FT Alphaville » Markets live transcript 5 Jun 2009

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Markets live transcript 5 Jun 2009

Posted by Paul Murphy on Jun 05 11:02.

Markets live chat transcript for the chat ending at 12:05 on 5 Jun 2009. Participants in this chat were: Paul Murphy, FT (PM) Neil Hume, FT (NH)

PM:

Hello there

PM:

Welcome to Markets Live

PM:

This is FT Alphaville’s daily market chat

PM:

It’s Friday.

PM:

Neil’s here

NH:

morning all

NH:

We are sitting here like everyone else – watching Brown’s cabinet go round and round in the blender

NH:

What you can do is follow young Alex Barker’s Westminster Blog, which is here

NH:

http://blogs.ft.com/westminster/2009/06/darling-to-stay/

NH:

He’s live blogging proceedings.

NH:

John Hutton went less than an hour ago

NH:

Sugar’s stirring it.

NH:

There’s also talk of Carol Vorderman becoming chief secretary at the treasury

NH:

Help Darling out with his sums

PM:

The westminster blog is well worth a visit

PM:

You have to refresh to tget the updates, btw

NH:

( A spoonful of Suagr makes the Tottenham go down – an old Arsenal song)

NH:

And welcome back Monkey

NH:

where have you been

PM:

I can report a bit of tension in the air round here actually.

PM:

A few pesky commenters.

PM:

Neil, Izy AND Tracy have been threatening to ban people this morning.

PM:

Tracy has drawn up a little list of “people you should never respond to”

PM:

Neil just wants to zap people. Just to see them go up in the pixelated version of pink mist.

Warning to rude and abusive commenters – you’re ability to comment will be terminated immediately and permanently, without warning. Henceforth, FTAlphaville has instituted a One Strike and You Are Out policy. We’ve had enough. We are going to clean up these pixels once and for all.

PM:

Izy is just whailing.

PM:

Im calm. Ish.

PM:

But just a heads up

NH:

Watch it!

NH:

i am itching to pull the trigger

NH:

go on make my day

PM:

Come on, let’s get on

PM:

Monkeyand others — good luck with the CFAs

PM:

I coldnt even frame q question

NH:

while we are ranting

NH:

You off next week?

PM:

I am

NH:

Swaning around NY while we do all the work.

PM:

Er, not quite.

NH:

Oh yeah, forgot. You have to struggle over Cipriani’s on Wall St and pick up a Webby.

PM:

NH:

Got your acceptance speech sorted?

PM:

I’ve got to do it into some bloody Youtube booth.

NH:

So we can all laugh at it later.

NH:

You better make sure its good then.

PM:

Hmm.

PM:

We did have a competiton here.

PM:

There were some very good entries – but I can’t find that session immediately.

PM:

So, if anyone has any fresh suggestions, do make them.

PM:

Five word Webby acceptance speech

NH:

The Webby drinks are on

NH:

word we would all love to hears

PM:

This is for you Marj

PM:

Good old suggestion

PM:

Sorry I am late again

PM:

Zoomy zoomy zoomy zoomy zoomy

NH:

got one

NH:

RED CARD

NH:

coming out

NH:

pompous comment from Deepbreath

NH:

You’re banned

PM:

Only for a week tho

NH:

that’s better

NH:

let’s get onto the markets

11:12AM

NH:

FTSE 100 up

NH:

60 points better at 4,447

NH:

all down to the miners

NH:

which brings us nicely on to RIO

PM:

the $15bn rights issue

PM:

the JV with Billiton

PM:

and the rising share price

PM:

Price is up 293p at 30.13

PM:

11%

PM:

marked contrast to yesterday’s price action, when the shares were falling on fears of a jumbo rights issue

PM:

Better to arrive than travel, clearly

NH:

hmm

NH:

price action

NH:

was weakness

NH:

investors worried about the cash call

NH:

but there is fresh news this morning

NH:

the key here I think is the JV with BHP

NH:

and it looks a pretty outcome for both sides

NH:

Rio is getting a $5.8bn “true-up” payments as part of the JV

PM:

“true-up”, that’s a new one on me

NH:

$10bn of synergies

NH:

taken together with the proceeds of the cash call, that’s over $20bn knocked off Rio’s debts

NH:

they can repay all of the cash due over the next couple of years

NH:

and that should help close the “leverage discount” between Rio and the other miners

PM:

hmmm, all makes sense

PM:

but on a more human level

PM:

Tom Albanese, can he survive?

NH:

in a word, no

NH:

he might have a longer life expectancy than Gordie Brown

NH:

but, he must go

NH:

and soon

NH:

he bought Alcan at the top of the market, presumably as a poison pill against a BHP bid

NH:

then takeover talks with BHP faltered

NH:

and then he cobbled together a refinancing when the market was on its knees in February

NH:

giving the Chinese an extremely favourable deal

NH:

and now we get the screeching u-turn

NH:

more of a handbrake turn actually

NH:

smoke everywhere

PM:

So we are sacking Albanese ?

NH:

yeah, why not

NH:

You’re fired

NH:

in fact, it looks like a successor is already being lined up

PM:

who is that?

NH:

Some iron ore executive

NH:

never heard of him

NH:

but the analysts have and reckon he could be the man to succeed Albanese

PM:

what’s his name them?

NH:

Sam Walsh

NH:

head of iron ore business, just been appointed to the board of Rio

PM:

interesting

PM:

What do you think the chinese reaction will be to this??

NH:

well

NH:

anger

PM:

For sure

NH:

but what can they do

PM:

I wonder what this means for the future — not only have they been snubbed by a key supplier

PM:

Suddenly the supplier is in bed with another key supplier

NH:

i suppose they could provide difficult over the iron ore negotiations

PM:

Will they understandably smell an anti-competitive rat?

PM:

DLC mentions to the right

PM:

back to Africa for the Chinese, i think

NH:

can’t see the Chinese selling their 10% holding though

NH:

that was purchased at £60+

NH:

no sense selling that in a fit of peak

PM:

Any analysts comment on all of this?

NH:

good idea

NH:

here’s Cazenove

NH:

Rio Tinto is guiding to synergies worth $10bn or $1bn p.a from this JV. Our revised forecasts leave Rio Tinto with $16.4bn of cash on its balance sheet and therefore comfortably able to fund this year’s debt repayment ($7.15bn). On both CazE and spot commodity prices we also believe the group will have sufficient cash to meet next year’s $8.1bn debt repayment if refinancing is impossible.

NH:

For BHP Billiton, we estimate the JV to be 10% accretive for CY10, although the major benefit (for both companies) is likely to be seen in accelerated and lower cost production expansions in the future. We note that despite the EPS moves, Rio Tinto remains cheaper than BHP Billiton on earnings metrics.

NH:

Liberum Securities

NH:

this is a bit longer and more detailed

NH:

Rio Tinto: $15.2bn rights confirmed and $5.8bn in from iron ore JV

NH:

The market in Oz loved the deal with both shares up c.9% overnight. We stand by our view that this is a good deal for both parties but the relative value remains in RIO. That said we wonder why RIO have raised so much cash – so expect outperformance to wane after +15%.

NH:

RIO have still given no guidance on why the deal is off with the Chinese. We feel a combination of Chinese intransigence and RIO ‘cold feet’ led to the breakdown – the new Chairman clearly had an influence in the decision. More colour on this will come at the presentation at 10am no doubt. However, it remains to be seen how RIO will be treated by the Chinese from now on. They can’t expect to have ‘favoured partner’ status at the very least…

NH:

Iron ore JV: $5.8bn cash payment fair, synergies in line with our estimates. The details of the 50:50 iron ore JV are now clear. RIO will receive a $5.8bn balancing payment for BHPB to equalize he 50:50 nature of the deal. $5.8bn is derived from a 55:45 split, implying a total valuation for the iron ore biz of $116bn. This values RIO iron ore stand alone at $63bn (in line with RIO’s entire closing mkt cap of $60bn yesterday!). It is also a valuation which is much ahead of the $34bn implied by the Chialco deal (they were paying $5.15bn for 15%) – so it is easy to break the Chinalco deal on the grounds of “superior value”.

NH:

interesting line there

NH:

This values RIO iron ore stand alone at $63bn (in line with RIO’s entire closing mkt cap of $60bn yesterday!

NH:

no wonder they are up this morning

NH:

So we see the deal as a very good one for RIO, but does in our view reduce the probabilities of a bid from BHPB. BHPB have now got the synergies they want so why bother with a bid? The companies’ estimate of synergies from the JV are exactly in line with our estimates of yesterday – close to $10bn (split 55:45 in RIO’s favour). On an earnings basis we think the cost savings could be 15% of COGS which would add 5% to RIO group EBITDA in their first full year or, or c.7% for earnings. The fact that the two companies may now be talking to harvest the obvious synergies is a major positive for both equities.

NH:

(SFB – you’re fine)

NH:

Why raise so much? We don’t understand why RIO is raising so much equity – the iron ore JV plus rights equals $21bn – more than the total $19.5 from Chinalco which was a mix of cash and CB. The $20bn need back then was against a backdrop of capital markets that were shut and commodity prices on their knees. We just don’t ‘get’ why they have overclubbed the equity piece – is it because RIO think there is a material deal risk to the JV? Or is it beacse as ever the bankers couldn’t help themselves by recommending a bigger offer (fee)? One possible reason for the bigger number could be that RIO want to go back to being pro-growth, reinstating shelved capex. Post rights and JV the RIO 2010 net debt is likely to be sub $10bn (i.e. net debt to EBITDA of c.0.7x) something that we needn’t be this low at this point in the cycle.

NH:

Chinalco deal similarly dilutive but no hard synergies. We think the asset sales to Chinalco imply a value for RIO’s equity at the £30/share level (i.e. earnings neutral) but for that there is a loss of corporate optionality and no hard synergies. Overall a post Chinalco deal PER is 10% cheaper than the alternative of a Plan B rights with iron ore synergies. It is a gap worth taking in our view.

Overall then we would remain buyers of RIO. Our positive stance of last night remains, but tempered somewhat by the fact that they seem to be raising too much equity. For BHPB the rise in Oz seems deserved – they no longer have their biggest customer in bed with their biggest competitor and have managed to use some of their flabby balance sheet close to the bottom of the cycle buying into a quality, synergistic deal. The management premium in BHPB remains deservedly intact. Where will the rights funding come from in the sector? With so much money needed it has to come from the liquid plays – so our favorites are BHPB or XTA. Selling AAL seems dangerous to us with Pt in the ascendant.

NH:

and finally Merrill

NH:

Our primary concern with the rights issue is its excessive size: why does Rio
Tinto need to secure this amount of new capital? US$15.2bn rights issue +
US$5.8bn from BHP + US$2.5bn in asset sales + US$3.5bn termed out debt +
plus no interim dividend, paid in 2009 (US$0.8bn) = US$28bn vs. US$19.5bn
offered by the proposed Chinalco deal (which we also thought was excessive).
Maintain BUY

NH:

so, the analysts are puzzled about the size of the cash call in summary

NH:

and with the BHP cash, they do looked to have over-clubbed things

NH:

but at least their debt troubles are behind them

PM:

Thanks for that Neil.

PM:

Just busy in the background here

NH:

another red cap

PM:

Someone’s getting a ban applied elsewhere on the site

NH:

yipeeeee

PM:

No – we dont like using the zap

NH:

i do

PM:

Just wish everyone would chill

PM:

This is a free site

PM:

People dont have to read it

PM:

And they don’t have to sit there, anonymously, typing out abuse

PM:

Anyway, sod-it, lets move on

11:26AM

NH:

interesting release just come out of the FSA

NH:

on building socities

NH:

horse and stable door springs to mind

PM:

Ah, Neil — it’s not much more than a decade since they relaxed the rules on BS funding

NH:

here’s the release

NH:

FSA consults on additional guidance for building societies

NH:

The Financial Services Authority (FSA) is today consulting on additional guidance to ensure that building societies diversifying away from the traditional business model have the risk management systems and skills necessary to operate safely.
Using a combination of existing and new guidance, the FSA expects building societies to re-examine their risk management and business models in the areas of liquidity, wholesale funding and lending to ensure they are aligned.

NH:

Societies that demonstrate the necessary risk management systems and skills will have complete flexibility to run their business within the statutory limits set by the Building Societies Act. Those which cannot, the FSA will steer to a simpler business model category and activities they can safely undertake.

NH:

that looks like a threat to me

PM:

That’s rather funny actually

NH:

steer to simple business model

NH:

that’s about as strong as it gets from the FSA

NH:

this is war on the BS sector

NH:

Jon Pain, the FSA’s retail managing director, said:

NH:

“Our approach is very simple; the more diversification, the higher the level of management skills and systems and controls the FSA will demand from the firm. This interventionist approach is entirely consistent with our heightened supervision and is designed to challenge and encourage a strong and vibrant building society sector for the future.

NH:

“Building societies will still be free to innovate and diversify, but not beyond the limits of their risk management skills.”

NH:

Today’s consultation paper forms part of the FSA’s intensive supervisory regime for building societies, where supervisors are judging the sustainability of business models and assessing senior management skills.
Building societies have statutory freedoms to diversify and innovate, but recent experience has shown some building societies diversified without having the requisite skills and systems to manage the risks.
The guidance outlined today would not limit those freedoms to diversify, but would clearly set out the skills and controls buildings societies need to have to manage more complex business models.
The consultation will close on 5 September 2009.

NH:

and here’s a link to the consultation paper

NH:

http://www.fsa.gov.uk/pages/Library/Policy/CP/2009/09_17.shtml

NH:

now, I wonder if the West Brom BS will pass?

NH:

which brings us back to that Sunday Times story

NH:

which West Brom trashed

NH:

but now looks

NH:

sort of true

PM:

indeed

NH:

here’s the Sunday Times story from Mau

NH:

A RESCUE operation to save one of Britain’s biggest building societies is under way in the first of a new series of expected bailouts in the sector.

West Bromwich building society, which celebrated its 160th anniversary this year, has a loan book worth almost £10 billion. It is being secretly offered to potential white-knight bidders by the Financial Services Authority (FSA), the City regulator.

Coventry and Yorkshire building societies are both in talks with the regulator on a possible takeover of their struggling rival. If no deal can be agreed the worst parts of its loan book are likely to be nationalised, with its 47 branches and 530,000 customers passed to another society. The move follows stringent new stress tests being imposed on the sector by the FSA.

An early draft of West Brom’s full-year results that has been passed to the FSA revealed it made sizeable losses last year due to bad debts on commercial property.

11:31AM

NH:

a little bit of breaking 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.

NH:

Rumours Saad selling BKG talk doing the rounds again..stock getting hit

NH:

and they sure are

NH:

down 57.5p at 822.5p

NH:

a bit of volume for this story soon

PM:

Anymore traction to that story that Saad was selling HSBC?

NH:

it was denied

NH:

for now

NH:

but as no one has any clue as to what is going on at Saad

NH:

one has to be alert

PM:

HSBC off a tad, btw

PM:

trading down 4p at 527

11:33AM

NH:

Right

NH:

Dan Thomas out property correspondent

NH:

has just sent something interesting through on Liberty Internation

NH:

which had a huge spike in yesterday’s closing auction

NH:

concerns one of its shareholders – Simon nGroup

NH:

from an investor forum

PM:

Think all the big props have been cheered by this news that Oman is taking 75% of Bishops Square from Hammerson

PM:

Development near liverpool st

NH:

Rich Moore – RBC Capital Markets – Analyst

What are your intentions on Liberty International?

NH:

David Simon – Simon Property Group – Chairman & CEO

Well, you know, we are the second largest owner. That should be treated seriously. And we are going to evaluate ultimately how to create as much value at that company that we would like to see created. So at this point, we are going to just monitor the situation, but we are a 6.2% owner and we want to see obviously improvement in that company over a period of time.

NH:

The UK is going through obviously a tough economic environment. The mood there is not — I hate this phrase greet shoots, but — I think it’s brown shoots over there, if there is such a thing. And the mood here is better. The mood there is still a little depressed. It’s part of — probably part of the nature of the country historically.

But look, we like the company. We like the properties, you know, and at this point we will just continue to monitor what goes on there.

NH:

sounds like a warning

NH:

not surprised they moved yesterday

NH:

(yes Poppy he is in the States, either NY or Florida)

11:37AM

PM:

While on “raw” — any more?

NH:

yes I have somoe

NH:

but first a quick update on Heritage Oil

NH:

there’s a new name in the frame, according to Reuters at least

PM:

yeah, saw that stuff in the LR

PM:

Turkish company

NH:

that’s right

NH:

By Tom Bergin and Thomas Grove LONDON/ISTANBUL, June 4 (Reuters) – Unlisted Turkish Energy company Genel Enerji is the unnamed party in merger talks with British oil explorer Heritage Oil, sources close to the situation said on Thursday.
Heritage, which has a market capitalisation of around $2.5 billion, said on Wednesday it was in merger talks with an unnamed party, and its shares were suspended. The company has two main assets – stakes in oil blocks in Uganda and Iraq’s semi-autonomous Kurdistan region where discoveries, potentially containing billions of barrels of oil, have been made.

NH:

The tie-up talks with Genel Enerji, which is part of the Cukurova Group, one of Turkey’s largest industrial conglomerates, are centered on Heritage’s Miran field in Kurdistan, the sources said. ‘Iraq is the focus,’ one source said.
Rather than buy out Heritage shareholders, Genel would contribute assets to the enlarged entity, one of the sources, who spoke on condition of anonymity, said. The talks could prompt a bidding battle for Heritage but industry sources said there was a limited field of potential acquirers.

NH:

and here is a little backgrounder from a friendly analyst

NH:

Commercial conglomerates with numerous investments ranging from automotive, telecommunications, media, textiles, energy, transportation and information technology services. Further information about Genel Enerji is available at www.genel-enerji.com or at www.cukurovaholding.com.tr.

NH:

Genel (55%) are partners with Addax (45%) in the Taq Taq field in Kurdistan, adjacent to Heritage’s block and Genel was assigned a 25% stake in DNO’s Tawke field by the KRG (Kurdish Regional Government) at the end of 2007.

NH:

The Genel rumour is quite plausible given its presence in Kurdistan and closeness to the KRG but its holdings in the licences with Addax and DNO were arranged without reverse takeovers being involved. Furthermore, Genel would inherit the Uganda operations of Heritage which would be a new operating environment for them, although they already work outside Turkey/Kurdistan through their interests in Colombia.

11:40AM

PM:

thanks for that

NH:

back to the RAW

NH:

Lamprell

NH:

some very educated buying this morning

NH:

and I think they are buying for yield, if you catch my drift

PM:

NH:

not buying for yield, should have said

PM:

A bid?

NH:

that’s the word in the market

PM:

what’s Lamprell?

NH:

oil field services company, based in Dubai

NH:

controlled by Steve Lamprell, the founder

NH:

he owns 33% of the company

NH:

so any deal would need his blessing

PM:

Shares up just 2p at 127.25

NH:

yeah, but there is a sizeable seller in the market apparently

PM:

how good to do we think this is?

NH:

well, OK

NH:

but look, there has been a lot of activity in the sector recently

PM:

Bandit?

NH:

Heritage Oil

PM:

okay — fair enough

NH:

Dragon Oil last night

NH:

deals just can’t be ruled out right now

NH:

as this note which came out of Caz this morning highlights

NH:

E & P sector consolidation – a game of skittles – Sector OVERWEIGHTYesterday, Dragon Oil [DGO LN 403p NR] announced that it had received a preliminary approach that may lead to a possible offer for the company. This follows an announcement from Heritage Oil the day before regarding a possible reverse take-over [HOIL LN 585p OUTPERFORM]. That followed the off-market tender and bid by Gazpromneft for Sibir Energy [SBE LN 500p, OUTPERFORM].

NH:

Beyond the UK E & P space, we note that PetroChina has also just launched a bid for a mini-integrated name in Asia, Singapore Petroleum [SPC SP S$6.11 NR] and this followed the take-over of Verenex [VNX CN C9.01 NR] by the Libyan government that stymied a recommended all cash bid by CNPC of China. In our view, opportunistic buyers are moving ahead of an end to a double bear market in equities and commodities (oil price). In our piece ‘E & P Sector – who goes next’ (2 December 2008), we argued for further consolidation, warning investors not to sell out that risked missing out on some high-impact M & A action. That coupled to our bullish oil price outlook supported our OVERWEIGHT sector stance.

NH:

yes

NH:

Lamprell has an outside shot at the FTSE 250

NH:

along with Punch Taverns

NH:

and Yell of all things

NH:

reshuffle announced next week

NH:

possible promotions to the FTSE 100

NH:

Wolseley

NH:

and the LSE

PM:

sure

11:45AM

PM:

We shoudl do a currency update

PM:

Sterling still weak

PM:

Cable stands at 1.6082

PM:

at 0.881 agaisnt the euro

NH:

really has winged around this week, hasn’t it

NH:

up to $1.66

NH:

bac down to $1.60

PM:

yep — hihg of 1.666

PM:

high, even

NH:

seen this

NH:

http://isgordonbrownstillprimeminister.com/

NH:

just been mailed through

11:48AM

NH:

Here’s one thing I had forgotten about

NH:

the new FSA disclosure rules on CFDs

PM:

oh yea

NH:

came into force this week

NH:

and we are starting to get a real picture of company share registers

NH:

have a look at this

NH:

in Songbird Estates

NH:

the vehicle that owns Canary Wharf

PM:

go on — do share

NH:

Following the implementation of the new Disclosure and Transparency Rules
requirements for the disclosure of Contracts for Difference, on 3 June 2009 the
Company received the following notifications:

1. That as at 01 June 2009, Citadel Europe LLP had an interest via Contracts
for Difference in 30,940,584 Class B Shares in the Company, representing a
nominal value of 16.03% in the B Share voting rights in issue. The notification
confirmed that Citadel Europe LLP acts as sub-investment advisor to Citadel
Advisors LLC. Citadel Advisors LLC is the investment manager of various funds
which own the instruments subject to disclosure.

NH:

Following the implementation of the new Disclosure and Transparency Rules
requirements for the disclosure of Contracts for Difference, on 3 June 2009 the
Company received the following notifications:

NH:

might be worth spending an hour or two going through these disclosures this afternoon

NH:

bound to throw up something interesteding

PM:

think you’re right

NH:

Mike Ashley

NH:

those sort of folk could show up

11:51AM

NH:

Has the Shrewdette been in touch

NH:

Oaks today

NH:

Derby tomorrow

NH:

at Epsom

PM:

Just this minute actually

NH:

she must have some tips

NH:

how lucky was that

NH:

just as we speak

NH:

she mails

NH:

and people say we script this!

PM:

Today 16:05 The Oaks: Perfect Truth 9/1 enen tho fav Sariska looks
hard to beat.

PM:

Tomorrow 15:45 The Derby: Sea The Stars fav 11/4 should win but I’ll
couple him with Black Bear Island who I’ve got on his own at 17/2 just
in case he surprises.

NH:

hmmm

NH:

don’t know much about flat facing

PM:

Shrewdette does — more than jumps

PM:

her father was a trainer

NH:

well bred then

PM:

yeah, but in calcutta

11:53AM

NH:

Right, Zoomy

NH:

sorry we are slow on the uptake

NH:

we received your latest piece of art

NH:

a cardboard cut out of a pint of Guinness

PM:

Thanks for that Z

PM:

Ah — neil has jsut discovered that there’s something in it

PM:

ltos of things in it

PM:

what are they Neil?

NH:

invites

NH:

to the Namarama

NH:

one for me

NH:

one for you

NH:

and five other passes

PM:

I can’t make it

PM:

But I’m sure that the NAMARAMA drinks in Dublin will be great

PM:

June 26??

PM:

One to attend if you can

NH:

and Paul is a VIP too

NH:

just looked on the back

NH:

so much detail

11:57AM

NH:

right a few things to finish up on

NH:

non farm payrolls at 1.30pm

NH:

here’s what Deutsche Bank are going for

NH:

It does seem to us that the market is set up for a fairly dull employment report
today which ironically could easily make for more volatility if we see much
deviation away from the -520k expectations. The tension is perhaps not as high as
we thought it would be as we go into today’s report mostly because ADP was
only 7k away from expectations on Wednesday and Initial Jobless Claims were
only 1k away from expectations yesterday. We can’t recall a time when ADP and
jobless claims were so near consensus in Payrolls week.

NH:

Having said all this, continuing claims did fall more than expected yesterday and
indeed fell for the first time this year. This did seem to help push 10 year Treasury
yields 17bps higher. Notwithstanding this we still think the market is expecting a
broadly consensus number today which actually means we should pay more
attention than normal (if that’s possible!).

NH:

that was from the Early Morning Reid

NH:

(thanks Zoomy, I feel much happier. No zapping from me this afternoon!)

NH:

and here’s a little something for small cap corner

PM:

ah, small cap corner

PM:

What have you got?

NH:

Eros

NH:

Aim-listed Bollywood film maker

NH:

been in dispute with some of the big cinema chains in India

NH:

but I am hearing that has been settled

NH:

and Eros films will be on show again

NH:

shares up 5% to 103p

PM:

(DebbieDowner — firstname dot lastname At ft dot com)

NH:

her’s some comment from Evo

NH:

EVO TAKE – The stand-off between the Bollywood producers and Indian multiplex owners appears to have been resolved ending a four month period of uncertainty.
DETAILS – While not confirmed by any official announcement, it would appear that the main producers and multiplex owners have reached a consensus on the share of gross box office receipts. According to The Economic Times an agreement was struck late yesterday. Producers/distributors will receive 50% of the first weeks’ box office, and 42%, 35% and 30% for weeks two, three and four. A small uplift will be provided for blockbusters. This will benefit the likes of Eros, which tend to release larger budget movies. Historically Eros has refrained from providing details of its share of box office (in all territories) for commercial reasons. But the terms are similar to those seen in the West.
VALUATION AND RECOMMENDATION – The shares have started to recover from the March profit warning. However, the rating still provides good upside.

NH:

oh, and they did something on Dragon Oil

NH:

EVO TAKE – Fed up with the stock market’s reluctance to value the shares fully, The Emirate National Oil Company (ENOC) has launched a bid for the 48% of the company it does not own. Dragon’s management has previously said it would pay $10/barrel for acquisitions which would suggest it is looking for at least 450p/share.
DETAILS – ENOC has this morning come out and said that it has made a preliminary approach for Dragon at an offer price that would represent a “modest premium” to the closing price on 3rd June (338p). ENOC’s majority holding makes a counter-bid almost impossible.
VALUATION AND RECOMMENDATION – Updating our model for Q1 results, our core NAV is now 461p, (of which 87p is the cash on the b/s less abandonment costs). This is the equivalent to $10.4/barrel which compares to the $9.5/barrel Dana paid for Bow Valley and the $8.4/barrel Premier paid for Oilexco (both of which were pre the benefits of tax losses). Dragon has little in the way of exploration upside and our core plus risked EMV value is just 5p higher at 466p.

PM:

thanks for that Neil

12:00PM

NH:

I think we are done

NH:

Paul is very tired

NH:

been up since 5.00am

PM:

Dont mean to be

PM:

Just too much stuff to sort out

PM:

Complicated stuff

PM:

time consuming stuff

PM:

irritating stuff

PM:

Anyway — let’s try and adopt a better mood this afternoon

PM:

We’ve been far too badtempered with the readers

NH:

some of the readers are the ones that are being bad tempered

PM:

yeah, i know — be we have to be patient

PM:

customer always right, etc

PM:

here’s a site to check occasionally

PM:

http://isgordonbrownstillprimeminister.com/

PM:

And we are done

PM:

Thanks for the vast majority of the comments today

NH:

cya

PM:

Neil will be back on Monday

PM:

at 11am

NH:

oh year and on my own

NH:

why is that I wonder?

PM:

with bryce

NH:

no NY for me

PM:

No — sorry — not my fault

PM:

Seeya

This entry was posted by Paul Murphy on Friday, June 5th, 2009 at 11:02 and is filed under Uncategorised. Edit this entry.

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Markets live transcript 5 Jun 2009

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