PM: What fun — M&A bankers scrambling 
NH: but we do have a few notes to put up for you
NH: this is from Dresdner, who have been quite good in the sector
NH: Carlsberg and Heineken have announced that they plan to make a cash
offer for the whole of S&N. If successful, Carlsberg will keep BBH, France
and Greece, Heineken will get the UK, Belgium, Portugal and Finland (there
is no mention of India, China or Vietnam). We estimate that the consortium
could be willing to pay 823p per share – above our break-up value of 740p,
implying that S&N shareholders benefit from one-third of the capitalised
value of the estimated synergies.
NH: S&N’s statement insists that it does not welcome a bid, and that it has an
attractive independent future. This formulaic statement will not deter the
consortium, and the S&N Board is duty-bound to consider any reasonable offer.
NH: What might they pay? Our pre-synergy break-up value of S&N is 740p per
share, based on an EV of £9.3bn, a 2007E EV/EBITDA of 12.3x. We estimate
synergies of £180m; taxed at S&N’s tax rate of 20%, capitalised at 18x
(beverage sector 2008 average PE), and less integration costs of 1x synergies
(cf Miller Coors merger announcement last week), the value of the synergies is
£2.4bn, or 253p per share
NH: In the recent consortium bid for ABN AMRO, we estimate that about one-third of
the expected synergies were given away to ABN AMRO shareholders in the
form of a control premium – the difference between the offer price and our
estimated break-up value. Using this as a guide, we estimate that the consortium
could pay a premium of 83p per S&N share above our estimated break-up value
of 740p.
NH: Competing bids. Not from InBev (big anti-trust problems in UK and France), but
possible from SABMiller or Anheuser Busch. But neither needs more mature
market exposure, and neither would gain control of BBH. On balance, unlikely.
The Hartwall family owns 10.2% of S&N, and may not welcome a cash bid,
preferring to remain invested in the sector. That, together with dealing with
S&N’s JV partners, may affect the eventual structure of the bid, but is unlikely to
de-rail it.
NH: and this is from Evo Securities
NH: EVO TAKE – Carlsberg and Heineken are in talks about making a joint bid for Scottish & Newcastle. We estimate a bid value of around 800p, which would place the group on 20x 2008 earnings. There is only a slim chance that there may be a counter bid, so much is already in the share price.
NH: DETAILS – Carlsberg and Heineken are still in talks about a joint bid for Scottish & Newcastle, so it is still short of an actual bid although now that it is in the public domain there is an incentive to come to an agreement quickly. A joint bid should get around UK merger issues. Carlsberg with a 13% UK market share would not be allowed to acquire Scottish & Newcastle’s 29% UK share but Heineken, whose UK market share has reduced in recent years to around 1%, would.
NH: And we estimate a bid value of around 800p, which would place the group on 20x 2008 earnings, so much is already in the share price. There is only a slim chance that there may be a counter bid: SABMiller has already been bitten by developed market experience in the US, we do not believe it will not want to repeat this; and Anheuser-Busch is rumoured to be in merger talks with InBev. Also no one other than Carlsberg would be able to get control of BBH.
NH: VALUATION AND RECOMMENDATION – We retain our Add recommendation with a target price raised to the expected bid price of 800p; so the current share is within 10% of the likely eventual bid price.
PM: thanks for that — got anything from Merrill — I seem to remember them reporting back on a meeting in NY with Carlsberg not too long ago and saying there was nothing in this S&N chatter???
NH: well I have got the Merrill morning sheet. no comment about S&N
NH: of course that could mean they are advising someone
NH: and they have worked for SAB before
PM: Of course.
PM: just to go to pintsareoneme below (who needs to shorten his/her posting name
PM: We dont have the detail — but EM assets have been going up in price everywhere
PM:
PM: right what other bits of RAW market info do we have??
NH: Tesco are rumoured to be looking at Casino
PM: 
NH: HSBC and Soc Gen supposed to be planning a break up bid for BBVA
NH: vague rumours of STMicro looking at Arm Holdings
NH: and we have also had a call from an old friend this morning
PM:
PM: roll of the drum
NH: 
PM: oh
PM:
NH: our Glaswegian correspondent
PM: Scot taxi driver — been bit quiet recently
PM: What’s he got to say ??
NH: he is back on form
NH: he reckons Woolworths have received a 28p a share bid approach
PM: really? again?
PM: Sales of cut price CDs going well
PM: Discounted star wars toys
PM: Who — pray — wants to bid for a tat shop like Woolies???
NH: I know, i know
NH: who in their right mind is going to bid for Woolies in the run up to Xmas
NH: anyway don’t shoot the messenger
NH: shares are up 0.75p at 21.5p
NH: A rise of 3.5%. Have been as high as 22.5p
NH: actually a lot of analysts have started to turn positive on Woolies in the past couple of weeks
NH: and the boss of Baugur, which is one of Woolies biggest shareholders, mysteriously pulled out a retail dinner the other evening
NH: that said, I saw the Woolies CEO at a PR bash on Tuesday
PM: And?
NH: well he did not look like a man who had received a bid approach
PM: Why?
NH: because he looked pretty miserable
PM:
PM: that’s Trevor Bishbashbosh
NH: of course there could be another explanation for the rise
PM: Go on
NH: contract extension with Tesco announced yesterday
NH: good news apparently
NH: this is what Kaupthing had to say on it
NH: WOOLWORTHS (Buy, TP 27p) ~ Contract extension. Yesterday Woolies confirmed that it had extended its book supply contract with Tesco. The contract is now to run until February 2009. We estimate that this contract is worth about £100m per year, equivalent to about 6-7% of the £1.5bn total EUK distribution business. Helped by this and the Bertrams deal, EUK is capable of delivering cost savings and new contract earnings such that our forecast next year of less than £40m EBIT (a 2.5% margin) could be exceeded. We have recently turned buyers of Woolworths on the basis that they are now close to hiving off excess retail space to the grocers, which would generate a new rental income stream and incremental footfall in those locations.
PM: Meant to say — hope that helps a little Viktor — below
PM:
PM: Right — before we go Neil has something to share on Sports Direct
NH: shares were v strong yesterday
NH: down 7.75p at 148.75p this morning
NH: now a lot of people are blaming the dismal England result yesterday
PM: Logical
NH: SPD is the biggest retail of replica football kits in the UK
NH: but Umbro, which makes the England kit, is up 3.25p at 123.25p
NH: explain that
PM: Interesting
PM: So you are hinting that Ashley is going to bid for Umbro?
NH: well he owns 15%
PM: sure
NH: must have some game plan
PM: One to watch — if dangerous to bet on. This is Ashley we are talking about
NH: anyway very funny note from Oriel Securities this morning
NH: Euro champs read across
NH: Far be it from us to make stock recommendations based on football results….but we
have to follow the Home Countries’ debacles yesterday.
NH: Sports Direct shares popped dramatically late doors yesterday (as Rooney scored)…but
the fact that England ultimately lost and so did Scotland means that SpD will lose ground
dramatically this morning,
NH: Umbro’s comments on this topic last month are revealing from two perspectives. They
state that England’s non-qualification would take £15m off their PBT (forecast to be £22m
this year). Sports Direct owns 15% of Umbro. The numbers won’t be so dramatic for SpD
but obviously the expected bounce back in LFL that a Euro 2008 campaign was expected
to bring may well now not happen.
NH: Not much point changing forecasts since I had no confidence in them in the first place but
if we work with an optimistic 12p of EPS for 2008, and put that on 10x, we come up with
a price target of 120p.
NH: The shares will spike sharply down but if you can get any clients out of this (or to short it),
then do so first thing.
PM: That’s v funny
PM:
PM: That’s from Jonathan Pritchard at Oriel — just to give him a name check
PM: We must finish up now
NH: bonkers story just in on Saint Gobain
NH: Wendel currently own 6% stake. The rumour is that they’re increasing their
stake and agitating for a buyer
NH: hearing they want to go as high as 50%
PM: Yeah, right
NH: which would surely trigger an offer
NH: unless the French market has a whitewash rule
PM: Must do
NH: difficult this live posting isn’t it VP???
PM: Note VP’s point below — Bank of America figs coming out from across the pond — and they look useless. Q3 eps down 31%
PM: FTSE over here now off 52 points at 6625 — that’s a big reversal while we have been online
PM: Time for lunch i believe
NH: good idea
PM: Thanks for joining us. Thanks for all the comments. We will be back tomorrow at 11am
NH: bye