Markets live chat transcript for the chat ending at 12:02 on 22 Nov 2007. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM: Welcome to Markets Live, FT Alphavile’s daily markets commentary
PM: Neil Hume is with me
NH: morning
NH: from a nation in mourning
PM: it’s Brown’s fault you know
NH: what England’s failure to qualify for Euro 2008??
PM: Yep — the Crunch, datagate, now the football
PM: This is from First Post – the online mag. Points out that the reason that just 74 of 220 players starting premiership games last week is because of the non-dom loophole.
PM: So why do overseas players now dominate? As the supposedly economically competent Gordon Brown would understand, it’s because they enjoy a huge and unfair competitive advantage over British players. Tax rules allow foreign players to claim ‘non-domicile’ status and, with the help of clever lawyers, pay 40 per cent less tax than their British rivals on much of their income. Savvy clubs and agents aren’t slow to exploit the gap: Treasury figures reveal 300 such ‘non-dom’ players.
In opposition Brown promised to eliminate this tax break (which coincidentally benefits many major Labour donors), but for 10 years as Chancellor he refused to do so in the face of fierce lobbying from its wealthy beneficiaries. In the process English football was denuded of home-grown talent.
Brown is now leading the bid to have England host the 2018 World Cup. But he’s done his best to wreck any chance of winning it.
NH: so shareholders in Sports Direct will be asking Mr Brown for compensation
PM: yes it would be nice to see Sports Direct brought up at PMQs
PM: one for vince cable i believe
NH: look at the share price this morning
NH: down 18.2p at 94.25p
NH: that’s a fall of 16.2%
NH: and let’s not forget, Sports Direct listed at 300p
PM: the biggest fall in the FTSE 250 today
NH: as you will no doubt be aware, the company issued a profits warning this morning in the wake of England’s failure to qualify for Euro 2008
NH: : here’s the statement from Mad Mike Ashley’s lean, mean retail machine
NH: At the time of its AGM on 10th September 2007, the Company announced that it
remained confident that its pre-exceptional EBITDA for the full year ending 27th
April 2008 should show limited growth from the results reported for the year
ended 29th April 2007.
NH: As England have not qualified for the 2008 European Football Championships, the
Company can no longer be confident of achieving that level of financial
performance and believes at this stage that pre-exceptional EBITDA for the
current financial year is likely to be below that achieved in the last year.
NH: The Interim Results for the 26 weeks ended 28th October 2007 will be announced
on 19th December 2007, and the Company expects to give further guidance at that
time.
NH: Mind you not everyone is convinced that England and its hapless ex-manager Steve McClaren is responsible for the Sports Direct warning
PM: Really?
NH: Do you remember Jonathan Pritchard, the retail analyst at Oriel Securities
PM: yes, he’s the mega bear of Sports Direct
PM: writes those really acerbic notes
NH: he does
NH: and has penned another one this morning
NH: very amusing
NH: he feels Ashley has used the England defeat as an excuse to unleash a profits warning he believes was coming anyway
PM: Well, the statement did come out very promptly this morning
NH: just minutes after RNS opened
PM: OK, let’s have a look at this note
NH: The profits warning could have happened at any moment in the last two months but Sports Direct has chosen to hide behind England’s Euro 2008 non-qualification as an excuse for not meeting expectations this year.
NH: Yes the hit to replica shirts will be material but this is a business model that is broken (no footfall drivers left) and it is thus virtually impossible to put a value on.
NH: There might be 9p of EPS to report come next April (might being the operative word), and at least a 20% discount to the sector PE is appropriate. Thus we come up with a price target of 80p. But it’s more a case of thinking of your favourite number and halving it. The biggest risk to the short is Mr Ashley taking this back private.
PM: You’re favourite number and halving it – brilliant
NH: It’s not just McLaren’s fault…: Sports Direct’s earnings do fluctuate in and out of major football tournaments, and the fact that England (and the other Home Nations) have failed to qualify for Euro 08 could have up to 10% impact on EPS. It’s not just the lower sales of replica kit itself that is the problem, it is the fact that customers have less of an excuse to come in to the store at all.
NH: …the whole business model is broken: But this is increasingly the day to day experience anyway at Sports World. The downgrading of the adidas and nike ranges are impacting footfall, and footfall is key to the model as customers won’t come to the store just to buy the Sports Direct own brand products as these labels aren’t strong enough in their own right. We’ve never truly believed our numbers and we think there was a profits warning waiting to happen here even had England got through to Austria/Switzerland.
NH: 80p? It’s very hard to value a business model that is broken. It’s a leasehold business, sector sales growth will remain negative and within the industry, Sports World’s appeal is waning fast. The forecast is a falling knife. The share price is a falling knife. Trying to catch either will result in pain. MR Ashley said the shares might one day see 80p before going higher. We suspect he got it half right
PM: Trying to catch the falling knife will result in pain
PM: Love it
NH: in fairness to SPD and Mr Ashley, Umbro, marker of the England kit, have also issued a profits warning this morning
NH: but its shares have not fallen nearly as far because they are underpinned by the bid from Nike
PM: that was pitched at 193p right?
NH: yep
NH: and Mr Ashley owns 29.9% of it
PM: So he even more highly geared to the performance of the England football team
NH: yep
NH: Umbro shares currently 7p lower at 167.5p
NH: now there is some speculation, and I don’t believe this, that Nike will use the England result to pull their bid
NH: and the interesting thing to note here is that they have not filed their offer doc yet
NH: that comes out tomorrow
PM: sure, but they must have has some inkling England’s qualification campaign could end in failure
NH: of course they did and that’s why I don’t believe the deal will be pulled
NH: but there is a big spread on the deal now
PM: I ll say
NH: but then again this deal is not straight forward
NH: Mad Mike could block it and the competition commission might launch an inquiry
NH: hang on, just received a Umbro note from Citi
NH: Some chunky downgrades, EPS for this year cut by 10%
and next year by 19%
NH: here’s the note
NH: Trading update — Branded sales growth and international performance
remains in line with expectations. However, sell through of England kit has
weakened further since the interims.
NH: England fail to qualify for Euro 2008 — Following England’s defeat by
Croatia last night, England have not qualified for the Euro 2008
championship. Therefore, sales of Away England kit are likely to be
significantly lower in 2008.
NH: Downgrading numbers — We downgrade our 2007 EPS numbers by 10%
and 2008 by 19%. These forecasts assume 5% lower licensed kit revenues
in 2007 (due to lower orders in 4Q) and 10% orders in 2008, due to the
away kit. It allows for some margin benefit from less gross margin dilution
from tournament associated products, and lower marketing spend
NH: Unlikely to derail Nike bid — Luckily for Umbro, Nike has made a bid at
193p. England qualification looked unlikely when Nike entered negotiations,
so we believe this outcome is unlikely to derail the offer. However, any hopes
major shareholders may have of getting a higher price look less likely.
NH: Offer scheme document released tomorrow — On the current share price
Umbro trades on 20x 2008E P/E and 13.1x EV/EBITDA. On the offer price of
193p this rises to 22x and 15.3x, respectively.
PM: thanks for that
PM: Still if the deal does blow up we know who to blame
NH: Gordong Brown??
NH: Steve McClaren
PM: Yep
NH: actually I have a bit of sympathy for the formed England manager
PM: Oh yeah, why is that — former manager
PM: it was shambolic display last night and he is getting a hefty pay off
NH: yeah, £2.5m
PM: Another reward for failure
NH: I know
NH: but look McClaren is just the scapegoat here
NH: he was just the muppet in charge when it all finally went wrong
NH: when the problems at the grass roots level at the English game finally caught up with the national team
NH: it has been obvious for years that we are not producing players with the technical ability to succeed at the highest level
NH: and that’s because at the grass roots levels football has a nasty macho streak running through it
NH: it is all about booting the ball as hard as you can, and running as fast as you can etc
NH: very, very little interest is paid to technical ability
NH: and it is even worse at the kids level
PM: 
NH: why are children aged 10 made to play on a full size pitch?
NH: what is the point of that??
PM:
NH: they should be playing on pitch half that size
NH: that way the onus would not be on who can kick the ball furthest and run after it
NH: it would be about accurate passing, ball control, dribbling
NH: in fact all the things we could not do at Wembley last night and the Croats could
NH: so the hope has to be that last’s nights results will act as wake up call
PM:
NH: and the stuffed shirts at the FA will finally understand that there has to be a radical overhaul of the game in the UK, starting with the way kids are taught to play
NH: if they don’t we will keep on getting bad results
NH: but I fear what will happen is that they will hire a decent foreign coach like Gus Hiddink who will be able to paper over the cracks for a few years
NH: actually there was a really good piece about the ills of the English game in the times yesterday
NH: here’s the link
NH: http://www.timesonline.co.uk/tol/sport/columnists/martin_samuel/article2910642.ece
PM: excellent!
PM: there ends the sermon
PM: 
NH: i am
NH: bsb – i reckon i could do a better job than Trevor Brooking and Brian Barwick
NH: wouldn’t fancy the managers job though
NH: right let’s get back to the market
PM: 
NH: Sports Direct aside, not been a good morning for the retailers
NH: Comments from Kesa Electricals, which owns Comet, has spooked a lot of people
NH: they issued a trading statement first thing
NH: which was a disappointment
NH: on a number of company specific levels
NH: no news on the sale of BUT
NH: and on top of that it said any proceeds from the eventual sale of BUT would not be returned to shareholders
PM: nice – BUT is Kesa’s French furniture biz
NH: but then management had this to say on a conference call with analysts
NH: big white goods, ie washing machines and fridges have turned down slightly over the last 4 weeks, in
both the UK and France.
PM: Uh oh
PM: Consumer slowdown alert
NH: Yep
NH: Kesa are down 7.25p at 231.75p
NH: DSG International are down 3.4p at 103.6p
NH: Home Retail Group off 8.5p at 342p
PM: Interesting
PM:
PM: Ok — to the wider market
PM: In stocks — not england managers
NH: hang on Rio bid story flash
NH: CVRD TO HOLD PRESS CONF MONDAY..
NH: according to their website
PM: Whoa!
NH: Rio shares up 30p at £49.30
PM: CVRD — big brazilian iron ore miner
PM: Name has been repeatedly mentioned as a potential white knight for Rio
PM: Looks like a global bid table in the ming sector — fight in four corners of the globe
NH: right back to the market
NH: FTSE 100 currently up 37.9 points at 6,107.8
PM: Strong move on the Footsie over the past hour or so
NH: it is
NH: But to be honest it has been all over the place this morning
NH: no US investors around today
NH: so a lack of liquidity
NH: and the market winging around
NH: but a pretty unimpressive dead cat bounce given the losses of the past week
PM: 
NH: and the only reason we are now up 36 points is a really panicky driven flight to quality
NH: have you seen the share prices of GlaxoSmithKline and AstraZeneca??
PM: Er — Astra up 135p at 22.28
PM: 6.5%
PM: Glaxo up 63p at 12.23
PM: 5.5% higher
PM: goodness
PM: they are big moves for bid companies
NH: Certainly are
NH: and the reason is a flight to perceived quality
NH: No one wants to own cyclical stocks like retailers and housebuilders for obvious reasons
NH: people are increasingly less willing to hold the miners because they think the decoupling argument will turn out to be a red herring
PM: Helen did a post on decoupling earlier if any of interest…
NH: So where does one put there money if, as looks like, we are in for a rocky six months?
NH: investors have already piled in teleco stocks and driven the prices of things like Voda and France Tel sky high
NH: they have nibbled away at oil stocks but are wary to go any further because they have serious structural problems
NH: and now they are looking at big pharma
NH: and not just because of prediction of a boom in prozac consumption
PM: As NJS points out — Buy Prozac
NH: of course none of this is to say that the pharma industry does not have big structural issues as well
NH: because it does
NH: but these stocks are cheap
NH: one broker was telling me this morning they are trading at 10-year relative lows
NH: and on top of that big pharma are bloated companies with plenty of fat to cut
NH: so, there are a lot of costs to cut that should prop up earnings even if they can’t find any new drugs and all their existing ones are ripped off by generic drug companies
NH: to give you a flavour of what people are thinking about pharma
NH: got a couple of good notes from Citi
NH: one is from their strategy team and the other from the sector specialists
NH: Growing Pains — Fat Pharma
PM: Fat Pharma! very good title
NH: Dog — European Health Care has been the worst performing sector over the
past two years. It is the only sector to have negative returns since end-05.
NH: As bad as it gets — Regulatory risk, patent expiry, generic threat, pipeline
paucity, US$ exposure & rising political risk have made life tough for Pharma.
NH: Worse than the “Clinton” years — Recent performance worse than during the
early 1990s Clinton years; underperformance has matched that in TMT bubble.
NH: Capitulation — Health Care has rarely been this over-sold on a performance
basis. Consensus recommendations highlight capitulation from analysts.
NH: De-rated — Health Care has been aggressively de-rated. In Europe, never
cheaper relative to defensive peers. In UK, heading to “Clinton” ratings.
NH: Income attraction — UK stocks look increasingly attractive to income investors.
Dividends look well supported, especially relative to Banks.
NH: Recession risk — US 10-year Treasuries yield less than 4% again. Record gap
between bonds and Health Care performance has opened up.
NH: Cutting our short — We raise Health Care from Underweight to Neutral. A lot of
bad news is priced in. We lower Autos (best YTD performer) to Underweight
PM: V interesting
NH: and here is the sector note
NH: Sector Cash Cycles Vary: AstraZeneca Best, GlaxoSmithKline & Roche Worst— We perform a detailed analysis of the cash (or working capital) cycles of the mega-cap EU pharma companies. Cash cycle = time between spending a dollar of cash on materials/costs and receiving a dollar in cash from sales. We find surprising
differences: AstraZeneca, the most defensive company, has the shortest cycle
(more efficient); GlaxoSmithKline and Roche have the longest.
NH: Are Cash Cycles a Hidden Confidence Signal? — The tightening of cash cycles may be used in tough times to squeeze efficiency out of the business. As a
result pre-emptive tightening may signal low confidence and tougher times
ahead (e.g. AstraZeneca) or a need to tighten up cashflow due to acquisitions
(e.g. Sanofi-Aventis), as seen in 2003-04. As such this measure may give
investors insight into future confidence levels.
NH: Potential to Raise Capital Returns Significantly: Winners GSK, ROG, NOVN— These improvements could raise dividends by a significant sustainable amount. Winners are Roche (up to 34% lift), GSK (up to 17% lift) and Novartis (up to 16% lift). Relative losers are Sanofi-Aventis and AstraZeneca, with <14% and <8% lifts respectively. Alternatively, GSK could raise its share buyback by 4% of market cap (7% with debt) from its current 16%. Roche could return similar by special divs.
NH: Changes May Drive Alpha for Those Embracing Them— The dividend raises would place these stocks favourably in a screen that matches our EU Strategy team’s
current tilt to growth, low leverage and dividend support. As the market begins to
cast its eye over pharma, differentiation on dividend returns could drive alpha.
Furthermore, we highlight quant data, suggesting greater buybacks can drive
alpha (c.3% over 150 days) post the first buyback transaction.
PM: Thanks for all that
NH: and here’s a little bit more
NH: it’s from the Grim Reaper and it is more of a market take on the pharma strength
NH: Pharmas are starting cut costs in the way the telcos did so effectively
2 years ago. I would want some protection vs a pharma rally from these
levels.
NH: Miners, Industrials, Autos, Financials all look broken near-term. Foods
and Telcos look too high to chase just now. Every dog has its day and I
reckon people are starting to look at Pharma. Just think how annoying a
year-end rally led by GLAXO and ASTRA would be?
PM:
PM: Can we just have a quick switch of asset class — some of the readers might be able to help us out a bit on this
PM: Covered bonds
NH: What are covered bonds exactly?
PM: High class mortgaged backed paper.
NH: So no hint of subprime?
PM: Well no
PM: On the contrary — typically bonds secured by a pool of mortgages. But this collateral is managed dynamically to ensure that it remains top quality. AND – if there is any problem there the holder of a covered bond typically has a direct call on the issuing bank.
PM: Covered bonds also carry public-sector debt. I believe they are about as close as you can get to gilt-edged paper.
NH: But they’ve shut the market!
NH: A one trillion euro market – shut.
PM: This happened late yesterday
PM: lets be clear here – interbank market making in European covered bonds has been suspended – by the committee of banks that overseas it.
PM: Holders of covered bonds – investors – can still buy or sell their paper direct to a bank.
PM: It’s the interbank market that has been suspended.
NH: And this was because spreads were going all over the place.
PM: Yes. – and market makers have found it increasingly difficult to make firm prices.
NH: And this is also why we have seen the likes of Abbey and HBOS struggling to make covered bond issues.
PM: I know – it is extraordinary – it is yet more evidence that banks don’t trust each other.
PM: They think one or more of their number is bust!
PM: Some guy was quoted on Reuters as saying that if the suspension could easily last beyond Monday. In fact he said it might last to the end of the year.
NH: End of the year! A one trillion euro market effectively shut for the foreseeable????
NH: I cant quite understand why the equity market is just ignoring this today.
NH: or why the banks stocks are not lower
PM: Well the UK mortgage banks – and the bigger money centre banks – have already taken such a fearful beating.
NH: yeah, but this just feels as though it is really serious. All that talk of the wider money markets normalising was just guff. Things are getting worse!
NH: This basically constrains banks from lending money – right down to street level. It pushes the price of money up. There has just got to be a feed-thru effect.
NH: and on top of that we have Libor rates ticking higher every day
NH: we are going to be back at August levels before long
PM: Yep
PM: NJS mentions below that Rock has lots of covered bonds
PM: Moody’s put Rocks’ covered bonds on ratings watch few days ago i think
PM: I am not sure a covered bond has ever been downgraded in the 10 years that the market has been formally operating
NH: update on the CVRD story from earlier
NH: well informed broker says
NH: it seems to be a normal investor day in paris..it’s on their events calendar, it looks like it’s been planned for a while, good story tho on a quiet day
PM: And PC — thanks for that comment on Sam#s securitisation stuff – one reader was saying he didnt know what he was talking about
PM: I certainly dont know what im talking about
NH: and talking of hacks who don’t know what they are talking about
NH: seen this petition??
NH: http://petitions.pm.gov.uk/Mkt-Journalism/#detail
PM: What is it ?
NH: It’s a petition on the Downing St website aimed at the likes of you and i
NH: Over recent months there have appeared a number of stories in both financial journals and programming that have made serious errors in fact. Examples include the reporting of the SIV market, as well as the coverage given to Northern Rock. There has been a serious lack of diligence in verifying the accuracy of these stories, although they have been presented as fact not opinion. Accordingly, we call on the Prime Minister to ensure that the financial legislation governing Market Abuse (Distortion and Dissemination) is appropriately applied to these journalists by the FSA.
PM: So who’s got this up???
NH: Well I can tell you that.
NH: One Thomas McLaren
PM: And who has signed it??
NH: • ramesh yesodharan
• Jonathan Wyles
• Harshit Shah
• Akin Majekodunmi
• Marta Pawlukowska
• Richard Pelling
• Ian Fernandes
PM: Seven people.
NH: Yes – that’s up from five last week when I was first alerted to it.
PM: And now you have alerted a bunch more people who will be looking at our drivel and be thinking “Right, I’m going to go and sign that petition and hopefully get a few financial hacks jailed.
NH: I can think of one person who would like to add his name to the list
PM: Don’t go there!!!!
PM:
PM: Right — we are off to our new favourite mortgage company
NH: PARA GONE
PM: The former Paragon
NH: but it’s coming back a bit this morning
PM: Oh yeah?
NH: shares have rallied 9.5p to 89.5p
NH: mind you have they have tanked 70% in the past two days
PM:
NH: couple of things going on
NH: first, talk that the institutions backing the emergency cash call have been hedging themselves
PM: ooooooh “hedging” themselves
NH: yes, that’s one term for it
PM:
NH: and them we have had a story that Paragon could be a takeover target for PE
NH: which may or may not happen
NH: but the point is and we alluded to it yesterday, is that PARA GONE is possibly worth something like 130p in run off
NH: that’s because it has mactched its lending and borrowing and locked in a margin
NH: something the Crock failed to do
Readers may also know this former bank as Northern Rock.
NH: anyway, have a good note from KBC
PM: Do share
NH: they are telling clients to close their short positions
NH: Paragon’s shareholders consent to the back-stop £280m Right Issue
Under this scenario, we see new equity owning two thirds of the ongoing business. Obviously shareholders will be given rights, which they can take up or sell. Our concerns about the ongoing valuation of Paragon reflect the difficult outlook for UK residential property. However, we feel confident that the value of the ongoing entity will exceed £420m (ie £280m + 115m*122p).
NH: Paragon’s management finds a more attractive “cocktail” of new debt and asset sales
As we do not know what is going into the “cocktail” which management is attempting to put together, we cannot judge the potential valuation. However as the proposals would be “better” than the Rights Issue, we estimate our valuation would be over 150p a share.
NH: Paragon management accepts the “unattractive terms” offered by its current lenders
Management says the terms offered by Paragon’s bankers (a syndicate led by RBS and JP Morgan) were “unattractive”. In the light of Paragon’s share price below 100p, we think shareholders might find the terms attractive. If management accepted the terms and sold assets over the next 12 months, we expect the reported NAV would fall c10% from 272p a share to c245p a share. We would expect Paragon shares would still trade at a c20% discount to reported NAV (ie 200p a share).
NH: Investment recommendation and target price
We recommend that investors close all short positions at prices below 120p a share.
We recommend that investors recognise that Paragon is unlikely to pay a dividend for at least a year.
We set our target price at 122p a share and recommend investors be prepared to not only take up their rights (should the rights issue be forced onto shareholders), when they buy shares at below 110p.
NH: its a big call from Robin Savage at KBC
PM: Hmm. Interesting. And brave
NH:
PM: Where now?
PM: how about Burren Energy?
NH: good idea
NH: shares have ticked higher this morning
NH: currently up 25p at £10.43
NH: on some fresh bid rumours
NH: now, Burren rebuffed an offer from ENI over the weekend
NH: shares tanked
NH: hit £10
NH: ENI offer was at £12
PM: 
NH: but are rallying today on a report in the India press
NH: that the company is in the sights of Mittal
PM: Mittal eh? that guy gets linked with more takeover situations than…
NH: he does but anyway here is the piece
NH: see what u think
NH: NEW DELHI: Steel baron LN Mittal may have set off on a new oil hunt yet
again.
And this time the target seems to be Burren Energy, a listed company on
the
London Stock Exchange that owns oil-producing assets in Turkmenistan as
well as
West Africa.
NH: The London-based oil and gas exploration and production (E&P) group
currently
produces over 35,000 bpd of oil. Burren Energy, incidentally, has been
in the
headlines over an unsolicited bid by Italian oil major ENI.
NH: Korean oil major Korea National Oil Company (KNOC) too had made
overtures to the
company, but its GBP11-per-share bid was rejected by the Burren board.
KNOC has
gone on record that it may “consider its options” and may return with a
higher
offer. International reports said KNOC’s move could value Burren at more
than
GBP1.7 billion.
NH: With global oil prices sniffing at $100 per barrel, valuations of oil
companies
have reached new highs and battles over acquisitions have only got
tougher.
Burren owns prized assets in Turkmenistan and Congo where it is
producing oil,
and exploration blocks in Yemen, Egypt and Oman. Takeover tycoon
Mittal’s move
comes in the wake of these developments.
NH: Mr Mittal, who has been flirting with the energy sector with
acquisitions in
Kazakhstan and Nigeria, is understood to be evaluating options for
acquiring
Burren’s assets. Company officials, however, declined to comment. “We do
not
wish to comment on speculation,” an official said, when asked to comment
on
Mittal’s latest oil sector targets.
NH: But investment banking sources who did not wish to be named said Mr
Mittal, who
is making forays into the energy sector, is interested in Burren’s
assets.
“Burren Energy, along with Maurel and Prom, has been on LN Mittal’s
radar and a
bid at some point cannot be ruled out,” a source said. Maurel & Prom is
a French
oil company that does most of its drilling in Colombia.
PM: Thanks for that
PM:
PM: Neil want to have a quick chat about Mitchells & Butler
PM: he is trying to root out a note on the subject
NH: yep, interesting note from Morgan Stanley this morning
PM: M&B price down 14p at 582p currently
NH: like us, they think the pub operator will announced plans to adopt REIT status when it announces results next week
NH: but they think the upside is limited
NH: in fact they have downgraded to equal-weight
NH: now given the size of the bull position in M&B this might interest a few people
NH: We downgrade MAB to Equal-weight and lower our price target by 18% to 700p (12% implied
upside) as we think the prospect of a successful JV deal is fading and an alternative REIT
demerger would add significantly less value
NH: The JV proposal likely to be replaced by a propco
REIT demerger but this is not as attractive and should the shares rally on such an announcement
we would sell above 700p. MAB is under increasing pressure to release value from its pub
assets, and the credit crunch has scuppered the plan to sell its assets to a JV and return cash to
shareholders. An alternative propco demerger with REIT conversion is only worth 750p, we
estimate, less than the 930p JV proposal, as there is no cash return, no control over the assets,
and property is trading at a big NAV discount. Results due out next week.
PM: Right — thanks for that
PM:
PM: Been so many comments this morning below — hardly been able to keep up
NH: before u do
NH: just go some more stuff on Burren
NH: the Korean are still interested, apparenntly
NH: EOUL (Dow Jones)–State-owned Korea National Oil Corp. Thursday said it has not yet withdrawn its interest in London-listed Burren Energy Plc (BUR.LN).
“This year, we made an approach to Burren Energy but received no response from the British (oil and gas exploration) company,” a KNOC official told Dow Jones Newswires.
Asked if KNOC is planning to make another approach, he said: “We have not withdrawn the interest we had expressed to the takeover panel in London.”
He explained that the takeover panel oversees disclosures on possible merger and acquisitions of London-listed companies.
KNOC said that Jefferies Group Inc. (JEF), the boutique investment bank, is advising it on its “approach” for Burren.
The Sunday Telegraph newspaper reported in October that the South Korean company had tabled an indicative offer of GBP11 a share, valuing Burren at GBP1.5 billion ($3 billion).
PM: Thanks
PM: Smith & Nephew — debbie asking below
PM: Same flight to a new class of “quality as AZ and GLK we assume
PM: Tho it has been a bid candidate in the not too distant past
NH: getting some libor fixes now
PM: Zipping through below…
PM: No — we do not know where all the CDOs are hidden
PM: And would love to hear from anyone who has been buying CDO squared
PM: James Browne — you’re call as to whether you remove the tin hat for Xmas pud
NH: right here are the Libor’s we have from Reuters
NH: sterling 2-month at 6.58%
NH: sterling 3 month at 6.528
PM: Oooh — the trend higher is accelerating
NH: it – 3 month peak at 6.8% in August
NH: FXtrader – someone made exactly that point to me at lunch yesterday
PM: Hmmm
NH: said the only thing he could remember like it was the aftermath of Drexel collapse
PM: To finish off….
PM: Seen this the Chinese market?
NH: not in detail
PM: Took our eye off this particular ball – been so busy on things closer to home.
PM: But there’s been something approaching a market crash in Shanghai – prices down 4.4 per cent overnight – Shanghai Composite has fallen back through the 5000 level.
PM: Prices are off almost 20% since last month.
NH: Yeah – still got a long way to fall tho.
NH: Just looking at the chart – Shanghai Comp still more than double its level at the beginning of the year.
PM: But you know, just as we got loads of nonsense out of China on the way up, we now getting the opposite type of dross on the way down.
PM: Here’s what some analyst has told Reuters:
PM: A further drop will trigger massive redemption in mutual funds, which would have a snow-ball effect on the index.
NH: Well, might be right.
PM: Hmm. Well just wanted to draw attention to that
PM: We are done!
PM: Thank you for some v v lively comments this morning
PM: And we will be back for the next session of Markets Live at 11am tomorrow
NH: see ya