Markets live chat transcript for the chat ending at 12:14 on 30 Nov 2009. Participants in this chat were: Neil Hume, FT (NH) Bryce Elder (BE)
NH:
hola
NH:
it’s 11.03am
NH:
and time for Markets live
NH:
FT Alphaville’s daily whizz round the markets
NH:
Bryce is here
BE:
Hello.
NH:
and before we push on today
NH:
a quick bit of housekeeping
NH:
we have a special treat for readers tomorrow
NH:
a guest editor
NH:
a real market professional
BE:
As in, someone who actually knows what they’re on about.
NH:
yep
NH:
Jonathan Wilmot
NH:
now, he is the super smart Global strategist at Credit Suisse
NH:
the plan is
NH:
for Wilmot and his colleagues
NH:
to write a series of posts tomorrow morning
NH:
5 or 6
NH:
on topics ranging from gold, money supply, US natural gas prices
NH:
and then
NH:
he will join in ML for the first 30 mins
NH:
which will give you lot
NH:
that’s the ROTR
NH:
the chance to ask questions
BE:
Sort of a People’s Friday
BE:
Except no questions about the small-cap rubbish lurking at the bottom of your portfolio
NH:
and the zapper will be poised to strike down any rude or abusive readers
NH:
and bryce makes a good point
NH:
Wilmot can’t talk about stocks
NH:
he is a big picture strategist
NH:
a free thinker
NH:
and a down to earth guy
NH:
I think it should be a fun day
BE:
He dropped by on Friday afternoon to have a laugh at the IT setup
NH:
NH:
I suspect it was a shock
BE:
I suspect it was, yes. But he was polite.
NH:
anyway,
NH:
get your questions ready
NH:
the post should start going up from 8.00ish
NH:
and I think there might be one on elastic money, which is very very interesting
NH:
right
NH:
let’s push on
NH:
wider market?
11:09AM
BE:
So we’ve given up Friday’s gains, pretty much
BE:
Footsie down 42 at 5202
NH:
hang on
NH:
an announcement from my favourite oil stock
BE:
GKP?
NH:
Gulf Keystone Petroleum Limited (AIM: GKP) announces that on the 27th November
2009 Jeremy Asher, a non-executive director of the Company, purchased 2,000,000
common shares in the Company (“Common Shares”) (representing approximately 0.41%
of the issued share capital) at an average price of 94p per share, through Agile
Energy Limited (“Agile Energy”).
2009 Jeremy Asher, a non-executive director of the Company, purchased 2,000,000
common shares in the Company (“Common Shares”) (representing approximately 0.41%
of the issued share capital) at an average price of 94p per share, through Agile
Energy Limited (“Agile Energy”).
Agile Energy is a Channel Islands company owned by the Asher Family Trust, of
which Jeremy Asher is the settler and lifetime beneficiary.
NH:
Gulf Keystone Petroleum Limited (AIM: GKP) announces that on the 27th November
2009 Jeremy Asher, a non-executive director of the Company, purchased 2,000,000
common shares in the Company (“Common Shares”) (representing approximately 0.41%
of the issued share capital) at an average price of 94p per share, through Agile
Energy Limited (“Agile Energy”).
2009 Jeremy Asher, a non-executive director of the Company, purchased 2,000,000
common shares in the Company (“Common Shares”) (representing approximately 0.41%
of the issued share capital) at an average price of 94p per share, through Agile
Energy Limited (“Agile Energy”).
Agile Energy is a Channel Islands company owned by the Asher Family Trust, of
which Jeremy Asher is the settler and lifetime beneficiary.
NH:
Agile Energy has also notified the Company that it has agreed to pledge its
entire beneficial interest in the Company as part of the security package for a
revolving credit facility to be provided to the Asher Family Trust. There is no
change in Agile Energy’s overall shareholding in the Company, and it continues
to have an interest in 14,000,000 Common Shares representing approximately 2.9%
of the issued share capital of the Company.
entire beneficial interest in the Company as part of the security package for a
revolving credit facility to be provided to the Asher Family Trust. There is no
change in Agile Energy’s overall shareholding in the Company, and it continues
to have an interest in 14,000,000 Common Shares representing approximately 2.9%
of the issued share capital of the Company.
BE:
Bit of a sting in the tail there
BE:
He’s done a Ross.
Gulf Keystone Petroleum (GKP:LSE): Last: 102.75, up 1 (+0.98%), High: 107.75, Low: 101.00, Volume: 1.64m
NH:
anyway
NH:
back to the market
NH:
I guess we have followed the middle east lower, no?
BE:
Yeah, that seems to be as good an explanation as any.
BE:
Down 54 points now.
NH:
some statement just come out of Dubai
NH:
being reported by CNBC
NH:
apparently govt of Dubai
NH:
saying they do not
NH:
gurantee Dubai World debt
NH:
hang on
NH:
just looking for the flash
NH:
seems there is a press conference going on this morning
NH:
RTRS-TOP DUBAI FINANCE OFFICIAL SAYS THERE IS A BIG CONFUSION BETWEEN GOVT OF DUBAI AND DUBAI WORLD -TV
11:06 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL – RESTRUCTURING MIGHT AFFECT CREDITORS IN SHORT TERM BUT THERE ARE LONG-TERM BENEFITS
11:07 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL – THE GOVERNMENT DOES NOT GUARANTEE DUBAI WORLD’S DEBT
11:08 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL – BANKS DO NOT NEED ANY MORE LIQUIDITY HELP FROM C.BANK
11:11 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL SAYS “NO NEED TO WORRY”
11:12 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL SAYS DUBAI WORLD NOT PART OF DUBAI GOVERNMENT
11:13 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL SAYS DUBAI WORLD CREDITORS CARRY RESPONSIBILITY FOR THEIR LENDING DECISION
11:06 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL – RESTRUCTURING MIGHT AFFECT CREDITORS IN SHORT TERM BUT THERE ARE LONG-TERM BENEFITS
11:07 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL – THE GOVERNMENT DOES NOT GUARANTEE DUBAI WORLD’S DEBT
11:08 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL – BANKS DO NOT NEED ANY MORE LIQUIDITY HELP FROM C.BANK
11:11 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL SAYS “NO NEED TO WORRY”
11:12 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL SAYS DUBAI WORLD NOT PART OF DUBAI GOVERNMENT
11:13 30Nov09 RTRS-TOP DUBAI FINANCE OFFICIAL SAYS DUBAI WORLD CREDITORS CARRY RESPONSIBILITY FOR THEIR LENDING DECISION
BE:
Dubai finance official says: “don’t panic!”
NH:
I like this one
NH:
TOP DUBAI FINANCE OFFICIAL SAYS THERE IS A BIG CONFUSION BETWEEN GOVT OF DUBAI AND DUBAI WORLD
NH:
yep
NH:
that about sums things up
NH:
so
NH:
Dubai World being let go
NH:
is that what they are saying?
BE:
That seems to be the implication
NH:
that’s not helping the RBS share price at all
NH:
down 1.65 at 33p
NH:
wow
NH:
didn’t realise they were that low
NH:
Stan Chart
NH:
just starting to get hit
NH:
off 30.5p at £14.89
NH:
in spite of seemingly every broker in the City
NH:
advising to buy on the dips
BE:
Hm.
BE:
Lloyds also weak this morning.
BE:
Did you read Waples in the STRNS over the weekend?
NH:
yes
NH:
excellent coment
NH:
really cut to the chase
NH:
this is a bust bank
NH:
still being propped up by the govt
NH:
worth repeating the piece in full
NH:
because it is good
NH:
Come clean, Lloyds
The last time I wrote about Lloyds, a shareholder said he was reporting me to the Financial Services Authority. He said I was trying to sabotage the share price and wanted me in jail.
Oh dear, he is going to be annoyed again. The bald truth about Lloyds is that even after its £13.5 billion rights issue, it is still a bust business if taxpayer support is removed.
Meryvn King, governor of the Bank of England, revealed for the first time last week that at the time of buying HBOS, it was being propped up by an emergency £25 billion loan from the Bank. What he failed to say was that the Bank is still providing loans, possibly as high as £100 billion — and without it, Lloyds cannot exist.
The way Lloyds has treated investors is little short of contemptuous. If they had known the existence of the HBOS loan at the time of buying the bank, they would have questioned more rigorously why it paid any money at all for HBOS.
Lloyds said it repaid the Bank’s loan in January, but that is disingenuous. By that time it was reliant on a drip provided by the Bank’s special liquidity scheme. It is like saying you have repaid your Visa card and taken out a new Mastercard loan for even more.
NH:
The failure to inform investors is a disgrace — made even more so by the fact that the enlarged bank is still refusing to reveal the terms of its funding arrangements with the Bank. It is now receiving £165 billion of support from various government agencies — which the bank declines to break down. The special liquidity scheme was put in place when the wholesale markets closed and banks lost trust in lending to each other.
Lloyds is the biggest user of this scheme. It has been unable to shrink its balance sheet at the same speed as Royal Bank of Scotland and Barclays, which have more liquid assets to sell.
Lloyds has a history of poor disclosure, but this beats them all. That said, it is far from alone. Lloyds is the only bank so far to have released its overall disclosure and it is lkely other British banks, who have been helped by America’s Federal Reserve and the European Central Bank will have higher global exposure than Lloyds.
Nobody is saying the Bank was wrong to provide a covert emergency facility. It was the weekend that Lord Myners, the City minister, was facing a financial meltdown. Had Royal Bank of Scotland and HBOS not received money, there would have been a run on sterling.
NH:
Deposits were being withdrawn from the two banks at such a rate that unless preventative action was taken, the two institutions would have needed £150 billion of Bank support. Little surprise then that Myners missed some of the finer detail in Sir Fred Goodwin’s pension that weekend.
It is appalling, though, that Lloyds never came clean on buying a bust bank and never owned up to the fact that without continuing state support it is still very vulnerable. Investors have been hoodwinked and should demand the facts.
NH:
that is a bit long
NH:
but worth reading
11:19AM
NH:
Actually Bryce
NH:
what are HSBC doing
NH:
aren’t they exposed to Dubai?
BE:
Biggest bank in the UAE
BE:
So yes.
NH:
but hang on, they are up on the day
NH:
why
NH:
2.4p higher at 708.7p
BE:
Fair question
BE:
There is a Merrill upgrade in circulation
NH:
ah
NH:
that might explain it
BE:
However ……
BE:
It’s on the Honkers line, not the London one
BE:
0005.HK not HSBA.L
NH:
but it could still have an impact no?
BE:
The reasoning seems not to be arb valuation
BE:
So why they haven’t moved the London stock as well is a mystery
BE:
Perhaps Alexander Tsirigotis, the UK analyst, is on his hols
NH:
(Thanks TL – quite like that: Arch cretin
BE:
Anyway, here’s the note
BE:
Time to go with the strength – Upgrading to Buy
We are upgrading our rating on HSBC to BUY from Neutral premised on:
Sustained period of earnings revisions expected – While mkt estimates have risen steadily since 2Q, we believe HSBC is likely to experience a further sustained period of earnings upgrades as the market gains confidence in the outlook and plays catch up with improvements in credit costs and revenues.
Defensive qualities should rise to the fore – HSBC has used 2009 to strengthen its balance sheet, capital and liquidity, which are now among the most
robust for big, international banks. With <2% of loans in UAE, HSBC is well placed to deal with the potential fallout from recent developments in Dubai.
Attractive risk/reward profile & with a dividend – While not the cheapest stock in the world, we believe HSBC’s risk/reward profile should appeal to investors
looking for a big, liquid, diversified way of gaining exposure to the global banking sector. The bank’s 3-4% dividend is also quite attractive in our view.
We are upgrading our rating on HSBC to BUY from Neutral premised on:
Sustained period of earnings revisions expected – While mkt estimates have risen steadily since 2Q, we believe HSBC is likely to experience a further sustained period of earnings upgrades as the market gains confidence in the outlook and plays catch up with improvements in credit costs and revenues.
Defensive qualities should rise to the fore – HSBC has used 2009 to strengthen its balance sheet, capital and liquidity, which are now among the most
robust for big, international banks. With <2% of loans in UAE, HSBC is well placed to deal with the potential fallout from recent developments in Dubai.
Attractive risk/reward profile & with a dividend – While not the cheapest stock in the world, we believe HSBC’s risk/reward profile should appeal to investors
looking for a big, liquid, diversified way of gaining exposure to the global banking sector. The bank’s 3-4% dividend is also quite attractive in our view.
BE:
Upgrading 2010-11 earnings by 18% & 31% respectively
The three main drivers of our earnings upgrade include: (i) we have scaled back our previously overly cautious view on the progress on of loan loss provisions; (ii) we have toned down the size of the forecast decline in GBM revenues in 2010 (vs 2009); and (iii) we have factored in a modest rise in NIM in 2H10 & 2011 as global rates begin to move higher. We believe there is upside risk to our 2011 NIM ests.
The three main drivers of our earnings upgrade include: (i) we have scaled back our previously overly cautious view on the progress on of loan loss provisions; (ii) we have toned down the size of the forecast decline in GBM revenues in 2010 (vs 2009); and (iii) we have factored in a modest rise in NIM in 2H10 & 2011 as global rates begin to move higher. We believe there is upside risk to our 2011 NIM ests.
BE:
Raising PO by ~21% to HK$118. Suggests >35% upside
Our new PO of HK$118 for HSBC suggests >35% upside. We have pegged our SOTP derived PO to our 2011 estimates as we believe this year should be more reflective of the bank’s underlying earnings power. At our new PO, HSBC would trade at 12.3x 2011E (16.8x 2010E) earnings and 2.3x 2011E (2.6x 2010E) NAV.
Our new PO of HK$118 for HSBC suggests >35% upside. We have pegged our SOTP derived PO to our 2011 estimates as we believe this year should be more reflective of the bank’s underlying earnings power. At our new PO, HSBC would trade at 12.3x 2011E (16.8x 2010E) earnings and 2.3x 2011E (2.6x 2010E) NAV.
NH:
thanks for that
11:23AM
NH:
some of the ROTR asking about banks exposure to the UAE
NH:
there is a good round up out from MOST today
NH:
based on some data from Dealogic
NH:
which mointor the various bond issues by Dubai
NH:
Spillover impact on Dubai World/Nakheel’s
standstill, rather than DW itself, is the key issue for
European banks from our analysis
standstill, rather than DW itself, is the key issue for
European banks from our analysis
NH:
Based on
Dealogic data, we think European banks’ direct
exposures are limited, as they are likely to have less
than $225mn each of the $13bn of DW syndicated loans
(RBS, CSG & DBK the top-3 syndicators). Within
Europe, UK banks have ~$50bn of the ~$87bn in
European banks’ exposure to UAE. Of this, triangulating
3 sources, we think UAE exposures may include: HSBC
~$16bn, STAN ~$8bn, BARC ~$4bn, ABN ~$2bn, BNP
~$2bn & Lloyds ~$2bn. Inside we summarize what 50+
financials have told us
Dealogic data, we think European banks’ direct
exposures are limited, as they are likely to have less
than $225mn each of the $13bn of DW syndicated loans
(RBS, CSG & DBK the top-3 syndicators). Within
Europe, UK banks have ~$50bn of the ~$87bn in
European banks’ exposure to UAE. Of this, triangulating
3 sources, we think UAE exposures may include: HSBC
~$16bn, STAN ~$8bn, BARC ~$4bn, ABN ~$2bn, BNP
~$2bn & Lloyds ~$2bn. Inside we summarize what 50+
financials have told us
NH:
so the exposure there are quite small
NH:
but
NH:
On a macro level, one likely
implication is differentiation of broad sovereign risk
impacting rising cost of capital for the region, which
could potentially impact a far wider range of loans.
However, we think the odds of this in UAE beyond Dubai
are very low, given large sovereign reserves.
implication is differentiation of broad sovereign risk
impacting rising cost of capital for the region, which
could potentially impact a far wider range of loans.
However, we think the odds of this in UAE beyond Dubai
are very low, given large sovereign reserves.
NH:
Differentiation key to picking banks. We had reduced
the amount of pure “recovery” trades in our Euro banks
best ideas, and upped the quality as investors focus on
“delivery” rather than just “normalization”. We remain
OW GLE (1x TNAV) & BARC (0.9x TNAV), where we
see longer term value, although we recognize spillover
risk to i-banking revenues (though we incorporated this
in 15-30% falls in FICC into 10e for i-banks we cover).
Our assessment of UAE exposures is more about risk
appetite, and remains focused on relative value.
the amount of pure “recovery” trades in our Euro banks
best ideas, and upped the quality as investors focus on
“delivery” rather than just “normalization”. We remain
OW GLE (1x TNAV) & BARC (0.9x TNAV), where we
see longer term value, although we recognize spillover
risk to i-banking revenues (though we incorporated this
in 15-30% falls in FICC into 10e for i-banks we cover).
Our assessment of UAE exposures is more about risk
appetite, and remains focused on relative value.
NH:
In EM, we would use weakness to add to our key
Overweights – Sberbank and Standard Bank. We
expect intensifying discussions about external sovereign
vulnerabilities into 2010 (Ukraine and broader CEE) and
clearer stock differentiation, focused on earnings
delivery. Within MENA, Abu Dhabi banks bear the brunt
of Dubai’s dislocation (through credit and funding
channels), while Qatar and Saudi’s impact is limited.
Overweights – Sberbank and Standard Bank. We
expect intensifying discussions about external sovereign
vulnerabilities into 2010 (Ukraine and broader CEE) and
clearer stock differentiation, focused on earnings
delivery. Within MENA, Abu Dhabi banks bear the brunt
of Dubai’s dislocation (through credit and funding
channels), while Qatar and Saudi’s impact is limited.
NH:
Immaterial exposure for European insurers. Our
conversations with insurers suggest immaterial
exposures on the asset side to Dubai World debt. The
only insurers with any notable exposure are Allianz, ING
and Old Mutual – however, in all cases this is immaterial.
conversations with insurers suggest immaterial
exposures on the asset side to Dubai World debt. The
only insurers with any notable exposure are Allianz, ING
and Old Mutual – however, in all cases this is immaterial.
NH:
but note
NH:
the insurers still weak this morning
Legal and General Group (LGEN:LSE): Last: 77.95, down 3 (-3.71%), High: 81.35, Low: 77.85, Volume: 11.22m
Resolution Ld (WI (RSL:LSE): Last: 82.55, down 1.85 (-2.19%), High: 84.05, Low: 82.30, Volume: 1.97m
Aviva (AV:LSE): Last: 373.60, down 5.9 (-1.55%), High: 380.30, Low: 370.40, Volume: 2.41m
BE:
That’s just market down = insurers down, isn’t it?
NH:
probably
NH:
although
NH:
Resolution have not performed well
NH:
since they went into the FTSE 100
11:26AM
NH:
Right
NH:
another Dubai flash
NH:
this one is positive
NH:
JEBEL ALI FREE ZONE MAKES SEMI-ANNUAL COUPON PAYMENT OF 4.175 PCT PER ANNUM ON 7.5 BLN DIRHAMS ISLAMIC BOND – SOURCE
NH:
now
NH:
Jebel is ring fenced from Dubai World
NH:
but there has been fears
NH:
they would not pay this coupon
BE:
Yes – Sam did a piece about this for today’s paper
NH:
yes
NH:
here it is
NH:
The Jebel Ali Free Zone Authority – the operator of one of Dubai’s key economic development zones – will on Monday become the latest subsidiary of the debt-ridden Dubai World conglomerate to face a key test of its ability to meet financing obligations.
According to creditors, a semi-annual coupon payment is due for payment on more than $2bn of bonds issued by the company in 2007.
NH:
The repayment is the first due from a Dubai World company since the state-backed giant requested a standstill agreement last week on $4bn of bonds issued by its property development company Nakheel.
BE:
A minor positive in the scheme of things, I guess.
11:29AM
BE:
GBK update …….
NH:
yeah
NH:
looks very weak
NH:
RTRS-STERLING EXTENDS LOSSES VS EURO, HITS 1-MTH LOW 91.38 PENCE
11:29 30Nov09 RTRS-STERLING REVERSES EARLY GAINS VS DOLLAR, HITS DAY’S LOW $1.6456
11:29 30Nov09 RTRS-STERLING REVERSES EARLY GAINS VS DOLLAR, HITS DAY’S LOW $1.6456
NH:
not sure why
NH:
there’s no eco data out is there?
NH:
risk aversion?
NH:
parallels with Dubai
NH:
perhaps
BE:
Perhaps
BE:
What about cable?
NH:
that’s above
NH:
but again the euro
NH:
the dollar was fallen
NH:
around 1.5035 at the moment
NH:
so perhaps the sovereign default fears
NH:
are catching up with the UK again
11:31AM
BE:
Ok – so what else have you been looking at this morning?
NH:
well a couple of things
NH:
the most boring float of the year
NH:
been having a quick look at that
BE:
Which one’s that then?
NH:
Gartmore – yawn
NH:
pricing range announced
BE:
And?
NH:
250p to 330p
NH:
which gives a market cap of £730m
NH:
they are raising a total of £400m
NH:
of which £280m is new money
BE:
So – Roger Guy is worth £730m is he?
BE:
Not bad.
NH:
£870m post money
NH:
seems overvalued to me
NH:
what are the assets under management
BE:
£22bn
BE:
Apparently
BE:
So that’s 3.5% of AUM
NH:
I think so
NH:
sounds toppy to me
NH:
for a fund management company
BE:
Just scanning back to find out what BGI was valued at ………
NH:
3.5% of AUM
NH:
at this point in the cycle
NH:
anyway
NH:
some other things I have been looking at this morning
NH:
John Lewis sales figures out
NH:
and
NH:
well, they have had a record week
NH:
or TV sales
NH:
Total sales up 22% yoy
NH:
now, what does that say?
NH:
(So TL, the performance of Gartmore has been quite good then? So that market cap is about right?)
BE:
Good question, that.
BE:
Either sales were exceptionally depressed this time last year.
BE:
Or all the people employed by the public sector are in a quite spectacular level of denial
NH:
hmmm
BE:
(* editorialising warning)
BE:
Also, TVs are the one area where deflation is very very fast
NH:
true
BE:
So perhaps it’s working a bit like a Dutch auction at this point.
11:39AM
NH:
Just going back to sterling for a moment
NH:
which is weak
NH:
here’s one explanation
NH:
GBK being pressurised by persistent selling against the euro and the yen, which forced Cable back below the 1.6500 handle. EUR-GBP was boosted by month end related flows. Elsewhere, BDO Stoy Howard said the BoE’s predictions for the U.K. economic recovery are too optimistic, which reinforces BoE Posen’s remarks that the now is not the time to exit policy in today’s interview in the Nikkei.
NH:
must admit
NH:
I had missed the Possen i’view
BE:
Of course, we’ve got the pre-budget report next week
BE:
Although it’s likely to be a damp etc.
BE:
Given the proximity to an election
BE:
Nevertheless, George Buckley at Deutsche Bank has penned a few thoughts
NH:
go on
NH:
sounds interesting
BE:
The most eye-catching of which is 20% VAT ……
BE:
….. although not until 2010.
BE:
Here’s the summary
BE:
The Treasury’s forecast in the April Budget were based on relatively conservative near-term assumptions, including higher unemployment than we are likely to see, a sharp (and permanent) decline in trend output, and equity markets recovering by less than they have done so over the past six months.
BE:
As a result, the Treasury may be able to reveal a better fiscal position than was the case in the spring, allowing the announcement of significant tightening measures to be postponed until after the election. Still, the government’s forecasts are based on relatively strong rates of GDP growth in the medium term, at which point we believe the risks might be to the downside.
BE:
The government’s current intent is to tighten fiscal policy over the coming year at a rate that should hold the ratings agencies at arm’s length for the time being, but not indefinitely. Both the government and opposition parties may well wait until after the election before revealing their true colours when it comes to the extent of fiscal tightening that will eventually be authorised.
BE:
Our forecast is that the UK’s sovereign debt rating will not be downgraded, although that view does rely on the Treasury ultimately committing to rein in the deficit more quickly than is currently forecast. It is worth noting that Fitch argues that it would like to see the debt/GDP ratio falling by 2-3pp per year “soon after 2011″ to be consistent with the UK retaining its AAA status. Current plans are some way from this happening.
BE:
Raising VAT further to 20% may well feature in forthcoming fiscal consolidation plans (although it is uncertain whether such a plan would be announced prior to the general election given its likely unpopularity). There are some solid reasons for doing this (simplification of calculation, it raises a substantial amount of money, and it would be closer to the European average).
BE:
We forecast the cash deficit for the current fiscal year to be around GBP10bn less than was forecast at the time of the Budget, i.e. our new forecast is for GBP210bn. We assume that this will mean modestly lower gilt issuance during the year of GBP212bn (versus a previous expectation of GBP220bn), leaving just short of GBP50bn to raise between now and the end of March 2010.
NH:
right
NH:
Pre-budget report on 9th Dec
11:44AM
BE:
Ok – back to stock specific stuff?
NH:
(Jezzman – as predicted here last week,)
NH:
good idea
NH:
somone asking about 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:
Go on then. I thought there was zero this morning.
NH:
well
NH:
it is a bit of an old one
NH:
Alphameric
NH:
a betting software company
NH:
where the biggest shareholders is…
NH:
Joe Lewis
NH:
talk of a 42p a share cash offer coming
NH:
from private equity
NH:
and Lewis
NH:
who owns a 29.9% stake
NH:
might carry his investment into the buyout
BE:
Where’s it trading?
BE:
My screen says up 1.75p at 35.5p.
NH:
of course
NH:
this rumour needs to be treated with some care
NH:
because of events at M&B this morning
BE:
Aha
NH:
that’s Mitchells & Butlers
11:47AM
BE:
It does look like things have come to a head in the M&B boardroom
BE:
They’ve approached the Takeover Panel to decide whether there’s a concert party at work.
NH:
and the biggest shareholders are Joe, with 23%
NH:
and Eplida with 17%
NH:
Elpida is controlled by the Irish racing tycoons
NH:
John Magnier
NH:
and JP Macmanus
BE:
The Coolmore Mafia
NH:
yes
NH:
now
NH:
if the Panel find a concert party has been at work
NH:
it can do
NH:
one of two things
NH:
is they bought stock after they became a concert
NH:
they could force them to bid
NH:
at the highest price they paid for stock in the past 12 months
NH:
or force the concert party to sell down their combined holding
NH:
so it is below 30%
BE:
So there could be a huge lump of stock heading for the market?
NH:
well, it is certainly possible
NH:
but M&B
NH:
are going to need to some really, really strong evidence
NH:
and the question is
NH:
do they have it
BE:
Difficult one to prove, I’d imagine
BE:
This case could go on forever.
NH:
I can’t imagine
NH:
they drew up an agreement
NH:
if there is one
NH:
and longer term
NH:
it looks like this looks like
NH:
another long drawn out power struggle
NH:
and that’s a pity
NH:
because the underlying business is not trading too badly
NH:
but they need a chairman
NH:
and probably a refinancing
BE:
Any research on this?
NH:
I think I saw something out of Panmure a little earlier
NH:
will just grab it
NH:
Boardroom turmoil
M&B has this morning issued a statement highlighting “two actions by a
shareholder representative of Piedmont Inc [Joe Lewis’s investment vehicle]
which together could potentially undermine the independence and
effectiveness of the Board”. Unfortunately this will once again divert
attention away from the group’s operational excellence. We retain our Hold
recommendation and 295p price target.
M&B has this morning issued a statement highlighting “two actions by a
shareholder representative of Piedmont Inc [Joe Lewis’s investment vehicle]
which together could potentially undermine the independence and
effectiveness of the Board”. Unfortunately this will once again divert
attention away from the group’s operational excellence. We retain our Hold
recommendation and 295p price target.
NH:
The first action taken was to veto, at the final stage, three independent candidates for
election to the position of Chairman.
! The second action was requesting the resignation of Senior Independent Director, Simon
Laffin, advising that if he did not, a small number of large shareholders would vote
against his election at the January AGM.
election to the position of Chairman.
! The second action was requesting the resignation of Senior Independent Director, Simon
Laffin, advising that if he did not, a small number of large shareholders would vote
against his election at the January AGM.
NH:
M&B has approached the Panel on Takeovers and Mergers and will imminently submit
cumulative evidence that a number of shareholders have been seeking to gain control of
the Board and of the Company to advance the interests of a small group of shareholders
at the expense of others.
cumulative evidence that a number of shareholders have been seeking to gain control of
the Board and of the Company to advance the interests of a small group of shareholders
at the expense of others.
NH:
This could be another long and drawn out power struggle at M&B which will once again
divert attention away from the group’s operational excellence. We retain our Hold
recommendation and 295p price target.
divert attention away from the group’s operational excellence. We retain our Hold
recommendation and 295p price target.
NH:
right
NH:
share price
Mitchells and Butlers (MAB:LSE): Last: 252.40, down 0.6 (-0.24%), High: 259.40, Low: 249.30, Volume: 242.51k
11:53AM
NH:
where now?
NH:
a bit of some cap corner?
BE:
Sure
BE:
What’s on your mind?
NH:
Regal
NH:
the latest update from Ukraine
NH:
was trying to make sense of it
BE:
Go on
NH:
and I think it is another holding statement
NH:
the vital bit of info
NH:
the flow rates
NH:
have not come out yeet
Regal Petroleum (RPT:LSE): Last: 96.00, down 1.5 (-1.54%), High: 98.25, Low: 95.25, Volume: 616.35k
NH:
actually I have a note from Merrill on this
NH:
but it is all T-Zones
NH:
b-sands
BE:
Super.
BE:
Regal Petroleum has this morning provided an operational update with little
material incremental information. Although the company faced multiple delays to
SV-58 well due to the challenging nature of the well (high pressure), we expect
the company to announce the (SV-58) flow rates soon – the key near term
catalyst for the stock.
SV-58: gas flows to the surface, flow rates expected soon
Gas has been flowed to surface from the SV-58 well, with the well expected to be
tested soon. Although the company faced multiple delays due to the challenging
nature of the well (high pressure), we expect the sustainable flow rates to be
announced within few days – the key catalyst for the stock that could potentially
confirm the commerciality of the core reserves valued at 168p/sh (we highlight
that it took around one week for MEX-106 flow rates to get to the sustainable
level). As we pointed out in our most recent research note (Key insights from
Ukraine trip, October 9, 2009), Regal won’t perforate T and D-sands from the SV-
58 well at this stage due to the safety reasons.
material incremental information. Although the company faced multiple delays to
SV-58 well due to the challenging nature of the well (high pressure), we expect
the company to announce the (SV-58) flow rates soon – the key near term
catalyst for the stock.
SV-58: gas flows to the surface, flow rates expected soon
Gas has been flowed to surface from the SV-58 well, with the well expected to be
tested soon. Although the company faced multiple delays due to the challenging
nature of the well (high pressure), we expect the sustainable flow rates to be
announced within few days – the key catalyst for the stock that could potentially
confirm the commerciality of the core reserves valued at 168p/sh (we highlight
that it took around one week for MEX-106 flow rates to get to the sustainable
level). As we pointed out in our most recent research note (Key insights from
Ukraine trip, October 9, 2009), Regal won’t perforate T and D-sands from the SV-
58 well at this stage due to the safety reasons.
NH:
MEX-106: B-sands producing 521boe/d, T and D-sands to be tested by the Y/E
Regal confirmed that a fishing operations will be conveyed to remove a
mechanical obstruction lodged in the well with the intention of testing T-sands
(20p/sh risked NAV, 125p/sh unrisked) and D-sands (not in our valuation) by the
year end – a source of a significant NAV upside. Although the flow rates from the
shallower B-sands (75mcm/d of gas and 75boe/d of condensate) is below our
expectation (this is not new), the production rate could increase significantly when
T-sands and D-sands come on stream in December – this is also key to the
company’s ability to achieve 3kboe/d Y/E production target.
Regal confirmed that a fishing operations will be conveyed to remove a
mechanical obstruction lodged in the well with the intention of testing T-sands
(20p/sh risked NAV, 125p/sh unrisked) and D-sands (not in our valuation) by the
year end – a source of a significant NAV upside. Although the flow rates from the
shallower B-sands (75mcm/d of gas and 75boe/d of condensate) is below our
expectation (this is not new), the production rate could increase significantly when
T-sands and D-sands come on stream in December – this is also key to the
company’s ability to achieve 3kboe/d Y/E production target.
NH:
SV-61 & SV-66: SV-61 result expected in 1Q09, SV-66 spudded a week ago
SV-61 well has reached a c4.9km depth in less than 3 month – a significant
improvement in the drilling times compared to MEX-106 and SV-58. The well
result is expected in 1Q09. Finally, Regal confirmed the spudding of the fourth
new generation well SV-66 on 23 November with the results expected in 2Q09.
SV-61 well has reached a c4.9km depth in less than 3 month – a significant
improvement in the drilling times compared to MEX-106 and SV-58. The well
result is expected in 1Q09. Finally, Regal confirmed the spudding of the fourth
new generation well SV-66 on 23 November with the results expected in 2Q09.
NH:
Buy: catalysts and compelling valuation, PO 150p per share
We regard Regal as one of the cheapest stocks in the sector on both NAV and
reserves valuation, trading at: 1) a c.50% discount to our 190p/sh total risked
NAV vs the peer average discount of 23%, and 2) US$1.4/boe (US$2.6/boe
booked 2P reserves), a c.90% discount to the peer average of US$11/boe. We
like the material near-term catalysts, strong M&A potential and very attractive
valuation. Buy.
We regard Regal as one of the cheapest stocks in the sector on both NAV and
reserves valuation, trading at: 1) a c.50% discount to our 190p/sh total risked
NAV vs the peer average discount of 23%, and 2) US$1.4/boe (US$2.6/boe
booked 2P reserves), a c.90% discount to the peer average of US$11/boe. We
like the material near-term catalysts, strong M&A potential and very attractive
valuation. Buy.
BE:
Ta for that.
BE:
Guess it’ll be useful to someone.
11:56AM
NH:
Right
NH:
it is getting close to midday
NH:
let’s round up a few things
NH:
a very interesting note out on Anglo American this moring
NH:
from Caz
NH:
looking at Anglo Plats
NH:
which is a real headache for the company
NH:
in fact
NH:
it is the single most important thing
NH:
Anglo and its new chairman need to fix
NH:
if they are not to fall into the hands of Xstrata one day
BE:
(Lorcan – can’t you just use a magnet on a string? Like when you drop your keys down the drain?)
NH:
Anglo Plays
NH:
needs to raise money
BE:
Yup
NH:
but the question is how
NH:
this is going to be central to the performance of the Anglo share price going forward
Anglo American PLC (AAL:LSE): Last: 2,601, up 13 (+0.50%), High: 2,653, Low: 2,596, Volume: 1.83m
BE:
Can we have a look at the Caz note?
NH:
sure
NH:
Anglo American – Amplats: doing the numbers [AAL.L AAL LN 2,588p] IN-LINE Sector: OVERWEIGHT
NH:
In this note we look in some detail at the issues facing Anglo Platinum, Anglo American’s 80%-owned subsidiary. The manner of their resolution will go a long way to determining the success of Anglo American’s restructuring drive and to some extent its future as an independent company in our view. It also has important implications for the platinum industry. Key points:
Despite the recent increase in Rand PGM prices and some encouraging steps operationally, we estimate 15% of group output (c.275koz pa), is cash negative/breakeven at spot prices.
Despite the recent increase in Rand PGM prices and some encouraging steps operationally, we estimate 15% of group output (c.275koz pa), is cash negative/breakeven at spot prices.
NH:
It is increasingly obvious, though, that the most pressing issues are debt and capex. On our numbers Amplats’ CFO generation is relatively robust at R4-6.5bn over the next three years. Annual capital expenditure has, however, increased significantly, from R2bn in 2000 to R14.4bn in 2008 (coming down to c.R10bn this year); consequently, Amplats has been funding dividends by accumulating debt since 2007. Post-interest and capex the business is loss-making into perpetuity on our numbers, meaning there is little prospect of paying dividends under the current business model.
NH:
The most obvious mechanism by which to reduce the debt burden is by raising equity. We believe the most prudent course of action would be to recapitalise the balance sheet in combination with curtailing production at some of the highest cost mines, which should in turn help to reduce sustaining capital requirements. In our view, the current environment represents the best opportunity for many years to reshape the business in a meaningful way, although we recognise the obstacles to cutting capacity are significant.
NH:
On balance, we believe the market reaction to such a plan would be positive, with our most aggressive scenario being modestly EPS accretive to Anglo American in the first full year (+3%) and also improving group cashflow and net debt. While we do not expect any announcement before full year results in February, management has said it is actively considering its options with regards to the balance sheet. The impact on the platinum market would also be significant, increasing our forecast deficit to c.400koz in 2010.
NH:
We continue to believe there is an exciting long term investment case for Anglo American; however, we believe the current valuation is pricing in much of the good news and there is a risk of disappointment against expectations over the next six months. For example, we believe consensus earnings estimates for Amplats (and the parent company as a consequence) are currently too high. Furthermore, we see a material risk of cash calls from Amplats and De Beers (see various recent news stories) and therefore retain our IN-LINE recommendation.
BE:
Cheers
BE:
De Beers risk is a running story too of course
BE:
Everyone had written the value to zero
BE:
But the idea that it’s going to vampire into the cash for eternity is still a bit of an issue.
12:01PM
BE:
While on the miners
BE:
Credit Suisse turned positive on ENRC today
NH:
Okay
Eurasian Natural Resources Corp (ENRC:LSE): Last: 843.50, down 2 (-0.24%), High: 876.00, Low: 843.50, Volume: 648.02k
BE:
Usual argument – South Africa chrome is expensive and getting more so, Kaz chrome is not.
BE:
The former sets the benchmark and the latter benefits.
NH:
)fjp73 – KDD not following that at the moment)
BE:
Upgrading numbers and rating
Action: We are upgrading our rating on ENRC to Outperform (from Neutral) and the target price to 1100p (from 960p). ENRC has been a major laggard of late versus equities selling into the ferrous sector, namely Rio and XTA. We believe the market has neglected the upside risk to ENRC earnings from recent upgrades to iron ore and the longer term positive FeCr outlook, as well as ENRC superior growth potential. We are updating our ENRC model to reflect our revised iron ore forecast (Refer Commodities Quarterly-Bulk order dt 11th November 2009) and factor in our still positive view on stainless steel output and acquisition of CAMEC. We revise our 2010E EPS from $1.21 to $1.56 and 2011E EPS from $1.52 to $2.16.
BE:
Investment Case: ENRC is primarily a play on iron ore and ferrochrome and growth potential in Central Africa (mainly copper and cobalt) and from further balance sheet flexing. We see the group benefiting from lower cost of production as the South African FeCr producers struggle to keep up with a strong rand and power availability. We expect ferrochrome market to remain tight in the next 2-3 years and an upward shift in the cost curve as marginal production becomes higher cost. Iron ore could see a significant uplift in 2011E when the ex-China steel market should have fully recovered.
Catalysts: Rising stainless steel and carbon steel output in the next 2 years bode well for volumes and pricing in core markets alongside a strong competitive position and power constraints in South Africa. Our belief is that 2011E especially could see a substantial uptick in FeCr and iron ore prices. After a volume and price recovery in 2010E sensibly acquired growth could also add structural EBITDA of US$400m-500m on our estimates.
Valuation: We are upgrading our TP from £9.6 to £11.0 and changing our rating from Neutral to Outperform. We see a possible £2 of additional value to come from sensibly acquired growth.
12:03PM
NH:
Thank you for that
NH:
almost forgot to mention this
NH:
but the prop stocks are all weak today
British Land Co (BLND:LSE): Last: 450.00, down 9.8 (-2.13%), High: 467.50, Low: 448.50, Volume: 2.10m
Liberty International (LII:LSE): Last: 474.20, down 7.8 (-1.62%), High: 486.80, Low: 473.90, Volume: 515.40k
NH:
not that could be
NH:
because there will be limited buying from the middle east
NH:
or it could be down to a very, very bearish note from HSBC
NH:
slapped underweight ratings on everything it follows
NH:
forecasting a double dip correction
NH:
and wondering out loud
NH:
how all of this debt is going to be refinanced
BE:
Hm. Had a big run, the props, which seems to have been founded on the argument that NAVs can go up as well as down
NH:
(Tuna – stop it)
BE:
That all sounds a nicely bearish counterpoint.
NH:
well have a look at this
NH:
Bank property debt maturities and
replacement with equity finance set to
steer property into a double-dip
correction
replacement with equity finance set to
steer property into a double-dip
correction
NH:
Short-term yield compression to give
way to our forecast average 10% fall in
portfolio values in 2010
Target prices unchanged, projecting
average 33% negative potential return.
Reiterate Underweight (V) ratings on all
nine stocks under coverage
Funding requirements at record 23% of
investable stock
way to our forecast average 10% fall in
portfolio values in 2010
Target prices unchanged, projecting
average 33% negative potential return.
Reiterate Underweight (V) ratings on all
nine stocks under coverage
Funding requirements at record 23% of
investable stock
NH:
here’s the stuff on funding
NH:
An estimated GBP155bn of bank debt and GBP16bn of
CMBS matures between 2009 and 2013 with GBP35bn
maturing in 2010 against our estimate that there is
approximately GBP20bn maximum absorption capacity. We
calculate that GBP132bn (or 22.5% of investable stock) of
outstanding bank and CMBS debt is in excess of a long-term
sustainable 65% LTV level (of which GBP47bn is in negative
equity) with c85% of commercial property loans made since
2004 in breach of covenant.
CMBS matures between 2009 and 2013 with GBP35bn
maturing in 2010 against our estimate that there is
approximately GBP20bn maximum absorption capacity. We
calculate that GBP132bn (or 22.5% of investable stock) of
outstanding bank and CMBS debt is in excess of a long-term
sustainable 65% LTV level (of which GBP47bn is in negative
equity) with c85% of commercial property loans made since
2004 in breach of covenant.
NH:
We believe the bank debt maturity bottleneck will require
replacement by more expensive equity as lenders reduce
exposure to the sector ahead of stale income growth
potential in a deflationary economy. We expect the resulting
shortage of funding available to property to lead to higher
long-term borrowing costs and therefore higher required
portfolio income returns than are being priced in by UK
REITs share prices. We believe high vacancy rates, higher
business rates and weak prospective occupier demand should
lead rents to fall further in most sub-markets, which we
forecast at 12% for UK REITs.
replacement by more expensive equity as lenders reduce
exposure to the sector ahead of stale income growth
potential in a deflationary economy. We expect the resulting
shortage of funding available to property to lead to higher
long-term borrowing costs and therefore higher required
portfolio income returns than are being priced in by UK
REITs share prices. We believe high vacancy rates, higher
business rates and weak prospective occupier demand should
lead rents to fall further in most sub-markets, which we
forecast at 12% for UK REITs.
NH:
and the conclusion
NH:
Shares grossly overvalued
NH:
UK REIT share prices are pricing in a weighted average 9%
rise in prices compared to our forecast 9-16% falls in 2010.
REITs’ implied average 5.9% initial yields are below the allin
cost of new debt at c6%. We maintain our Underweight
(V) ratings on all the stocks in our coverage universe with
our target prices implying an average potential negative
return of 33%. We continue to be less negative on British
Land’s long leases, Shaftesbury’s defensive locations and
SEGRO’s higher income yield against Liberty International
and late-in-the-cycle Derwent London, which have the
largest negative potential total returns
rise in prices compared to our forecast 9-16% falls in 2010.
REITs’ implied average 5.9% initial yields are below the allin
cost of new debt at c6%. We maintain our Underweight
(V) ratings on all the stocks in our coverage universe with
our target prices implying an average potential negative
return of 33%. We continue to be less negative on British
Land’s long leases, Shaftesbury’s defensive locations and
SEGRO’s higher income yield against Liberty International
and late-in-the-cycle Derwent London, which have the
largest negative potential total returns
BE:
Cheers. Good reading.
NH:
(of course Driss)
NH:
and I think
NH:
we are done
BE:
Hang on – some mention to the right about UBS on financials
BE:
I suspect you mean their 2010 preview
BE:
Which is nearly, but not quite, too dull to post
BE:
A year of transition
We expect the cyclical recovery to continue through 2010, providing additional
support for equity markets. But just as the investment landscape looks better than it
did 12 months ago, challenges remain. To that end, 2010 will likely mark a year of
transition where the strength of the recovery is tested by structural headwinds.
We expect the cyclical recovery to continue through 2010, providing additional
support for equity markets. But just as the investment landscape looks better than it
did 12 months ago, challenges remain. To that end, 2010 will likely mark a year of
transition where the strength of the recovery is tested by structural headwinds.
BE:
From risk to fundamentals
Over the last two years, markets have been driven primarily by the ‘risk trade.’ We
see this trend moderating and anticipate a more balanced performance at both the
sector and stock level as investor focus returns to fundamentals and valuation. We
believe this should make 2010 a more investable market from a fundamental
perspective, and we recommend investors seek out ‘quality’ in their stock selections.
Over the last two years, markets have been driven primarily by the ‘risk trade.’ We
see this trend moderating and anticipate a more balanced performance at both the
sector and stock level as investor focus returns to fundamentals and valuation. We
believe this should make 2010 a more investable market from a fundamental
perspective, and we recommend investors seek out ‘quality’ in their stock selections.
BE:
Earnings growth, not valuations, to drive markets
We continue to see equity markets as fairly valued, noting that the rise in multiples
reflects investor expectations for earnings recovery. However, we also see
structural challenges limiting further multiple expansion. This balance suggests
that gains in equity markets will need to be driven primarily by earnings growth.
We continue to see equity markets as fairly valued, noting that the rise in multiples
reflects investor expectations for earnings recovery. However, we also see
structural challenges limiting further multiple expansion. This balance suggests
that gains in equity markets will need to be driven primarily by earnings growth.
BE:
Our key sector and regional allocations
Our most preferred sectors are Technology, Consumer Staples, and Energy.
Meanwhile, our least preferred are Consumer Discretionary, Telcos, and Industrials.
We have cut Financials and raised Materials, moving both to neutral. Regionally, we
prefer GEM, are neutral US and Europe, and underweight Japan.
Our most preferred sectors are Technology, Consumer Staples, and Energy.
Meanwhile, our least preferred are Consumer Discretionary, Telcos, and Industrials.
We have cut Financials and raised Materials, moving both to neutral. Regionally, we
prefer GEM, are neutral US and Europe, and underweight Japan.
BE:
That’s the summary. Full details in the usual place.
NH:
also for a quick mention on Yell, which are being pushed by Deutsche Bank this morning
NH:
for the following reason
NH:
*YELL GROUP PLC (Tgt 125p to 80p, Buy, close 37.01p, 116% upside to tgt)
*YELL GROUP PLC (Tgt 125p to 80p, Buy, close 37.01p, 116% upside to tgt)
Tgt 125p to 80p With the capital restructuring now complete, the balance
sheet is no longer an overhang. We anticipate a material recovery in EPS
(20% growth pa from next fiscal year) over the next 3 years driven
solely by reducing interest costs.
Yell Group (YELL:LSE): Last: 38.23, up 1.22 (+3.30%), High: 39.50, Low: 36.25, Volume: 6.98m
NH:
would like to see the workings on that
NH:
and Tuna
NH:
didn’t read the Mail at the weekend
NH:
just looking at the bond story now
NH:
if it’s £2bn doesn’t sound like it will be Colgate
NH:
SSL poss
NH:
but if the SSL directors have been selling stock
NH:
clearly no offer has gone in
BE:
Couple of director trades in Reckitt late last week too.
NH:
and SSL are not cheap anymore
NH:
anyway here is the piece in question
NH:
http://www.thisismoney.co.uk/markets/article.html?in_article_id=495034&in_page_id=53946&ito=1565
NH:
Large shareholders in the company, which has only £400m of debt, told Financial Mail that Reckitt wanted to take advantage of buoyant bond markets and could raise the capital before Christmas.
This is thought to be the first time the group, based in Slough, Berkshire, has considered tapping the bond market.
One investor said: ‘It could borrow up to £4bn through bonds and bank debt if it wanted to.’
He added that a multi-billion pound deal appears close but declined to comment on the target. Reckitt would not comment.
BE:
Thing is, there are a million possible targets for Reckitt
BE:
There’s every chance their next deal will be some OTC medicines business
BE:
That was non core to the seller, and we’ve never heard of.
NH:
owned by one of the big pharma companies
BE:
Or private equity.
NH:
good point
NH:
right
NH:
that’s it
NH:
we must go
NH:
the Lunch Wrap must be sent
NH:
but remember
NH:
pls log into tomorrow
NH:
with some questions for our guest editor
NH:
Jonathan Wilmot of Credit Suisse
NH:
but keep them sensible
NH:
otherwise
BE:
(Josey – why not apply then.)
NH:
it will be a zapping massacre
NH:
half the readers could end up with a ban
NH:
I don’t want that
NH:
to happen
NH:
and nor do you lot
NH:
but remember
NH:
the second half of the show
NH:
will be given over the usual banter
NH:
so there will be stock stuff
NH:
then
NH:
just not from Jonathan
NH:
but he will have plenty of interesting stuff to say
BE:
Right. We’re done.
NH:
we are
NH:
cya tomorrow
BE:
Bye.