Markets live chat transcript for the chat ending at 11:44 on 7 Aug 2009. Participants in this chat were: Paul Murphy (PM) Bryce Elder (BE)
PM:
Hi
11:02AM
PM:
Welcome to Market Live
PM:
At FT Alphaville
PM:
that record of starting on time didnt last long
PM:
Bryce will be with me in a mo
PM:
but he’s just having to reboot his computer
PM:
So he should only be ten minutes or so
PM:
First thing to note this morning – this will be a truncated session
PM:
For various reasons that are too boring to share.
PM:
But session will be closed at 11.40 at the latest
PM:
Sorry bout that
PM:
Tears for Tier 1 seems a tad upset with our cricket coverage
PM:
TFT1 — do write to the editor
PM:
dunno who wrote the leader
PM:
Dont think Mr Lionel has had time to make it to the cricket
PM:
Tho he is v v keen on the game
BE:
Hello
PM:
ah, help me celebrate this down day.
PM:
Is the great bull market over?
BE:
Dunno.
BE:
Think it was Abbey Cohen that did it in – late yesterday on CNBC.
PM:
Was reading about that, but I can’t get the sound to work.
BE:
Try this link
BE:
That’s Abbey Cohen – famous Goldman strategist now departed
BE:
And the brilliant David Rosenberg
PM:
BUL MARKET OR BS?
PM:
Asks cnbc in its usual low key way.
BE:
Cohen said the S&P 500 was headed to 1100 by the end of the year – up another 10 per cent.
BE:
Rosenberg matches that with
BE:
I’m seeing an S&P 500 that has priced in 30% profit growth next year.
We were priced for Armageddon and now we’re priced for nirvana but the
truth is probably somewhere in between.”
We were priced for Armageddon and now we’re priced for nirvana but the
truth is probably somewhere in between.”
PM:
Obviously, big pull back in London this morning
PM:
Footsie down…
PM:
52 at 4638 currently
PM:
Resident bears can rest easy for a mo
BE:
Actually on the strategy front , I’m sure we can out Cohen Cohen
PM:
ah yes
PM:
How bout this
PM:
This’ll bear Monkey’s paws
PM:
Gary Baker – Merrill lynch
PM:
33% upside
BE:
BE:
Actually this is to the DJ Stoxx 600 index
PM:
That’s a wide European index
PM:
Something we wouldn’t usually focus on
BE:
What, cos it has DJ in the title??
PM:
No – cos they cant spell stocks
PM:
Dinner jacket stocks 600 index
BE:
But hang on – 33% — ???
BE:
By when??
PM:
End of 2010
PM:
SXXP target 300 = 33% upside
We are confirming our medium term target for the SXXP of 300 by end-2010. This
rests on a belief that the worst of the economic recession is behind us and despite
an initial lag European recovery building momentum through 2010, pulled along
by strong improvement in the wider global economy and a continuing deluge of
global liquidity. This provides economic and corporate earnings catalysts to allow
markets to take advantage off still undemanding valuation levels.
We are confirming our medium term target for the SXXP of 300 by end-2010. This
rests on a belief that the worst of the economic recession is behind us and despite
an initial lag European recovery building momentum through 2010, pulled along
by strong improvement in the wider global economy and a continuing deluge of
global liquidity. This provides economic and corporate earnings catalysts to allow
markets to take advantage off still undemanding valuation levels.
PM:
Modest EPS recovery sufficient to get us there
The average 2-year EPS recovery following the last 4 recessions has been 70%.
In the current cycle, we factor in only modest EPS recovery of 30% over the next
2 years from an expected earnings cycle low in Q3/Q4 (after a 45% peak to
trough fall). This gives €23 of SXXP earnings by 2011. A forward PE of 13x
(slightly below long term average) provides an index target of 300 for end-2010.
The average 2-year EPS recovery following the last 4 recessions has been 70%.
In the current cycle, we factor in only modest EPS recovery of 30% over the next
2 years from an expected earnings cycle low in Q3/Q4 (after a 45% peak to
trough fall). This gives €23 of SXXP earnings by 2011. A forward PE of 13x
(slightly below long term average) provides an index target of 300 for end-2010.
PM:
Risks are to the upside for the next 6 months
We are comfortable with modest mid-term recovery estimates, but there are
growing risks that the initial recovery could be far more potent than current
forecasts, boosted by global inventory re-stock. Although Europe lacks quality
aggregated inventory statistics, it was clear in Q2 earnings reports that a deep destocking
cycle has washed through a number of industries. Given stretched
relationships between global PMI/ inventory/ IP measures, an argument can be
made for a very sharp recovery in industrial production into year end. Adding to
this picture is recovery in industrial pricing power, which bodes well for corporate
profits and has provided a lead indicator for European (and Japanese)
outperformance against US.
We are comfortable with modest mid-term recovery estimates, but there are
growing risks that the initial recovery could be far more potent than current
forecasts, boosted by global inventory re-stock. Although Europe lacks quality
aggregated inventory statistics, it was clear in Q2 earnings reports that a deep destocking
cycle has washed through a number of industries. Given stretched
relationships between global PMI/ inventory/ IP measures, an argument can be
made for a very sharp recovery in industrial production into year end. Adding to
this picture is recovery in industrial pricing power, which bodes well for corporate
profits and has provided a lead indicator for European (and Japanese)
outperformance against US.
PM:
What can de-rail recovery? Downside risks include 5C’s
Investors seem determined to apply high weightings to risk factors in constructing
what-can-go-wrong scenarios. This is bullish for equities as they continue to
successfully scale this wall of worry. But where are the real risks for derailment?
For us they are focused on five C’s: China, US consumer, Central banks,
currencies and commodities. These five factors will likely determine whether the
bond market continues to behave supportively in the face of building inflationary
concern, as well as the strength and durability of final demand which will dictate
the pace at which corporates feel able to start investing and hiring.
Investors seem determined to apply high weightings to risk factors in constructing
what-can-go-wrong scenarios. This is bullish for equities as they continue to
successfully scale this wall of worry. But where are the real risks for derailment?
For us they are focused on five C’s: China, US consumer, Central banks,
currencies and commodities. These five factors will likely determine whether the
bond market continues to behave supportively in the face of building inflationary
concern, as well as the strength and durability of final demand which will dictate
the pace at which corporates feel able to start investing and hiring.
BE:
Okay, so his downside risks include China, US consumer, Central banks,
currencies and commodities.
currencies and commodities.
BE:
Those are substantial escape chutes.
BE:
Like say, things should be just fine so long as nothing goes wrong.
PM:
PM:
Indeed,
PM:
Some funny V-charts in that note – will try and share a bit more later
11:11AM
PM:
QE being discussed by the Rabble
PM:
thoughts Bryce?
BE:
Personally, not many
BE:
But it’s worth highlighting these points in a Bond Vigilantes post
BE:
Not everyone’s been anticipating the end of QE, and among the people who deserve a hat tip is UBS’ Roger Brown, who showed us the chart below on Tuesday. He pointed out that the Bank of England’s main aim has been to increase M4 money supply. When the BOE initially got permission to begin QE, M4 money supply stood at £2trillion. The BoE is targeting money supply growth of 7.5%, and that’s why the BOE originally sought permission to buy £150bn of assets. However, M4 money supply has in fact been dropping rapidly in the past few months, and was negative in June. On this measure, therefore, QE has been a failure, and Roger Brown therefore argued that more QE is likely (although he stressed that this didn’t make him a long term bull for gilts – QE extension would just delay the enormous gilt market puke that is surely going to happen at some point). Why hasn’t QE worked? There’s a bit of a clue in Lloyds’ recent results – end December 2008, it had £7.5bn of ‘cash and balances at central banks’, and by the end of June 2009 it had over £60bn.
BE:
In fairness to the BoE, though, everything they said in the release above is entirely true. The UK and global economy remains in a very fragile state. The BoE is walking a tightrope – do too much QE and the result will be growth in the short to medium term, but accompanied with runaway inflation, which will be very bad for longer term growth as rates are hiked and government bond yields soar. Do too little QE, or implement the exit strategy too soon, and the result would be an acceleration of the downturn and further pressure on the vulnerable banking sector.
BE:
The noises coming from MPC members in recent weeks have been occasionally confusing, but maybe the title of this blog is a little harsh. But better to be the Grand Old Duke of York than the Pied Piper, or we’re all in trouble.
PM:
enormous gilt market puke? Lovely
BE:
Good blog.
PM:
sure
11:14AM
BE:
(Arsenal should walk that. Celtic look woeful this season.)
PM:
We cant stay away from….
PM:
Pearson
Pearson plc is the parent company of the Financial Times, publisher of FT Alphaville.
BE:
Shares in Pearson SURGED as HIGH AS 722p earlier.
BE:
Currently up 11p at 715p.
PM:
Seems to be on the back of a downgrade by ING – cut their rating from buy to hold.
PM:
And the shares are up 1.5 per cent.
BE:
The Barings contrary indicator
PM:
Actually, there’s a slew of upgrades – all come out following the interim figures, which rather caught everyone on the hop.
BE:
So this doesn’t fall in to some Dash for Trash categegory.
PM:
Er, no.
BE:
Increased appetite for junk stocks
PM:
Er, no
BE:
News that Penguin is going to publish Vladimir Nabokov’s final novel, the Original of Laura??
PM:
Not that either
PM:
Just solid institutional buying, I believe.
BE:
Great.
BE:
Let’s move on.
11:17AM
PM:
Okay – RBS time
PM:
We were rather amazed on here yesterday to see RBS stock trading well above 50p.
BE:
The government was in the money, albeit briefly.
PM:
Well, the taxpayer is back on the hook this morning
PM:
Interim figure have really rattled people.
PM:
Impairments have gone up!!
BE:
Shock.
BE:
But what we’ve got for you now is a little treat.
BE:
RBS on RBS
PM:
Fred Goodwin would never have allowed that
BE:
Well, these are the RBS analysis snaps on RBS
BE:
But they don’t rate themselves.
PM:
What, they think they are rubbish?
BE:
No they don’t rate as in buy/sell/hold
BE:
But still rather critical
PM:
Share
BE:
RBS (not rated)
1H09 results headlines: a) confusing due to new divisional structure with core / non core bank b) sharp reduction in sequential “core bank” pre impairment profit and operating profit Q2 on Q1 : ex own debt gains, from £4.8bn to £3.6bn ; all PiP decline from GBM (capital markets) , £3.2bn to £1.7bn; core ex GBM PiP up slightly QoQ from higher revenues & lower costs, from £1.6 to £1.9bn
BE:
c) bad debt trend deteriorated Q2 on Q1, though primarily non core : core impairments Q2 up only slightly (£1.1 to £1.2bn) d) Guidance is for elevated bad debts over next couple of years (retail deterioration; corporate steady); combined with further margin pressure group likely to be loss making until FY11F, though core bank should be profitable. This is notably different to peers.
BE:
e) tangible book = 58p (pre APS dilution; 55p fully diluted) f) Explicit that APS vital; cautious on progress, requiring both UK Government & EU approval. Delivery unlikely until Autumn; terms & conditions could change, for asset coverage & price and perhaps market share in UK business banking g) Core bank divisional targets for FY13F imply >15% group RoE with >8% core tier 1 ratio
BE:
Detail:
Headline group operating PBT is a £3.3bn loss, implying a £3.5bn loss Q2 (Q1 was +£0.2bn); pre-impairment profit declined from £3.0bn Q1 to £1.1bn Q2. For “core” bank, pre-impairment profit declined from £5.8bn Q1 to £2.6bn Q2 but heavily influenced by shifts in own debt gains: “clean” core bank PiP fell from £4.8bn Q1 to £3.6bn Q2. All of the sequential slowdown was in GBM (capital markets), where Q2 revenues (ex own debt) were £2.9bn vs £4.8bn Q1. Rates, FX and porfolio mgt were big swing factors. Guidance is for further slowdown to come due to market conditions and key personnel departures. GBM cost income ratio is 35%, but will rise H209. Core bank ex GBM showed slightly QoQ PiP improvement from higher revenues & lower costs. Biggest positive surprise = v strong core UK franchise deposit growth, due to internal focus on funding profiles.
Headline group operating PBT is a £3.3bn loss, implying a £3.5bn loss Q2 (Q1 was +£0.2bn); pre-impairment profit declined from £3.0bn Q1 to £1.1bn Q2. For “core” bank, pre-impairment profit declined from £5.8bn Q1 to £2.6bn Q2 but heavily influenced by shifts in own debt gains: “clean” core bank PiP fell from £4.8bn Q1 to £3.6bn Q2. All of the sequential slowdown was in GBM (capital markets), where Q2 revenues (ex own debt) were £2.9bn vs £4.8bn Q1. Rates, FX and porfolio mgt were big swing factors. Guidance is for further slowdown to come due to market conditions and key personnel departures. GBM cost income ratio is 35%, but will rise H209. Core bank ex GBM showed slightly QoQ PiP improvement from higher revenues & lower costs. Biggest positive surprise = v strong core UK franchise deposit growth, due to internal focus on funding profiles.
BE:
Actually, getting loads of stuff thru on RBS now – just haven’t had time to read properly.
PM:
Slapped it up
BE:
Okay – this is UBS
BE:
RBS H1 underlying loss of £3.4bn versus UBS expectation of £2.5bn
Before the gain of £3.8bn on repurchased debt, RBS generated a loss before tax of
some £3.4bn. The group has reorganised itself into core and non-core divisions
with the former generating a profit of £6.2bn with the latter realising a loss of
£9.7bn. GBM was the main driver of both, generating £4.9bn of PBT within the
core division but also negative revenues of £4.2bn and a significant share of total
impairment charges of £5.3bn in non-core.
Disclosure excellent and clear targets too
RBS has provided comprehensive disclosure on core and non-core divisions both
in terms of income and key exposures. There is significant overlap between the
non-core division and the APS assets with the company indicating that 40% of
non-core assets and 56% of non-core risk assets will be covered by the APS.
Targets have been provided back towards profitability and normalised earnings
which are framed in terms of 2013 delivery.
Before the gain of £3.8bn on repurchased debt, RBS generated a loss before tax of
some £3.4bn. The group has reorganised itself into core and non-core divisions
with the former generating a profit of £6.2bn with the latter realising a loss of
£9.7bn. GBM was the main driver of both, generating £4.9bn of PBT within the
core division but also negative revenues of £4.2bn and a significant share of total
impairment charges of £5.3bn in non-core.
Disclosure excellent and clear targets too
RBS has provided comprehensive disclosure on core and non-core divisions both
in terms of income and key exposures. There is significant overlap between the
non-core division and the APS assets with the company indicating that 40% of
non-core assets and 56% of non-core risk assets will be covered by the APS.
Targets have been provided back towards profitability and normalised earnings
which are framed in terms of 2013 delivery.
BE:
Margins and credit challenges
Margins declined to 1.65% in Q2 from 1.78% in Q1 and 2.07% for 2008. We
expect the rate of attrition to decline from here. Overall impairment charges were
£7.5bn of which c.70% relate to charges in respect of assets in the APS.
Valuation
We will review our estimates and price target following the analyst meeting later
today but would not be surprised to see the stock to retrench after its recent run.
We see trough tangible book value at 43p by end 2011. Our 40p price target is this
trough value discounted back a year.
Margins declined to 1.65% in Q2 from 1.78% in Q1 and 2.07% for 2008. We
expect the rate of attrition to decline from here. Overall impairment charges were
£7.5bn of which c.70% relate to charges in respect of assets in the APS.
Valuation
We will review our estimates and price target following the analyst meeting later
today but would not be surprised to see the stock to retrench after its recent run.
We see trough tangible book value at 43p by end 2011. Our 40p price target is this
trough value discounted back a year.
BE:
That’s John-Paul Crutchley
BE:
And here’s Sandy
PM:
Ah, Chen from Panmure
PM:
We were thinking he looked a bit offside yesterday with his extremely bearish stance on Lloyds
PM:
Looks decidedly less clownish today
BE:
H1 2009 results initial comment
Overall, results look in-line with our expectations. The quarter-on-quarter
weakening in performance does concern us, though.
Overall, results look in-line with our expectations. The quarter-on-quarter
weakening in performance does concern us, though.
H1 2009 statutory attributable loss was £1.0bn, we had forecast a £354m loss so there or
thereabouts given the large moving parts. Group income growth of 27% (to £18bn) was
combined with restrained cost growth of 4%, but impairment charges were up 5x to
£7.5bn, driving a Group operating loss of £3.4bn. A group pre-tax profit of £15m was
reported largely because of £3.8bn in debt swap gains.
BE:
Operating profit in the Core businesses was £6.3bn, up 33% YOY; 25% income growth
combined with restrained 7% cost growth enabled the core businesses to absorb a 3x
increase in impairment charges (from £670m to £2.2bn). H1 2009 benefited particularly
from strength in Global Banking and Markets, but GBM income fell from £5.4bn in Q1
2009 to £2.4bn in Q2 2009 and operating profit in GBM fell from £3.7bn in Q1 2009 to
£1.2bn in Q2 2009, supporting management’s expectation that H2 2009 GBM
contribution will be substantially less than in H1 2009.
combined with restrained 7% cost growth enabled the core businesses to absorb a 3x
increase in impairment charges (from £670m to £2.2bn). H1 2009 benefited particularly
from strength in Global Banking and Markets, but GBM income fell from £5.4bn in Q1
2009 to £2.4bn in Q2 2009 and operating profit in GBM fell from £3.7bn in Q1 2009 to
£1.2bn in Q2 2009, supporting management’s expectation that H2 2009 GBM
contribution will be substantially less than in H1 2009.
Overall, the quarter-on-quarter progression is concerning; in the Core business,
operating profit fell from £4.8bn in Q1 2009 to £1.5bn in Q2 2009; besides the
weakening in GBM income, the main driver was impairments, which were up 63% from
£2.3bn in Q1 2009 to £4.7bn in Q2 2009. Loan impairment charges as a percentage of
gross loans more than doubled quarter-on-quarter, from 1.34% in Q1 2009 to 2.98% in
Q2 2009. A quick glance at impairment trends across the Group gives little indication
that impairments will subside; this is worth contrasting with LLOY’s statements earlier
this week.
BE:
Overall, these results look in-line with our expectations. Management is doing the right
thing in undertaking a radical restructuring of the Group, but it is burdened with a
balance sheet built up under very different macro conditions. Participation in the
government APS may still help address these balance sheet legacies, but it seems a finely
balanced decision.
thing in undertaking a radical restructuring of the Group, but it is burdened with a
balance sheet built up under very different macro conditions. Participation in the
government APS may still help address these balance sheet legacies, but it seems a finely
balanced decision.
BE:
And, while we’re doing CTRL-C CTRL-V, here’s JPMorgan
BE:
Carla Antunes da Silva
BE:
“underweight”
BE:
Reported NAV per share 58p. We estimate a NAV per share of 55p
including the £6.5bn of APS fee and £19bn of additional B share capital.
Our 2009 YE NAV drops further to 43p.
including the £6.5bn of APS fee and £19bn of additional B share capital.
Our 2009 YE NAV drops further to 43p.
BE:
More importantly, RBS is losing £9-11bn of deferred tax assets –
Currently it has £5bn on balance sheet so it loses that and is going to
build a new £4-6bn asset over the next 3 years which would imply
between £14-21bn cumulative losses over the period. This compares to
our cumulative loss assumption of -£20.4bn, so this is in line with our
estimates.
Currently it has £5bn on balance sheet so it loses that and is going to
build a new £4-6bn asset over the next 3 years which would imply
between £14-21bn cumulative losses over the period. This compares to
our cumulative loss assumption of -£20.4bn, so this is in line with our
estimates.
BE:
RBS presented clear targets, with a sobering outlook statement,
highlighting that results may not substantially improve until 2011 and
full recovery will take time. It is targeting a sustainable RoE 15% by
2013, CI ratio <45% compared to 59% H1. Note it is also targeting a
LDR of 100% compared to 156% last year, highlighting the further deleverage
necessary.
highlighting that results may not substantially improve until 2011 and
full recovery will take time. It is targeting a sustainable RoE 15% by
2013, CI ratio <45% compared to 59% H1. Note it is also targeting a
LDR of 100% compared to 156% last year, highlighting the further deleverage
necessary.
BE:
The message on the APS is that despite the difficulties management still
expect to see this completed in the Autumn. More importantly, they
highlight that without the APS they would face significant capital and
funding constraints.
In sum, a sober set of results, reminding us that the return to
profitability will be a slow process. Whilst ‘clean’ results appear to
beat expectations, the net attributable losses continue to lead to
significant NAV erosion. We remain UW.
expect to see this completed in the Autumn. More importantly, they
highlight that without the APS they would face significant capital and
funding constraints.
In sum, a sober set of results, reminding us that the return to
profitability will be a slow process. Whilst ‘clean’ results appear to
beat expectations, the net attributable losses continue to lead to
significant NAV erosion. We remain UW.
PM:
cheers for all that
PM:
have we printed an RBS price?
BE:
Nope – it’s down 6.7p at 46.8p.
BE:
Off a low of 44.5p
BE:
And Lloyds, while we’re here, is off 6.9p at 97.8p.
BE:
Even though, apparently, they’re going to recover 18 months ahead of RBS
BE:
According to management.
BE:
Still can’t quite get my head around how that will work.
PM:
sure
11:24AM
PM:
Right — was trying to find something for Fitz on China
PM:
but cant immediately
PM:
Was ready some stuff on China Construction bank — but cant find the link
PM:
Promising to cut back on lending during the second half
PM:
All command recovery stuff
BE:
Murph hunting Bloglines at the moment.
PM:
Ah, try this
PM:
Courtsey of Alea
PM:
Ouch — maybe not
PM:
Abstract:
China’s emergence as a major player in world trade is well known, but its rising role in global finance is perhaps underappreciated. China is the second largest creditor in the world today, with a net creditor position of exceeding 30% of GDP in 2007. In this paper, we test the importance of growth differential, demographics, government debt, financial depth and the exchange rate in shaping China’s net foreign asset position. Our findings highlight the sharp fall in youth dependency as one key driver behind China’s puzzlingly large net lender position and also confirm the neoclassical prediction that faster growth attracts more capital inflows. Looking ahead, our findings also suggest that China is unlikely to turn into a meaningful net debtor nation over the next two decades. Moreover, we project that, as China engages in increased cross-border asset trade, its gross foreign assets and liabilities could triple in 10 years. While adjustments in China’s net foreign asset position are expected to be gradual and may thus facilitate its capital account opening, increasing exposure to external shocks and growing interactions with the rest of the world may present challenges both to China and to the global financial system.
PM:
Let’s mvoe on
11:27AM
PM:
Where now?
BE:
Broker Wars.
BE:
Namely, Numis say Brewin Dolphin’s been fiddling its profits.
PM:
Steady on. 
BE:
Ok. To clarify, I don’t mean “fiddle” in the sense that they’re doing anything dodgy
BE:
But …
BE:
Well, here’s the note.
BE:
In our view, Brewin Dolphin’s accounting policies over-state income and the
balance sheet value of some assets. We believe the last year’s earnings would have been 28-110% lower had the company followed the accounting policy of its peers.
balance sheet value of some assets. We believe the last year’s earnings would have been 28-110% lower had the company followed the accounting policy of its peers.
BE:
We also believe the net tangible asset value may currently be c.10% over-stated as a result of another accounting policy. Finally, we believe regulatory capital requirements are likely to rise, wiping out a material amount of the surplus capital.
PM:
Goodness me
PM:
That’s aggressive.
BE:
Isn’t it?
BE:
The gist is that they’re booking staff costs as goodwill.
BE:
Actually, it’s a well-written note so I’ll just let the analysts explain it themselves.
BE:
The policy of capitalizing rather than expensing incentive payments made to new joiners is in itself a fairly aggressive policy in our view. However, the company choose to recognise this capitalized item as goodwill, hence no amortization is ever charged, thus the real cost of acquiring new staff is almost never recognised in the P&L. Peers in the industry follow much less aggressive policies.
BE:
The company has in effect recognised £93m of such costs which have never been through the income statement and are unlikely under the current policy to ever do so. We calculate that the 2008A earnings would have been c.28% lower if the company had adopted an accounting policy similar to Rathbones and up to 110% lower (i.e. loss making) if the company had adopted a policy similar to Rensburg Sheppards.
BE:
This would mean the trailing P/E would go from c.12x as reported, to 16.7x under the Rathbones policy to -115x under Rensburg Sheppard’s policy.
BE:
Given that Rathbones trade on 11.7x Dec-08 earnings and Rensburg Sheppards trade on 10.7x Sep-08 (implied) earnings, we do not believe Brewin Dolphin deserves its premium rating given its lower discretionary FuM (as a proportion of total FuM), lower quality revenues (recurring revenue as a proportion of total revenue) and almost half the net profit margin (as reported) compared to Rensburg Sheppards and Rathbones.
PM:
Who wrote that?
BE:
David McCann and James Hamilton
BE:
Who have a bit of form.
BE:
James in particular, who is an nuclear winter-grade permabear.
BE:
Seem to remember he called Cattles worthless back when it was in the FTSE 250
BE:
There’s a bit more of the note, by the way.
BE:
Euroclear Valuation: c.20% of Brewin Dolphin’s net tangible assets are held in a position in the privately owned clearing house, Euroclear. Brewin Dolphin values this position at £503/share based on the company’s reported book value. The current grey
market price for this company shows a value of £200-250/share. We therefore believe the value of net tangible assets needs to be written down by c.10%, or c.£5m.
market price for this company shows a value of £200-250/share. We therefore believe the value of net tangible assets needs to be written down by c.10%, or c.£5m.
BE:
Regulatory Capital Requirement: We believe that its requirement is likely to rise over the next year or two, reflecting i) an expectation of greater industry requirements due to the events of the last two years and ii) an existing requirement which we believe was set under much more favourable market conditions relative to others in the industry.
Regulatory Capital Requirement: We believe that its requirement is likely to rise over the next year or two, reflecting i) an expectation of greater industry requirements due to the events of the last two years and ii) an existing requirement which we believe was set under much more favourable market conditions relative to others in the industry.
PM:
So I’m guessing they’re sellers?
BE:
Yup. Target 95p.
BE:
Brewin down 2.8p at 139p last I checked.
PM:
Thanks for that.
11:31AM
PM:
WhenIWereYoung – welcome back
PM:
sorry you had access problems
BE:
Do “access problems” mean he was accidentally zapped?
PM:
No — itw as something more complicated
PM:
A firefox add on was interfering with the comments system on AV
11:32AM
PM:
Moving swiftly on, because we are time constrained
PM:
How’s Sports Direct doing?
BE:
Down.
BE:
Down 4% or thereabouts.
Sports Direct International (SPD:LSE): Last: 87.40, down 3.6 (-3.96%), High: 90.10, Low: 86.75, Volume: 104.67k
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close
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On news the Competition Commission will be poking its nose into its peculiarly cosy relationship with JJB
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OFT referred Ashley’s purchase of 31 stores from JJB to the Commission, because of its its failure to sell five overlappers
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Sports Direct was given three months to sell the stores, but failed
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So now the Commission could now veto the whole deal
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Although that may be the worst-case scenario.
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Here’s Singer, which is shop to Sports Direct
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If competition is found to have been lessened Sports Direct would at the very least be prevented from trading in those 5 locations, either burdening them with unmitigated occupancy costs or leaving them in need of a sub-let. Depending on the individual units, SPD’s Field & Trek brand could potentially be leveraged, but this would still effectively leave competition in the area lessened with regards to sports merchandise. There is the possibility of more drastic action with implications for all 31 stores therefore. It remains to be seen whether or not the leases might have to revert back to JJB Sports, particularly in light of the recent CVA there
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Although the exact details of the stores under the spotlight is unclear, we believe it unlikely that the annual liability to Sports Direct from unmitigated occupancy costs would exceed £1.5m (vs SCMe £84.8m PBT to Apr’10, £97.5m PBT to Apr’11). Nonetheless, this news could weigh on the shares which have performed well over the last quarter (+32%). The stock trades on a cal’10 PER of 8.2x or 5.4x EV/EBITDA which we believe offers good value in light of the improvements to its core UK business and, more recently the recovery of Sterling against the Dollar.
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Unfortunate thing to happen just as the market’s supposedly reviving.
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You have to feel sorry for Mr Ashley.
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Do we?
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Perhaps we should move on.
11:35AM
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Small cap update
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You know I mentioned this investor showdown at Spark Ventures
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Well, the rebels won
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Company pushed out a statement late yesterday
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Independent directors completed a U turn – rethink the plan to sell the fund management business to an MBO at what appeared to be shamefully low price
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Always nice to see rebels win these things.
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Vine St Capital – I think
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Stocks unchanged at 7.87 in the middle
11:36AM
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here’s something off beat
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Claimar Care
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Up 150% !!!!
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Stock has jumped from 12.5p to 33p – on the back of a bid at 39p a share
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£20m
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Now, the novelty here is that Housing 21 is a charity. It’s non-profit making.
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What’s more – I believe the government backs Housing 21’s borrowings.
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What does it do??
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Sheltered housing.
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Got about 16,000 properties.
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So why is it bidding for this – and at such a premium?
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well…
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Claimar looked to be in some trouble before.
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Care group – shareholders offered an exit.
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Think the point here is that the country really needs well managed and well funded health care –especially for he aged.
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Hm.
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Housing 21 one way of providing that.
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Charity M&A. Is that what we’re down to these days?
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Are things really that bad?
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Bankers knocking on the door of NGOs etc
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No M&A elsewhere
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I’m blaming August.
11:40AM
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Right — you know what?
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It’s 11.40
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I’ve got to go
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I believe this is not an early lunch, for a change.
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Murph has been summoned to see the editor.
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Although I’m off to Roast, which in better times was the FT canteen.
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Ah, have a nice time
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Havent been there for ages
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Likewise
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hard to get JD Wetherspoon pie-and-pint deal though expenses these days.
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Which brings us back to why Pearson’s up.
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Ticker, on Catlin
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Just for you …
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here’s Numis
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Headline figs: Reported PBT of $240m is materially ahead of consensus of $190m
(NSe $180m) due to a stronger than expected investment result. NTA at 30 June was
$5.09 (consensus $4.83), which is 304p at the spot £/$ rate of 1.677 and about 16p
ahead of consensus. The interim dividend is up 9% to 8.2p.
n Investment earnings: Catlin’s investment portfolio benefited from the recovery in risk
assets in H1 and has delivered a sector-leading total return of 2.9% in the period (NSe
1.6%) giving investment earnings of $195m (NSe $101m). The group continues to
reduce the risk profile of the portfolio, taking action in H1 to sell its cash equities
portfolio and serving redemption notices on $240m of hedge fund investments (about a
third of the total).
n Underwriting earnings: The H1 combined ratio of 96% compares to our forecast of
94%. As widely expected, large individual losses had a negative effect (such as the
Australian bush fires, Air France and a major satellite loss). The group puts the impact
on the combined ratio at 4.3ppts above normal expectations of 5ppts, which we
calculate equates to an abnormal charge of around $56m in H1. Prior year reserve
releases benefited the CR by 3.0ppts, which is down from 5.7ppts last year but in line
with the recent average.
(NSe $180m) due to a stronger than expected investment result. NTA at 30 June was
$5.09 (consensus $4.83), which is 304p at the spot £/$ rate of 1.677 and about 16p
ahead of consensus. The interim dividend is up 9% to 8.2p.
n Investment earnings: Catlin’s investment portfolio benefited from the recovery in risk
assets in H1 and has delivered a sector-leading total return of 2.9% in the period (NSe
1.6%) giving investment earnings of $195m (NSe $101m). The group continues to
reduce the risk profile of the portfolio, taking action in H1 to sell its cash equities
portfolio and serving redemption notices on $240m of hedge fund investments (about a
third of the total).
n Underwriting earnings: The H1 combined ratio of 96% compares to our forecast of
94%. As widely expected, large individual losses had a negative effect (such as the
Australian bush fires, Air France and a major satellite loss). The group puts the impact
on the combined ratio at 4.3ppts above normal expectations of 5ppts, which we
calculate equates to an abnormal charge of around $56m in H1. Prior year reserve
releases benefited the CR by 3.0ppts, which is down from 5.7ppts last year but in line
with the recent average.
BE:
Underwriting earnings: The H1 combined ratio of 96% compares to our forecast of
94%. As widely expected, large individual losses had a negative effect (such as the
Australian bush fires, Air France and a major satellite loss). The group puts the impact
on the combined ratio at 4.3ppts above normal expectations of 5ppts, which we
calculate equates to an abnormal charge of around $56m in H1. Prior year reserve
releases benefited the CR by 3.0ppts, which is down from 5.7ppts last year but in line
with the recent average.
n Outlook: Catlin’s comments are reasonably bullish with the expectation that rates in
nearly all areas will continue strengthening for the foreseeable future. H1 gross
premium income growth of 7% to $2.2bn was in line with our expectations based on Q1
performance and the group says it is well positioned for further growth.
n Numis view: The H1 PBT outperformance has positive implications for our FY09
forecasts, although the effect may be moderated by the risk that H1 investment gains
reverse in H2. We are raising our TP by 10p to 400p to give partial credit for the NTA
beat at H1. The current P/NTA of 1.08x falls to 0.99x on FY09 forecasts (spot £/$),
which we believe is attractive given high ROE potential from the leveraged B/S.
Remains a key pick in the sector. BUY.
94%. As widely expected, large individual losses had a negative effect (such as the
Australian bush fires, Air France and a major satellite loss). The group puts the impact
on the combined ratio at 4.3ppts above normal expectations of 5ppts, which we
calculate equates to an abnormal charge of around $56m in H1. Prior year reserve
releases benefited the CR by 3.0ppts, which is down from 5.7ppts last year but in line
with the recent average.
n Outlook: Catlin’s comments are reasonably bullish with the expectation that rates in
nearly all areas will continue strengthening for the foreseeable future. H1 gross
premium income growth of 7% to $2.2bn was in line with our expectations based on Q1
performance and the group says it is well positioned for further growth.
n Numis view: The H1 PBT outperformance has positive implications for our FY09
forecasts, although the effect may be moderated by the risk that H1 investment gains
reverse in H2. We are raising our TP by 10p to 400p to give partial credit for the NTA
beat at H1. The current P/NTA of 1.08x falls to 0.99x on FY09 forecasts (spot £/$),
which we believe is attractive given high ROE potential from the leveraged B/S.
Remains a key pick in the sector. BUY.
PM:
NOTE: Webby drinks is locked to Aug 28, Bleeding Heart
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We will find the funding from somewhere
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Good. Bleeder’s excellent.
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Gotta run
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Cheers for joiniong
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hvae a good weekend
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back on Monday at 11am
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Bye.
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seeya