Markets live chat transcript for the chat ending at 12:07 on 3 Jun 2009. Participants in this chat were: Paul Murphy, FT (PM) Neil Hume, FT (NH)
PM:
Hi there
PM:
Welcome
PM:
This is Markeets Live
PM:
Markets Live even
PM:
Alphaville’s daily markets chat
PM:
Neil is here
PM:
but hear with us for a mo
PM:
he’s just trying to nail something
PM:
That may be rather interesting…
PM:
PM:
On a day when precious else is going on
NH:
morning all
PM:
Quick wider market
PM:
I’ve got to pat myself on the back this morning
PM:
having stopped Neil from closing the short position yesterday
PM:
Phew!
NH:
oh pleazzzzzzzzzzzzze
NH:
me closing the short
NH:
I said keep the faith remember
PM:
Yeah yeah – sorry i wobbled
PM:
N&M Cap Management — back in the money
PM:
Albeit small
PM:
The trend is once again our friend
NH:
right
NH:
FTSE 100 down 90 points at 4,386
NH:
miners taking a bit of pounding
NH:
well, it is probably more profit taking on the back of these bearish comments coming out China
PM:
Such as??
NH:
10:27 03Jun09 RTRS-IMPACT ON CHINA OF GLOBAL FINANCIAL CRISIS IS NOT OVER-CABINET
NH:
10:28 03Jun09 RTRS-CHINA’S JOBLESS SITUATION IS STILL SEVERE-CABINET
NH:
CHINA SAYS SECOND-HALF TRADE OUTLOOK IS NOT OPTIMISTIC
*CHINA SAYS FOREIGN TRADE FACES `UNPRECEDENTED DIFFICULTIES’
NH:
that seems to have triggered a wave of profit taking
PM:
cue the joke: Even the recovery in China was fake
NH:
anyway, those flashes have encouraged stuff like this
NH:
KEEP YOUR EYE ON THE FTSE MNG INDEX, WEAK COMMENTS OUT OF CHINA
PLUS THE $ TRYING TO HAVE A FIGHT BACK AGAINST £ AND EURO COULD
SEE THE 15571 LEVEL TESTED
PLUS THE $ TRYING TO HAVE A FIGHT BACK AGAINST £ AND EURO COULD
SEE THE 15571 LEVEL TESTED
NH:
*CHINA SAYS SECOND-HALF TRADE OUTLOOK IS NOT OPTIMISTIC *CHINA SAYS FOREIGN TRADE FACES `UNPRECEDENTED DIFFICULTIES’ also says ‘See decline to exports and imports in H1 2009′. Are’nt bulls sacred in China ?
PM:
just looking at some prices
PM:
Here’s a sector under pressure
Eurasian Natural Resources Corp (ENRC:LSE): Last: 639.50, down 39.5 (-5.82%), High: 687.50, Low: 637.00, Volume: 758.74k
Xstrata (XTA:LSE): Last: 737.50, down 40.5 (-5.21%), High: 786.50, Low: 735.50, Volume: 7.58m
BHP Billiton (BLT:LSE): Last: 1,506, down 51 (-3.28%), High: 1,568, Low: 1,498, Volume: 3.25m
Rio Tinto (RIO:LSE): Last: 2,971, down 82 (-2.69%), High: 3,074, Low: 2,960, Volume: 2.19m
11:09AM
PM:
Okay — slight change of format this morning
PM:
We’ve noticed that a good number of readers just come on for the second half, hoping to scoop up the raw
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
PM:
So we’ve got an appertif
PM:
for you this morning
NH:
yes, we do
NH:
stock tartare
PM:
carppacio for starters
PM:
Neil?
NH:
right
NH:
something is cooking at Debs
NH:
this is what I have picked up this mornig
PM:
Price is up 2.25p at 95.75 currently
NH:
a fund raising is coming
PM:
NH:
along with a placing of the stock held by the private equity groups
PM:
NH:
being marketed to institutions around the 75p a share level
PM:
NH:
not sure how much they are trying to raise
NH:
but if they pull it off
NH:
could be good news
PM:
Clear the air
NH:
balance sheet strengthened, not sorted
NH:
and the PE overhang gone
PM:
Nice one
NH:
also some talk that the company will pay a div on the new shares
PM:
trying to sort the balance sheet and the share register simultaneously
NH:
apparently Merrill Lynch are putting the whole thing together
NH:
and it could come this week
PM:
How much do the PE lot still own
PM:
if you remember they really stiffed people when this was floated
PM:
Merrill paid heavily in terms of replutation
NH:
according to Reuters, which is notriously inaccurate where these things are concerned
NH:
Texas Pacific has 5.5%
NH:
and CVC 3.75%
NH:
both sound a bit low to me
PM:
We’re just checking those figures
PM:
But to re-iterate here — cash call and PE placing on the cards at Debs
PM:
We think it is very close
PM:
75p the key level
PM:
But the move we remove stock overhang and reduce debt
NH:
the company has been sounding out institutions for a weeks now
NH:
Debenhams is working on plans to raise up to £500m in a rights issue in the next few weeks to cut the department store chain’s debt burden of almost £1bn.
The company is looking to raise anything from £300m to £500m after it revealed interim profits that were better than expected last month, driven by strong trading in its “Designers at Debenhams” fashion lines designed by top names in the industry.
PM:
Who is that from
NH:
The FT. wrote a few weeks back
NH:
thanks, Daddy that sounds more accurate
NH:
can’t get to the Bloomie
NH:
because it is on the other side of the newsroom
PM:
You reckon the shewdies have been buying on the back of this story Neil?
NH:
well, they think it would meet with a positive response
NH:
not sure anyone is brave enough to buy it after the run it has had
PM:
I think the price move is very difficult to call — short term
NH:
Debs at 95p
NH:
who would have thought that at Xmas
PM:
ha
PM:
okay — let’s move on
11:18AM
NH:
Yep, I have no more at the moment
PM:
Latest cabinet meltdown stuff confirmed btw
PM:
Havel Blears off
NH:
Havel
NH:
is she Czech?
PM:
Hazel — sorry!
PM:
Stange to watch — the Brown meltdown
PM:
For those who havent read it — the Guardian’s leader is a must today
PM:
All must agree that the die is cast and a hard judgment made. Otherwise progressive politics will be dragged down at a general election in May 2010 that could lead to a much bigger defeat than Labour suffered in 1979. That might bring a chance for other parties to take it forward, as the Liberal Democrats are trying to do in this election. But they are not placed to enter government. Labour has a year left before an election; its current leader would waste it. It is time to cut him loose.
PM:
Brown = toast
NH:
NH:
Gordo
11:21AM
PM:
While we are on politics
PM:
what do you think of this North Korean news Neil?
NH:
What news? Another missile?
PM:
No – the new heir
PM:
The third son — Kim Jong-woon
PM:
According spies etc – he’s the 20-something son of Kim Jon-il who is going to take over.
PM:
Thought to have attended a swiss boarding school, but other than that no one seems to know anything about him.
NH:
Sorry, Murph, I don’t know anything about Korea except for the war
NH:
did a lot of stuff at Uni on that
PM:
I do. A bit
PM:
I used to cover N Korea – write about their debt negotiations.
NH:
People lent them money???
PM:
Yeah they did – years ago.
PM:
And of course they defaulted and a bank creditors committee had to be set up.
NH:
Bet that was fun.
PM:
Was actually – had to deal with some guy at Morgan Grenfell – and then also North Korea’s one man in the UK.
NH:
He spoke English then.
PM:
Oh, no – he was English – some random business man represented the country financially. No embassy of course.
PM:
Cant remember his name. But one deal he did was buying a brewery, which they then took apart brick by brick and shipped to Pyongyang
NH:
Right….
PM:
Seriously, I worked at the Banker mag then – and a guy from the US embassy rang me up to ask me whether I was getting my information.
NH:
Wacky wacky country.
PM:
For the record, if you ever want to get deep into places like North Korea you need to sign up for BBC Monitoring.
PM:
It’s a radio monitoring operation out of Cavendish – near Reading.
PM:
You get this transcripts of things like Pyongyang radio.
PM:
Always used to look out for reports of a car crash.
PM:
If someone high up in N Korea had been purged – or simply executed – it would be reported that So and so had suffered a terrible car crash on Tuesday night or whatever.
NH:
just Zim then
PM:
Well, that was supposed to be a real accident of course
11:26AM
NH:
So, are you go to put out a note or something saying that Sam Jones has suffered an unfortunately collision.
NH:
With him being purged from AV?
PM:
Yes. Its true – and its public now.
PM:
Sam is moving from Alphaville to become hedge fund correspondent – on the paper.
NH:
Warmed him often enough, so I don’t think we should feel guilty.
PM:
Going on about bloody bond convexity. The hedge fund job – in the financial services team.
NH:
Going on about bloody bond convexity. The hedge fund job – in the financial services team.
PM:
That’ll learn him.
NH:
We jest, of course.
NH:
We are very sad to lose Sam. He will be departing at the end of the month.
PM:
We will miss him – and also miss what one reader once referred to as “exquisitely posh English prose”
NH:
Done some great stuff for AV.
NH:
So good luck Sam.
PM:
You may need it.
PM:
Writing for the spike.
PM:
11.15 at night…. Ring ring
PM:
“Hello is that Sam Jones. This is the night desk here”
PM:
“There’s a story in the Times saying some hedge fund guy has paid himself £10m and they have a picture of his wife kissing some other bloke outside a nightclub.”
PM:
Sam: “But I offered that to the desk at 2 oclock this afternoon!”
PM:
Nightdesk: “Yeah, whatever. 400 words please. Need the copy by 11.30”
NH:
So, we have a free slot here on AV.
PM:
Number of internal people vying for it.
PM:
But if you know someone young and cheap and incredibly talented – by all means tell em to get in touch.
NH:
email paul.murphy@ft.com
NH:
saying why u would love to work for AV
NH:
and why 7.00AM starts are no bother
11:29AM
PM:
Let’s mvoe forward
PM:
Right
PM:
lot’s going on in the banking sector this morning
PM:
Barclays still falling
NH:
they are
NH:
down 14.5p at 259p
NH:
must admit, I thought they would stabilise
NH:
but anyway, the word in the market Credit Suisse might have been left with a few shares
PM:
hang on, I thought the book was covered
NH:
so did I
NH:
I reckon the fall probably has more do with the fact that investors are stuffed with financial paper
NH:
and they just can’t take anymore
NH:
like the fat man in Monty Python
NH:
look at this story from the Journal this morning
NH:
they reckon $65bn of financial paper has been issued since the results of the Great Stress Test were announced, what a month ago
PM:
NH:
that’s $65bn a month
NH:
they are calling it a Telethon
PM:
Telethon???
NH:
you must remember them
NH:
Charity TV nights
NH:
where you dial up and pledge money
NH:
some celeb sometimes anwers the phonwe
PM:
got it
NH:
except in this case, it investors phoning bank chief execs to pledge cash
NH:
actually there is a very funny graphic in the Journal, with the CEO’s JPM, MOST, BOA holding phones to their ears
NH:
with a flashing totaliser above
PM:
here’s the link to that story
PM:
and the top few pars
PM:
Banks are having an easy time dialing for dollars.
PM:
J.P. Morgan Chase & Co., Morgan Stanley, American Express Co. and regional bank KeyCorp said Tuesday they sold a combined $8.7 billion in common stock. That pushed the total value of shares sold by the 19 financial firms that were stress-tested by the government to at least $65 billion since the results were announced May 7.
Nonguaranteed debt sales and the conversion of preferred shares to common stock have generated roughly another $20 billion, for a total of $85 billion or more, giving most of the banks considerably more capital than U.S. regulators have required them to amass as they ride out the recession. Money is pouring in so fast that surprised bankers can hardly believe it, especially since most investors didn’t want to go near financial stocks just three months ago, even though they were nearly 40% cheaper
Nonguaranteed debt sales and the conversion of preferred shares to common stock have generated roughly another $20 billion, for a total of $85 billion or more, giving most of the banks considerably more capital than U.S. regulators have required them to amass as they ride out the recession. Money is pouring in so fast that surprised bankers can hardly believe it, especially since most investors didn’t want to go near financial stocks just three months ago, even though they were nearly 40% cheaper
NH:
thanks
NH:
some breaking RAW
11:33AM
NH:
Heritage Oil
NH:
suspended limit up
PM:
NH:
out of the blue
PM:
We’ve been waiting for something here
NH:
shares up 60p to 590p
PM:
Noting that a certain corporate financier was in Iraq…
NH:
before suspension
PM:
Might be nothing
NH:
could be a fat finger
PM:
aah
NH:
volume not high
NH:
doesn’t look like it
NH:
order book just got taken out
NH:
all time high that one
PM:
Chart looks marvelous
PM:
Stock was 238 at the begiining of march
NH:
for those of you not up to speed on the spec around Heritage
NH:
word in the market has been that a bidder is set to pounce
NH:
a state oil company
NH:
either chinese or indian
NH:
Heritage’s great attraction
NH:
is a massive oil field in Iraq
NH:
which could contain up to 4bn barrels of oil
NH:
and some assets they are developing with Tullow in Uganda
NH:
two bits of raw
NH:
in one morning
NH:
good job soon
NH:
I was famished
NH:
thought I was going to die of malnutrition
NH:
more on Heritage
NH:
they have a meeting scheduled with a broker in the Cituy
NH:
in 30mins
NH:
not been cancelled
NH:
YET
NH:
…
PM:
PM:
Okay — let’s move on
PM:
Heritage traading again
PM:
come back sharply
PM:
Trading at 567 — up 37
PM:
7%
PM:
Situation confused
PM:
But keep a close eye on that one
PM:
Trading at 580 now
PM:
Very dangerous situation this
PM:
READER BEWARE
11:40AM
NH:
right, where were we before all of that
PM:
Er, we were talking about Barclays
PM:
i think
NH:
ah yes
NH:
has the sale by the Abu Dhabi investors called the top of the banking rally?
PM:
well, that would be a first — Shrewd Wealth Fund
PM:
???
NH:
(G Cox – 15 points – 11 points Voda)
PM:
they usually buy at the top of the market
NH:
NH:
actually, yesterday’s sale by IPIC, the AB vehicle, is being hailed in some quarters as the punt of the decade
PM:
hhhh
PM:
Escape act of the decade
NH:
near death investment experience
NH:
anyway
NH:
did u see these flashes on Reuters
NH:
It would seem another one of Barclays’ overseas investors quietly sold their holding
NH:
RTRS-SINGAPORE’S TEMASEK SOLD NEAR 2 PCT STAKE IN BARCLAYS PLC MONTHS AGO -SOURCES
10:05 03Jun09 RTRS-TEMASEK LIKELY TO HAVE LOST OVER 800 MLN STG ON BARCLAYS INVESTMENT -REUTERS CALCULATION
10:05 03Jun09 RTRS-TEMASEK LIKELY TO HAVE LOST OVER 800 MLN STG ON BARCLAYS INVESTMENT -REUTERS CALCULATION
NH:
actually there is a story up now
NH:
: LONDON, June 3 (Reuters) – Singapore state investor Temasek sold its stake in British bank Barclays Plc several months ago at a big loss, people familiar with the matter said on Wednesday.
After spending over 1 billion pounds on the shares in the last two years, unlisted Temasek [TEM.UL] may have lost over 800 million pounds ($1.3 billion) on the investment, according to calculations by Reuters.
Temasek sold its near 2 percent stake in Britain’s second biggest bank in December and January, one of the sources said. The sources declined to be named due to the confidential nature of the investment.
Temasek and Barclays declined to comment, and details of the price it sold at were not known
After spending over 1 billion pounds on the shares in the last two years, unlisted Temasek [TEM.UL] may have lost over 800 million pounds ($1.3 billion) on the investment, according to calculations by Reuters.
Temasek sold its near 2 percent stake in Britain’s second biggest bank in December and January, one of the sources said. The sources declined to be named due to the confidential nature of the investment.
Temasek and Barclays declined to comment, and details of the price it sold at were not known
PM:
That’s more like the SWF we’ve come to know and love
PM:
a thumping loss of £800m
NH:
nice work
PM:
I wonder if Qatar will follow AB out of the door?
NH:
what in Barclays?
PM:
yeah
NH:
well they have already sold some of course
NH:
35m shares for some of market driven volatility hedging arrangement
NH:
apparently
NH:
so it is deffo possible, but I suspect they might have missed their window
PM:
How about on the analysts side
PM:
There must be someone who likes Barclays
NH:
Well there are a few supportive notes around – but people are just ignoring them – looking at the simple supply of stock – and the demand for it.
NH:
but the shares are now below yesterday’s placing price
NH:
off 13.5p at 260p
PM:
Let’s be positive on Barc. Poor bank
PM:
Here’s Ian Gordon from Exane BNP.
NH:
Go on, what’s he saying.
NH:
Actually, first, what’s happened to James Eden. I haven’t seen stuff directly from him for ages.
NH:
he was a great contra-indicator
PM:
Harsh!
NH:
but fair
NH:
!
PM:
PM:
Surely he hasn’t jumped ship again.
PM:
If he had he would have taken Gordon with him, no?
NH:
I don’t know .
NH:
But anyway, here’s Gordon on Barc
NH:
“Technical” correction leaves fundamental attractions intact
International Petroleum Investment Company (IPIC) elected to convert its GBP2bn
holding of 9.75% coupon Mandatory Convertible Notes (MCNs) a month early, (saving
Barclays c.GBP16m), and yesterday it successfully placed the resultant 1.3bn shares
into the market at 265p after some scaling back of strong institutional demand. The
overhang of potential disposals from Middle Eastern (and other) investors is materially
reduced (albeit not eliminated) while valuation, at 0.94x 2010e tNAV per share, is
relatively attractive in an overpriced sector. We upgrade to Outperform (from Neutral).
International Petroleum Investment Company (IPIC) elected to convert its GBP2bn
holding of 9.75% coupon Mandatory Convertible Notes (MCNs) a month early, (saving
Barclays c.GBP16m), and yesterday it successfully placed the resultant 1.3bn shares
into the market at 265p after some scaling back of strong institutional demand. The
overhang of potential disposals from Middle Eastern (and other) investors is materially
reduced (albeit not eliminated) while valuation, at 0.94x 2010e tNAV per share, is
relatively attractive in an overpriced sector. We upgrade to Outperform (from Neutral).
NH:
We continue to assume exercise of GBP3bn warrants in H2 2009
IPIC and Qatar Holding each continue to hold GBP1.5bn of warrants with an exercise
price of 197.775p, and a 2013 maturity. Given their time value, it is by no means
certain that these will be exercised in 2009 (as we currently assume) even with the
expected resumption of cash dividends in H2 2009. So whereas it is entirely possible
that the end-2009 share count may reach c.12.6bn, and that Middle Eastern investors
may further reduce their remaining c.20% collective interest, this is mere conjecture.
IPIC and Qatar Holding each continue to hold GBP1.5bn of warrants with an exercise
price of 197.775p, and a 2013 maturity. Given their time value, it is by no means
certain that these will be exercised in 2009 (as we currently assume) even with the
expected resumption of cash dividends in H2 2009. So whereas it is entirely possible
that the end-2009 share count may reach c.12.6bn, and that Middle Eastern investors
may further reduce their remaining c.20% collective interest, this is mere conjecture.
NH:
Further good news still ahead?
An improvement in terms, or extension to the iShares disposal, appears increasingly
likely when the “Go Shop” period expires on 18 June, while the Barclays Capital
investor event (16 June) surely won’t deliver any negative surprise on current trading?
An improvement in terms, or extension to the iShares disposal, appears increasingly
likely when the “Go Shop” period expires on 18 June, while the Barclays Capital
investor event (16 June) surely won’t deliver any negative surprise on current trading?
NH:
Remain underweight banks, but upgrade UK banks to equal-weight
UK banks have continued to underperform European banks in 2009 (year-to-date),
though in upgrading Barclays, our stance on UK banks versus European banks is also
raised to equal-weight. We remain negative on the sector, but we do expect Barclays,
Standard Chartered and HSBC to remain profitable in 2009/10, with dividend support.
UK banks have continued to underperform European banks in 2009 (year-to-date),
though in upgrading Barclays, our stance on UK banks versus European banks is also
raised to equal-weight. We remain negative on the sector, but we do expect Barclays,
Standard Chartered and HSBC to remain profitable in 2009/10, with dividend support.
PM:
ta for that
PM:
Im a bit bored of banks now
11:46AM
PM:
can we move on
NH:
hang on one moment
NH:
one more thing, a bit of RAW Banks
PM:
oh, go on
NH:
HSBC
NH:
Rumours that Saad Investments are being forced to sell their 3% holding
PM:
3% of HSBC
PM:
what’s that worth
NH:
hang on
NH:
around £2.8bn
NH:
Merrill apparently doing the placing
PM:
do we really believe this????
NH:
not really
PM:
Allegedly doing the placing
NH:
I mean it is possible, Saad is in a pickle particular after the Moody’s downgrade
NH:
and he will have to raise some capital to sort out the liquidity sqeeze
NH:
but 3% of HSBC
NH:
so soon after the Barc sale
NH:
anyway, there is another bearish tale around in HSBC
NH:
apparently its weighting is about to fall in some Hong Kong index
NH:
from 19% to 15%
NH:
change effective as of Friday, could trigger selling
NH:
60m shares apparently
NH:
that’s RAW to BTW
PM:
HSBC currently down 19.5p at 515.5
PM:
Off 3.6%
NH:
hang on
NH:
Stacy has just sent me through something on Saad
NH:
from Moody’s
NH:
withdrawn ratings
NH:
that’s a day after downgrading to junk
PM:
oh dear
NH:
Moody’s Investors Service today has withdrawn all ratings including the following
ratings of the Saad Group; the B1 issuer ratings of Saad Trading Contracting & Financial Services Company
(STCFSC), Saad Investments Company Limited (SICL) and Saad Group Limited (SGL), and the B1 debt
ratings on issuance of Golden Belt 1 Sukuk Company — together “the Saad Group”. The ratings have been
withdrawn because Moody’s believes it lacks adequate information to maintain the ratings. Please refer to
Moody’s Withdrawal Policy on moodys.com.
ratings of the Saad Group; the B1 issuer ratings of Saad Trading Contracting & Financial Services Company
(STCFSC), Saad Investments Company Limited (SICL) and Saad Group Limited (SGL), and the B1 debt
ratings on issuance of Golden Belt 1 Sukuk Company — together “the Saad Group”. The ratings have been
withdrawn because Moody’s believes it lacks adequate information to maintain the ratings. Please refer to
Moody’s Withdrawal Policy on moodys.com.
NH:
Moody’s previous rating action on the Saad Group was on the 1 June 2009 when the rating agency
downgraded the ratings of the Saad Group to B1 on review for further downgrade.
downgraded the ratings of the Saad Group to B1 on review for further downgrade.
NH:
lack the info?
NH:
WTF
NH:
why did it start covering Saad in the first place
NH:
if it lacked info
PM:
Hmm
PM:
Probably fair to say that Moody’s is a rather different – and more risk averse – institution than it was
PM:
Partly thanks to one Sam G Jones
PM:
Oh — who wants to guess want “G” stands for
NH:
Gordon
PM:
nope
NH:
Gavin
PM:
nope
NH:
Greg
PM:
nope
NH:
Giddeon
PM:
nope
NH:
Gunter
PM:
nope
NH:
Gary
PM:
nope
NH:
that’s a nice name
NH:
keep going
NH:
we will get the comment count up
NH:
sucked in
PM:
PM:
Still no one has got it
NH:
come on
NH:
put us out of our misery
PM:
Okay…
PM:
It’s Gadwin
NH:
PM:
Samuael Gadwin Jones AV 2007-09
NH:
Hedge Fund Correspondent 06-2009
11:55AM
PM:
oh dear
PM:
Funny job this
PM:
What else Neil?
NH:
Tuna – made editor 2015
PM:
yes
NH:
well, a few readers yesterday were asking about the toxic pub companies, Enterprise and Punch
PM:
yes, very puzzling
PM:
share price wise
PM:
Punch down 8.5p at 158 this morning
PM:
Enterprise off 7.75 at 155
NH:
well I was doing a bit of digging, trying to find the reason for the price moves
NH:
thought it might be short selling
NH:
but drew a blank there
NH:
but then someone pointed me in the direction of a couple of disclosures from a Dallas-based hedge fund called Maverick Capital
PM:
okay
NH:
and I discovered they have been aggressive buyers of both
NH:
they hold a 5.7% stake in Punch
NH:
and 5.8% in Enterprise
PM:
PM:
what on earth would a Dallas-based hedge fund know about the British pub industry.
PM:
??
NH:
perhaps they think the Toxic Pub Co’s are cheap
NH:
who knows
NH:
but US hedge funds don’t have a great record in toxic pub co’s
NH:
David Einhorn, who made a bundle on the demise of Lehman, has been buying Punch all the way down
NH:
anyway, here at the details of the top guys at Maverick
NH:
DAVID B SINGER
LIMITED PARTNER
Maverick Capital Ltd Work: +1-214-880-4000
300 Crescent Court
Dallas TX 75201
United States
LIMITED PARTNER
Maverick Capital Ltd Work: +1-214-880-4000
300 Crescent Court
Dallas TX 75201
United States
MICHAEL PAUSIC Hits today: 1
FUND MANAGER
) Maverick Capital Ltd Work: +1-214-880-4028
300 Crescent Court mpausic@bloomberg.net
Dallas TX 75201 mike_pausic@maverickcap.co
United States
PEDRO ZEVALLOS
SENIOR ANALYST
) Maverick Capital Ltd Work: +1-214-880-4034
300 Crescent Court pzevallos3@bloomberg.net
Dallas TX 75201
PM:
where did you get that from?
PM:
company website??
NH:
nah
NH:
that’s useless
NH:
need a pass word to get past the home page
NH:
which features a rather aggressive disclaimer
NH:
Access to this site is authorized and permitted solely for those persons who have agreed to Maverick Capital’s Terms of Service and who have received from Maverick Capital a valid User ID and Password. Unauthorized access is a violation of 18 U.S.C. 1030 and may subject you to civil liability and criminal prosecution.
PM:
Okay dear – that’s a bit aggressive
PM:
So do you think the Feds are gong to come and get you Neil?
PM:
Not sure orange would suit you
NH:
Nah
NH:
Got it from Bloomberg
NH:
they have a nifty little function
NH:
PEOP GO
NH:
which brings up the names and numbers of anyone who has a machine
PM:
so you can’t go ex-directory on Bloomie?
NH:
not by the looks of things
NH:
Anyway, Caz does not like the Toxic Pub Co
NH:
published a note this morning which argues that Punch will find it more difficult to keep buying back its debt at big discount
NH:
here is the note
NH:
The main development in the Punch Taverns investment case has been its decision to accelerate the pace of asset disposals in order to retire its securitised debt at substantial discounts to face value. In the first 35 weeks of the year it has generated £91m from disposals (compared to original FY guidance of £50m) and repurchased £314m of debt at a 35% discount to par value. This alone adds 41p to our fair value and is marginally enhancing to the debt service cover ratios on its securitisations. This has resulted in strong share price performance with the stock rerating from a PER (2009E) of 1.3x to 3.4x in the last quarter.
NH:
Overall our analysis suggests that the recent share price rally implies that debt can continue to be repurchased at a big discount to face value. Ultimately, the more success Punch has in repairing its balance sheet via disposals the less likely it is to be able to retire debt at deep discounts. We have seen active evidence of this at Greene King which repurchased only £22m of debt in a tender for up to £100m. In this note we make various assumptions on debt repurchases in a scenario analysis. Our central case assumes £150m of disposals at 10x EBITDA being used to retire £214m of debt. At a target EV/EBITDA of 9.2x the stock is 15% to 29% overvalued
NH:
We believe there is only attractive upside if our fundamental forecasts are too bearish or the group surprises with the level of debt retirements. We believe it is too early to call the turning point in tenanted pub trading and we are not comfortable basing a buy case purely on debt repurchase. We would therefore continue to avoid the stock.
PM:
thanks for that
12:02PM
PM:
Right — we’re gonna scoot
PM:
Let people watch PMQs
NH:
OK, I did have a few notes to put up
NH:
MOST note on Draz
NH:
Sorry Drax
NH:
and Caz on the supermarkets
NH:
some of which are a good market today
NH:
here’s Drax
NH:
We upgrade Drax to Equal-weight and increase our price target to 545p (from 475p) as we now believe that weak 2009 dark green spreads are in the price. The risk-reward profile for the stock has improved, in our view, but is not yet compelling in a sector context – our preferred name for a
play on UK power is IPR. Biomass investment could be a positive, but it is too early to be sure. In our bull case (805p – 64% implied upside), we show how three dedicated biomass plants could be worth up to 100p of value. However, the valuation spread is wide, and uncertainties remain.
play on UK power is IPR. Biomass investment could be a positive, but it is too early to be sure. In our bull case (805p – 64% implied upside), we show how three dedicated biomass plants could be worth up to 100p of value. However, the valuation spread is wide, and uncertainties remain.
NH:
S&P recently downgraded Drax’s corporate credit rating to BBB- and has the rating on negative outlook. But given our EBITDA forecast increases, we see risk to a further downgrade as low.
NH:
and on supermarkets
NH:
UK Supermarkets – Ignore inflation: upgrade to Neutral (from Underweight)
Investors and analysts have a fraught relationship with the subject of food price inflation/deflation with regard to supermarkets. The widely held view at present is that the erosion of inflation over the coming six to twelve months will increase competition for volume growth and consequently presents the risk of a downwards spiral towards a value destructive price war. We disagree. In our view the industry has, over a long period of time, demonstrated its inherent rationality and there is every reason to expect that it will continue to do so. In essence the industry manages profitability at a cash margin level with the percentage gross margin naturally fluctuating (lower in times of inflation, higher when prices are falling) to accommodate this. While we do envisage the top line growth of the industry moderating as inflation falls away, we do not expect there to be an adverse profit effect.
Investors and analysts have a fraught relationship with the subject of food price inflation/deflation with regard to supermarkets. The widely held view at present is that the erosion of inflation over the coming six to twelve months will increase competition for volume growth and consequently presents the risk of a downwards spiral towards a value destructive price war. We disagree. In our view the industry has, over a long period of time, demonstrated its inherent rationality and there is every reason to expect that it will continue to do so. In essence the industry manages profitability at a cash margin level with the percentage gross margin naturally fluctuating (lower in times of inflation, higher when prices are falling) to accommodate this. While we do envisage the top line growth of the industry moderating as inflation falls away, we do not expect there to be an adverse profit effect.
NH:
This is supported by history; we can find no evidence that industry profitability has been affected by waning inflation in the past and, more pragmatically, there is no correlation whatsoever between inflation/deflation and either absolute or relative sector performance. Despite this there will, inevitably, be an ongoing debate as to the risks presented by inflation to either or both profitability or sentiment towards the sector and while we cannot rule out a period of more intense price competition (for example if the government fulfils its promise to increase the rate of VAT) our fundamental advice is to ignore the vagaries of pricing indices (which are of dubious statistical veracity in any case). Inflation, we believe, is little more than a distraction for investors in UK supermarkets.
NH:
Our position on this issue is a major factor in our decision to upgrade our sector stance from Underweight to Neutral. We regard food retail as a sector offering long term, low volatility (ie defensive) growth and in the context both of the solidity of the industry’s profits through the economic downturn and the extent of the (cyclical-led) market re-rating it has become increasingly tenuous to argue that this growth is being over-priced.
NH:
right
NH:
think we are done for today
NH:
let’s go and listen to Gordo
NH:
thanks for tuning in today
PM:
yep im off — ta for all that Neil
NH:
see you all tomorrow
NH:
and let’s hope the RAW keeps coming
NH:
bye