Markets live chat transcript for the chat ending at 12:11 on 22 Sep 2009. Participants in this chat were: Neil Hume, FT (NH) Bryce Elder (BE)
NH:
Hello
NH:
Good morning
NH:
and welcome
NH:
to another Markets Live
NH:
FT Alphaville’s breeze around the markets
NH:
Bryce is with me today
BE:
Morning all.
NH:
so, while I have been away….
NH:
what have I missed??
NH:
Bear with us
NH:
Bryce having the normal email probs
BE:
Er …
BE:
Markets kept rising.
NH:
yes
NH:
six days in a row
NH:
closes lower yesterday
NH:
and recovers all those losses this morning
NH:
FTSE 100 currently up 42 points at 5,177
BE:
Yeah. Other than that not much really
BE:
well apart from a load of fantasy M&A
BE:
A cash call from Balfour Beatty
BE:
and some increasingly strange behaviour from Frank Timis.
NH:
yes, I read some of that
NH:
the ENRC smack down was a classic
BE:
yes
BE:
I rather fear Frank might have pushed things too far with that one
NH:
and he seems to be using Mergermarket and Bloomberg as a personal newservice
BE:
all very odd
NH:
anyway, enough of that let’s get to the market
11:08AM
NH:
before we get to some stock specific stuff
NH:
some flashes coming through
NH:
from a conference Miles is at this morning
NH:
where John Crompton is speaking
BE:
Head of UKFI
NH:
here’s the highlights, such as they are
NH:
On potential sales of UKFI’s holdings in Lloyds and RBS:
“We haven’t talked to any investor about taking a stake in
Lloyds or RBS.”
“We haven’t talked to any investor about taking a stake in
Lloyds or RBS.”
NH:
On when and how the stakes will be sold:
“We don’t know the answers to that.”
UKFI has “no projections, no assumptions and no targets to
hit” when it comes to selling the holdings. They will most
likely be “capital markets sales.” As the economic environment
improves, “we’d hope we’ll see opportunities to transfer the
holdings to the market.”
“We don’t know the answers to that.”
UKFI has “no projections, no assumptions and no targets to
hit” when it comes to selling the holdings. They will most
likely be “capital markets sales.” As the economic environment
improves, “we’d hope we’ll see opportunities to transfer the
holdings to the market.”
NH:
The size of the sales will be large compared with the
market average, so “we will need to innovate,” he said. “Will
there be new instruments, techniques? Will retail investors
return?”
market average, so “we will need to innovate,” he said. “Will
there be new instruments, techniques? Will retail investors
return?”
NH:
So
NH:
CB’s
NH:
and a Tell Sid/BG style sell off
BE:
Redistribute the stock certs to live for decades under pensioners’ beds.
BE:
Good plan.
NH:
Yeah, great
NH:
anyway here’s the price action in Lloyds and RBS this morning
Lloyds Banking Group (LLOY:LSE): Last: 107.40, down 0.2 (-0.19%), High: 109.60, Low: 107.05, Volume: 17.23m
Royal Bank of Scotland Group (RBS:LSE): Last: 53.75, up 0.35 (+0.66%), High: 54.25, Low: 52.85, Volume: 59.53m
11:11AM
NH:
so
NH:
what shall we look at?
NH:
go on
BE:
I guess Heritage Oil looks kinda interesting
BE:
its merger with Genel of Turkey has still not been consummated
NH:
yep, because of an FSA investigation
BE:
well, apart from Heritage and Genel
BE:
there is another big player in Kurdistan
NH:
Gulf Keystone
BE:
no, a proper company
BE:
DNO of Norway
BE:
trading in its shares has been suspended because of a row with the Oslo Stock Exchange
BE:
here’s a quick wire take on what’s happening
BE:
The Kurdistan Ministry of Natural Resources in a letter
informed DNO its operations would be halted for a maximum six
weeks and said the company needs to “remedy, and to our full
satisfaction, the damage done to the KRG reputation and for once
and all to sort its internal problems” with the exchange.
informed DNO its operations would be halted for a maximum six
weeks and said the company needs to “remedy, and to our full
satisfaction, the damage done to the KRG reputation and for once
and all to sort its internal problems” with the exchange.
BE:
“All oil exports will cease and DNO shall not be entitled
to any economic interest” during the suspension, Minister of
Natural Resources Ashti Hawrami said in the letter. In a
separate statement, DNO said it “will explore all options
available to protect the interests of DNO shareholders”
to any economic interest” during the suspension, Minister of
Natural Resources Ashti Hawrami said in the letter. In a
separate statement, DNO said it “will explore all options
available to protect the interests of DNO shareholders”
BE:
The exchange last week disclosed that the authority, which
administers the semi-autonomous northern Kurdish area in Iraq,
acted as a middleman in a transaction of 43 million shares of
DNO last year and earlier this year. DNO had sought to keep the
authorities’ role in the deal undisclosed.
administers the semi-autonomous northern Kurdish area in Iraq,
acted as a middleman in a transaction of 43 million shares of
DNO last year and earlier this year. DNO had sought to keep the
authorities’ role in the deal undisclosed.
BE:
“We don’t know how it will impact results as we don’t know
how long production is going to be shut down,” Mark Edwards, a
company spokesman based in London, said by phone. “They’re
already trying to arrange a meeting with the KRG and there are
ongoing talks with the Oslo Stock Exchange to try and get this
resolved.”DNO
how long production is going to be shut down,” Mark Edwards, a
company spokesman based in London, said by phone. “They’re
already trying to arrange a meeting with the KRG and there are
ongoing talks with the Oslo Stock Exchange to try and get this
resolved.”DNO
NH:
meh
NH:
that’s all sounds very messy
NH:
very, very messy
NH:
but I guess that’s how business gets done out there
BE:
well it gets even worse
BE:
because DNO is considering legal action against the Olso SE for disclosing what it says was confidential information
NH:
hells teeth
BE:
have a look at this, picked it up from a broker
BE:
The Kurdish Regional Government (KRG) has suspended production by DNO, after a dispute between the Oslo Stock Exchange (OSE) and DNO showed that
the Kurdistan Minister of Natural Resources, Ashti Hawrami, had acted as a middleman in a deal whereby DNO sold 4.8% of its shares to Genel Enerji in
October 2008 for NOK175.5m. The OSE claimed DNO should have disclosed who the buyer was before it actually did in April 2009, while DNO stated it did not
know the buyer’s identity until the date it disclosed it. The KRG said it was ceasing all oil exports from DNO facilities and putting its partners in the PSCs
governing the fields in control of the production facilities. The announcement infuriated the KRG, which said the information was confidential and its release hurt
the reputation of the government and Hawrami. The DNO suspension would continue for up to six weeks, during which the company must find ways to remedy
the damage done to the KRG reputation, otherwise DNO’s involvement in Kurdistan may be terminated with or without compensation. The company said it
agreed Hawrami’s role should have remained confidential and has threatened legal action against the exchange.
the Kurdistan Minister of Natural Resources, Ashti Hawrami, had acted as a middleman in a deal whereby DNO sold 4.8% of its shares to Genel Enerji in
October 2008 for NOK175.5m. The OSE claimed DNO should have disclosed who the buyer was before it actually did in April 2009, while DNO stated it did not
know the buyer’s identity until the date it disclosed it. The KRG said it was ceasing all oil exports from DNO facilities and putting its partners in the PSCs
governing the fields in control of the production facilities. The announcement infuriated the KRG, which said the information was confidential and its release hurt
the reputation of the government and Hawrami. The DNO suspension would continue for up to six weeks, during which the company must find ways to remedy
the damage done to the KRG reputation, otherwise DNO’s involvement in Kurdistan may be terminated with or without compensation. The company said it
agreed Hawrami’s role should have remained confidential and has threatened legal action against the exchange.
NH:
hang on
NH:
this is all very complicated, but Genel are involved somewhere along the line
NH:
and there’s people suspending production, share trading
NH:
in what looks like tit for tat row
BE:
Yes. That’s a fair summary.
BE:
and Genel/Heritage are the subject of an FSA investigation
NH:
which has delayed their merger being completed
NH:
right
NH:
what are Heritage doing
NH:
they must have taken a thump
Heritage Oil (HOIL:LSE): Last: 516.50, down 10.5 (-1.99%), High: 527.00, Low: 495.50, Volume: 2.07m
NH:
no
NH:
that’s strange
BE:
It is.
NH:
at the very least there has to be a chance that this deal does not complete for yonks
BE:
true
NH:
in fact it may not happen at all
NH:
I think I said this before
NH:
but Genel needs looking at much more closely
NH:
as does the FSA investigation
BE:
yep
NH:
there has been nothing on that
NH:
no detail at all
BE:
in the meantime, here’s what Evo makes of it all
BE:
The KRG is feeling very aggrieved after the Oslo Stock Exchange published what the KRG regards as misleading and incomplete information in relation to the OSE’s argument with DNO. This argument arose as a result of DNO raising money last October through the sale of treasury share to fund its ongoing projects in Kurdistan. The KRG had agreed a prepayment/cash advance loan to Genel Enerji, but it was more convenient for the KRG to arrange payments for the shares directly, instead of first sending the money to Genel Enerji in another country. The OSE has published information relating to this transaction that the KRG believes has allowed press speculation about the KRG Oil Minister acting in a personal capacity rather than as the Minister. The net result is that the KRG is livid to say the least, as the OSE did not contact it to seek clarification.
BE:
The consequences for DNO are pretty dire as the KRG has suspended all DNO’s operations in the Kurdish region with immediate effect and has appointed other PSC contractors to manage day to day operations in the intervening period (Turkey’s Genel, currently in takeover talks with Heritage). In addition, all exports from DNO’s Tawke field have been suspended and DNO will not be entitled to any economic interest in the PSC during the suspension period. The KRG has given DNO six weeks to remedy the damage done to the KRG’s reputation and resolve its internal problems with the OSE. Failure to do so could risk total loss of licence entitlements and any compensation for that loss would be adjusted by the KRG for reputational damage. This should not affect Heritage directly and, if DNO is kicked out, Genel which Heritage is buying could be a direct beneficiary. However, there will be a perception of increased licence risk in Kurdistan as a result of this incident and it could easily see a further delay in the publication of Heritage’s prospectus as the FSA is already investigating certain members of Genel’s operational management
NH:
ta for all that
11:18AM
NH:
Monkey is asking about the Lloyds RMBS deal
NH:
and I think we have a little bit of comment
NH:
from Simon Pilkington at Caz
NH:
Lloyds Banking – (LLOY.L LLOY LN IN-LINE 108p)
Yesterday Lloyds announced a new securitisation issue under the Permanent master trust.
The notable feature is that some of the notes are offered to investors and it is not entirely an internal transaction (issuing notes that the issuer can then use to repo; for example at 30 June Lloyds held £149bn of securitisation notes from its own vehicles).
Indications are that the issue size will be c. £3bn and pricing at c. 190bp over 3m LIBOR (source: Bloomberg).
The issue is expected to close with final pricing and size later this week.
Unusual features of the notes include a dedicated yield reserve established with a subordinated loan from Bank of Scotland and an offer from Lloyds TSB Bank plc to repurchase at par (plus accrued interest) at the step-up date of October 2014 (source: Moodys). These features, designed to enhance the income and capital characteristics, clearly are at an additional cost to Lloyds.
Yesterday Lloyds announced a new securitisation issue under the Permanent master trust.
The notable feature is that some of the notes are offered to investors and it is not entirely an internal transaction (issuing notes that the issuer can then use to repo; for example at 30 June Lloyds held £149bn of securitisation notes from its own vehicles).
Indications are that the issue size will be c. £3bn and pricing at c. 190bp over 3m LIBOR (source: Bloomberg).
The issue is expected to close with final pricing and size later this week.
Unusual features of the notes include a dedicated yield reserve established with a subordinated loan from Bank of Scotland and an offer from Lloyds TSB Bank plc to repurchase at par (plus accrued interest) at the step-up date of October 2014 (source: Moodys). These features, designed to enhance the income and capital characteristics, clearly are at an additional cost to Lloyds.
NH:
Comment
As the first public UK RMBS in over a year and the first by a master trust in over two years, we regard this issue as a positive development for banks’ funding. It is an encouraging sign of the securitisation market thawing but not a guarantee that the market is now open.
In total Lloyds funds £450bn through wholesale markets. The group’s long-term ambition is to reduce its loan-deposit ratio down to 140% from the current level of 185%. So even long-term it will require substantial funding from wholesale markets.
The mooted size of the public issue is small and the price is high (e.g. August 2007, A&L issue was priced at c.16bp) but we expect the terms will improve if further issues are made.
For Lloyds the re-opening of the securitisation and the covered bond markets are critical to wean itself off funding provided through central banks. For example, the Bank of England took £287bn of MBS through the Special Liquidity Scheme which closed in January 2008, and both HBOS and Lloyds participated (the amount is not disclosed).
As the first public UK RMBS in over a year and the first by a master trust in over two years, we regard this issue as a positive development for banks’ funding. It is an encouraging sign of the securitisation market thawing but not a guarantee that the market is now open.
In total Lloyds funds £450bn through wholesale markets. The group’s long-term ambition is to reduce its loan-deposit ratio down to 140% from the current level of 185%. So even long-term it will require substantial funding from wholesale markets.
The mooted size of the public issue is small and the price is high (e.g. August 2007, A&L issue was priced at c.16bp) but we expect the terms will improve if further issues are made.
For Lloyds the re-opening of the securitisation and the covered bond markets are critical to wean itself off funding provided through central banks. For example, the Bank of England took £287bn of MBS through the Special Liquidity Scheme which closed in January 2008, and both HBOS and Lloyds participated (the amount is not disclosed).
BE:
Hold on – Neil’s just offline for a moment.
11:20AM
NH:
sorry
NH:
Heritage have just been on
BE:
Crikey – quick response.
NH:
yeah it was, but they are very relaxed about events in Norway
NH:
apparently
BE:
Sure.
NH:
and apparently the delay in the Genel deal
NH:
has nothing to do with the FSA investigation
NH:
they want to make that clear
NH:
it is do with Kurdistan not having an oil minister
NH:
so that’s all clear then
NH:
and the Hoil team are also pushing this note from Oriel
NH:
which explains why nonne of us should panic
NH:
DNO announced yesterday that its operations have been suspended by the Kurdish Regional Government (KRG) and all operations will be managed by the PSC partners.
· The dispute stems from the purchase of a 4.8% interest in DNO by Ashti Hawarmi on behalf of the KRG, which the Oslo Stock Exchange (OSE) has deemed to be an insider transaction. As a result of the OSE’s notices and the press comments the KRG sent a letter to DNO highlighting “that unjustifiable and incalculable harm has been caused to the reputation of the KRG”.
· The suspension is for a maximum of six weeks during which DNO needs to remedy the damage done to the KRG’s reputation. If DNO satisfies the KRG’s requirements all the PSC rights will be re-instated. However if DNO fails to remedy the damages caused, the KRG may terminate DNO’s involvement in the Kurdistan Region with or without compensation.
· Whilst this issue obviously highlights some of the risks of operating in Kurdistan, it shouldn’t have any direct impact on Genel/Heritage as Genel will take over the operations of Tawke during the six week suspension period and we see this as an opportunity to BUY the shares ahead of the prospectus which is due late Sept/early Oct.
NH:
Our valuation currently stands at 637p/sh (which includes NAV of 486p/sh and EMV of 151p/sh)
BE:
I suspect we’re not going to convince the Kurd bulls on this one.
NH:
no chance.
11:24AM
NH:
right
NH:
were next?
BE:
Marks & Spencer up again.
Marks and Spencer Group (MKS:LSE): Last: 383.80, up 9.4 (+2.51%), High: 388.40, Low: 374.30, Volume: 6.84m
BE:
Had a run yesterday on a SocGen upgrade, which said trading hasn’t proved as bad as everyone thought a couple of months ago.
BE:
The whole downtrading thing has passed, year-on-year comparisons are getting easier, etc.
BE:
Now Merrill has come out today with something similar.
NH:
got the note
BE:
Sure
BE:
Increasing EPS by 11% for FY10 and by 7% for FY11
Recent statements from Next and Debenhams have given us more conviction in
our thesis that gross margins in the clothing sector are benefiting from a
combination of a soft sourcing environment and from tight inventory control. For
M&S we now forecast an overall gross margin fall of c.-80bp in FY10 compared to
company guidance of -125bp to -175bp. We have raised our PBT forecast for
FY10 by £57mn – £35mn of this comes from our expectation of higher amount of
markdown recovery in clothing, with the rest coming from cost savings as we
expect the company to meet its operating costs target of -1% for FY10 (ex bonus).
Recent statements from Next and Debenhams have given us more conviction in
our thesis that gross margins in the clothing sector are benefiting from a
combination of a soft sourcing environment and from tight inventory control. For
M&S we now forecast an overall gross margin fall of c.-80bp in FY10 compared to
company guidance of -125bp to -175bp. We have raised our PBT forecast for
FY10 by £57mn – £35mn of this comes from our expectation of higher amount of
markdown recovery in clothing, with the rest coming from cost savings as we
expect the company to meet its operating costs target of -1% for FY10 (ex bonus).
BE:
Q2 trading statement Sept 30th
M&S is due to give a Q2 trading update on Wed Sept 30. We forecast group sales
+2% with UK sales +1% and UK LFL sales -2% for General Merchandise and -1%
for Food. We expect M&S to report that it is continuing to gain share in clothing,
driven by an improved product offer and well targeted marketing spend. We think
M&S’ Portfolio brand has performed very well, per una is now in better shape and
we expect M&S to benefit from a more balanced price architecture and from a
gradual improvement in older shoppers’ consumer confidence. In Food we
forecast a small improvement compared to Q1 excluding calendar effects.
M&S is due to give a Q2 trading update on Wed Sept 30. We forecast group sales
+2% with UK sales +1% and UK LFL sales -2% for General Merchandise and -1%
for Food. We expect M&S to report that it is continuing to gain share in clothing,
driven by an improved product offer and well targeted marketing spend. We think
M&S’ Portfolio brand has performed very well, per una is now in better shape and
we expect M&S to benefit from a more balanced price architecture and from a
gradual improvement in older shoppers’ consumer confidence. In Food we
forecast a small improvement compared to Q1 excluding calendar effects.
BE:
Reiterate Buy; raising PO from 410p to 450p
As a result of our earnings upgrades, our PO moves from 410p to 450p, based on
DCF analysis. M&S remains one of our top picks in General Retail as 1) We think
the market has underestimated the markdown recovery opportunity for M&S in
clothing, owing to an improved offer and better inventory control 2) We believe
operational improvements in Food will lead to an improvement in LFL sales and
more stable gross margin going forward and 3) We think that cost and capex
control will lead to significant operating leverage as from next year.
As a result of our earnings upgrades, our PO moves from 410p to 450p, based on
DCF analysis. M&S remains one of our top picks in General Retail as 1) We think
the market has underestimated the markdown recovery opportunity for M&S in
clothing, owing to an improved offer and better inventory control 2) We believe
operational improvements in Food will lead to an improvement in LFL sales and
more stable gross margin going forward and 3) We think that cost and capex
control will lead to significant operating leverage as from next year.
BE:
And, while on retailers, some discussion among the RORT about DSG’s surprisingly clever new ad campaign
BE:
Taking the mick out of Selfridges, John Lewis and Harrods
BE:
A surprising burst of self-awareness from Dixons
DSG International (DSGI:LSE): Last: 29.51, up 0.58 (+2.00%), High: 29.89, Low: 28.86, Volume: 4.45m
NH:
perhaps there is hope for them
NH:
so, the idea is
NH:
you go to JL
NH:
get professional advice
NH:
and then buy it from DSG online?
BE:
Exactly. The tag line’s something along the lines of “Dixons – the last place you want to look.”
BE:
Realism from management can never be a bad thing.
NH:
sort of draws attention to their customer service shortcomings, no?
NH:
and the last time I looked
NH:
DSG still had a huge high street presence
BE:
Yup. Currys and PC World are a problem.
BE:
Particularly while they’re still trying to sell scart cables at 25 quid a pop and employing people incapable of knowing which end to plug in.
NH:
11:30AM
NH:
staying with the the retailers for a moment
BE:
Carphone’s having a bit of a run.
NH:
why?
BE:
Caz has had a look at the demerger of TalkTalk.
BE:
Which looks like it should be coming soon, given all the operations seem to have rebranded to get away from CPW.
BE:
Here’s the note
BE:
We are upgrading our recommendation on Carphone
Warehouse (CPW) to OUTPERFORM believing that the forthcoming demerger will serve to highlight the standalone and strategic value of both of the group’s main operating divisions.
Warehouse (CPW) to OUTPERFORM believing that the forthcoming demerger will serve to highlight the standalone and strategic value of both of the group’s main operating divisions.
BE:
The demerger is expected to be complete by July 2010 at the latest. On completion, TalkTalk UK will be a UK-listed broadband provider with EBITDA growth substantially ahead of the European Telecoms sector as it extracts synergies from the integration of Tiscali UK which was acquired in June 2009.
BE:
The other listed entity will hold a 50% stake in Best Buy
Europe, formally CPW’s distribution business, with the other remaining 50% owned by US retailer, Best Buy Inc. We believe the retail business has significant scope to increase profits owing to a recovery in the retail environment having invested heavily in gross margin.
Europe, formally CPW’s distribution business, with the other remaining 50% owned by US retailer, Best Buy Inc. We believe the retail business has significant scope to increase profits owing to a recovery in the retail environment having invested heavily in gross margin.
BE:
Furthermore, the business’s planned expansion into
‘big box’ stores may be a significant driver of value for the group in the longer term with management’s long-term targets suggesting a trebling of EBIT over the next three years. While we retain concerns about the execution of this venture, we recognise it as a material opportunity and believe the downside risk is limited.
‘big box’ stores may be a significant driver of value for the group in the longer term with management’s long-term targets suggesting a trebling of EBIT over the next three years. While we retain concerns about the execution of this venture, we recognise it as a material opportunity and believe the downside risk is limited.
BE:
The group trades on a CY2010E PER of 12.4x which looks attractive relative to the wider market on 13.2x particularly given that we expect a three-year EPS CAGR of 17%.
BE:
Using a sum-of-the-parts analysis, we derive a fair value
for the shares of 227p- representing a 23% premium to
the current share price. On a standalone basis, we believe the current share price implies an EV/EBITDA for TalkTalk UK of 4.5x for CY2010E which is attractive relative to the European Telecoms sector which is on 4.8x.
for the shares of 227p- representing a 23% premium to
the current share price. On a standalone basis, we believe the current share price implies an EV/EBITDA for TalkTalk UK of 4.5x for CY2010E which is attractive relative to the European Telecoms sector which is on 4.8x.
NH:
ta for all that
NH:
so demerger by next July
BE:
Yeah – although there was some Sunday press suggesting it was going to be a bit earlier than that.
11:34AM
NH:
right, Bryce is retail crazy this morning
BE:
(Monkey – I’ll have you know I spent five years as a tech correspondent. I’m aware cables need to be plugged in at both ends.)
BE:
Anyways, we have Swiss watch sales figures today.
NH:
Otherwise known as the How To Spend it Indicator
NH:
And?
BE:
Still pretty grim. But stable.
BE:
Sales down 22% by value for August.
BE:
Which is traditionally the worst month for the industry.
BE:
Of course, the anniversary of Lehman makes the year-on-year figures meaningless.
BE:
But the general conclusion is that we’ve stopped falling but we’re not rising. Bouncing along at a 26% decline year-to-date.
NH:
BE:
Conspicuous consumption remains out of fashion.
BE:
There’s bit of demand returning for the Tag Heuers and Movados.
BE:
But no sign of recovery whatsoever in the market for Hublots and Piagets.
NH:
that’s a shame
BE:
I’ll cut to BNP Paribas for their take on the figures
BE:
The high-end segment remains the most affected
In line with the trend seen since the beginning of the year, August again shows a continuous weakness for the highest price segments.
Wristwatches costing between CHF500 and CHF3,000 were down c. 25% in value, and luxury pieces above CHF3,000 recorded the steepest fall, down c. 30%. In August, the situation was fairly contrasted for entry price lines, with watches costing less than CHF200 reporting a steep decline (down c. 22%) even though the mid range pieces costing between CHF200 and CHF500 again registered a more moderate drop (-10%).
BE:
Leading markets down in line with YTD trends, but good surprise in China
Hong Kong (the no.1 market) fell 25%, slightly better than July (-32%). The US was still very affected, down 37% (vs -39% in July). Europe remained in line with the YTD trend, i.e down low single to mid double digits, depending the country. On the positive side, the Mainland Chinese market rebounded sharply, up 20% in August, after -34% from January to July. This bodes particularly well for Swatch, which has the largest exposure to Mainland China (c. 13% of sales, 25% including Hong Kong)
NH:
It’s odd that Hong Kong’s the world’s biggest market for watches.
BE:
Yeah. The obsession with visible status symbols over there is very peculiar.
BE:
I bought a Vacheron Constantin when I was in Honkers.
NH:
Really?
BE:
Yeah. From a guy up in the New Territories who also sold boiled goose necks.
BE:
Cost $10 American. Still running well today.
NH:
11:37AM
NH:
Ok
NH:
I am a bit out of the loop on this
NH:
but Lex on Bloomberg
NH:
Bryce has the detail
NH:
such as it is
BE:
No I don’t.
BE:
Bloomberg’s started running copy from various papers inside its own story template.
BE:
And there’s the possibility being suggested that some people could appear on the Borg telly more often.
BE:
But, frankly, this is all an issue for the marketing department and very little to do with us.
BE:
Should we move on now, Neil?
NH:
yep
NH:
will check in with the powers that be on this Lex stuff
NH:
if people are appearing on the telly
NH:
is it interesting
NH:
because I thought Lex was one man
NH:
a real person
BE:
It’s been ruined.
NH:
it has
NH:
Mr Lex outed on Bloomie TV
BE:
It’s like the curtain coming down at the end of the Wizard of Oz.
NH:
somehow I think AV won’t be invited on to the Borg
NH:
given our previous run ins
BE:
I won’t be – I can guarantee that.
NH:
11:43AM
NH:
moving swiftly on
NH:
Bryce
NH:
you seem to have caused a bit of price action in the utilities this morning
BE:
Well – we just highlighted a story that was going round yesterday.
BE:
About the possibility of rights issues pre Ofwat’s final determination
NH:
hmmm
NH:
one has to think that a few cash calls will becoming due to the review
NH:
has to happen
BE:
Yeah – and while I don’t entirely undertand the whole K mechanism thing, the idea is that if companies like Severn Trent move early they’ll be in a better position to implement the changes when they come
NH:
odd, though that the market is ignoring the yields on these stocks
NH:
I suppose they are worried they could be cut
BE:
Sector down across the board today
Severn Trent (SVT:LSE): Last: 974.00, down 24 (-2.40%), High: 1,000, Low: 957.00, Volume: 1.05m
BE:
United Utilities down 2.6% at 453.5p
NH:
ta
NH:
another reason for today’s weakness
NH:
cou;d be
NH:
UK gas prices
NH:
day ahead prices fell to a three year low of 12.2p yesterday
NH:
that’s was a 39% fall on the day
NH:
all to do with the Ormen Lange pipeline coming back to service following a maintenance outage and continued low demand
NH:
and to put things into a little bit of perspective
NH:
Day ahead gas prices are currently 82% lower than they were one year ago at this time (69.5p).
BE:
That can’t be good.
BE:
So who’s affected?
NH:
International Power
NH:
and Scottish & Southern Energy I think
NH:
Centrica looks to be the best placed
NH:
as they buy a lot of gas in the wholesale market
NH:
they are long customers/short gas
NH:
something they are trying to sort out by acquiring companies like Venture Production
11:49AM
NH:
elsewhere
NH:
I noticed Tullow Oil have been all over the place since I legt
NH:
up in bid spec
NH:
up on a big oil find
NH:
down on director share sales
NH:
and then news that ENI aren’t interested in bidding after all
BE:
Yeah – that pretty much sums it up.
BE:
Snake and ladder stock over the past week or so.
NH:
hmmm
NH:
Morgan Stanley
NH:
have pubbed a big note on the stock this morning
NH:
asking whether investors should book profits
NH:
and the answer is nada
BE:
Can we have a look?
NH:
Tempted to lock in profits on Tullow? We think this would be wrong. While TLW’s (OW) success
story has been exceptional we argue that the buy case is more compelling today as Energy
markets tighten and as TLW rolls out a drilling campaign that we think could double the share
price.
story has been exceptional we argue that the buy case is more compelling today as Energy
markets tighten and as TLW rolls out a drilling campaign that we think could double the share
price.
NH:
While in its infancy, the ‘transform margin’ play type through Ghana to Sierra Leone was
substantially de-risked with the Venus discovery last week – risk factors on success have moved
higher to between 20-30% (previously 10-15%); we estimate a 6 well campaign could de-risk up
to c.450p/sh net TLW. We raise our price target ~22% to 1500p (~30% implied upside), and,
re-running our ‘back of the envelope’ calculations and making some assumptions on the
extension of the cretaceous fan play in West Africa, move our bull case above £20.
substantially de-risked with the Venus discovery last week – risk factors on success have moved
higher to between 20-30% (previously 10-15%); we estimate a 6 well campaign could de-risk up
to c.450p/sh net TLW. We raise our price target ~22% to 1500p (~30% implied upside), and,
re-running our ‘back of the envelope’ calculations and making some assumptions on the
extension of the cretaceous fan play in West Africa, move our bull case above £20.
BE:
Twenty quid!?
BE:
That’s aggressive.
NH:
yep, and here’s what to look for in Q4
NH:
What to look for into Q4: Drilling of the South Grand
Lahou prospect (Cote d’Ivoire) in Oct. will provide
another valuable datapoint on Ivorian basin upside
potential and could further de-risk surrounding
prospects. In Ghana, the Mahogany-4 appraisal well is
drilling and a result is expected end Oct./early Nov.; it
could begin to de-risk an upside case of 1.8bn boe for
Jubilee (P50 1.2bn boe) and be worth c.40p/sh unrisked.
In Uganda, we expect the Buffalo-Giraffe campaign to
recommence in early Dec.
Lahou prospect (Cote d’Ivoire) in Oct. will provide
another valuable datapoint on Ivorian basin upside
potential and could further de-risk surrounding
prospects. In Ghana, the Mahogany-4 appraisal well is
drilling and a result is expected end Oct./early Nov.; it
could begin to de-risk an upside case of 1.8bn boe for
Jubilee (P50 1.2bn boe) and be worth c.40p/sh unrisked.
In Uganda, we expect the Buffalo-Giraffe campaign to
recommence in early Dec.
Tullow Oil (TLW:LSE): Last: 1,172, up 14 (+1.21%), High: 1,196, Low: 1,167, Volume: 1.09m
11:52AM
NH:
right
NH:
before we head to Small Cap corner
NH:
a couple of things to check on
NH:
sterling
BE:
Go on then
NH:
a euro buys 0.906p
NH:
and cable is $1.6333
NH:
very weak against the Euro
NH:
and we had some questions about Punch Taverns
NH:
and why the Toxic Pub is up
Punch Taverns (PUB:LSE): Last: 127.00, up 7 (+5.83%), High: 127.90, Low: 120.00, Volume: 2.10m
NH:
this is the best I can come up with
NH:
- Since the court ruling on ETI LN last week, this sector has been decimated by a mkt preoccupied by headlines that has completely missed the detail… – Firstly, what did the verdict say: The particular pub’s rent was £16/- pa. ETI wanted to raise it to £30/-, the tenant wanted £9/-. So the Court ruled an increase to £18/- and significantly, upheld the methodology. – Hence the mkt over-reacted and questioned ALL of ETI’s growth projections regardless of the fact that this judgement only effected a total of 8 pubs & so after a -22% correction in 1 week, we have to conclude that this iscrazy. – Which brings us to PUB LN. Not as purist landlord as ETI, it paid off £1bn of its debts, its growth prospects have always been overshawdowed by Ted Tuppen who simply enjoys a better relationship with the City, so from all this collateral damage, PUB LN represents a better model than ETI & is simply a steal at this level. BUY (and BUY ETI LN too, but more risky!)
NH:
an email doing the rounds this morning
NH:
and I just noticed this
NH:
someone selling some trash
NH:
a SWF selling trash that has rallied a long way
NH:
Sept. 22 (Bloomberg) — Government of Singapore Investment
Corp., manager of more than $100 billion of the city’s foreign
reserves, said it pared its stake in Citigroup Inc. to below 5
percent through open market sales.
GIC, which had held more than 9 percent of Citigroup, said
in a statement that a “stake below 5 percent reflects GIC’s
goals and desire to be a portfolio investor.”
Corp., manager of more than $100 billion of the city’s foreign
reserves, said it pared its stake in Citigroup Inc. to below 5
percent through open market sales.
GIC, which had held more than 9 percent of Citigroup, said
in a statement that a “stake below 5 percent reflects GIC’s
goals and desire to be a portfolio investor.”
BE:
You’re not calling Citi trash, are you?
NH:
sorry, a bombed out stock. didn’t mean trash obviously
NH:
11:55AM
BE:
Nearly midday …
BE:
Any raw to share, Neil?
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:
well
NH:
I have a few bits
NH:
but I still looking into it
NH:
a few leads that look good
NH:
one stock I have been told to watch is Palm
NH:
had a really big move in heavy volume last night
NH:
this could be to do with bears closing short positions
NH:
because its cash call is going to be priced at a good level
NH:
but then again
NH:
there are bid rumours around and Nokia is being mentioned
BE:
Hm.
BE:
Interesting thought.
BE:
But wouldn’t it be cheaper for Nokia to build rather than buy?
NH:
true
BE:
What does Palm have the Nokia hasn’t?
NH:
and guess who is the biggest shareholder in Palm?
BE:
Go on.
NH:
Bono
BE:
Is that true?
NH:
well, sort of
NH:
apart from being a global pop star
NH:
Bono is also the partner of a private equity firm
NH:
Elevation Partners
NH:
after which U2 named a song
BE:
Yet U2 are sponsored by Blackberry.
NH:
really
NH:
how ironic
BE:
Bit of a conflict of interest there.
NH:
there’s the evidence
NH:
Bono at his PE company
BE:
Ha! Spot the odd one out.
NH:
indeed
NH:
anyway, will be keeping watch on Palm
12:01PM
NH:
finally
NH:
to small cap corner
NH:
Minerva
NH:
flying on the refinancing news
Minerva (MNR:LSE): Last: 32.50, no change, Volume: 5.86m
NH:
sadly we have no research
NH:
because everybody looks to have given up covering the company#
BE:
Not really an equity story any more, to be frank.
NH:
and finally
NH:
Bryce picked up on this story last night
NH:
and it needs another airing
NH:
this is quite amazing even for an Aim company
12:03PM
NH:
you couldn’t as they say
NH:
make this one up
NH:
A day after surviving an apparent assassination attempt in Ra’anana, Eli Reifman, the CEO of Emblaze Ltd, was sent to jail for 45 days for contempt of court on Monday.
NH:
The Supreme Court decided to cancel the postponement of the Tel Aviv District Court sentencing, which was handed down after Reifman failed to obey an order to give his shares in Emblaze to creditors as part of bankruptcy proceedings.
Judge Hanan Meltzer said that Reifman’s appeal against the order would be dealt with at a later court hearing.
Reifman had claimed that if sent to prison, he would not be able to transfer his shares to the special manager appointed by the court, and that the transaction is a process that requires time to complete.
Reifman reportedly owes his creditors $60 million.
He also allegedly owes a large amount of money on the black market.
Judge Hanan Meltzer said that Reifman’s appeal against the order would be dealt with at a later court hearing.
Reifman had claimed that if sent to prison, he would not be able to transfer his shares to the special manager appointed by the court, and that the transaction is a process that requires time to complete.
Reifman reportedly owes his creditors $60 million.
He also allegedly owes a large amount of money on the black market.
NH:
On Sunday night, Reifman was leaving Emblaze’s offices when a motorcyclist fired two shots at his the car. Reifman was unharmed, though his vehicle was slightly damaged.
On Thursday, another of his cars was torched, and police said he received threats over the telephone last week.
On Thursday, another of his cars was torched, and police said he received threats over the telephone last week.
BE:
Actually, I think Emblaze is on the main market, no Aim.
NH:
wasn’t Emblaze once know as Geo Interactive?
BE:
That’s the one.
BE:
Technology developed by the Israeli army, if memory serves.
BE:
I had lunch with Eli once, way back in boom times.
BE:
In the Bleeder. He paid.
NH:
nice
NH:
stock unchanged at 38.25p at the moment
NH:
(Tuna
NH:
right
NH:
I think we are done for today
NH:
thanks for joining us
NH:
FTSE 100 now up almost 50 points
NH:
at 5,183
BE:
(Lorkan – with every respect, if there was anything to tell you about some tie-up brewing with Bloomberg we would tell you. Sadly, we’ve heard nothing whatsoever.)
BE:
And on that note, thanks for all your comments.
NH:
yes, i’ll second that
NH:
see you all tomorrow
NH:
bye
BE:
Bye.
NH:
hang on
NH:
just go a Bono biog from Elevation Partners
BE:
Oh – here we go.
NH:
Bono is a Managing Director and Co-Founder of Elevation Partners.
NH:
Bono is the lead singer of Irish rock group U2, one of the most well-known and successful bands in the history of the recorded music industry. Since 1977, U2 has gained an extensive audience through their spellbinding live performances and critically acclaimed recordings. They have sold over 150 million albums worldwide and won 22 Grammy Awards. U2 has also been an industry leader in the management of its business operations and intellectual property. Unlike many artists, U2 owns and controls most of its own catalog.
NH:
doesn’t say much more
NH:
other than detail always his good work for charity
BE:
Front page lists him as “co-founder of U2″
NH:
that should be all his good work for charity
BE:
Wonder if he kept a controlling stake, or was diluted when The Edge joined.
NH:
NH:
right
NH:
that’s enough
NH:
lunch beckons
NH:
cya
BE:
Bye.