Markets live chat transcript for the chat ending at 12:02 on 29 Sep 2009. Participants in this chat were: Neil Hume, FT (NH) Bryce Elder (BE) Paul Murphy (PM)
NH:
hola
NH:
and welcome to Markets Live
NH:
FT Alphaville’s daily quick step around the markets
NH:
Bryce is here again
NH:
but having the usual log in problems
NH:
have, however, managed to fix his Reuters screen
NH:
so while we wait
NH:
news of another screeching u-turn from FT Alphaville
NH:
and no, we are not turning positive on the market
NH:
and before anyone asks
NH:
we are, however, revising our stance on the Cadbury bid situation
NH:
not because of City Am
NH:
which are days behind
NH:
somewhat prematurely we advised readers to reject Kraft’s opportunistic bid
NH:
our argument went as follows
NH:
Cadbury is a great British business, with a marvelous Anglo-African heritage, superb financial prospects and a sparkling management team. In any case, its takeover by Kraft Foods Inc would almost certainly be against both the UK national interest and the common consumer good, not to mention excellent goodie bags.
NH:
well, having had time to think through the situation again and examine the pros and cons of the bid
NH:
and I minded to think that the bid is not necessarily against the national interest
NH:
and the price, well, it really isn’t that bad
BE:
er, Neil
BE:
this change of tack
BE:
wouldn’t have anything to do with that huge goody bag sitting on your desk
BE:
the one with Kraft Foods: “Make today delicious” on the side
NH:
look Bryce, the idea that we could be swayed by something like that is just plain ridiculous
NH:
our stance is based on cold, rational analysis of the underlying fundamentals
NH:
nothing more
NH:
actually pretty impressive bag
NH:
chocolate orange
NH:
Milka bars
NH:
Milka selection box
NH:
some polish thing
NH:
Toblerone
NH:
and Oreos
NH:
although slightly disappointingly
NH:
not doubled stuffed
BE:
No cheese?
BE:
No chicken in a biskit?
NH:
no
NH:
anyway
NH:
we don’t want to bore some of our more serious readers
NH:
so to the market
11:09AM
BE:
where do you want to start
NH:
I guess we had better look at Legal & General
BE:
I guess so.
BE:
flown out of the traps this morning
BE:
with some good volume behind it
BE:
shares biggest riser in the FTSE 100 at the moment
BE:
L&G up 4.9p at 82.8p
BE:
Nearly 25m traded
NH:
hmmm
NH:
obviously this on the back of bid rumours
NH:
However, the bandits aren’t buying this Resolution bid idea
BE:
really
NH:
nope, they believe someone else is looking. And that’s why L&G has drawn up a defence document
BE:
so, if not Cowdery then who?
NH:
although, given the dismal performance of its share price over the past year it would be surprised if L&G had not drawn up a doc
NH:
well, the usual names are being dusted down and given a fresh airing
NH:
and by that I mean Generali
BE:
Of course.
BE:
Always with the Generali …
BE:
they always get linked with big overseas acquisitions
BE:
I guess Axa will be linked soon
NH:
presumably
NH:
although I did here a bizarre rumour the other day
NH:
that RSA had hired Rothschild to work on a bid for L&G
BE:
er
NH:
(welcome Wiltshire)
BE:
Rothschild does seem very busy with the questionable rumours.
NH:
indeed
BE:
Seems to have its name paird against every flaky story out there.
NH:
and this one is very questionable
NH:
Andy Haste at RSA doesn’t appear to be a great fan of life companies
NH:
So what he would want with L&G I have no idea
NH:
clearly Haste wants to do a deal as per those recent cash call stories
NH:
but I would have thought a big commercial insurer
NH:
something like Brit would have been more to his liking
NH:
and more importantly a more digestable size
BE:
Quite
NH:
I think the best we can say on this one is that someone appears to be running the numbers over L&G
11:14AM
BE:
hang on
BE:
Neil is on the phone
BE:
nodding his head a lot
BE:
furious note taking
BE:
still nodding
BE:
like a old horse
BE:
Ok – he is off. What was all that about?
NH:
Okay
NH:
some serious market punters have a new name
NH:
and this is a new name, to me at least
BE:
go on
NH:
AMP of Australia
NH:
which have a presence in this country
NH:
and want a bigger one by all accounts
NH:
apparently prepared to offer between 100p and 110p a share
BE:
right
NH:
but listen this is still pretty 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.
BE:
Steak tartare.
NH:
yep
NH:
the usual warnings apply
BE:
NH:
also
NH:
I was just passed another bid of RAW
NH:
Alphameric
NH:
betting software I think
NH:
now, there is talk out there
NH:
that a bid is coming
NH:
40p a share
NH:
now, one possible bidder is Joe Lewis
NH:
through one of his investment vehicles
NH:
he has amassed a 29% stake
BE:
Odd company, Alphameric. Best known I suspect for the Turf TV joint venture
NH:
Alphameric shares currently up 1p at 36.5p
NH:
L&G, meanwhile, up 3.6p at 82.5p
NH:
I think they are out of Turf TV now
NH:
or at least have capped their liabilities
NH:
I think it is the latter
NH:
as for Silence Thera
NH:
yesterday’s bit of RAW
NH:
we don’t have anymore details
NH:
as this is a reverse takeover
NH:
they are automatically suspended
NH:
by the bidder
NH:
is a US company backed by private equity
NH:
they have $25m of cash
NH:
willing to plough into the new company
NH:
and AstraZeneca, a shareholder in Silence, are backing the deal
NH:
we don’t have a name yet
NH:
but there have been meetings in the past week or so
NH:
so this could be getting nearer
BE:
Well done for finally smoking that one out, Neil. It’s been a constant source of rumour for ages.
NH:
it has
11:20AM
NH:
right
NH:
we had better have a quick peak at the wider market
NH:
and after yesterday’s out of the blue rally
NH:
which I am still puzzled about
NH:
the FTSE 100 is….
BE:
down, small
BE:
Ftse off 14 points at 5151
BE:
and volumes – ex-L&G
BE:
are pretty pitiful to be honest
NH:
thanks
NH:
before we look at some more stock specific stuff
NH:
a bit of worrying news from our man in NY
11:21AM
NH:
apparently poor Murph is disappointed by the relative lack of lunching activity on this side of the Pond.
BE:
NH:
but do not fear
NH:
help is at hand
NH:
according to Stacy
NH:
it seems some NY establishments are already on a mission to bring lunching (back) to Manhattan.
NH:
To lure expense account lunchers back into the restaurant , Midtown steakhouse Maloney & Porcelli now offers decoy doggy bags with Chipotle, Sbarro, and Olive Garden logos displayed across the side. They’ve also launched a website called expenseasteak, a tool to help office workers forge expense accounts. Desperate times… [EaterWire]
As an example of the kind of receipts expenseasteak generates, see:
http://www.expenseasteak.com/receipts/MyExpenses4637.pdf
BE:
now, clearly Murph would never stoop so low as to use that
NH:
hmmmm
NH:
perhaps
11:22AM
NH:
right, what’s the Great British Krona doing??
BE:
Bit of a rally
BE:
Cable’s 1.595
BE:
Euro’s at 0.911
BE:
That follows the surprise jump in retail sales for September
NH:
right
NH:
it was much weaker earlier
NH:
in fact it has been a busy day for eco releases
NH:
and none of its suggests the UK is on the road to recovery
BE:
Well, the CBI stuff does suggest it. Sort-of.
NH:
or that QE is working
NH:
now I never imagined in a million years that I would end up writing about M4 money supply
BE:
but …
NH:
well, the figures for Aug are out and they suggests that all the money being printed by the BoE just isn’t getting through
NH:
and given the Guvnor has just been in Sweden
BE:
… that could mean the BoE deposit rate could get cut
NH:
well, that’s one view
NH:
and there is also that big gathering of economists at the BoE today
NH:
anyway
NH:
here’s quick rap of today’s eco data
NH:
and a bit of comment on the M4 lending figures
NH:
and why the preferred BoE measure looks weak
NH:
and why we could soon be going all Swedish
NH:
Ikea and all
NH:
Britain’s economy shrank less than previously estimated in the second quarter of this year, due to a better-than-expected performance by the construction industry, official data showed on Tuesday.
The Office for National Statistics said gross domestic product contracted by 0.6 percent in the quarter, less than the 0.7 percent decline it estimated a month ago.
On the year, GDP shrank 5.5 percent, unrevised from the previous estimate and still the biggest annual decline since records began in 1955.
Markets showed little reaction to the data, which was broadly in line with what many analysts had been expecting, and offer few clues about the strength of any rebound in the economy in the second half of the year.
“The GDP number was a bit better, but I think that was always likely given the revisions to the construction data that we’d seen,” said Stephen Lewis, economist at Monument Securities.
The Office for National Statistics said gross domestic product contracted by 0.6 percent in the quarter, less than the 0.7 percent decline it estimated a month ago.
On the year, GDP shrank 5.5 percent, unrevised from the previous estimate and still the biggest annual decline since records began in 1955.
Markets showed little reaction to the data, which was broadly in line with what many analysts had been expecting, and offer few clues about the strength of any rebound in the economy in the second half of the year.
“The GDP number was a bit better, but I think that was always likely given the revisions to the construction data that we’d seen,” said Stephen Lewis, economist at Monument Securities.
NH:
and the QE comment
NH:
from RBC
NH:
The final est of Aug money supply released this morning is notable for its inclusion of M4 growth excluding other intermediate financial corporations – a bit of a mouthful but, given this is the BoE’s favoured measure money supply, a key input in terms of judging the success of the QE process. To this end, today’s numbers will make for less than inspiring reading for the Bank – the m/m growth in M4 excl OFC’s stood at a relatively modest 0.2% in Aug vs. 0.4% the previous mth (this revised down from an original est of 0.6%).
NH:
While it would be rash to place too much emphasis on one-month’s worth of data, today’s numbers will do little to persuade the BoE its QE efforts are gaining traction. To put this into some degree of perspective, in annualised terms, the Bank’s favoured money supply measure saw growth of 4.9% in Jul and 2.4% in Aug. As the attached chart shows, this is a far cry from the 10% or so pace that would appear consistent with the MPC’s stated aim of bringing annual nominal GDP growth back up to the 5.0% mark.
In the wake of these numbers then, a further increase in the QE limit (as evidently still favoured by Governor King) and/or a cut in the deposit rate (the Bank effectively shifting from targeting the stock of money to its velocity) remain very much within the realms of possibility.
In the wake of these numbers then, a further increase in the QE limit (as evidently still favoured by Governor King) and/or a cut in the deposit rate (the Bank effectively shifting from targeting the stock of money to its velocity) remain very much within the realms of possibility.
BE:
thanks for that
11:27AM
NH:
oh
NH:
there was also some data about conumers repaying loans
NH:
which doesn’t sit with the retail sales stuff
NH:
but still
11:27AM
NH:
Right
NH:
back to some stock specific stuff
NH:
What else do you want to look at?
BE:
Compass Group
BE:
Trading update
BE:
Margins a bit better than hoped
BE:
More sawdust in the sandwich fillings, one assumes
BE:
And annual sales, like Holland, are “broadly flat”.
BE:
Which is better than feared following its July update.
BE:
Q3 showed organic revenue dropping sharply. So stabilisation is the theme.
NH:
Any comment?
BE:
Sure.
BE:
Merrill says the consensus should bump higher by about 5%.
BE:
This is from Ian Rennardson.
BE:
Q4 sales turn out as expected, margins better
The key point of the year end trading update is that at less than 3% down (and with the rate of decline slowing) Q4 organic sales are in-line with expectations and margins are up 70bps. As we expected, the company reiterated it expects full year organic sales to be broadly flat and margins to be up 60 bps. It also said that at constant FX, EPS is expected to grow by c14% against BofAMLe 12%. It says it expects pressure to remain on organic sales growth in the short term, but is
optimistic about its operational gearing to an economic recovery. We reiterate our Buy recommendation with 410p PO.
The key point of the year end trading update is that at less than 3% down (and with the rate of decline slowing) Q4 organic sales are in-line with expectations and margins are up 70bps. As we expected, the company reiterated it expects full year organic sales to be broadly flat and margins to be up 60 bps. It also said that at constant FX, EPS is expected to grow by c14% against BofAMLe 12%. It says it expects pressure to remain on organic sales growth in the short term, but is
optimistic about its operational gearing to an economic recovery. We reiterate our Buy recommendation with 410p PO.
BE:
RoW the hardest hit in Q4, Europe improving
The US and UK showed relatively minor increases in Q4 organic sales declines versus Q3, Europe showed a decent improvement from -4.8% in Q3 to -2.2% in Q4, but was most skewed by the Easter effect. RoW however showed a decline to -4.6% in Q4 from +1.8% in Q3. We believe this was caused by tough new business win comparisons. We leave our top of the range 2009 and 2010
forecasts unchanged but believe consensus needs to rise by c5%.
The US and UK showed relatively minor increases in Q4 organic sales declines versus Q3, Europe showed a decent improvement from -4.8% in Q3 to -2.2% in Q4, but was most skewed by the Easter effect. RoW however showed a decline to -4.6% in Q4 from +1.8% in Q3. We believe this was caused by tough new business win comparisons. We leave our top of the range 2009 and 2010
forecasts unchanged but believe consensus needs to rise by c5%.
BE:
Reiterate Buy and 410p price objective
Compass trades on 2010E metrics of 11.7x PE, 7x EV/EBITDA, with a 4% dividend yield and a 8.5% FCF yield (post all capex), and has a strong balance sheet. We think there are upside risks to our forecasts, which assume a margin of 6.4% in 2009, 6.5% in 2010 and 6.6% in 2011. Compass’ earnings forecasts are very sensitive to small changes in cost and pricing assumptions. A further 100bps increase in forecast EBITA margin, all other things being equal, would add 20% to our 2010 EPS forecast, leaving the stock trading on just 9.6x PER.
Compass trades on 2010E metrics of 11.7x PE, 7x EV/EBITDA, with a 4% dividend yield and a 8.5% FCF yield (post all capex), and has a strong balance sheet. We think there are upside risks to our forecasts, which assume a margin of 6.4% in 2009, 6.5% in 2010 and 6.6% in 2011. Compass’ earnings forecasts are very sensitive to small changes in cost and pricing assumptions. A further 100bps increase in forecast EBITA margin, all other things being equal, would add 20% to our 2010 EPS forecast, leaving the stock trading on just 9.6x PER.
NH:
Compass shares up 10p at 369p.
11:29AM
NH:
Is that the real David Schwartz on the right?
NH:
or an imposter?
BE:
Imposters will, of course, be hunted down and zapped.
NH:
yes
BE:
Zero tolerance.
NH:
life ban
NH:
with no chance of parole
11:31AM
BE:
While we’re here …
BE:
How’s Vodafone doing on news it’s going to sell the smugPhone?
BE:
It’ll be going to the moon, I assume.
NH:
Down. Down 2%.
NH:
off 2.95p at 141.5p
BE:
Eh? That can’t be right.
BE:
The smugPhone is wonderful.
BE:
There are apps for it.
BE:
you can use it as a tip calculator
BE:
and a spirit measure.
NH:
It’s bad news that they’re not getting Christmas, I guess.
NH:
Contract starts in early 2010.
NH:
Figure Apple don’t want to risk running low on supplies.
NH:
But Orange can start selling from next quarter, so it looks like Vodafone might have been shafted on this one.
NH:
There’s also a BNP Paribas note in circulation.
NH:
We recommend staying away from the temptation to play the cyclical rebound in European mobiles, hence our reiterated Underperform rating on Vodafone, (see our
separate report published today Over hyped cyclical story).
separate report published today Over hyped cyclical story).
BE:
Yeah – still waiting on the full note there.
BE:
Anyway, there is another potential loser from the Apple non-exclusivity stuff.
BE:
Carphone Warehouse.
BE:
Under the O2 deal Carphone was the only other chain able to sell smugPhone contracts.
BE:
And they’ve said previously that the Iphone was their bigggest selling handset.
BE:
So it seems certain they’re going to lose market share.
BE:
It’s a marginal negative, I guess, but a negative nevertheless.
Carphone Warehouse Group (CPW:LSE): Last: 192.40, up 1.7 (+0.89%), High: 192.60, Low: 187.50, Volume: 453.93k
BE:
And finally, Imagination Technologies apparently makes 30c per iPhone sold, versus something like 6c for Arm Holdings.
BE:
So you could argue the broader distribution’s going to be good for them.
Imagination Technologies Group (IMG:LSE): Last: 172.90, up 0.5 (+0.29%), High: 174.00, Low: 171.20, Volume: 76.02k
NH:
thanks for all that – seems to have woken up the ROTR
NH:
everyone loves an iPhone
NH:
more than Compass anyway
BE:
Yeah – nothing like Apple to rouse the rabble.
BE:
Good write-up about the fanboyism from Walrusface Brooker in the Guardian yesterday.
NH:
yes, saw that
BE:
Anyway, we should move on.
NH:
we should
11:35AM
NH:
Right, whoever just impersonated me
NH:
has been zapped
NH:
we don’t won’t to encourage that sort of thing
NH:
and in anycase
NH:
people with editorial privilleges
NH:
will appear in Red on the right
NH:
like Murphy
NH:
in the next ten mins
NH:
you have been warned
11:36AM
BE:
Ok – now that the unpleasantness has been dealt with
BE:
Should mention real estate. A bit weak this morning
NH:
we should, although Monkey is right: today’s unbelievable story is pretty disappointing
NH:
It’s not much fun worrying about your bills and where the next pay rise is coming from. But there is a silver lining – financial adversity could be good for you.
Researchers studying health in the Great Depression found that death rates dropped in the lean days of the early 1930s and increased when the economy expanded.
Read more: http://www.dailymail.co.uk/health/article-1216770/Cheer-Study-Great-Depression-shows-hard-times-good-health.html#ixzz0SUUcEdRE
NH:
see what I mean
BE:
Pretty sure all those guys living in Hooverville weren’t healthier as a result, but who am I to argue with the Daily Mail?
NH:
Right, real estate. One of the weakest sectors in the London market today
NH:
check this price action
Segro (SGRO:LSE): Last: 367.90, down 8.5 (-2.26%), High: 379.00, Low: 367.10, Volume: 556.31k
British Land Co (BLND:LSE): Last: 477.20, down 9.6 (-1.97%), High: 484.60, Low: 474.80, Volume: 1.46m
Land Securities Group (LAND:LSE): Last: 635.50, down 21 (-3.20%), High: 662.50, Low: 635.50, Volume: 1.08m
NH:
HMSO:LSE
Hammerson (HMSO:LSE): Last: 400.50, down 9 (-2.20%), High: 407.30, Low: 398.90, Volume: 990.48k
NH:
any reason for that?
NH:
well, traders are putting it down to a strategy note out of Credit Suisse today
BE:
Andrew Garthwaite?
NH:
yes
NH:
iI think so
BE:
can you paste?
NH:
Sure
NH:
Having raised weightings in April and June to overweight, we now downgrade UK real estate to benchmark for the following reasons:
• UK economic momentum is no longer the best. The UK has moved from top to bottom of our regional economic scorecard (based on the level and change in PMIs). Household leverage and house price valuations are more extended in the UK than the US and the structural government deficit is the worst in the OECD. We therefore reduce exposure to domestic UK sectors.
NH:
• Sterling. Credit Suisse’s FX team has lowered its 3-month Eu/£ forecast from 0.89 to 0.94. BoE’s QE programme is bigger than other major central banks as a proportion of GDP, the UK’s current account is beginning to deteriorate and the MPC appears to be indifferent to sterling weakness.
• Sensitivity to cost of debt. Previously, we had favoured real estate as it tends to outperform more than any other sector when the cost of debt falls. But since 18 September, we have been more cautious on credit.
NH:
• Real estate valuation. We believe the net cost of owning property is 2.8% and thus the required property yield is 6.5%. The current cap rate, after adjusting for a 10% decline in rents, is 7.1%. Hence, property should trade on a 9.5% premium to NAV on our calculations. With debt at 60% of sector EV, this translates into a 24% premium to equity EV. The average premium is currently 23%. P/E and P/B relatives are close to their historical averages.
• Switch into international stocks. GlaxoSmithKline, BAE Systems and Meggitt are Credit Suisse Outperform rated, with more than 50% of sales from outside the UK and P/E relatives below average, cheap on HOLT and have positive earnings momentum. We continue to be underweight retailing and benchmark UK banks.
BE:
Ok – thanks for that.
11:42AM
NH:
Right
NH:
as noted to the right
NH:
that Cadbury story is not new
NH:
appeared in the weekend press
NH:
Cadbury to shrink size of chocolate bars in fight off Kraft, Independent says
In an attempt to stave off a £10bn bid from Kraft Foods (KFT), Cadbury (CBY)is proposing to shrink the size of its chocolate bars to disguise price rises it will be forced to make next year because of high cocoa costs, the Independent reports. Finance director Andrew Bonfield admitted that the company has already decreased the size of bars abroad to keep prices below key levels which would deter buyers.Cadbury’s defence against the hostile bid from Kraft is expected to include a profits forecast. Cadbury’s CEO, Todd Stitzer, argued that “big is not necessarily better”. The Takeover Panel is investigating comments made by Mr Stitzer at a recent investors’ meeting referring to valuations
In an attempt to stave off a £10bn bid from Kraft Foods (KFT), Cadbury (CBY)is proposing to shrink the size of its chocolate bars to disguise price rises it will be forced to make next year because of high cocoa costs, the Independent reports. Finance director Andrew Bonfield admitted that the company has already decreased the size of bars abroad to keep prices below key levels which would deter buyers.Cadbury’s defence against the hostile bid from Kraft is expected to include a profits forecast. Cadbury’s CEO, Todd Stitzer, argued that “big is not necessarily better”. The Takeover Panel is investigating comments made by Mr Stitzer at a recent investors’ meeting referring to valuations
BE:
The PizzaExpress defence.
NH:
sounds ridiculous
NH:
there would be a backlash
NH:
and anothe reason for us to back Kraft
NH:
as long as we could insurances over the Chocolate Orange
BE:
Can’t have it shrinking to satsuma size.
NH:
no
NH:
not
11:44AM
NH:
What’s BNP doing after today’s cash call?
BE:
Seems to have gone down ok
BE:
Up 2.6% at 58e
NH:
I guess to some extend this was flagged
NH:
the CEO was talking in the FT last week
NH:
about repaying govt money
NH:
and that’s what todya’s cash is for?
BE:
Yup
BE:
4.3bn in new capital
BE:
To repay the government’s e5.1bn in preference shares.
NH:
OK
NH:
what’s the view from the street
BE:
Nomura cautious.
BE:
BNP capital increase – a positive step but not enough?
BE:
BNP’s repayment of government capital is clearly a positive step and the whole process was superior to a rights issue earlier in the year. However, with the core Tier 1 at 7.1% versus peers at 8-9% and IFRS derivative-adjusted leverage at 2.5% versus US peers at 4%, we question whether BNP Paribas will still be seen to have enough capital despite good risk management and decent core profitability. At 1.5x tangible book, we see limited upside potential for the shares.
BE:
This will leave the core Tier 1 at 7.1%, still below the 8.0% target that the industry is increasingly setting itself for retail banks and a more appropriate 9.0% for investment banks, in our view. Tangible equity/tangible assets will remain at just 2.5%, even after netting down derivatives, compared with a US standard of 4.0%.
BE:
•Although we estimate that BNP will earn around 60bp of Tier 1 capital in 2010 with a 25% payout ratio, we still believe that a G-20 mandated leverage ratio could require additional common equity or a significant balance sheet restructuring that could weigh somewhat on profitability.
BE:
•BNP states that the issue will be 8.4% accretive to ordinary earnings per share, although this assumes that the preference shares formed part of EPS, which we had not used in our calculation. We estimate the transaction is around 2% dilutive to our 2010 EPS forecast. Our tangible book value per share forecast for end-09 increases marginally to EUR 38.2 from EUR 38.1.
BE:
•While the share capital increase helps relieve an overhang and makes our view on the stock incrementally more positive, in our view the amount raised still does not put the question of capital sufficiency completely to rest given emerging requirements, particularly the leverage ratio. Trading at 1.5x tangible book versus the sector on 1.6x, we see limited upside potential considering BNP’s higher leverage and lower forecast growth on a three-year view (the normalisation of FICC trading offsetting growth in other businesses including Fortis).
NH:
thanks for that
NH:
of course
NH:
this is just the first of many cash calls to come from the banks
BE:
SocGen next, you’d imagine.
NH:
have Unicredit gone yet?
NH:
and then there is Lloyds
NH:
and RBS
BE:
Of course.
BE:
Any feedback from the ML conference today?
NH:
yep
NH:
there’s some comments from RBS’ Hester around
NH:
BN 9:09 *RBS SEES INTEREST RATES STARTING TO RISE IN 2011 :RBS LN
BN 9:08 *RBS SAYS `MOST OF HEAVY LIFTING’ IS DONE ON ASSET MARGIN SIDE
BN 9:07 *RBS SAYS ASSET MARGINS IN BANKING INDUSTRY NEED TO IMPROVE
BN 9:06 *RBS SAYS SEES INCOME GROWTH RATES `SINGLE-DIGIT’ :RBS LN
BN 9:04 *RBS SAYS 5-YR TECH INVESTMENT SPEND WILL MAKE RBS `FITTER’
BN 9:04 *RBS SAYS 5-YR TECH INVESTMENT SPEND WILL BE ABOUT 6 BLN PNDS
BN 9:01 *RBS SAYS COSTCUTTING PROGRAM `WELL UNDER WAY, AHEAD OF PLAN’
BN 9:01 *RBS SAYS COST/INCOME RATIOS `MUST IMPROVE’ :RBS LN
BN 8:56 *RBS SAYS ALL `CORE BUSINESSES’ HAVE NOT LOST CUSTOMERS IN YEAR
BN 8:55 *RBS SAYS ALL UNITS MUST `RETOOL’ TO FIX PREVIOUS WEAKNESSES
BN 8:53 *RBS SAYS 2013 VISION IS TO RETURN TO 15%+ SUSTAINABLE ROES
BN 8:52 *RBS SEES ROES STAYING BELOW PRIOR PEAKS :RBS LN
BN 8:52 *RBS’S HESTER SEES FOCUS FOR BANKS ON DISCIPLINED MARGIN REBUILD
CO3 8:52 Royal Bk Scot: The Royal Bank of Scotland Group plc (RBS
BN 8:50 *RBS’S HESTER COMMENTS IN WEBCAST TODAY :RBS LN
BN 8:50 *RBS’S HESTER SAYS BANKING `STILL CONTINUING’ TO CONSOLIDATE
BN 9:08 *RBS SAYS `MOST OF HEAVY LIFTING’ IS DONE ON ASSET MARGIN SIDE
BN 9:07 *RBS SAYS ASSET MARGINS IN BANKING INDUSTRY NEED TO IMPROVE
BN 9:06 *RBS SAYS SEES INCOME GROWTH RATES `SINGLE-DIGIT’ :RBS LN
BN 9:04 *RBS SAYS 5-YR TECH INVESTMENT SPEND WILL MAKE RBS `FITTER’
BN 9:04 *RBS SAYS 5-YR TECH INVESTMENT SPEND WILL BE ABOUT 6 BLN PNDS
BN 9:01 *RBS SAYS COSTCUTTING PROGRAM `WELL UNDER WAY, AHEAD OF PLAN’
BN 9:01 *RBS SAYS COST/INCOME RATIOS `MUST IMPROVE’ :RBS LN
BN 8:56 *RBS SAYS ALL `CORE BUSINESSES’ HAVE NOT LOST CUSTOMERS IN YEAR
BN 8:55 *RBS SAYS ALL UNITS MUST `RETOOL’ TO FIX PREVIOUS WEAKNESSES
BN 8:53 *RBS SAYS 2013 VISION IS TO RETURN TO 15%+ SUSTAINABLE ROES
BN 8:52 *RBS SEES ROES STAYING BELOW PRIOR PEAKS :RBS LN
BN 8:52 *RBS’S HESTER SEES FOCUS FOR BANKS ON DISCIPLINED MARGIN REBUILD
CO3 8:52 Royal Bk Scot: The Royal Bank of Scotland Group plc (RBS
BN 8:50 *RBS’S HESTER COMMENTS IN WEBCAST TODAY :RBS LN
BN 8:50 *RBS’S HESTER SAYS BANKING `STILL CONTINUING’ TO CONSOLIDATE
NH:
I think his full speech is up on the RBS website
NH:
the same with Varley of barclays
NH:
both stocks up
Barclays PLC (BARC:LSE): Last: 371.20, up 6.2 (+1.70%), High: 372.50, Low: 367.20, Volume: 16.56m
Royal Bank of Scotland Group (RBS:LSE): Last: 53.00, up 1.4 (+2.71%), High: 54.15, Low: 51.30, Volume: 59.51m
NH:
and good call on Soc Gen Bryce
BE:
Blimey – that was quick
NH:
RTRS-SOCGEN SAYS IT COULD CONSIDER STARTING REIMBURSING THE FRENCH STATE FROM EARLY 2010, MONITORING MARKET DEVELOPMENTS
11:51AM
NH:
Any more on that Autonomy takeover story from the other day?
BE:
No
BE:
But one of the bears has turned a bit more positive
BE:
Cazenove, interestingly
NH:
what they saying?
NH:
they reckon Autonmy’s accounts are questionable
BE:
Yeah – this is Daud Khan, who’s been quite a vocal critic of its acquisition accounting
BE:
However, like everyone else, he is resigned to the fact that Q3′s likely to pop the lightbulbs out.
BE:
Here’s the note.
BE:
Based on commentary from a recent conference, it appears likely that Autonomy will outperform
its lowered expectations for Q3 (revenue of $180m and EPS of 19c vs. prior consensus (source:
Bloomberg) of $200m in revenue and $23c EPS). Hence a positive trading statement in early
October almost seems inevitable. However, this is unlikely to fuel an upgrade for the balance of
the year as Q4 remains a heavily weighted quarter and in our view is unachievable without
considerable contribution from larger deals or perhaps an acquisition.
its lowered expectations for Q3 (revenue of $180m and EPS of 19c vs. prior consensus (source:
Bloomberg) of $200m in revenue and $23c EPS). Hence a positive trading statement in early
October almost seems inevitable. However, this is unlikely to fuel an upgrade for the balance of
the year as Q4 remains a heavily weighted quarter and in our view is unachievable without
considerable contribution from larger deals or perhaps an acquisition.
NH:
Based on commentary????
NH:
surely not quoted company would say anything price senstive at a conference
BE:
I’ve never known that to happen. NEVER.
BE:
The highly flagged launch of IDOL SPE is unlikely to contribute meaningfully to revenues until 2011 according to comments from the company. We have not seen any substantial evidence (e.g. TV advertisements, an increase in print advertising) of the planned marketing expenditure of $10-15m which was mentioned in the Q2 results. This is likely to assist in underlying EPS outperformance (against lowered guidance) at least in the short term.
Aside from the revenue and earnings expectations, we believe investors should investigate some of the financial movements around Interwoven. In our view the rapid decline of receivables from year end and the subsequent rapid ramp up post acquisition is inconsistent with the details the company have provided with regards to pre and post acquisition revenue. We detail our case later in the note and hope this is a trigger for the company to provide further disclosure.
Aside from the revenue and earnings expectations, we believe investors should investigate some of the financial movements around Interwoven. In our view the rapid decline of receivables from year end and the subsequent rapid ramp up post acquisition is inconsistent with the details the company have provided with regards to pre and post acquisition revenue. We detail our case later in the note and hope this is a trigger for the company to provide further disclosure.
BE:
The rest of the note details the usual concerns about accounting.
BE:
Which we have reported on many, many times and just don’t want to go away.
PM:
Hi there — can i say hello briefly
11:56AM
NH:
Morning Murph
BE:
Hi Paul.
BE:
Not slumming it with the ROTR today?
PM:
Fully understand your decision to review the Cadbury recommendation
PM:
Well, Ive half got my tech sorted out at home
PM:
so i thought i would see how it would work
PM:
Answer: get up earlier
NH:
PM:
So i wont hang around for long
NH:
OK
PM:
Just thought i would pass on this key link
NH:
go on
PM:
not sure whether you have pubbed yet
NH:
yes
NH:
we did
PM:
ah , fine
NH:
forge your expenses
PM:
apols
PM:
difficult to catch up quickly
BE:
No problem – it’s good enough to repeat.
NH:
yes
NH:
we have moved a bit quickly this morning
NH:
right we had better bring this to a close
NH:
I have two lunches to get to
PM:
Speak later
NH:
and need to be on my way
NH:
but before we go
NH:
on L&G
PM:
Heading in to the office
NH:
some people suggesting a merger wtih SLife
PM:
Oh yeah — L&G?
NH:
makes the most sense
NH:
and some more reaction to another bit of RAW from recent days. Novartis looking at AstraZeneca, which no one frankly believes.
NH:
such as Collins Stewart
NH:
Downgrading AZN to Sell, with price target of 2676p
After a strong run of newsflow we think investor attention might now
turn to
Crestor s looming patent challenge, with recent takeover talk
likely to come
to nothing. AZN has one of the steepest patent cliffs in the industry (and is
later over it than GSK). Our 2676p price target is NPV driven, whilst 2306p is
our adjusted CS Quest
Modeller value (includes capitalised R&D and 10
year forecasts).
After a strong run of newsflow we think investor attention might now
turn to
Crestor s looming patent challenge, with recent takeover talk
likely to come
to nothing. AZN has one of the steepest patent cliffs in the industry (and is
later over it than GSK). Our 2676p price target is NPV driven, whilst 2306p is
our adjusted CS Quest
Modeller value (includes capitalised R&D and 10
year forecasts).
NH:
Attention might now turn to Crestor patent challenge
January 10 patent trial for Crestor (statin, NPV 494p/share) looms largest.
We, and the market, expect AZN to win, with the drug protected until 16. But
it is unwelcome uncertainty for AZN s most valuable asset
(14% of 09E
Pharma sales, 20% of 16E). We re also relative bears of
Crestor s potential
(even if protected) as we are unconvinced that JUPITER data will lead to a
strong uptake in a new market segment (CRP).
January 10 patent trial for Crestor (statin, NPV 494p/share) looms largest.
We, and the market, expect AZN to win, with the drug protected until 16. But
it is unwelcome uncertainty for AZN s most valuable asset
(14% of 09E
Pharma sales, 20% of 16E). We re also relative bears of
Crestor s potential
(even if protected) as we are unconvinced that JUPITER data will lead to a
strong uptake in a new market segment (CRP).
NH:
AZN is possibly the most in-play of the Euro majors, but that doesn t make
a premium take-over likely in our view. (1) its market cap at £41bn is big in
the industry. (2) Novartis, most mentioned as likely acquirer, has its hands
full with Alcon, with major cash out in 10. (3) GSK emphatically rules it out,
Roche has Genentech, Sanofi too small, with most of the US players are
tied-up with existing deals. AZN (like Novartis) has intense pipeline
pressures over the next 5 years, but the most probable way out is costcutting
which we believe is a credible strategy. If not then a straight
merger looks far more likely than an attractive premium.
a premium take-over likely in our view. (1) its market cap at £41bn is big in
the industry. (2) Novartis, most mentioned as likely acquirer, has its hands
full with Alcon, with major cash out in 10. (3) GSK emphatically rules it out,
Roche has Genentech, Sanofi too small, with most of the US players are
tied-up with existing deals. AZN (like Novartis) has intense pipeline
pressures over the next 5 years, but the most probable way out is costcutting
which we believe is a credible strategy. If not then a straight
merger looks far more likely than an attractive premium.
12:00PM
NH:
Okay
NH:
thanks for tuning in today
NH:
good viewing figs today
NH:
and some good comments
NH:
although the imposter joke
NH:
is surely dead
NH:
and cannot be revived
BE:
That’s you lot told.
NH:
and
NH:
no figs
NH:
right
NH:
we are off
NH:
and yes
NH:
do look at the new table in the LR
NH:
http://ftalphaville.ft.com/longroom/tables/moorads-morning-shout
Moderation options
Moderation options
BE:
See you tomorrow.
NH:
cya