Markets live chat transcript for the chat ending at 12:14 on 4 Nov 2009. Participants in this chat were: Neil Hume, FT (NH) Miles Johnson, FT (MJ)
NH:
hola
NH:
it’s 11.03am
NH:
and time for Markets Live
NH:
60 minutes of stimulating markets chit chat here on the award winning
FT Alphaville
FT Alphaville
NH:
Miles is here
MJ:
Hello
NH:
and
NH:
we are pleased to report
NH:
everything is good with the world today
NH:
well the UK at least
NH:
Britons are still buying
NH:
clothes
NH:
new houses
NH:
and the market is up
MJ:
hang on
MJ:
Weren’t we advising people to reach for their tin hats yesterday?
NH:
er yes
NH:
we were
MJ:
And the FTSE was below 5000
MJ:
What is going on?
NH:
er dunno
NH:
this market is so skittish at the moment
NH:
no one trusts anything
MJ:
From this
MJ:
MJ:
To this
MJ:
MJ:
very skittish
NH:
Lorcan
NH:
on Tullow
NH:
this is the news being referred to
NH:
Nov. 4 (Bloomberg) — Tullow Oil Plc 19/64s Tweneboa field
offshore Ghana may hold as much oil as the nearby Jubilee field,
Tim O 19/64Hanlon, vice president for Africa, said at a conference in
Cape Town today.
offshore Ghana may hold as much oil as the nearby Jubilee field,
Tim O 19/64Hanlon, vice president for Africa, said at a conference in
Cape Town today.
Tullow Oil (TLW:LSE): Last: 1,193, up 35 (+3.02%), High: 1,203, Low: 1,157, Volume: 1.34m
NH:
Right
NH:
where shall we start?
NH:
quick market update
MJ:
FTSE is up
11:07AM
MJ:
40 points to 5077
MJ:
And the Great British Krona is doing well thismorning
MJ:
Cable at 1.6525
MJ:
An a euro buys 89.3p
NH:
this must be a reaction to Brown and Darling’s genuis banking rescue
NH:
really helped the UK economy
MJ:
That must be it
MJ:
They have saved the banking system again
NH:
indeed
11:09AM
NH:
what’s the gold price doing Miles?
NH:
still rising?
MJ:
Hit a new all-time high actually
MJ:
was up at $1094 a troy ounce
MJ:
Dollar is broadly weaker, so the old correlation obviously helps
MJ:
but
MJ:
that news about the IMF selling 200 tonnes to the Reserve Bank of India
NH:
So all those big name hedgies like Paul Tudor Jones will be feeling smug at the moment.
MJ:
has made already bullish gold bug go into overdrive
NH:
(Monkey that is grim)
MJ:
Well he certainly will
MJ:
This fits in perfectly with his argument about non-G7 G20 nations looking to diversify their reserves into gold
MJ:
In his most recent investir letter The Trader said Golds time had come
NH:
Can you put up the summary we did?
MJ:
I wil dig it out
MJ:
G7 central banks currently have around 35 per cent of their total reserves in gold, but the remaining G20 nations only have 3.5 per cent of their assets in gold — in spite of the fact that these same countries have made up close to 50 per cent of the increase in global reserves over the last five years.
If the the non-G7 central banks want to shift their gold allocation to 10 per cent, this would require the purchase of 370m troy ounces — or around 20 per cent of current, non-official, above ground supplies.
If the non-G7 central banks want to match the current c.35 per cent gold position of the G7 nations then they would have to purchase 1.3bn troy ounces, or 65 per cent of all non-central bank gold, according to Tudor Jones’ research.
If the the non-G7 central banks want to shift their gold allocation to 10 per cent, this would require the purchase of 370m troy ounces — or around 20 per cent of current, non-official, above ground supplies.
If the non-G7 central banks want to match the current c.35 per cent gold position of the G7 nations then they would have to purchase 1.3bn troy ounces, or 65 per cent of all non-central bank gold, according to Tudor Jones’ research.
MJ:
This is certainly one of the most lively macro/strategic debates at the moment
MJ:
how do countries with vast dollar reserves hedge their currency risk?
NH:
It is very interesting. The idea that China is trying to slyly shift into hard assets is becoming popular.
NH:
they are buying all these oil explorers
NH:
and produces
NH:
producers
MJ:
back to the idea that China is trying to edge away form the dollar
MJ:
and make the renminbi convertable
NH:
That would be very, very bad news for dollar
MJ:
I did a post on this a whle back
MJ:
can see it here if interested: http://ftalphaville.ft.com/blog/2009/09/03/69851/the-renminbi-black-swan/
NH:
right what have the analysts made of the India’s move
NH:
have we got any comment?
MJ:
Here is Barclays from lateer yesterday
MJ:
The sale was made from 19-30 October, and was equal to almost half of the 403.3 tonnes the IMF intended to sell. As an off-market deal, the sale confirms that such a large amount of gold won’t reach the open market, but more significantly, it reinforces the perception that Asian central banks are now looking to diversify their foreign exchange holdings, and that gold is their asset of choice. The RBI held
about 357.7 tonnes of gold before the purchase, which means that it has more than
doubled its holdings. However, our calculations (using the RBI’s annual report released in March this year and current prices for gold) show that gold reserves as a percentage of total reserves still remain relatively low at 8%, compared to key European central banks and the US which hold over 50% of their reserves in gold.
about 357.7 tonnes of gold before the purchase, which means that it has more than
doubled its holdings. However, our calculations (using the RBI’s annual report released in March this year and current prices for gold) show that gold reserves as a percentage of total reserves still remain relatively low at 8%, compared to key European central banks and the US which hold over 50% of their reserves in gold.
NH:
here’s a bit more reaction
NH:
Gold moved to fresh record highs today to current 1086, from yesterdays
close at 1062. The metal has taken out our topside resistance at 1067
and 1070 triggering stop loss buying. The focus has returned to the topside
in Gold with measured target 1106. Look for support now back near
former resistance levels
close at 1062. The metal has taken out our topside resistance at 1067
and 1070 triggering stop loss buying. The focus has returned to the topside
in Gold with measured target 1106. Look for support now back near
former resistance levels
NH:
that’s from Scotia Capital
11:15AM
MJ:
Just going back to sterling for a minute
MJ:
Some of the move was down to UK services PMI data which was out this morning
MJ:
came in at 56.9, rising from 55.3 in October
NH:
okay
NH:
and that was strong?
MJ:
was good
MJ:
But really the Fed meeting tonight is far more important
NH:
we will come to that a moment
NH:
but what about the PMI
NH:
figures please
NH:
I see you have done them
NH:
I have a slow system today
NH:
screen not updating
11:17AM
MJ:
Dollar basket slipping from yesterday’s one-month high ahead of the meeting
MJ:
Here is a line or two from BoA Merrill Lynch currency strategists
MJ:
For reading whilst Neils computer comes back online
MJ:
Our broad outlook for the USD remains to look for short-term negative pressures, but a recovery in 2010 against G10. The link between positive risk sentiment and a lower USD has been strong and we do not expect it to disappear immediately. Near-term positive growth news should continue to imply a USD-negative dynamic.
USD weakness is, however, already prompting further currency discussion from policymakers overseas, as foreign currency strength is proving painful at the macro level. While initial comments were more out of the political side, we have been recently hearing more commentary from central bankers, including ECB officials.
Policymakers in commodity producing countries have been particularly vocal. Concerns over recent currency strength against the USD are starting to influence monetary policy decisions in Norway, Canada and New Zealand. This rhetoric also reflects our view that previous G10 foreign currency strength is laying the groundwork for its own demise because of the damage it does to those economies
NH:
Thanks
NH:
right the Fed meeting
11:19AM
NH:
but before we get to that
NH:
here’s a Fitch flash
NH:
Fitch Ratings-London-04 November 2009: Fitch Ratings has today downgraded the Republic of Ireland’s Long-term foreign and local currency Issuer Default Ratings (IDRs) to ‘AA- ‘ from ‘AA+’ respectively. The Outlook on the Long-term IDR is Stable
NH:
So
NH:
the Fed meeting this evening
NH:
and the big question is will Ben change his language
NH:
recall that at the moment rates are on hold for an
NH:
extended period
NH:
will that be changed?
MJ:
er good question
MJ:
perhaps we should open this up the readers
NH:
good idea
MJ:
what do they think?
NH:
but if they want some clues
NH:
there is a very good post on the FT’s Money Supply blog today
NH:
by our Fed watcher Krishna Guha
MJ:
ah, Krishna
MJ:
very plugged in to the Fed
MJ:
what’s his view
NH:
well, he thinks the language stays on hold
NH:
but he says the Fed are starting to mull a change
NH:
and there’s a chance, albeit a small one
NH:
that they do signal a change this evening
NH:
which could create mayhem
MJ:
Interesting
MJ:
got the post?
NH:
hang on
NH:
will put some of it up
NH:
Will they / won’t they? All eyes will be on the Fed statement issued around 2pm EST Wednesday to see if there is any change to the “extended period” language the US central bank uses to guide market expectations of the future path of interest rates.
The current formula is as follows: “the Committee…continues to ancitipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Translated from Fedspeak: the committee does not expect to raise interest rates from the current level of near zero for a period some officials define as at least six months, others as longer than this.
The current formula is as follows: “the Committee…continues to ancitipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Translated from Fedspeak: the committee does not expect to raise interest rates from the current level of near zero for a period some officials define as at least six months, others as longer than this.
NH:
As I first reported in the FT ten days ago – and my excellent competitor Jon Hilsenrath of the WSJ subsequently confirmed – Fed officials are starting to mull changing the “extended period” language. I/we know this for a fact. The question is whether they are far enough along in this process to make a change at this meeting.
Unlike most analysts, I don’t think we can rule this out. But I do agree that the likelihood of a change this time is a good deal less than 50-50 – for two reasons: a) internal debate on this subject – which only recently got going – is lively and may not be ripe for resolution b) I believe that the Fed will prepare the ground for a statement change through speeches, testimony and/or minutes first in order to minimise the risk that it is misinterpreted by the market.
Unlike most analysts, I don’t think we can rule this out. But I do agree that the likelihood of a change this time is a good deal less than 50-50 – for two reasons: a) internal debate on this subject – which only recently got going – is lively and may not be ripe for resolution b) I believe that the Fed will prepare the ground for a statement change through speeches, testimony and/or minutes first in order to minimise the risk that it is misinterpreted by the market.
NH:
If there is a change at this meeting it is likely to come by way of policymakers adding conditionality to the “extended period” phrase rather than by way of diluting the time frame from “extended period” to eg “some time.” A conditional qualifier would be easier to agree at this stage and might not require explanation in advance.
Allow me to elaborate – with the caveat that this post is based on my own evaluation and not any eleventh hour tip-off from chairman Bernanke (Trust me: that isn’t how it works).
Allow me to elaborate – with the caveat that this post is based on my own evaluation and not any eleventh hour tip-off from chairman Bernanke (Trust me: that isn’t how it works).
Meanstream officials think the time has come when they need to start thinking about scaling back the “extended period” language. They worry that this implies a false degree of certainty as to their own expectations for the path of interest rates.
Mainstream officials do not expect to raise rates in the next six months, but think there is a chance they may have to do so. They do not want to be boxed in by their guidance and would like the statement to give a better sense of the range of possible outcomes and the way they would respond to different developments – ie their reaction function.
NH:
that’s a truncated version
NH:
there’s more on the Money Supply blog
NH:
worth a read
MJ:
what time is the Fed statement due?
NH:
just after 7.00pm I think
NH:
and good point on GM
NH:
over on the right
NH:
if they are feeling confident enough
NH:
not to flog their european operations
NH:
perhaps things are really getting better
11:23AM
NH:
Right, I just need to mention another blog
NH:
that’s starting tomorrow at the FT
NH:
The Return of Martin Lukes
MJ:
Excellent
MJ:
That should be fun
NH:
Lukes breaks silence
Jailed a-b glöbâl chief has shock new plans
Jailed a-b glöbâl chief has shock new plans
NH:
basically it’s a prison blog
NH:
here’s a taster
NH:
This is a reach-out to all of you who have been giving 230 per cent in your battle to secure my release. From tomorrow you’ll be able to read extracts from my prison blog
NH:
and you can read it here
MJ:
Ok
NH:
and Miles
NH:
this is a bit before your time
NH:
But Alphaville played a part in Martin’s imprisonment
MJ:
How so?
NH:
have a look at this, an old post from Murph
NH:
from a few years back
NH:
KRR, the US buyout group, is preparing an £8bn takeover of a-b global, the unfocused conglomerate led by Cindy Czarnikow, FT Alphaville has learnt.
Harry Kravis, one of KRR’s founding partners, is understood to be leading an acquisition team that has been working on a bid for at least three months. However, formal proposals have yet to be put to the a-b global board and sources close to the situation warned that an offer might yet fail to materialise
Harry Kravis, one of KRR’s founding partners, is understood to be leading an acquisition team that has been working on a bid for at least three months. However, formal proposals have yet to be put to the a-b global board and sources close to the situation warned that an offer might yet fail to materialise
NH:
“KRR have been doing some deep, deep due diligence on this one,” one broking source said. “They know what they are buying. They have done their homework. But, as ever with KRR, it will all come down to price.”
While a-b global has a presence in 30 countries, it is best known in Britain for the antics of its attention-seeking divisional chairman, Martin Lukes, whose enthusiastic promotion of a-b’s Integethics concept has drawn some scathing media coverage. Mr Lukes also found himself embroiled in a row with Greenpeace recently after shooting a polar bear while on a corporate team building exercise in the Arctic Circle.
While a-b global has a presence in 30 countries, it is best known in Britain for the antics of its attention-seeking divisional chairman, Martin Lukes, whose enthusiastic promotion of a-b’s Integethics concept has drawn some scathing media coverage. Mr Lukes also found himself embroiled in a row with Greenpeace recently after shooting a polar bear while on a corporate team building exercise in the Arctic Circle.
NH:
In London, market sources indicated that rumours of a bid for a-b had begun to circulate quite suddenly on Monday morning, leading to a sharp increase in trading volumes and a near-10 per cent rise in a-b’s share price — activity that is now likely to be investigated by market regulators.
Asked about the price move on Wednesday, a spokeswoman for the Financial Services Authority said she could not comment on individual companies, but added that all suspicious price movements were examined as a matter of course.
Asked about the price move on Wednesday, a spokeswoman for the Financial Services Authority said she could not comment on individual companies, but added that all suspicious price movements were examined as a matter of course.
MJ:
So he was nicked for insider trading?
NH:
er yes
NH:
I think he was
NH:
and his son was involved to
NH:
if I remember correctly
NH:
Carlo
MJ:
Proto-Raj
NH:
won’t be running until tomorrow
11:26AM
NH:
Right some flashes on the Fitch Ireland move
NH:
RTRS-EURO FALLS BROADLY AFTER FITCH DOWNGRADES IRELAND’S SOVEREIGN RATING
11:13 04Nov09 RTRS-EURO FALLS AROUND 20 TICKS VS DOLLAR TO $1.4740
11:18 04Nov09 RTRS-10-YR IRISH/GERMAN GOVT BOND YIELD SPREAD WIDENS 2 BPS TO 148 BPS AFTER FITCH DOWNGRADES IRELAND
11:25 04Nov09 RTRS-IRISH 5-YR CDS WIDENS TO 144.7 BPS FROM 142.4 BPS AFTER FITCH DOWNGRADES IRELAND – CMA DATAVISION
11:13 04Nov09 RTRS-EURO FALLS AROUND 20 TICKS VS DOLLAR TO $1.4740
11:18 04Nov09 RTRS-10-YR IRISH/GERMAN GOVT BOND YIELD SPREAD WIDENS 2 BPS TO 148 BPS AFTER FITCH DOWNGRADES IRELAND
11:25 04Nov09 RTRS-IRISH 5-YR CDS WIDENS TO 144.7 BPS FROM 142.4 BPS AFTER FITCH DOWNGRADES IRELAND – CMA DATAVISION
NH:
and also
MJ:
Stacy has done a post on the Irish banks
MJ:
and NAMA
MJ:
For all our Irish readers
NH:
yes, that should be up soon
11:27AM
NH:
let’s head to the banking sector for a moment
MJ:
must we?
MJ:
I am all banked out at the moment
NH:
well, this is quite light hearted
MJ:
go on
NH:
well, I was laughing out loud on the train this morning
MJ:
why?
NH:
at the comments made by John Varley yesterday
MJ:
what
MJ:
about profit not being satanic?
NH:
no, but that’s funny as well
NH:
as is Izy’s post
NH:
Varley’s Inferno
MJ:
Can be seen here
NH:
what was making me chuckle
NH:
were the comments on yesterday’s corporate reshuffle
NH:
that has basically spilt Barclays in two
NH:
one giant IB run by Bob, Bigger than Jesus, Diamond
NH:
and the other, a retail bank
MJ:
Right
NH:
have a look at his
NH:
We see a remorseless increase and acceleration in the demands from our commercial clients on the skill sets housed in our wealth management business and BarCap,” said Mr Varley.
NH:
that’s from the FT
MJ:
say what?
NH:
yep
NH:
they did it all for their corporate clients
NH:
because they are just sooooo desperate to access some of Bob’s whizzy products
MJ:
oh pleezzze
MJ:
who believes that?
MJ:
it strikes me they gave Bobby D and the gang a bigger empire
MJ:
because he had threatened to take the top job at BoA
MJ:
or at least go for interview
NH:
and understandably the head of the retail bank Fritz Seegers
NH:
was none to pleased to see a part of division annexed
NH:
so he was removed
NH:
or executed
NH:
well, that’s my reading of it
NH:
and here’s what ING made of it all
NH:
Barclays has announced a divisional reorganisation and
management changes on the same day that the UK government
has announced investments in its competitors. The reporting
structure after FY09 is unclear, and we are concerned about a loss
of visibility on the divisions. To allay fears, Barclays has issued
guidance that group PBT in 3Q09 was consistent with the run rate
in 1H09. The 3Q09 trading update is on 10 November. HOLD
management changes on the same day that the UK government
has announced investments in its competitors. The reporting
structure after FY09 is unclear, and we are concerned about a loss
of visibility on the divisions. To allay fears, Barclays has issued
guidance that group PBT in 3Q09 was consistent with the run rate
in 1H09. The 3Q09 trading update is on 10 November. HOLD
Two new business groupings. A new Global Retail Banking division (GRB) has been created that will embrace UK Retail, Barclaycard, and the former GRCB Western Europe and Emerging Markets businesses after the FY09 results. It is the former Global Retail and Commercial Banking (GRCB) grouping minus Barclays Commercial Bank. GRB will be run by Anthony Jenkins, formerly head of Barclaycard. Frits Seegers, erstwhile head of GRCB, will leave.
NH:
Corporate & Investment Banking and Wealth. The old IBIM (Investment Banking
and Investment Management) with the imminent loss of BGI is being recast as
Corporate and Investment Banking (CIB) and Wealth, with the inclusion of Barclays
Commercial Bank (formerly in GRCB). The division within Barclays of a self-funding GRCB and wholesale dependent IBIM is undone further with the transfer of the Commercial Bank to add to Wealth and the corporate deposits in Barcap.
and Investment Management) with the imminent loss of BGI is being recast as
Corporate and Investment Banking (CIB) and Wealth, with the inclusion of Barclays
Commercial Bank (formerly in GRCB). The division within Barclays of a self-funding GRCB and wholesale dependent IBIM is undone further with the transfer of the Commercial Bank to add to Wealth and the corporate deposits in Barcap.
Reporting structure uncertain in 2010. After the FY09 results, there is no clarity on
how much detail within the two new groupings will be disclosed. There is a risk that
deteriorating trends within the UK bank and Barclaycard may become obscured in
2010. SME lending on businesses below £1m turnover is reported within Retail and
otherwise in the Commercial Bank. In addition, we forecast a small loss in 2010 in both Barclaycard and UK Retail, driven by higher impairments and rising unemployment.
We believe these forecasts are at the bottom of the consensus range.
Executive Committee expanded from three to 11, as heads of business and
function heads join. This is being billed by Barclays as a promotion of talent as well as recognition that regulation and risk management are taking a more prominent role in the business.
NH:
Why announce on a crowded day? We are surprised that the announcement of a
strengthening in the business has coincided with significant news from Lloyds and
RBS. However, to allay fears that these changes portend bad news at the upcoming
interim management statement, Barclays has included a one-line guide to 3Q09 that
group pre-tax profit was consistent with the run rate for 1H09.
7% downside to unchanged target price. Barclays will issue its 3Q09 trading update on 10 November. We maintain our HOLD rating in the meantime.
strengthening in the business has coincided with significant news from Lloyds and
RBS. However, to allay fears that these changes portend bad news at the upcoming
interim management statement, Barclays has included a one-line guide to 3Q09 that
group pre-tax profit was consistent with the run rate for 1H09.
7% downside to unchanged target price. Barclays will issue its 3Q09 trading update on 10 November. We maintain our HOLD rating in the meantime.
MJ:
Well, whatever your take on this is, the shares are up
Barclays PLC (BARC:LSE): Last: 333.70, up 10.25 (+3.17%), High: 338.00, Low: 329.65, Volume: 18.24m
NH:
well I guess they are trading well at the moment
NH:
guidance was good in yesterday’s reshuffle announcement
NH:
what about the rest of fabulous banking sector
NH:
any movement?
MJ:
both up actually
MJ:
Even RBS
Royal Bank of Scotland Group (RBS:LSE): Last: 37.00, up 1.07 (+2.98%), High: 37.70, Low: 36.20, Volume: 44.12m
MJ:
And Lloyds up 0.4p at 87.7p
NH:
(Policy Makers – Jose)
NH:
well at least Northern Rock are trading well
NH:
just for this from an analyst
NH:
Northern Rock Q3 trading has improved, unsurprisingly ahead of a likely sale. Higher net interest income and lower impairments. Outlook statement is cautious due to subdued conditions in mortgage & housing markets, and continued rise in unemployment and economic weakness. Still, it acknowledges that recent trends have been “encouraging”. In short, we see this is another positive indicator of the turnaround in the UK housing market, and further vindicates our Buy on Lloyds, who are the most geared into this theme.
MJ:
That is a rather cynical view
NH:
well
NH:
justified
NH:
I think
11:34AM
NH:
OK
NH:
time to go shopping
NH:
because we have results from M&S
NH:
and Next
NH:
and both have gone down reasonably well
MJ:
er
MJ:
I would say very well
MJ:
have you seen the share prices?
MJ:
Both are flying
Marks and Spencer Group (MKS:LSE): Last: 360.80, up 19.8 (+5.81%), High: 369.90, Low: 352.10, Volume: 16.24m
Next (NXT:LSE): Last: 1,923, up 113 (+6.24%), High: 1,937, Low: 1,865, Volume: 1.56m
NH:
Hmmm
NH:
just looking at M&S
NH:
seems that profits were around 7% higher than expected due mainly to improved margins
NH:
and current trading looks to be good
NH:
probably down to that Roast meal offer for £15
NH:
that includes a bottle of vino too
NH:
in fact like for like sales are probably positive, although the comparatives are weak
NH:
in fact
NH:
from what I have seen
NH:
looks like we are going to get profit upgrades of around 7%
MJ:
right
MJ:
where will that leave them?
NH:
around £620-630mn, or EPS of 28.4p-28.8p
NH:
that compares with vs 28p last year.
MJ:
So they have come through the downturn unscathed then?
NH:
yes, thanks to cost cutting and effiencey drive
MJ:
Britain keeps spending
NH:
the power of lower interest rates?
MJ:
and what about Next
NH:
like for like sales are positive in third quarter – and that’s a real surprise
NH:
a big change to guidance in fact
NH:
the company was telling the City to expect LFL’s down 3.5% to -6.5% for the 2H
NH:
but today that’s been revised to 0 to -3%.
MJ:
that’s a big upgrade
NH:
well, in sales terms yes
NH:
but for profits Next is telling analysts to move their forecasts up by 7% better to to £472m PBT or EPS of 172p
MJ:
still impressive
MJ:
what’s driving it?
NH:
well
NH:
the Directory business
NH:
although
NH:
I am puzzled y this
NH:
the performance of Next
NH:
is really at odds with what Philip Green has been saying
NH:
although he is focused on a younger demographic
MJ:
I would have thought
MJ:
the mild weather would have hit sales
NH:
obviously not
MJ:
what have the analysts made of this?
NH:
hang on
11:40AM
NH:
here’s Cazenove on MKS
NH:
M&S – interim results [MKS.L MKS LN] 341p, IN-LINE, Sector – Overweight
- Headline PBT of £298.3m compares with last year’s £297.8m (Caz estimate £286m, consensus per M&S £285m). As expected, the interim dividend has been reduced by 33% to 5.5p, in line with the reduction flagged with the final payment at the prelims.
- Sales performances have already been announced (GM lfl -1.6%, Food -0.2%). Gross margins were -30bps in GM (est: flat) and down by just 65bps (est: -220bps) in Food with better buying and lower wastage partially mitigating price investment. H1 opex rose by 0.4% pre the bonus provision. UK Retail EBIT fell from £318m to £299.1m (estimate: £293m) after a higher bonus provision that we would have expected at this stage of £30m.
- Headline PBT of £298.3m compares with last year’s £297.8m (Caz estimate £286m, consensus per M&S £285m). As expected, the interim dividend has been reduced by 33% to 5.5p, in line with the reduction flagged with the final payment at the prelims.
- Sales performances have already been announced (GM lfl -1.6%, Food -0.2%). Gross margins were -30bps in GM (est: flat) and down by just 65bps (est: -220bps) in Food with better buying and lower wastage partially mitigating price investment. H1 opex rose by 0.4% pre the bonus provision. UK Retail EBIT fell from £318m to £299.1m (estimate: £293m) after a higher bonus provision that we would have expected at this stage of £30m.
NH:
- There is no announcement at this stage on the triennial actuarial pension revaluation and any associated deficit funding requirements, which is likely to be announced in the New Year.
- M&S is not changing its existing guidance on FY10 full year gross margins (-50bps to -100bps), which looks at odds with the better than expected performance in Food in H1, operating costs (flat to +1% pre bonus) or capex (£400m). However, given the interim PBT number and the bonus provision already taken together with the positive comments on October trading (Food as well as GM we understand), we are likely to upgrade our full year PBT estimate of £585m (EPS: 26.6p) to at least £630m (EPS: 28.6p).
- While we maintain a sceptical view of M&S’ fundamentals looking out into the medium term, sentiment is already negative with the shares having behaved poorly since the upgrades on the Q2 IMS and the Investor Day, and should be due a rally on the back of upgrades which we do not believe had been discounted.
- M&S is not changing its existing guidance on FY10 full year gross margins (-50bps to -100bps), which looks at odds with the better than expected performance in Food in H1, operating costs (flat to +1% pre bonus) or capex (£400m). However, given the interim PBT number and the bonus provision already taken together with the positive comments on October trading (Food as well as GM we understand), we are likely to upgrade our full year PBT estimate of £585m (EPS: 26.6p) to at least £630m (EPS: 28.6p).
- While we maintain a sceptical view of M&S’ fundamentals looking out into the medium term, sentiment is already negative with the shares having behaved poorly since the upgrades on the Q2 IMS and the Investor Day, and should be due a rally on the back of upgrades which we do not believe had been discounted.
NH:
and on Next
NH:
- In the October quarter Next Retail sales are 2.2% ahead in total and are down by 1.3% like for like. This compares with management’s budgeting assumption for H2 overall for lfl’s to be down in the range of -3.5% to -6.5%. Next has now revised this lfl guidance to flat to -3%. Given that a) Q3 would have been hindered somewhat by unseasonably warm weather and b) that the comps are sharply weaker over the next couple of months, this could still be conservative. We would now assume no worse than flat H2 lfl’s versus our previous assumption of -3%.
- Next Directory sales are 5.1% ahead versus Next’s expectations of flat to +2% in H2 as a whole, with this guidance now revised to +4% to +6%.
NH:
- Management’s guidance for H2 of a broadly flat bought-in gross margin is not explicitly changed. The company is indicating that it expects full year market consensus PBT rising from £442m to c.£472m. We are likely to upgrade our FY10E PBT estimate from £450m to the area of £480m (EPS: 177.5p) on the lfl sales projection above. We would point out that Next’s profit guidance usually has significant contingencies built in.
- While the shares have recently held up better than a number of retail peers, in our view today’s update provides scope for further upside, with the PE (10.2x to January 2010E) on our revised numbers showing a material discount to the sector of around 25%. In this context the likelihood that Next may be on the verge of turning lfl positive for the first time in over four years could prove to be a watershed moment for the valuation.
NH:
and here’s Merrill on both
NH:
M&S has reported interim results ahead of our expectations with PBT (pre
property disposals) of £298mn vs our £291mn estimate and consensus of
£285mn. Fully diluted EPS was 13.7p compared to our 13.3p (-3% yoy) estimate.
Net debt was £2.4bn, below our £2.85bn forecast and DPS was 5.5p as
expected. M&S states that it has made a “good start to the third quarter” but
predictably remains cautious about the outlook for Christmas and the year ahead.
property disposals) of £298mn vs our £291mn estimate and consensus of
£285mn. Fully diluted EPS was 13.7p compared to our 13.3p (-3% yoy) estimate.
Net debt was £2.4bn, below our £2.85bn forecast and DPS was 5.5p as
expected. M&S states that it has made a “good start to the third quarter” but
predictably remains cautious about the outlook for Christmas and the year ahead.
NH:
We see these results as the first step in creating a more sustainable, less volatile
earnings stream going forward.
earnings stream going forward.
On pension M&S has stated that its deficit for accouting purposes was £521mn at
H1, up from £152mn at the full year, owing to an increase of £1bn in liabilities,
offset by an increase of £700mn in assets. M&S is not yet in a position to give an
update on the size of its pension deficit following its triannual actuarial review,
however we do not expect any onerous cash contributions – our model assumes a
£50mn cash contribution per year over the next 10 years.
Following these results we see £40-50mn upside risk to consensus PBT
estimates of £580mn. We view M&S’ valuation as attractive at these levels, as it
is trading at a 3% discount to the UK non-food retail sector, despite its size, asset
backing (property last valued at £3.6bn in the summer of 2004) and increasing
international exposure.
NH:
and once again
NH:
Next
NH:
Next has reported sales for the third quarter to end of October. Next Retail sales
were +2.2% ahead of our -0.6% forecast, with LFL sales -1.3% vs. our -4.0%
estimate and Directory sales +5.1% vs. our -0.8% forecast. Given improved
consumer confidence among mid market shoppers and given Next’s stable
relative pricing, we thought our LFL sales estimate was likely to prove
conservative, and that buy side expectations were closer to flat, even so this is a
very strong performance.
were +2.2% ahead of our -0.6% forecast, with LFL sales -1.3% vs. our -4.0%
estimate and Directory sales +5.1% vs. our -0.8% forecast. Given improved
consumer confidence among mid market shoppers and given Next’s stable
relative pricing, we thought our LFL sales estimate was likely to prove
conservative, and that buy side expectations were closer to flat, even so this is a
very strong performance.
NH:
In terms of profit guidance Next anticipates the market consensus for full year
PBT will increase by around £30m to circa £472m (BofAML current forecast
£447mn). This would represent an increase of 10% over last year’s profit of
£429mn, compared to its guidance given at the time of the half year results on
Sept 16 for PBT to be around the same level as last year. This comes from better
cost control and a less damaging FX impact than anticipated.
Prior to today, Next was trading on c.10.5x cal. 2010 P/E, a c.10% discount to the
UK General Retail sector average. Valuation looks particularly undemanding
relative to return on capital employed. However for us to generate meaningful
upside to our price objective Next would have to generate positive LFL sales
growth next year.
PBT will increase by around £30m to circa £472m (BofAML current forecast
£447mn). This would represent an increase of 10% over last year’s profit of
£429mn, compared to its guidance given at the time of the half year results on
Sept 16 for PBT to be around the same level as last year. This comes from better
cost control and a less damaging FX impact than anticipated.
Prior to today, Next was trading on c.10.5x cal. 2010 P/E, a c.10% discount to the
UK General Retail sector average. Valuation looks particularly undemanding
relative to return on capital employed. However for us to generate meaningful
upside to our price objective Next would have to generate positive LFL sales
growth next year.
MJ:
Thanks for that
11:41AM
NH:
Debbie noted Afren
NH:
been loads of newsflow from the company recently
NH:
and I think the idea is
NH:
to get the company into the FTSE 250
NH:
by the next index review
NH:
in December
NH:
that should trigger a load of tracker fund buying
MJ:
What is Afren doing?
NH:
shares up 9.2% to 95p
NH:
Afren has been an amazing performer since March
NH:
was down at 13p back then
NH:
I have a not on this
MJ:
Neil is just digging that out
NH:
here is the not(e)
NH:
from Morgan Stanley
NH:
Growing momentum: A small acquisition in offshore
Nigeria continues to build Afren’s exploration inventory
in the Cretaceous play (alongside Cote d’Ivoire and
Ghana) – see reserve update overleaf. Following on
from the positive update on Ebok (Nigeria) appraisal and
development yesterday, confirmation of the proposed
admission to the LSE main board highlights the
momentum behind the growth story at Afren. Listing is
targeted for early December subject to approvals from
the UKLA and the LSE. We expect further colour with
the analyst presentation this afternoon. Maintain OW
Nigeria continues to build Afren’s exploration inventory
in the Cretaceous play (alongside Cote d’Ivoire and
Ghana) – see reserve update overleaf. Following on
from the positive update on Ebok (Nigeria) appraisal and
development yesterday, confirmation of the proposed
admission to the LSE main board highlights the
momentum behind the growth story at Afren. Listing is
targeted for early December subject to approvals from
the UKLA and the LSE. We expect further colour with
the analyst presentation this afternoon. Maintain OW
NH:
Asset acquisition strategy maintained: Afren has
announced a farm-in to Block OPL 310, offshore
western Nigeria with 70% effective working interest
alongside indigenous player Optimum Petroleum. The
block is adjacent to the Aje field which has recently been
declared commercial. We think the upfront commitment
from Afren is relatively small (c.US$3m), with a further
US$10m payment when the license converts and
subsequent US$4m at first oil. Seismic data for the area
has been acquired and a number of prospects identified,
albeit drilling is not planned until 2011 – in aggregate,
the company resource estimate for the block is 330mb
unrisked.
announced a farm-in to Block OPL 310, offshore
western Nigeria with 70% effective working interest
alongside indigenous player Optimum Petroleum. The
block is adjacent to the Aje field which has recently been
declared commercial. We think the upfront commitment
from Afren is relatively small (c.US$3m), with a further
US$10m payment when the license converts and
subsequent US$4m at first oil. Seismic data for the area
has been acquired and a number of prospects identified,
albeit drilling is not planned until 2011 – in aggregate,
the company resource estimate for the block is 330mb
unrisked.
NH:
Adding to the Cretaceous exploration potential: In
addition to applying understanding of the West Africa
Cretaceous play on blocks CI-01 (Cote d’Ivoire) and
Keta (Ghana), Afren highlight the additional potential
from block OPL 310 where a number of prospects in the
Cenonian and Turonian sandstone reservoirs (Upper
Cretaceous) have been identified and potentially
increase Afren’s exposure to this play.
Near-term catalysts: 1) Analyst presentation today at
3pm (UK time). 2) A further update on the drilling of the
deeper D2 and Qua Iboe sands at Ebok-5. 3) Post
completion on Ebok-5, the Adriatic IX rig will then move
on to the D2 Southern Lobe prospect with results
expected in December (unrisked c.6p/sh). 4) Publication
of the listing prospectus ahead of the move to the main
board in early December.
addition to applying understanding of the West Africa
Cretaceous play on blocks CI-01 (Cote d’Ivoire) and
Keta (Ghana), Afren highlight the additional potential
from block OPL 310 where a number of prospects in the
Cenonian and Turonian sandstone reservoirs (Upper
Cretaceous) have been identified and potentially
increase Afren’s exposure to this play.
Near-term catalysts: 1) Analyst presentation today at
3pm (UK time). 2) A further update on the drilling of the
deeper D2 and Qua Iboe sands at Ebok-5. 3) Post
completion on Ebok-5, the Adriatic IX rig will then move
on to the D2 Southern Lobe prospect with results
expected in December (unrisked c.6p/sh). 4) Publication
of the listing prospectus ahead of the move to the main
board in early December.
NH:
they have a target price of 110p
MJ:
(Lorcan – RE: Exxilon did you see this story: http://www.ft.com/cms/s/0/a9a09016-c8b6-11de-8f9d-00144feabdc0.html)
NH:
it looks like a lof of ex Petro Kazakhastan people
NH:
Re Exxillon
NH:
Merrill, Ing and Mirabaud doing the float
NH:
and the company has some ambitious plans
NH:
targeting 40 kboed by 2014 from about 2 kboed now
MJ:
They want to do it by the end of the year
MJ:
maybe even annnounce it by end of this month
MJ:
First big Russian float on the LSE in 18 months
NH:
indeed
11:47AM
NH:
moving on
NH:
what on earth has got into the housebuilders this morning?
NH:
Look at this
Persimmon (PSN:LSE): Last: 419.00, up 35.7 (+9.31%), High: 423.50, Low: 390.00, Volume: 1.67m
Taylor Wimpey (TW:LSE): Last: 40.37, up 3.4 (+9.20%), High: 41.00, Low: 38.97, Volume: 15.92m
Redrow (RDW:LSE): Last: 150.50, up 11.1 (+7.96%), High: 151.90, Low: 142.30, Volume: 1.55m
Barratt Developments (BDEV:LSE): Last: 130.00, up 9.1 (+7.53%), High: 132.00, Low: 125.00, Volume: 20.02m
MJ:
wow
MJ:
well the rumps in Redrow and Barratt are being placed
MJ:
120.9p in Barratt in fact
MJ:
every thing looks to be going quite smoothly
MJ:
also, results from Taylor Wipe-up are out
MJ:
and they are reporting improved trading conditions
MJ:
it is now fully sold for 2009!
MJ:
and
MJ:
its order book stands at £1bn!!
MJ:
In fact
MJ:
it says sales rates have remained solid since the half year
MJ:
Private reservation rates for H2
MJ:
have been 0.56 homes per site per week
MJ:
Cancellation rates remain low at 16%
MJ:
and
MJ:
Prices have risen over the past three months
NH:
what
NH:
am I missing something here
NH:
retailers flying
NH:
housebuilders flying
NH:
is the recession over
NH:
or was that Q3 GDP figure just a load of rubbish?
MJ:
erm
MJ:
pass
NH:
but they are some really positive comments from Wipe-up
NH:
amazingly so
NH:
any comment
MJ:
yep
MJ:
here’s Mark Hake at Merrill’s
NH:
Hake = good analyst
MJ:
Overall reads well- pretty positive. Constraint still is lack of mortgage availability.
Demand/activity/reservation rates- summer did not see normal slowdown, and
reservations remained solid at 0.56 units per site per week vs 0.4 this time last
year and 0.65 in H1. Autumn has seen this continue.
Cancellation rates at 16% vs H1 at 19%.
Forward orderbook- fully sold for 2009, selling into next year. Stands at £1bn vs
£1.06bn this time last year.
ASPs have edged higher, c9% up y-o-y at £163,000, reflecting underlying price
improvemenst as well as mix changes.
MJ:
They have increased build rates, opening 22 new sites in H2 so far, making 317
active sites.
active sites.
Still very little activity in the land market, but some liquidity coming back.
North America- continued to be stable and prices are flat vs H1 at $275k.
Selling rates flat vs h1 at 0.6 units per site per week.
Cause for optimism into next year.
Foreclosures still an issue but have not made any additional negative effect in H2,
while affordability described as good and inventories have continued to reduce.
Orderbook $0.95bn vs $1.21bn this time last year.
Net group debt was £860m (gearing of 54%) and indicates that y/e will be under
£800m, £100m lower than previous guidance.
Indicate that they do not expect further land provisions unless their is materialadverse change to main markets.
Our current forecasts as follows:
2009 PBT of -£111m and EPS of -3.8p.
2010 PBT of £5.5m and EPS of 0.1p
Happy to retain a BUY opinion, price target of 67p.
MJ:
and here’s Investec
MJ:
We believe TW and the sector could be up today – possibly strongly – on the
back of a mainly upbeat IMS from TW, a good 97% rights take-up from Redrow
(but slightly more circumspect IMS, rec: Hold) and a less-bad-than-anticipated
92% rights take-up from Barratt (Sell).
back of a mainly upbeat IMS from TW, a good 97% rights take-up from Redrow
(but slightly more circumspect IMS, rec: Hold) and a less-bad-than-anticipated
92% rights take-up from Barratt (Sell).
MJ:
TW’s trading statement refers to the UK housing market being “significantly
better than in same period in 2008″. Its own performance had been
“encouraging”.
better than in same period in 2008″. Its own performance had been
“encouraging”.
The UK business is now fully sold for 2009 (normal at this time of year, in our
view). It is managing price rises due to the mix and underlying increases. The
£177k average price in the order book is higher than the £172k in our FY10E
estimates, but we believe this may be at the expense of lower volumes.
Transactions in the land market are “well below normal levels” and company is
“cautious on large scale land purchases”.
MJ:
North American outlook is “cautiously optimistic”, but there is no word on the
sale of the business. We believe the group should retain the US, but suspect
that the market wants a sale.
sale of the business. We believe the group should retain the US, but suspect
that the market wants a sale.
There is an analyst visit to Andover today. If the company reveals that a US sale
is unlikely in the short-term, there could be downward pressure on the shares.
We remain cautious on the sector, but as we stated in our 14 September sector
initiation, ‘Curb your enthusiasm’, we see short-term trading opportunities, and
after recent steep falls in the sector, stocks are arguably approaching interesting
levels.
NH:
I bet Wipe-up and its friends are praying the BoE keeps prining money
NH:
actually
NH:
I don’t think they will increase QE tomorrow
NH:
but I guess we could get an extra £25bn
11:54AM
NH:
Any 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.
MJ:
Not that much raw RAW
MJ:
A bit but we will come on to that after
MJ:
chatting about Kradbury for a bit
NH:
oh yes
NH:
Kraft released its third quarter numbers after the US close last night. Nothing special there – bit disappointing in fact.
MJ:
beat EPS expectations
MJ:
raised full year earnings guidance, but no one seemed particularly impressed
MJ:
See here
MJ:
Shares in the largest US food company fell more than 3 per cent in after-hours trading in New York, to $26.90, taking Kraft’s stock down to levels seen after it unveiled its $16.7bn approach to Cadbury in early September.
The sell-off came despite Kraft reporting earnings of 55 cents per diluted share, exceeding the 48 cents that Wall Street analysts expected.
NH:
And I take there was little sight of a knock out bid coming on Monday?
MJ:
Irene was, somewhat predictably, quite conservative
MJ:
Said all the standard stuff about maintaining the IG credit rating
MJ:
and dividend. “Disciplined approach”.
MJ:
Cadbury shares are off a bit
MJ:
Down 4p at 773p
NH:
Can you wack up some of the latest comment?
MJ:
Sure thing
MJ:
Here is JP Morgan’s latest take
MJ:
• We now project lower merger cost benefits. We are cutting our synergy
estimates now that Cadbury has clarified that sales force costs are not part
of marketing and selling expenses and are actually included in
administrative expenses (see note). We now project $1B in cost benefits
vs. $1.6B before (our number is not too far above the combined KFT
synergy estimate of $625M and VIA potential gains of $155M).
estimates now that Cadbury has clarified that sales force costs are not part
of marketing and selling expenses and are actually included in
administrative expenses (see note). We now project $1B in cost benefits
vs. $1.6B before (our number is not too far above the combined KFT
synergy estimate of $625M and VIA potential gains of $155M).
• We doubt KFT will go over 780p. In its 3Q call on Tuesday evening
KFT reminded investors of its four deal criteria: cash EPS accretion by
year 2, ROIC well ahead of WACC, able to keep investment grade, and
maintain dividend per share. We calculate that our above guidance cost
benefits assumptions would allow KFT to pay an extra 70-80p (on the base
offer currently worth 735p) and keep its IROIC target. We also argue the
company could increase the cash component of the offer to c70% (from
40% in the base offer) and end up with a still investment grade 3.5x net
debt/EBITDA on 2010 targets. Taking the low end of our fair valuation
range of 12-13x FV/EBITDA on our below guidance 2010 estimates (20-
30% discount to Mars deal) yields a 780p offer price (we used 12.5x
before). Such an offer with only a 30% stock component may be enough
MJ:
So they dont expect much
MJ:
But here is Nomura
MJ:
who are looking for a little more
MJ:
We see CBRY weaker today on hints of revised bid criteria from
Kraft and a weaker than expected sales performance. We continue to
advise investors to hold the stock as we expect they will realise c800p
either from the Kraft offer being formalised (probably hostile) or from
the standalone value if the approach is unsuccessful. Also provides
optionality into a counter offer.
Kraft and a weaker than expected sales performance. We continue to
advise investors to hold the stock as we expect they will realise c800p
either from the Kraft offer being formalised (probably hostile) or from
the standalone value if the approach is unsuccessful. Also provides
optionality into a counter offer.
MJ:
Our prior scenario was for Kraft to raise its cash component to
the limit that it could afford (ie from 300p in the initial proposal to
440p). This would value an offer today at 867p, including the 3% fall in
the Kraft share price after hours (vs Dow Jones of -0.2%). We now see
this as less likely – assuming Kraft raises the cash component from
original proposal to mid way of our estimated limit (+70p to 370p),
would value an offer for Cadbury offer at 797p (current Cadbury share
price 777p).
* We would also highlight our last published standalone value for
Cadbury is 625p dated 11 September. However, applying WACC adjustments
consistent with those made across the sector and extrapolating the 2-3%
implied increase to FY numbers with the Cadbury IMS on 21 Oct, would
theoretically raise our standalone fair value for Cadbury to 777p (based
on a 10 year DCF, WACC of 8.9%).
* Following the “shock” of the Kraft approach, we believe that
Cadbury (as part of its defence to remain independent) is in a strong
position to push cost reduction measures (plant closure/ head count
reduction) more aggressively than the current guidance.
the limit that it could afford (ie from 300p in the initial proposal to
440p). This would value an offer today at 867p, including the 3% fall in
the Kraft share price after hours (vs Dow Jones of -0.2%). We now see
this as less likely – assuming Kraft raises the cash component from
original proposal to mid way of our estimated limit (+70p to 370p),
would value an offer for Cadbury offer at 797p (current Cadbury share
price 777p).
* We would also highlight our last published standalone value for
Cadbury is 625p dated 11 September. However, applying WACC adjustments
consistent with those made across the sector and extrapolating the 2-3%
implied increase to FY numbers with the Cadbury IMS on 21 Oct, would
theoretically raise our standalone fair value for Cadbury to 777p (based
on a 10 year DCF, WACC of 8.9%).
* Following the “shock” of the Kraft approach, we believe that
Cadbury (as part of its defence to remain independent) is in a strong
position to push cost reduction measures (plant closure/ head count
reduction) more aggressively than the current guidance.
NH:
thanks
NH:
Do you know what I think will happen here?
MJ:
What?
NH:
I reckon Kraft will make formal the current offer
NH:
but will leave room to increase
NH:
they will then wait
NH:
and hope the market comes down a bit
NH:
and stick an increased bid
NH:
of around 780-800p on the table
NH:
if the market rallies
NH:
they are in trouble
NH:
of course
MJ:
If the market tanks, Cadbury investirs will be crying out for the first offer
NH:
indeed
NH:
they will rip Kraft’s arm off
NH:
if not
NH:
Cadbury will survive
NH:
Actually
NH:
I think the odds of that happening are quite high
NH:
and that’s not because
NH:
I have been sent a huge bag of chocs this week
MJ:
Of course not…
MJ:
So, back to raw RAW, what else is out there?
NH:
Well, the Sun/Oracle bid looks increasingly doomed
NH:
see the FT’s story today
MJ:
Oracle is braced for a formal objection from Brussels to its planned $7.4bn acquisition of fellow US technology company Sun Microsystems, escalating the company’s high-stakes legal wrangle with Europe’s competition authorities.
The US software company has refused to offer any concessions to European regulators to meet their concerns about the deal, according to one person close to the process. That has left Brussels close to issuing an official statement of objections, the first step on the path to blocking it, this person added.
The complaint could come within days, but there is still a chance that one side or the other will back down, according to observers in Brussels. Neither side commented yesterday.
NH:
and the of course, there is Legal & General. With the FP deal due to conclude on tomorrow, a lot of people think Resolution will make a move
Resolution Ld (WI (RSL:LSE): Last: 98.00, up 1 (+1.03%), High: 98.00, Low: 96.00, Volume: 978.78k
Legal and General Group (LGEN:LSE): Last: 79.10, up 1.1 (+1.41%), High: 79.30, Low: 77.55, Volume: 11.93m
MJ:
There was talk of a 105p bid yesterday
MJ:
But as Neil says, that was probablyjust due to the FP deal concluding
NH:
i suspect though, any offer would have to be a break up and RSL teaming up with a big player
NH:
someone would take
NH:
LGIM
NH:
and someone the rest of the company
NH:
in fact
NH:
reading our post results story in the paper today
NH:
it read like a defence doc almost
MJ:
hmmm
NH:
which I am just string to get
NH:
but FT.com is down
NH:
Legal & General sought to defend itself against the idea of a break-up of its businesses as it reported its lowest level of quarterly sales figures for at least seven quarters on Tuesday.
The life and pensions company, which is seen as a potential target for Resolution, Clive Cowdery’s consolidation vehicle, said that keeping its annuity, protection and asset management businesses under one roof brought valuable “synergies” across all three.
Tim Breedon, chief executive, said that about 30 per cent of its new business either came from cross-selling or was business the company would not have won if it did not have all three elements.
NH:
there it is
MJ:
(Lorcan – its not L&G)
NH:
Okay, it is past midday and we must go. Before we do, a couple of things to round up
12:05PM
NH:
a tech stock a lot of people are watching at the moment is
NH:
Imagination Technology
NH:
and the stock is motoring today
NH:
up 14.2p at 213.8p
NH:
on the back of a push from Panmure
NH:
following a meeting with the company last night
NH:
Imagination Technologies
Upgrading Target Price after positive Panmure sales meeting
Our confidence in Imagination’s prospects is increased following a meeting
with Panmure Sales. We gained further insight into the Meta processor core
and the Pure business, both of which have the potential to significantly
exceed our expectations. We upgrade our price target to 250p from 200p,
which would still represent reasonable revenue multiples compared with
ARM when it was in its high growth stage. Re-iterate Buy.
Upgrading Target Price after positive Panmure sales meeting
Our confidence in Imagination’s prospects is increased following a meeting
with Panmure Sales. We gained further insight into the Meta processor core
and the Pure business, both of which have the potential to significantly
exceed our expectations. We upgrade our price target to 250p from 200p,
which would still represent reasonable revenue multiples compared with
ARM when it was in its high growth stage. Re-iterate Buy.
NH:
Management were bullish on prospects for Meta, Imagination’s processor core, which is
a key building block of its graphics, video and communications products and could is
becoming a product in its own right. There is significant potential to penetrate market
for applications processors for Android based devices. It appears licences have already
been sold for this type of application and it would be reasonable to expect a partner to
be shipping product within a 1.5-2 year timeframe
a key building block of its graphics, video and communications products and could is
becoming a product in its own right. There is significant potential to penetrate market
for applications processors for Android based devices. It appears licences have already
been sold for this type of application and it would be reasonable to expect a partner to
be shipping product within a 1.5-2 year timeframe
NH:
It was confirmed that the new Motorola Droid phone (early reviews have said this is the
best Android phone to date and a worthy iPhone competitor) uses a TI OMAP with
Imagination graphics.
! From our discussion of the Pure business, we concluded its prospects are stronger than
we had previously believed. One of its leading customers has recently said that in the
UK, Pure is the 2nd most important audio brand after Apple. Another indicator of its
ability to penetrate new markets is evidence by that fact that Pure has built a 65% market
share in Switzerland for DAB radios.
best Android phone to date and a worthy iPhone competitor) uses a TI OMAP with
Imagination graphics.
! From our discussion of the Pure business, we concluded its prospects are stronger than
we had previously believed. One of its leading customers has recently said that in the
UK, Pure is the 2nd most important audio brand after Apple. Another indicator of its
ability to penetrate new markets is evidence by that fact that Pure has built a 65% market
share in Switzerland for DAB radios.
NH:
We believe the market is currently ascribing little
value to Pure at this point and therefore if it continues to execute so well, this would
drive further upside.
! Imagination is in a stage of positive momentum. We believe newflow will continue to be
favourable and that will drive a premium rating. We upgrade our price target to 250p
from 200p. After stripping out the Pure business, the new target represents an
EV/Revenue of 11x FY10E and 8x FY11E. As a comparison, in the timeframe between
ARM’s IPO in 1998 and before the severe inflation of the tech bubble in 1999, ARM
traded at 10-15x revenue. We re-iterate our Buy recommendation
value to Pure at this point and therefore if it continues to execute so well, this would
drive further upside.
! Imagination is in a stage of positive momentum. We believe newflow will continue to be
favourable and that will drive a premium rating. We upgrade our price target to 250p
from 200p. After stripping out the Pure business, the new target represents an
EV/Revenue of 11x FY10E and 8x FY11E. As a comparison, in the timeframe between
ARM’s IPO in 1998 and before the severe inflation of the tech bubble in 1999, ARM
traded at 10-15x revenue. We re-iterate our Buy recommendation
12:06PM
NH:
and finally
NH:
there is an update
NH:
on the latest AIM disaster
NH:
Aero Inventory
NH:
Aero Inventory – FD goes
The board of directors wishes to announce that Mr Hugh Bevan has notified the Company that he has decided to resign as a director of the Company with immediate effect.
Hugh Bevan, a Chartered Accountant, joined the company in April 2002. Between 1987 and 2001 he worked for Robert Fleming and Jardine Fleming, subsequently acquired by JP Morgan Chase. During this time, he worked mainly in the Hong Kong and London offices on fundraising and advisory transactions. In 1997 he became Chief Operating Officer of Jardine Fleming’s Asian Corporate Finance business, and in 1999 returned from Hong Kong to London as Head of Equity Capital Markets Execution.
NH:
oh and here’s something for Regal Petroleum watchers
NH:
a Czech bank has taken a stake
NH:
The Company was notified on 3 November 2009 by Ceska Sporitelna a.s. that, following the purchase of ordinary shares of 5 pence each in the Company (“Ordinary Shares”) on 23 October 2009, it has an interest in 12,636,067 of the Company’s Ordinary Shares, representing 4.00 per cent of the issued ordinary share capital of the Company.
Regal Petroleum (RPT:LSE): Last: 87.50, up 3 (+3.55%), High: 88.00, Low: 84.50, Volume: 559.35k
NH:
that’s looks slightly odd to me
12:08PM
MJ:
And for oilcan
MJ:
Here is a bit of the RBS/ABN note on ING
MJ:
ING Market too bearish on divestments
We believe the market has overreacted to ING’s restructuring plan. Assuming conservative
proceeds of 18bn for the insurance business, we estimate ING is trading at a discount of at least
8% to tangible book and less than 6x corrected normalised earnings. We raise our target price to
12 and upgrade to Buy.
We believe the market has overreacted to ING’s restructuring plan. Assuming conservative
proceeds of 18bn for the insurance business, we estimate ING is trading at a discount of at least
8% to tangible book and less than 6x corrected normalised earnings. We raise our target price to
12 and upgrade to Buy.
MJ:
Selling ING Insurance is not as bad as it sounds
Given that ING will have more than four years to sell ING Insurance, we believe it will be able to
get a good price. In our view, 60% of ING Insurance consists of attractive activities, such as the
CEE, Asian and Latin American activities, and the US excluding variable annuities. We estimate
ING Insurance will generate a normalised net profit of 2bn, excluding the cost of the core debt
and holding leverage, and we conservatively estimate the total divestment proceeds to be 18bn
(implying a sale multiple of 8.3x corrected normalised earnings over 2009). ING intends to use
the proceeds to redeem double leverage (7bn), core debt (3bn) and potentially the remaining
7.5bn government support + repayment penalty. We estimate that a sale of ING Insurance
would result in net proceeds of at least 0.5bn.
Given that ING will have more than four years to sell ING Insurance, we believe it will be able to
get a good price. In our view, 60% of ING Insurance consists of attractive activities, such as the
CEE, Asian and Latin American activities, and the US excluding variable annuities. We estimate
ING Insurance will generate a normalised net profit of 2bn, excluding the cost of the core debt
and holding leverage, and we conservatively estimate the total divestment proceeds to be 18bn
(implying a sale multiple of 8.3x corrected normalised earnings over 2009). ING intends to use
the proceeds to redeem double leverage (7bn), core debt (3bn) and potentially the remaining
7.5bn government support + repayment penalty. We estimate that a sale of ING Insurance
would result in net proceeds of at least 0.5bn.
MJ:
There you go
MJ:
Right
MJ:
Is it lunch?
NH:
I think it is
NH:
FTSE rallying
NH:
up almost 50 points now
NH:
at 5,084
NH:
panic over
NH:
tin hats off
12:09PM
NH:
Okay that’s it
NH:
obviously
NH:
there will be full Fed reaction
NH:
from PM
NH:
and Stacy this evening
NH:
we will be back tomorrow
NH:
and will see you all then
MJ:
Bye
MJ:
and thanks for the comments
NH:
yep
NH:
particularly as the system was running very slowly this morning
NH:
cya
NH:
thanks User 4720403
NH:
some interesting analysis
NH:
very interesting
NH:
we are done
NH:
cya tomorrow
NH:
for another Markets Live
NH:
and do check out the NAMA post
NH:
and Martin Lukes
NH:
tomorrow