Markets live chat transcript for the chat ending at 12:05 on 3 Jul 2008. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM:
Hi there
PM:
Welcome to Markets Live
PM:
This is FT Alphaville’s daily markets chat.
PM:
Neil is here
PM:
Honest
PM:
Couple of immediate things to kick off with today.
NH:
morning
PM:
First, a Quote of Day.
PM:
Sam picked this up earlier from Jeffrey Rosenberg at bank of America
PM:
If 2007 was the year of subprime, 2008 should count as the year for everything else.
NH:
And then we’ve got this Fact of the Day.
NH:
Killer fact, in fact.
NH:
Comes from a market shrewdy known to some of his mates as the Grim Reaper.
NH:
FACT : the mkt cap of GM is less than that of Mattel (maker of
matchbox cars)
matchbox cars)
PM:
PM:
General Motors stock was traded at 1950s levels last night
NH:
that followed the Merrill note
PM:
using the b word
NH:
which said the compayn needed to raise a lot of fresh capital
NH:
otherwise bankruptcy was a possibility
PM:
Hmmm
PM:
NH:
can we just look at Mitchells & Butlers
PM:
Yep — news just out
NH:
just had confirmation on a story we were looking at
NH:
heavy, heavy volume in Mitchells this morning
NH:
132m shares traded already
PM:
Robbie Tchenguiz selling??
NH:
don’t think so
NH:
he has just put two of his acolytes on the board
NH:
however, the trading is down to Mr T
NH:
from what I am hearing he is swapping his CFD holding for physical stock
NH:
in fact that has just been confirmed
NH:
previously his 29% stake broke down as
NH:
3% physical
NH:
the rest CFD
NH:
and this morning we got this
NH:
3. Additional information:
Violet Capital Group Ltd is wholly owned by the Tchenguiz Family Trust. As announced on 12 June 2008, it had an economic interest through contracts for difference (with no voting rights) in a total of 108,086,471 Mitchells & Butlers shares. The position has now been unwound in respect of 92,086,471 Mitchells & Butlers shares, which are now directly owned by Violet Capital Group Limited. Violet Capital Group Limited continues to have an economic interest through contracts for difference (with no voting rights) in a total of 16,000,000 Mitchells & Butlers shares, representing 3.96% of the ordinary share capital of the Company. This economic interest is over and above its interest in 25.78% of the ordinary shares in the Company with voting rights attached.
Violet Capital Group Ltd is wholly owned by the Tchenguiz Family Trust. As announced on 12 June 2008, it had an economic interest through contracts for difference (with no voting rights) in a total of 108,086,471 Mitchells & Butlers shares. The position has now been unwound in respect of 92,086,471 Mitchells & Butlers shares, which are now directly owned by Violet Capital Group Limited. Violet Capital Group Limited continues to have an economic interest through contracts for difference (with no voting rights) in a total of 16,000,000 Mitchells & Butlers shares, representing 3.96% of the ordinary share capital of the Company. This economic interest is over and above its interest in 25.78% of the ordinary shares in the Company with voting rights attached.
NH:
now this could all be viewed as a positive
NH:
coz it shows that Mr T has the cash to do it
NH:
and he can no longer face margins calls on his position
NH:
and another positive is that Mr T
NH:
could refuse to lend out any of his stock
NH:
in fact that is what he is telling people
NH:
he is sick of short sellers battering the stock
PM:
Oh dear
NH:
and will start calling it in
PM:
Wot are the shares doing on the back of this?
NH:
off 2.25p at 199.75p
NH:
were a lot lower earlier
NH:
hit 184.25p
NH:
and that was on fears that Mr T was being forced to unload his position
NH:
actually, sentiment toward the pub stocks is a bit better this morning, following a reassuring set of numbers from Greene King
PM:
yes — price up 15.25p at 415
NH:
think the main positive from the GK statement is that food sales were still growing in the first eight weeks of new financial year
NH:
also good news from its Bellhaven business in Scotland
NH:
and this is a real ray of hope for the sector
NH:
on the second full year of the smoking ban in Scotland, Belhaven reported revenue up 8%, driven by stronger food sales, with operating profits up 18%.
PM:
PM:
Any more RAW while you are at it — I’m trying to avoid us falling into the mining sector for a mo
NH:
well, we should have a quick look at Minerva
PM:
Ah yes — raised again below
NH:
just has been smashed up in the past couple of sessions
PM:
Bounced a little this mornign tho — up 1.75p at 70
NH:
market cap is now just £110m
NH:
from what we can gather talks with Limitless continue but are moving at a glacial pace
NH:
company must be rather sick of it all by now
NH:
why don’t they ask for a put up/shut up
PM:
From the Panel
NH:
I mean if Limitless want this company, £100m is loose change
PM:
Lmitless of course are frm Dubai
PM:
responsible for the Palm development out there
NH:
right, I have a quick note from Kaupthing
NH:
they talked to the company yesterday about the bid talks
NH:
everything seems to be OK
NH:
they reckon yesterday’s fall was down to a CFD holder being forced to sell
NH:
Minerva (MNR.L) – dramatic -16% price fall yesterday.
We have commented on the fundamentals here many times before, and have illustrated just below 200p base-case written down value. The outlook has deteriorated since, and we are becoming concerned first that MNR’s super-prime resi might not be expensive enough to sidestep London resi falls and, second that our City site assumptions might need another twist upwards on the yields. After these (perhaps 10-15% additional write-downs) there would still be large upside.
We have commented on the fundamentals here many times before, and have illustrated just below 200p base-case written down value. The outlook has deteriorated since, and we are becoming concerned first that MNR’s super-prime resi might not be expensive enough to sidestep London resi falls and, second that our City site assumptions might need another twist upwards on the yields. After these (perhaps 10-15% additional write-downs) there would still be large upside.
NH:
Having checked with MNR’s IR, we, they, the company, and the bid-advisors seem not to be aware of any new news or rumours yesterday, and we conclude that a medium-volume seller had to take the price available. 3m shares traded (c 2%)
NH:
We note that at 68p, the Market Cap of £109m is almost equivalent to where we think MNR’s gross cash level (c. £100m), so the property equity is effectively in for nothing. With no newsflow and huge speculation, fear generated by the share price movements is now feeding off itself. Will Limitless make a statement? Even crude analysis (“Say Croydon is worth nothing” etc.) would surely conclude that there is more value in the company than its gross cash?
PM:
Okay — thanks for that
PM:
PM:
To some questions…
PM:
Welcome back Baz
PM:
Becker — sorry didnt print C-Sore stuff. Will try and so so. Just snowed
NH:
crude oil on the march again
NH:
trying to go through $146
PM:
How about the wider market — response to all this??
NH:
not reacted well to the fresh oil price spike
NH:
FTSE 100 back in bear market territory
NH:
been in and out of it this morning
NH:
traded as high as 5,440
NH:
and as low as 5,358
NH:
now 5389, down 37 points
NH:
that is of course below the Bear Stearns bail out low of 5,414
NH:
all very bearish indeed
NH:
time for the tin hats
PM:
NH:
and we have the ECB meeting to comoe
NH:
US non farm payrolls
NH:
a half trading session on Wall STreet
NH:
and US markets closed tomorrow
NH:
could be volatile
PM:
And here’s a little check list for people watching a slew of data coming out of the US a bit later today.
PM:
US Change in Nonfarm Payrolls (JUN) -60k
US Unemployment Rate (JUN) 5.4%
US Change in Manufact. Payrolls (JUN) -30K
US Average Hourly Earnings MoM (JUN) 0.3%
US Average Hourly Earnings YoY (JUN) 3.4%
US Average Weekly Hours (JUN) 33.7
US Initial Jobless Claims (JUN 28) 385K
US Continuing Claims (JUN 21) 3125K
US Unemployment Rate (JUN) 5.4%
US Change in Manufact. Payrolls (JUN) -30K
US Average Hourly Earnings MoM (JUN) 0.3%
US Average Hourly Earnings YoY (JUN) 3.4%
US Average Weekly Hours (JUN) 33.7
US Initial Jobless Claims (JUN 28) 385K
US Continuing Claims (JUN 21) 3125K
PM:
Those are consensus forecasts, obviously
PM:
Just to recap here — nerves were a-Jangle on Wall street cos a sudden slump in the price of coal
PM:
Set offer worries about a so-called steel crisis
PM:
Customers refusing to pay surcharges for steel
NH:
US steel stocks got hammered overnight
PM:
Steel companies turning round to raw material suppliers and saying “we cant pass these prices on”
PM:
Here’s a quick note from Caz on the matter:
PM:
Thermal coal prices fell sharply yesterday during market hours (2 July), with API4 (FOB) for 2009 down 8.5% from $189/t to $173/t, and API2 (CIF) down 12.5% from $217/t to $190/t.
All else being equal, this is negative for most European generators. This is because coal is the marginal price setting fuel in Northern Europe, and a lower coal price reduces their gross margins on other types of plants (ie mainly nuclear, hydro, lignite). Conversely, this is positive for most UK generators, as gas sets the price and a lower coal price increases the gross margin of coal plants.
However, yesterday’s fall follows a very sharp rise over the past few weeks. API2 is only back to where it was on 23 June, and still up 62% YTD. Short-term and medium-term fundamentals continue to point to a tight market, with a mix of constrained supply (from the US, Indonesia, Russia, Australia) and strong demand (from Japan, South Africa, China).
PM:
In our view, the share price moves were interesting: the smaller, generation pure play stocks responded “as expected” (eg Fortum -4.2%, Verbund -3.4% vs. the sector -0.2%) however the larger, more integrated ones did not (eg E.ON +1.1%, RWE +0.9%). With the former having (rightly?) priced in the recent increase in forward prices significantly more than the latter, we believe this is only fair.
In our view, the share price moves were interesting: the smaller, generation pure play stocks responded “as expected” (eg Fortum -4.2%, Verbund -3.4% vs. the sector -0.2%) however the larger, more integrated ones did not (eg E.ON +1.1%, RWE +0.9%). With the former having (rightly?) priced in the recent increase in forward prices significantly more than the latter, we believe this is only fair.
With forward power prices above €85/MWh (vs. the consensus assumption of €60-65/MWh), the scope for mark to market upgrades on the large integrated names is still very big. In E.ON’s case, we estimate that every €5/MWh increase in our 2011 (fully unhedged at this stage) average achieved price assumption adds c.5% to EPS (and therefore DPS).
PM:
Generally people saying the move in coal was a correction — price has rocketed recently
NH:
hmmm
NH:
that seems to be the consensus view in the market
NH:
but we are not so sure
NH:
Paul did a post earlier
NH:
said it could be the
PM:
Canary for the stock market
NH:
NH:
but analysts seem to be relaxed
NH:
this was Morgan Stanley’s take on the coal price slump
NH:
Impact on our views: We remain constructive on US coal equities despite the extreme weakness yesterday. We believe the case for very strong 2009 domestic thermal coal contracts remains in place.
There is potential for further coal price weakness in global and US coal markets following recent strong gains. We believe any further equity weakness in response to
softer OTC prices presents an attractive opportunity to build positions, and in particular our favourite
NH:
Overweight–rated names, Alpha Natural Resources and
Peabody Energy.
Peabody Energy.
What’s new: US coal equities have declined sharply, likely in response to a sharp drop in European and US OTC thermal coal prices. We believe the coal price
correction represented some profit-taking following the sharp run-up, rather than a change in coal fundamentals.
We do not believe the latest $25/ton run to approximately $150 in coal prices was fully priced into the stocks, nor do we think it should have been.
We are using Central App term contract pricing of $95/ton in 2009, well below the current OTC prices.
NH:
this is what Merrill Lynch reckoned
NH:
Traded THERMAL coal prices in Europe collapsed overnight. European coal
headed for its largest decline in more than three years on speculation a record
rally in the past four weeks was overdone. Coal for delivery to Amsterdam,
Rotterdam or Antwerp with settlement next year dropped $27.50, or 13%, to $190
a metric ton as of 6:10 p.m. in London, according to ICAP Plc prices supplied to
Bloomberg. That would be the biggest drop compared with closing prices since
March 2005.
To put this into perspective … traded coal prices have now returned to levels they
were at mid-last week.
headed for its largest decline in more than three years on speculation a record
rally in the past four weeks was overdone. Coal for delivery to Amsterdam,
Rotterdam or Antwerp with settlement next year dropped $27.50, or 13%, to $190
a metric ton as of 6:10 p.m. in London, according to ICAP Plc prices supplied to
Bloomberg. That would be the biggest drop compared with closing prices since
March 2005.
To put this into perspective … traded coal prices have now returned to levels they
were at mid-last week.
NH:
What is our view and what does it mean?
These traded coal indices (API2) had jumped 36% from June 2 to yesterday’s
close….a huge rally that seemed overdone. Our Traders in London said they
expected a correction but just not this quantum in 1 day . However in their view
this correction has been simply profit taking and there was a recovery later in the
day with API2 at one point down $28/t before bouncing back $15/t up.
There could be some flushing out of European demand for coal at the margin with
a small amount of switching into gas … but gas prices aren’t attractive either! Our
European coal traders expect market to return with some stability tomorrow, with
API2 (delivered european marker) likely flat to a little down before strengthening
later on this week and into next week.
These traded coal indices (API2) had jumped 36% from June 2 to yesterday’s
close….a huge rally that seemed overdone. Our Traders in London said they
expected a correction but just not this quantum in 1 day . However in their view
this correction has been simply profit taking and there was a recovery later in the
day with API2 at one point down $28/t before bouncing back $15/t up.
There could be some flushing out of European demand for coal at the margin with
a small amount of switching into gas … but gas prices aren’t attractive either! Our
European coal traders expect market to return with some stability tomorrow, with
API2 (delivered european marker) likely flat to a little down before strengthening
later on this week and into next week.
NH:
Nothing has changed fundamentally with thermal coal
Still very strong demand, particularly in Asia
Still a very strong risk China bans or vastly reduces thermal exports in Q3 to
ensure Genco’s have adequate coal stocks over sensitive Olympic / Paralympic
period. We hear inventories at genco’s in several provinces around China are
down at 3 days
Still very strong demand, particularly in Asia
Still a very strong risk China bans or vastly reduces thermal exports in Q3 to
ensure Genco’s have adequate coal stocks over sensitive Olympic / Paralympic
period. We hear inventories at genco’s in several provinces around China are
down at 3 days
Still issues with ports in Australia – XTA Coal has confirmed that Dalrymple Bay
Coal Terminal, which was due to have JFY08 throughput of 52-54mtpa, will now
deliver <50mtpa, and the contract position against this is 68mtpa … so there is
going to be 18mt under-delivered vs contracts and some very unhappy customers
(25).
NH:
Look to BUY coal stocks them over next few day. In our view, the coal equities
will find a base quickly and that is your opportunity
will find a base quickly and that is your opportunity
NH:
and this is even more bullish
NH:
out of Liberum this morning
NH:
The mining correction: Don’t Panic Mr Mannering!
NH:
The UK miners fell heavily yesterday with the sector now down c.19% from its
peak in May. The chaos continued overnight with US steel stocks off at least
10% and Asian miners falling heavily led by coal plays (down 10%+ each), steel
stocks and RIO/BHPB (-6-7% each).
peak in May. The chaos continued overnight with US steel stocks off at least
10% and Asian miners falling heavily led by coal plays (down 10%+ each), steel
stocks and RIO/BHPB (-6-7% each).
PM:
Goodness — had not realised miners had come back so far recently
PM:
19% from the May peak
NH:
and that’s why the FTSE 100 is at 5,300
NH:
the mining prop has been removed
NH:
here’s more positive stuff from Liberum though
NH:
The source of the capitulation selling seems
to be centred on a large one day fall in the export thermal coal price and the
beginnings of a crisis in confidence in steel markets and steel raw materials
which we have been worried about for some time. As with all good capitulation
sell-offs the price falls have been pretty indiscriminate, particularly given
the relatively strong performance of some key commodities such as copper.
to be centred on a large one day fall in the export thermal coal price and the
beginnings of a crisis in confidence in steel markets and steel raw materials
which we have been worried about for some time. As with all good capitulation
sell-offs the price falls have been pretty indiscriminate, particularly given
the relatively strong performance of some key commodities such as copper.
Whilst it is tough to finesse the calling of any bottom, we are beginning to
feel there may be some decent low-risk buying opportunities emerging in the
sector. In this email we review which commodities we still see price risk
(steel raw materials) and those that seem relatively safe (precious metals;
energy related commodes of steam coal and aluminium and other key base metals
of copper, nickel and zinc). Names we would be starting to tentatively
accumulate are all of the big diversifieds (AAL, RIO, BHPB, XTA), selected base
metals plays (ANTO, TALV, STLT – the Indian line of VED) and certain precious
metals stocks (POG, AQP, HOC, FRES).
NH:
We would stay away from steel raw
materials stocks (ENRC, NWR, FXPO)
materials stocks (ENRC, NWR, FXPO)
NH:
We remain cautious on steel raw materials
1 month changes: ENRC (-22%), International Ferro Metals (-31%), New World
Resources (-7%), Ferrexpo (-12%)
Amongst yesterday’s doom and gloom we continue to see growing evidence of a
slowdown in the steel segment;
Traders reported large stocks of commodity grade heavy plate in the European
Union with stockholders reportedly having lower offer prices as stocks approach
saturation point;
ArcelorMittal admitted it had had trouble passing on May price increases for
flat-rolled products in the US
GM said yesterday it had cut its auto production this quarter by 12%
Metal Bulletin (MB)also reported that southern European rebar and wire rod
markets remain quiet as a result of the slowdown in the construction sector -
there has been a big slowdown in construction in southern Europe, mainly Spain
and Italy, with mills forced to export rebar and wire rod to North Africa due
to the weakening demand elsewhere;
MB report that China’s FeCr prices have slid on weak demand from stainless
steel mills; on Wednesday, HC ferro-chrome reportedly changed hands at
13,000-14,000 yuan (US$1,894-2,040) per tonne in the Chinese spot market, down
on average 650 yuan or 5% from last week.
NH:
Coking coal spot prices remain at c.$350/t with semi-soft trading at c.$300/t
so the market clearly remains very tight. With marginal costs at c.$100/t
though any correction on softening demand (reduced steel melt) will find no
obvious support levels. Remain cautious on NWR.
so the market clearly remains very tight. With marginal costs at c.$100/t
though any correction on softening demand (reduced steel melt) will find no
obvious support levels. Remain cautious on NWR.
Iron ore. Spot prices remain stable at $180/t CIF China. However, inventories
in China are high. We note that the FT reports today that BHPB look like they
are going to settle the same price as RIO for this years’ contracts with the
Chinese. With a high oil price environment re-valuing Australian assets
relative to those in Brazil (miners now beginning to be paid for the record
freight differential) we feel if there is weakness in the CIF price, the
headroom in freight differentials should minimise FOB price fallout for the
Australians. We still prefer RIO/BHPB over Vale.
NH:
Ferrochrome, manganese, Vanadium, Molybdenum – Spot ferrochrome prices are
sliding and we worry that the the disappointing FeCr contract in of Monday may
turn out to be this cycle’s peak. With FeCr still trading at 2x marginal cost,
EPS downgrades in a correction scenario for ENRC and IFL could be dramatic.
Continue to avoid these names. Manganese prices appear to be unaffected as yet,
but trade over 3x marginal cost. Avoid Eramet. Vanadium prices continue to
slide – no pure plays here. Molybdenum – trading at close to its highs on very
constrained supply (copper related production) – as such we don’t see great
price risk.
sliding and we worry that the the disappointing FeCr contract in of Monday may
turn out to be this cycle’s peak. With FeCr still trading at 2x marginal cost,
EPS downgrades in a correction scenario for ENRC and IFL could be dramatic.
Continue to avoid these names. Manganese prices appear to be unaffected as yet,
but trade over 3x marginal cost. Avoid Eramet. Vanadium prices continue to
slide – no pure plays here. Molybdenum – trading at close to its highs on very
constrained supply (copper related production) – as such we don’t see great
price risk.
NH:
Oil continues its rise now at US$143/bl. Gut feel is that it is overbought as
there is clear evidence of demand destruction, but the market to market upgrade
risk on oil versus consensus provides EPS support under all scenarios except a
very big correction..
there is clear evidence of demand destruction, but the market to market upgrade
risk on oil versus consensus provides EPS support under all scenarios except a
very big correction..
Thermal coal – there was nervousness in the market yesterday as European coal
experienced its largest decline in more than 3 years; coal for delivery to
Amsterdam, Rotterdam or Antwerp with settlement next year fell 13% to $190/t -
but we point out this off the back of record rally through June which saw the
price climb 36% to yesterday’s close. Although spot prices had risen at a
rapid rate, current contract prices (US$140-150/t) are in-line with historical
oil price movements and despite the recent correction, we feel the fundamentals
for this market remain strong; we believe there is relatively visible long-term
demand growth, particularly in China with planned “new generation” power
capacity. In short, it is inconsistent to expect a big retracement in thermal
coal unless oil and gas lead the way.
NH:
We see aluminium as a stable performer with limited downside risk. Prices are
at marginal costs and consensus forecasts continue to lag the forward curve.
Aluminium demand in China continues to grow and although inventories have risen
of late, they remain historically low on number of consumption weeks basis.
The increasing oil price, rising demand for energy and inability to readily
source low cost power remains a key barrier to entry in this market, indicate
growth in supply could struggle to meet forecast demand.
at marginal costs and consensus forecasts continue to lag the forward curve.
Aluminium demand in China continues to grow and although inventories have risen
of late, they remain historically low on number of consumption weeks basis.
The increasing oil price, rising demand for energy and inability to readily
source low cost power remains a key barrier to entry in this market, indicate
growth in supply could struggle to meet forecast demand.
Copper strong on supply constrictions while other base metals test the bottom
1 month changes: Antofagasta (-18%), Kazakhmys (-20%), Vedanta Resources (-18%)
In contrast to steel news, copper prices rose to $3.98/lb yesterday, as a
miners’ strike in Peru entered a second day. The price is now up c.9% in a
month. The commodity has been plagued by supply disruptions over the last
couple of years and there seems no clear resolution to the problem. Chinese
copper demand has been constrained by supply and a lack of global inventories
so we feel there is demand support. Unlike steel where much higher prices are
leading to increased scrap availability – we feel growth in secondary copper
supply will disappoint consensus estimates, adding to supply tightness.
Despite this rally, the Kazakhmys, Antofagasta and Vedanta have all declined
significantly of late. Of these only ANTO seems a straight buy as KAZ has a big
exposure to ENRC and Vedanta is trading at a big premium to the Indian quoted
sum of its parts in and its cost inflation in copper has been horrific of late.
NH:
In other base metals, we believe seemed nickel and zinc seem to have found a
investors look to hedge increasing uncertainty elsewhere in the market and we
see little downside over the near-term. While the platinum prices remain
underpinned by the supply and capacity constraints in South Africa, easing on
the demand side of the equation could reduce the squeeze; longer-term we also
point to significant potential for supply growth from Zimbabwe – when we were
there last week we were surprised to see how much development activity there
was from Impala, Amplats et al.
investors look to hedge increasing uncertainty elsewhere in the market and we
see little downside over the near-term. While the platinum prices remain
underpinned by the supply and capacity constraints in South Africa, easing on
the demand side of the equation could reduce the squeeze; longer-term we also
point to significant potential for supply growth from Zimbabwe – when we were
there last week we were surprised to see how much development activity there
was from Impala, Amplats et al.
Where are we in the de-rating?
RIO – We see no EPS risk to consensus (the consensus rating as compiled by the
company is a blob, the Bloomberg consensus is the line – EPS understated as it
has some pre-bid estimates in it). RIO is now trading on a company compiled
consensus PER of 2009E c.9.5x. In the depths of last summers ow it got to a
forward 2009E PER of 8.5x – but this was pre-bid.
PM:
bickie
Reminder to readers – if you arrived late and want to stop the dialogue ‘jumping’ as you catch up, hit the ‘pause auto-scrolling’ tab at the bottom right hand corner
PM:
PM:
Neil has got distracted by the idea of creating Felt Warrants
PM:
trademark
PM:
Idea would be to see which clients particular PR firms have, and then creat little indicies
PM:
Just looking at Finsbury
PM:
Shocking — crock, BBB, Taylor Wipeout, Pendragon, Friends Prov
Readers may also know this former bank as Northern Rock.
PM:
Kesa, MItchels & Butler
PM:
I know “Felt Tips”
NH:
great idea
NH:
let’s feed all its clients into the portfolio manager on FT.com and see how it performers against the market
NH:
can we do it retrospectively since the start of the year??
PM:
Er, dunno
PM:
Will see
PM:
Lets get back to work
PM:
NH:
just had a really interesting note through
NH:
technical analysis from a rsearch house called Redburn
NH:
and guess what comes up
PM:
go on
NH:
The Hindenberg Omen
PM:
Ah, goodness, i remember that
NH:
Criteria
The traditional definition of a Hindenburg Omen has five criteria:
The traditional definition of a Hindenburg Omen has five criteria:
NH:
That the daily number of NYSE new 52 Week Highs and the daily number of
new 52 Week Lows must both be greater than 2.2 percent of total NYSE
issues traded that day.
That the smaller of these numbers is greater than 75. (this is not a
rule but a function of the 2.2% of the total issues)
That the NYSE 10 Week moving average is rising.
That the McClellan Oscillator is negative on that same day.
That new 52 Week Highs cannot be more than twice the new 52 Week Lows
(however it is fine for new 52 Week Lows to be more than double new 52
Week Highs). This condition is absolutely mandatory.
These measures are calculated each evening using Wall Street Journal
figures for consistency. The occurrence of all five criteria on one day
is often referred to as an unconfirmed Hindenburg Omen. A confirmed
Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals
occur during a 36-day period from the first signal.
new 52 Week Lows must both be greater than 2.2 percent of total NYSE
issues traded that day.
That the smaller of these numbers is greater than 75. (this is not a
rule but a function of the 2.2% of the total issues)
That the NYSE 10 Week moving average is rising.
That the McClellan Oscillator is negative on that same day.
That new 52 Week Highs cannot be more than twice the new 52 Week Lows
(however it is fine for new 52 Week Lows to be more than double new 52
Week Highs). This condition is absolutely mandatory.
These measures are calculated each evening using Wall Street Journal
figures for consistency. The occurrence of all five criteria on one day
is often referred to as an unconfirmed Hindenburg Omen. A confirmed
Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals
occur during a 36-day period from the first signal.
PM:
here’s some background etc
http://ftalphaville.ft.com/blog/2007/07/31/6238/dr-doom-on-stock-markets-the-hindenburg-omen-and-what-next/
NH:
anyway, Redfern says the omen may come to pass
NH:
The S&P finally broke the March closing low at 1273. Makes it a 100
week closing low for the first time since early 2001. Before then it
hadn’t happened since 1982. Not good news anyway. Old lows are meant
to act as support. In a bear market support levels don’t work, only
resistance levels do! Key resistance to any bounce is 11634 on the
Dow. 1256.98 are the intraday S&P lows, which might hold. Maybe.. And
in Europe a few intraday March or January lows are still intact,
like 5338 on FTSE, 6167 on DAX.. And US small and mid cap indices,
and Nasdaq are still above Jan/March lows.. but if S&P breaks 1256,
or better, 126.00 on S&P ETF (SPY), then we are as they say, doomed..
week closing low for the first time since early 2001. Before then it
hadn’t happened since 1982. Not good news anyway. Old lows are meant
to act as support. In a bear market support levels don’t work, only
resistance levels do! Key resistance to any bounce is 11634 on the
Dow. 1256.98 are the intraday S&P lows, which might hold. Maybe.. And
in Europe a few intraday March or January lows are still intact,
like 5338 on FTSE, 6167 on DAX.. And US small and mid cap indices,
and Nasdaq are still above Jan/March lows.. but if S&P breaks 1256,
or better, 126.00 on S&P ETF (SPY), then we are as they say, doomed..
NH:
Doomed to 2 years of bear market maybe.. It could do a quick crash,
but we think the long slow drawn out bear market would hurt more people
(all those “hedge” funds who are not really!).. There has been a recent
Hindenburg Omen (Google it) which often foreshadows proper crashes,
but we’re petty sure they are usually Autumn events, not near mid
summer.. It is also a new moon today, and they more often mark short
term lows in sentiment (yes, really, too exuberant at full moons,
too worried at new moons!)
but we think the long slow drawn out bear market would hurt more people
(all those “hedge” funds who are not really!).. There has been a recent
Hindenburg Omen (Google it) which often foreshadows proper crashes,
but we’re petty sure they are usually Autumn events, not near mid
summer.. It is also a new moon today, and they more often mark short
term lows in sentiment (yes, really, too exuberant at full moons,
too worried at new moons!)
NH:
Some more serious measures of sentiment, like the AAII survey are
showing high levels of bearishness already, but we do think that
most hedge funds have not been shorting much recently as the risk
of a “bounce” has been high.. Also note the VIX remains pretty low,
certainly not into the mid 30s that we need to see for panic there?
Some more serious measures of sentiment, like the AAII survey are
showing high levels of bearishness already, but we do think that
most hedge funds have not been shorting much recently as the risk
of a “bounce” has been high.. Also note the VIX remains pretty low,
certainly not into the mid 30s that we need to see for panic there?
NH:
The big problem for us currently, and for markets, is that we are
seeing more weakness in industrials. Yesterday some of the steel stocks
were down double digit percentages, on high volume. Hard to say these
are clear tops but certainly time for fast money to get out.
seeing more weakness in industrials. Yesterday some of the steel stocks
were down double digit percentages, on high volume. Hard to say these
are clear tops but certainly time for fast money to get out.
Which leaves even fewer sectors still decent. Oils, Utilities, Pharma,
maybe telcos.. Financials and consumer cyclicals still deteriorating!
NH:
Mines struggling a bit too in UK. 3m rel lows by Antofagasta and
Kazakmys.. Copper price acting ok, nearly a breakout? Gold ok too,
above 950 would be a breakout. Oil still good, with the crude breakout
confirmed now by Heating oil and Gasoline.. Watch dollar too – 1.60 is
key level v Euro, and 0.967 v Australian Dollar. Sterling weak today,
heading back down to support at 1.234 v Euro.
Kazakmys.. Copper price acting ok, nearly a breakout? Gold ok too,
above 950 would be a breakout. Oil still good, with the crude breakout
confirmed now by Heating oil and Gasoline.. Watch dollar too – 1.60 is
key level v Euro, and 0.967 v Australian Dollar. Sterling weak today,
heading back down to support at 1.234 v Euro.
PM:
Blinkin eck Neil
NH:
Stocks – RWE, Eon, Air Liquide, Linde, Drax making nice rel
highs.. sounds defensive!
highs.. sounds defensive!
And some nice healthcare type names making rel highs today – Fresenius,
Rhoen-Klinkum, Stada Arz, Qiagen, Essilor, Novo Nordisk all making
12m rel highs.. AStra, Glaxo and even Sanofi making 3m rel highs
this morning.. Overweight pharma / healthcare
NH:
Shocking moves in some UK retailers yesterday, Marks & Spencer down
25% (dividend yield now higher than its PE?). Trend is down, and note
new 12m rel low by Land Securities. REITs breaking down anew..
25% (dividend yield now higher than its PE?). Trend is down, and note
new 12m rel low by Land Securities. REITs breaking down anew..
NH:
In telcos the best is NTT. In Europe it’s KPN, but many 3m rel
highs there now.. Not as pretty as pharma looked a few weeks ago,
but time to do some hunting around. Also bear in mind the sector has
outperformed in something like 5 of the last 6 second halves.. Global
telco cahrt pack available on request.
highs there now.. Not as pretty as pharma looked a few weeks ago,
but time to do some hunting around. Also bear in mind the sector has
outperformed in something like 5 of the last 6 second halves.. Global
telco cahrt pack available on request.
Stay defensive – pharma and utilities.. Avoid the usual financials
and consumers, and take extreme care in industrials.. Sell the trucks
/ auto / air related ones.. And probably sell some steels, or cut
longs anyway.. Construction stocks bad too – CRH off 12% yesterday
for instance.
NH:
Europe off 50bps or so, having been a slightly panicky 160 bps down
at one stage.. China pervesely up. Oil up again.. US holiday tomorrow
so jobs data brought forward to today.
at one stage.. China pervesely up. Oil up again.. US holiday tomorrow
so jobs data brought forward to today.
NH:
ore tomorrow. Watch S&P 1256 or 126.00. Maybe we bounce here, but
only if it clears 11634 on Dow does it mean anything. Next key Dow
level on the downside is around 10697 – the 50% retracement level,
and 10683 the July 06 low. Or 10725 is the 50% level on a closing
chart basis, that’s the one Richard Russell is watching actually.. He
says it’s a vital one to hold.
only if it clears 11634 on Dow does it mean anything. Next key Dow
level on the downside is around 10697 – the 50% retracement level,
and 10683 the July 06 low. Or 10725 is the 50% level on a closing
chart basis, that’s the one Richard Russell is watching actually.. He
says it’s a vital one to hold.
NH:
Happy long weekend for anyone not working tomorrow! (We will of course
be here.)
be here.)
PM:
That stuff is from Nick Glydon
PM:
He’s a top guy — used to be at Flemings
PM:
Brilliant chartist
PM:
Did his charts sitting on the Cote d Azur — said charts looked them same there as they did in the offices of JPM in London
PM:
Tough life
NH:
NH:
right we had some questions below about the housebuilders
NH:
and in particular Taylor Wipeout and Barratt Developments
PM:
Should mention that we didnt know about the rumours of a big jobs cull mentioned below — at Bdev
NH:
but we do know about some other RAW market rumours
PM:
yep — do share
NH:
obviously this is one strictly for the brave
NH:
or reckless
PM:
Go on — readers are consenting adults
NH:
well, talk in the market is that Barratt does not want to be tarred with the same brush as Taylor Wimpey
PM:
go on
NH:
and they are planning to bring forward their trading update
NH:
originally scheduled for July 10
NH:
and they are going to pull it forward because they have some good news
NH:
relative good news
NH:
specifically that their lenders have relaxed covenants and they have managed to refinance a £400m bond
NH:
and t that a US private equity group – Apollo is one name in the frame – has offered to help underwrite a cash call
NH:
now I should say that this was denied by the felts
PM:
NH:
but sometimes they are the last to know
PM:
Felt collared sources are PRs i should mention for new readers
PM:
Being a bit tough on them today. Apols
NH:
another story doing the rounds, and one that definitely isn’t true, is that Berkeley Homes is about to buy some of Barratt’s landbank
NH:
we checked that out last night and were told not to be silly boys
PM:
NH:
interesting that Barratt have given up all their early gains
NH:
traded as high as 43.25p
NH:
now stuck at 40p
PM:
And how about Taylor Wimpey
NH:
they have been all over the place this morning
NH:
been as high as 38.75p
NH:
low as 30.5p
NH:
now off 1.75p at 33.25p
NH:
the earlier move higher was on the back of stories that TPG has agreed to bridge a £100m funding shorting fall
PM:
hang on a minute
PM:
rewind a tad
PM:
They were trying to raise £500m according to the STRNS
NH:
they were
NH:
but a couple of the underwritters got cold feet on Tuesday night – probably after they had seen the trading statement and the state of global equity markets
NH:
that left a gap of £100m to fill
PM:
doesn’t seem like anyone believes the story
NH:
well, even if they do
NH:
it’s difficult to be positive on TW
NH:
say house prices fall 20%
NH:
Wipeout’s NAV could come back to 100p
NH:
and then say, Wipeout manages to get away a £500 fund raising
NH:
this would be hugely dilutive
NH:
and would see the NAV came rattling back to current levels
NH:
but hang on
NH:
one of my colleagues on the markets desk
NH:
Anousha Sakoui
NH:
has been listening in to the Wipeout bondholders conference call
NH:
and here are some very rough notes
NH:
some interesting points
NH:
Peter Redfern – the placing process we have been going thru was a specific choice of the board in terms of raising financing and we need to raise an additional level for equity to ensure we can trade thru these v diffi and tuf times.
NH:
We did consider rights issues but given record of recent rights board perceived risk was hi, open offer and placing is much shorter process and presented as the best option to raise add equity.
NH:
We commenced premarketing in middle of last week and have done 3 -4 days vising 40 or so insitutions , of both existing and new sholders, existing hldrs have stepped up to mark
NH:
of top four shareholders , 2 have done their corner, and other 2 have done sig more than that.
NH:
Monday looked like we were able to announce completed at last min, one of new shareholders withdrew – left us in quandary while pricing process continues we perceive that following that withdrawl that we would have less 50% change to be able to complete it, certainly overnight, had choice around what we needed to do around announcement, one a two line holding statement or full trading statement, we believe appropriate not to issue two line given where we were and trading statement went out.
NH:
The excersie continuing but will finish by end of this week, while still possible we will raise money we are seeking, prob is less than 50%.
NH:
Not in cov breach – have developed market scenarios for 09 and 10. and apparently under a number not all scenarios likely we would breach interest cover covenant -as a consequence we went early to bankers to seek support, they provided that very well – we had in place an amendment and a waiver of interest cover in place but it was subject to raising min amount of capital as we have not raised, that waiver therefore falls away, now talking to bank actively, and reviewing with advisers other options, still in progress but look to bring to head as soon as practical.
PM:
thanks for that
PM:
so a less the evens chance the fund raising will be completed this week
NH:
but they are looking at other options
NH:
I think a few shareholders would like to see Wipeout put up for sale
NH:
not sure they would find a buyer though
PM:
NH:
OK, let’s look at another stock we chatted about yesterday
NH:
Taylor Nelson Sofres
PM:
Ah yes — you were rather on the ball with this yesterday
NH:
well, we got a bid
NH:
but it was at 260p
PM:
But wasnt it supposed to be 300p
NH:
well, that’s what we heard
NH:
but what we got
NH:
173 pence in cash and 0.1889 of a WPP share for each TNS
NH:
and the offer drew a furious response from TNS
NH:
this is all getting very personal
NH:
and quite amusing
NH:
Sir Martin Sorrell is used to getting his own way
NH:
but he is encountering some fierce resistance on this deal
NH:
primarily from the chairman of TNS Donald Brydon
NH:
and he knows a thing or two about selling businesses
NH:
he was on the board at Allied Domecq and at Scottish Power.
NH:
which were both flogged to foreigners
NH:
and he spent most of his career BZW Investment Management
NH:
and here’s what he and the company thought of Mr Sorrell’s latest shot
NH:
REJECTION OF FURTHER PRE-CONDITIONAL PROPOSAL
The Board of TNS announces that on the evening of 2 July 2008 TNS received a further unsolicited proposal from WPP Group plc (‘WPP’) for TNS (the ‘Further Proposal’). The Further Proposal outlines a possible pre-conditional offer in which the consideration for TNS would be satisfied through 173 pence in cash and 0.1889 WPP shares for each TNS share. Based on the closing price of WPP on 2 July 2008 of 460.5 pence per WPP share the Further Proposal values each TNS share at 260 pence.
The Board of TNS announces that on the evening of 2 July 2008 TNS received a further unsolicited proposal from WPP Group plc (‘WPP’) for TNS (the ‘Further Proposal’). The Further Proposal outlines a possible pre-conditional offer in which the consideration for TNS would be satisfied through 173 pence in cash and 0.1889 WPP shares for each TNS share. Based on the closing price of WPP on 2 July 2008 of 460.5 pence per WPP share the Further Proposal values each TNS share at 260 pence.
NH:
The Board of TNS, which is being advised by Deutsche Bank and JPMorgan Cazenove, has unanimously rejected the Further Proposal which it believes again substantially undervalues TNS even on a standalone basis. TNS is the only quoted, independent, diversified operator in the market information sector. It is a unique company and has an attractive platform in this fast growing and dynamic sector and as such should command a commensurate premium valuation.
NH:
The Board believes that WPP’s successive approaches and considerable press
commentary and innuendo collectively represent an attempt by WPP purely to frustrate the merger of GfK AG (‘GfK’) and TNS.
The Board of TNS remains committed to implementing the merger of GfK and TNS which it believes to be in shareholders’ best interests. The Board of TNS believes that a combination of GfK and TNS creates leadership in market research and information through the combination of fact based and insight based analysis. The merger will deliver significant value to TNS’ shareholders through accelerating revenue opportunities and substantial cost savings. The Board of TNS continues to recommend that shareholders vote in favour of the merger at the TNS General Meeting being held on 18 July 2008.
commentary and innuendo collectively represent an attempt by WPP purely to frustrate the merger of GfK AG (‘GfK’) and TNS.
The Board of TNS remains committed to implementing the merger of GfK and TNS which it believes to be in shareholders’ best interests. The Board of TNS believes that a combination of GfK and TNS creates leadership in market research and information through the combination of fact based and insight based analysis. The merger will deliver significant value to TNS’ shareholders through accelerating revenue opportunities and substantial cost savings. The Board of TNS continues to recommend that shareholders vote in favour of the merger at the TNS General Meeting being held on 18 July 2008.
NH:
As required by the Takeover Code, TNS confirms that this announcement is not being made with the agreement or approval of WPP. There can be no certainty that an offer will be made nor as to the terms on which any offer might be made.
NH:
Donald Brydon, Chairman of TNS said:
NH:
*The Board of TNS has been extraordinarily patient with Sir Martin Sorrell. We have now received three proposals from WPP, each of which substantially undervalues the company. WPP have received materially the same information as has been provided to GfK. WPP have got all the information they need and have had all the time they need. It is clear that WPP are determined to try and frustrate the GfK-TNS merger for the benefit of WPP*s underperforming Kantar division. It is time for Sir Martin Sorrell and WPP to stop interfering and make their intentions clear.*
PM:
That’s typical Brydon stuff
PM:
he’s a very tough Scot
PM:
PM:
BDev on the move — could it be that there is some confusion out there
NH:
seems that Bloomberg are reporting, or telling their contacts, that our piece of RAW was fact
NH:
in fact
NH:
we said it had been deined by the felts
PM:
Yep — this keeps happening
PM:
Why do people just read the first line?
NH:
dunno
PM:
PM:
Anyway, back to TNS — what do you reckon happens next?
NH:
well, today’s statement from WPP does not meet the Takeover Panel putup/shut up
NH:
but i suspect TNS shareholders will want the company to start talking to Sorrell
NH:
and for Sorrell to bump his offer once more by the deadline
NH:
stock now 7p higher at 232p
PM:
ok
NH:
got some analyst comment on the deal
NH:
and what happens next
NH:
Landsbanki
NH:
TNS has rejected a revised proposal from WPP at 260p (173p cash and 0.1889 WPP shares). This proposal is conditional on due diligence, board recommendation and various irrevocables. WPP’s proposal has been set out as an announcement and there is to be an analysts’ meeting at 8.30am today. For the first time, WPP has set out its bid rationale and includes a synergy estimate of £52m which compares with £76m under the TNS-Gfk merger plan
NH:
It also makes various comments on the logic of the TNS-Gfk plan and questions the achievability of the associated synergies; the role of the GfK Verein investor as amongst other things a poison pill; and, the basis for TNS shareholders vote on the merger.
NH:
The plan here – especially given the analysts’ meeting – is to destabilise the merger and get TNS shareholders to urge for the necessary exchange of information to convert the proposal into a bid. Clearly the current share price does not see this happening, trading as it does for the first time below the latest bid proposal from WPP. Hold.
NH:
Kaupthing
NH:
Taking a view: TNS suggests that WPP is merely seeking to frustrate the merger due to the stiffer competition the merger will bring, however we believe WPP is very serious for 2 reasons
NH:
i) If TNS and GFK merge WPP will probably not be able to achieve its long term business mix goal given the lack of available and suitable businesses in the heavily consolidated Market Research segment
NH:
(ii) Given WPP is staring down the barrel of a very difficult 2009 macro situation and needs more stable businesses such as MR to dilute the effect it will be very difficult for WPP to walk away. If WPP does walk away then shareholders will probably see the GFK/TNS merger progress. From a TNS shareholder perspective the combined business will be even more resilient and offer a costs savings based earnings growth story against a weak macro back drop. This is not unattractive and we advise seeing this through given shares were at just 225p last night.
NH:
WPP potential offer price: In terms of WPP bid valuation we previously suggested £40-60m of savings would justify a 289-332p price (based on ROIC approach). WPP has flagged it can deliver “at least £52m” and deliver on its WACC target in second full year. This savings figure suggests a price of somewhere around 310p could be paid by WPP.
NH:
and finally Collins Stewart
NH:
Upgrade to BUY
NH:
An offer they can’t refuse
WPP today announced a revised possible offer for TNS, at 260p per share, with two-thirds cash, one-thirds WPP shares. We believe that this represents an excellent deal for TNS shareholders, who, having seen their price propped up by the possibility of a WPP offer, have been spared the collapse of the UK media sector. It’s difficult to see how TNS can refuse.
WPP today announced a revised possible offer for TNS, at 260p per share, with two-thirds cash, one-thirds WPP shares. We believe that this represents an excellent deal for TNS shareholders, who, having seen their price propped up by the possibility of a WPP offer, have been spared the collapse of the UK media sector. It’s difficult to see how TNS can refuse.
NH:
¦ Upgrade to BUY
We are upgrading WPP to buy based on three factors. First, it’s fallen below our target price which, to reflect falling media valuations, we have lowered to 530p. Secondly, we believe this earnings-accretive deal, if TNS act in shareholders best interests, should go through. Thirdly, WPP is now trading at an unsustainable discount to its US peer, Omnicon.
We are upgrading WPP to buy based on three factors. First, it’s fallen below our target price which, to reflect falling media valuations, we have lowered to 530p. Secondly, we believe this earnings-accretive deal, if TNS act in shareholders best interests, should go through. Thirdly, WPP is now trading at an unsustainable discount to its US peer, Omnicon.
NH:
Good deal for TNS
We believe that the proposed offer should be accepted given the 52% premium it represents over TNS’s share price pre-GfK talks announcement, on 28 April. Note that since then the FTSE Media sector has fallen 19%. Furthermore, TNS shareholders will benefit from the £52m cost synergies given the shares element of WPP’s proposed offer.
We believe that the proposed offer should be accepted given the 52% premium it represents over TNS’s share price pre-GfK talks announcement, on 28 April. Note that since then the FTSE Media sector has fallen 19%. Furthermore, TNS shareholders will benefit from the £52m cost synergies given the shares element of WPP’s proposed offer.
NH:
We estimated that with full synergies the deal should be c.5% accretive to WPP’s earnings by 2011, and the deal would be broadly earnings neutral in 2009 with only c.£15m (of the £52m total) synergies being achieved. As for the balance sheet, the deal should not unduly stretch it. WPP is currently on only c.1.2x 2009 net debt / EBITDA, post a deal we estimate that this would peak at well below 2x net debt / EBITDA.
¦ Omnicom discount out of kilter
There has long been a high correlation between WPP and Omnicom shares, albeit WPP is typically valued at a small discount. Since 28 April WPP has underperformed Omnicom by 15%. WPP now trades at a 30% PE discount Omnicom. That’s too wide given the similarities between the two groups.
¦ Omnicom discount out of kilter
There has long been a high correlation between WPP and Omnicom shares, albeit WPP is typically valued at a small discount. Since 28 April WPP has underperformed Omnicom by 15%. WPP now trades at a 30% PE discount Omnicom. That’s too wide given the similarities between the two groups.
NH:
NH:
Right, we are just going to take a look at LIBOR
PM:
LIBOR – jump in € rates ahead of the ECB decision – 4.963131 versus 4.95438
PM:
Sterling is down — 5.91250 v 5.93188
PM:
Where’s this ECB decision??
NH:
I think it comes out at 1.30pm
PM:
Sorry — i though there was some mention of 11.45
NH:
with the US non farm payrolls
NH:
NH:
before we go
NH:
had a question about the recruitment consultants
NH:
Hays has been seeing investors and analysts this week
NH:
and the message has been gloomy
NH:
and forecasts are coming down
NH:
trading update due on July 10
NH:
Consensus EBIT is coming down in FY09 – currently £230m, which implies an EPS of 12.6p, given we expect they will buy-back £100m of shares which is the current guidance
NH:
that’s what an analyst at Blue Oar said today
NH:
For the year just finished (June 30), Hays are comfortable with the current consensus of EBIT of £248m
Ø Given the buy-back Hays has 1380m shares in issue at the year end meaning a weighted ave. of 1410m. This implies an EPS of 12.3p for FY07/08 or growth of 20%
Ø For the full year dividend they said the growth at the interim of 16% is a good indicator of how much the final dividend will grow
Ø This would imply a final dividend of 3.9p and a full year dividend of 5.8p, meaning Hays is offering a dividend yield of 7%
Ø FCF yield of 15%
Ø Given the buy-back Hays has 1380m shares in issue at the year end meaning a weighted ave. of 1410m. This implies an EPS of 12.3p for FY07/08 or growth of 20%
Ø For the full year dividend they said the growth at the interim of 16% is a good indicator of how much the final dividend will grow
Ø This would imply a final dividend of 3.9p and a full year dividend of 5.8p, meaning Hays is offering a dividend yield of 7%
Ø FCF yield of 15%
NH:
Looking forward, ‘the last thing they will cut will be the dividend and they would aim to keep it sustainable and progressive’
Ø Our current dividend estimate for FY09 is 6.7p, implying a yield of 8%
Ø Consensus EBIT is coming down in FY09 – currently £230m, which implies an EPS of 12.6p, given we expect they will buy-back £100m of shares which is the current guidance
Ø Should the share buy-back will be cancelled in FY09, thus saving £100m in cashflow, we estimate that EBIT could fall to £180m (a fall of 27% form the June 07 consensus), before our dividend for FY09 is cut and for the company to remain in the same net debt position
Ø Trading statement will be issued on July 10th
Ø Our current dividend estimate for FY09 is 6.7p, implying a yield of 8%
Ø Consensus EBIT is coming down in FY09 – currently £230m, which implies an EPS of 12.6p, given we expect they will buy-back £100m of shares which is the current guidance
Ø Should the share buy-back will be cancelled in FY09, thus saving £100m in cashflow, we estimate that EBIT could fall to £180m (a fall of 27% form the June 07 consensus), before our dividend for FY09 is cut and for the company to remain in the same net debt position
Ø Trading statement will be issued on July 10th
NH:
hope that helps
PM:
Thank you for that
PM:
Are we done for the day?
NH:
i think we are
PM:
Thank you for joining us today
NH:
see you tomorrow
PM:
at 11am
PM:
cheers