Markets live chat transcript for the chat ending at 12:16 on 10 Dec 2009. Participants in this chat were: Neil Hume, FT (NH) Miles Johnson, FT (MJ)
NH:
hey there
NH:
welcome to Markets Live
NH:
FT Alphaville’s daily markets chat
NH:
I was going to kick things off this morning in Property Ladder style
NH:
by putting up some handy links
NH:
like this
NH:
and this
NH:
and this
NH:
but it looks as if my efforts were wasted
NH:
because bankers of the world
NH:
the bonus tax is coming to you
NH:
very soon
NH:
well, that’s one way to read this morning’s news
NH:
that France has followed the UK and slapped a super tax on those evil bankers
NH:
if you missed the FT story
NH:
which just came out
NH:
here it is
NH:
President Nicolas Sarkozy is to follow Britain and impose a one-off supertax on bonus pay-outs by banks operating in France.
The French government intends to include the tax in the budget bill currently going through parliament. It will be levied on bonus pay-outs over €27,000 and will be paid by the banks, bringing Paris in line with London. France and Britain want a similar one-off tax to be adopted across the EU.
A senior French official told the FT that the French government had been considering such a tax for some time but had been deterred from doing so by the threat to the competitiveness of Paris as a financial centre.
The French government intends to include the tax in the budget bill currently going through parliament. It will be levied on bonus pay-outs over €27,000 and will be paid by the banks, bringing Paris in line with London. France and Britain want a similar one-off tax to be adopted across the EU.
A senior French official told the FT that the French government had been considering such a tax for some time but had been deterred from doing so by the threat to the competitiveness of Paris as a financial centre.
NH:
“There is no obstacle to doing it now if it has been done in London,” the official said.
MJ:
Morning all
NH:
ah, Miles you’re back
NH:
and feeling a little better?
NH:
not the dreaded Swine then?
MJ:
just a heavy dose of man flu
NH:
well, it is good to have you back
NH:
any thoughts on the banker tax
MJ:
not really.The Geneva exodus doesn’t appear to be upon us yet
MJ:
And as you said in your post
MJ:
this move was rather telegraphed by the letter Nicolas and Broon sent to the Journal
MJ:
talking about a global banker tax
MJ:
so I guess the question is…
MJ:
who is next?
NH:
Germany I reckon
NH:
perhaps Spain
MJ:
what about the US?
NH:
hmmmm
NH:
I don’t know Miles, I just don’t know
NH:
could Obama get it through Congress??
MJ:
Probably not
NH:
going to be interesting to see how it plays out
NH:
and what about the Swiss?
NH:
no chance?
MJ:
That would be quite funny, in a cruel sort of way
NH:
it would be estate agents in Geneva
NH:
those guys will be weeping
MJ:
They would probably jump into the lake
11:07AM
NH:
anyway
NH:
I would just like to thank everyone who commented on our bonus posts yesterdaty
NH:
I think we had 15,000 words
NH:
which is just amazing
MJ:
and who said bankers were self absorbed?
NH:
NH:
Taxloss made that point yesterday
NH:
obviously the traffic was rather good too
NH:
so thanks
NH:
especially to our resident finance shaman
MJ:
Mr Fowke
NH:
yep
NH:
Michael was in the thick of it yesterday
NH:
fighting the good fight for the bankers of the world
MJ:
must catch up on some of that
NH:
do, it is very good
NH:
also thanks to everyone who help road test the ML USA yesterday afternoon
NH:
obviously we have a few technical issues
MJ:
who would have thought?
NH:
including no zapper at one point
NH:
a misfuncting swear filter
NH:
but it was much quicker
NH:
and more stable
NH:
even if Murph disappeared into the system at one point
MJ:
what, like the Matrix?
NH:
yeah, something like that. Actually I was thinking more like Tron.
11:09AM
NH:
Right
NH:
to the wider market
NH:
and…
MJ:
FTSE 100 up 23 points at 5227
MJ:
But its been more interetsing to watch sterling and the gilt market this morning
MJ:
British gilt futures slid more
than a full point on Thursday, taking the spread against euro
zone bonds to its widest in a year, as investors fretted about
the state of the public finances after the government’s
pre-budget report.
than a full point on Thursday, taking the spread against euro
zone bonds to its widest in a year, as investors fretted about
the state of the public finances after the government’s
pre-budget report.
MJ:
Gilts had rallied on Wednesday after the government revised
up borrowing for 2009/10 by less than expected to 178 billion
pounds and gilts issuance was also increased by less than feared
to 225.1 billion pounds from 220 billion pounds.
But analysts said the measures announced did not go far
enough towards tackling Britain’s ballooning budget deficit.
The opposition Conservative party, widely expected to win an
election due by mid-2010, warned Britain was still in danger of
losing its triple-A credit rating. [ID:LAK002514]
up borrowing for 2009/10 by less than expected to 178 billion
pounds and gilts issuance was also increased by less than feared
to 225.1 billion pounds from 220 billion pounds.
But analysts said the measures announced did not go far
enough towards tackling Britain’s ballooning budget deficit.
The opposition Conservative party, widely expected to win an
election due by mid-2010, warned Britain was still in danger of
losing its triple-A credit rating. [ID:LAK002514]
MJ:
Finance minister Alistair Darling told Reuters, however, the
measures should reassure investors the government is serious
about bringing down its debt. [ID:nLAK002517]
“Clearly the market is telling the government in no
uncertain terms that there is certainly concern around the lack
of strong measures to tackle the fiscal problems,” said Francis
Diamond, strategist at JP Morgan.
measures should reassure investors the government is serious
about bringing down its debt. [ID:nLAK002517]
“Clearly the market is telling the government in no
uncertain terms that there is certainly concern around the lack
of strong measures to tackle the fiscal problems,” said Francis
Diamond, strategist at JP Morgan.
NH:
hmmm
NH:
not sure the Tories will win a majority
NH:
it could be a hung parliament
NH:
which won’t be good news for gilts
MJ:
10 year gilt yeild up 0.97 to 3.76
NH:
and sterling
NH:
how is that performing
MJ:
Great British Krona is a bit steadier this morning
MJ:
after yesterday’s PBR-induced tumble
MJ:
Pound is at $1.6301 against the dollar
NH:
actually there is a very good note on the political implications of yesterday’s PBR
NH:
from Michael Saunders of Citi
NH:
who sounds like he might stand as a Tory MP
NH:
at the election
NH:
anyway
NH:
here it is
NH:
Politics Versus Economics
NH:
Rather than produce a serious and credible fiscal consolidation plan, the
Chancellor’s aim looks to be chiefly political: to reinforce Labour’s core vote
and try to deprive the Conservatives of a majority in Parliament after the next
election. The Conservatives need to be at least 10% ahead of Labour (roughly)
to get a majority in Parliament (the required lead increases if the Lib Dems do
well). Recent polls suggest that the Conservatives are indeed about 10% ahead
of Labour, but polls also suggest that Labour’s core support is significantly
higher than Labour’s current voting intentions (whereas the Conservatives’
voting intentions are well above their core support).
Chancellor’s aim looks to be chiefly political: to reinforce Labour’s core vote
and try to deprive the Conservatives of a majority in Parliament after the next
election. The Conservatives need to be at least 10% ahead of Labour (roughly)
to get a majority in Parliament (the required lead increases if the Lib Dems do
well). Recent polls suggest that the Conservatives are indeed about 10% ahead
of Labour, but polls also suggest that Labour’s core support is significantly
higher than Labour’s current voting intentions (whereas the Conservatives’
voting intentions are well above their core support).
NH:
Thus, Labour’s political strategy look to be aimed at making the election tribal
(hence the “class war” rhetoric); to avoid hurting their own core support
(hence no early fiscal tightening); and to portray the Conservatives as a party
that wants to cut public spending for ideological reasons (to detach floating
voters from the Conservatives).
(hence the “class war” rhetoric); to avoid hurting their own core support
(hence no early fiscal tightening); and to portray the Conservatives as a party
that wants to cut public spending for ideological reasons (to detach floating
voters from the Conservatives).
NH:
This approach seems to be working in political terms: three of the last five polls
have pointed to a hung parliament. But, in market terms, it implies no preelection
commitment to fiscal consolidation and a growing risk that there will
be a hung parliament – which also could prevent early fiscal consolidation
post-election as well.
have pointed to a hung parliament. But, in market terms, it implies no preelection
commitment to fiscal consolidation and a growing risk that there will
be a hung parliament – which also could prevent early fiscal consolidation
post-election as well.
NH:
and
NH:
some market implications
NH:
We suspect that, as this Budget is digested, gilts and sterling will react badly.
First, the UK remains on a tax and spend policy which – especially with the
arbitrary nature of the windfall tax on bank bonuses – may hurt potential
growth, discourage inward investment, and make it harder for the UK to reattract
the global export-oriented firms needed to take advantage of the low
pound and generate export-led growth. With the windfall tax not linked at all
to the capital ratios, financial soundness or level of risk-taking of individual
banks, we suspect that many firms will legitimately worry that any business
which by skill, hard work or luck generates bumper profits in the UK in
future years might be subject to a windfall tax.
First, the UK remains on a tax and spend policy which – especially with the
arbitrary nature of the windfall tax on bank bonuses – may hurt potential
growth, discourage inward investment, and make it harder for the UK to reattract
the global export-oriented firms needed to take advantage of the low
pound and generate export-led growth. With the windfall tax not linked at all
to the capital ratios, financial soundness or level of risk-taking of individual
banks, we suspect that many firms will legitimately worry that any business
which by skill, hard work or luck generates bumper profits in the UK in
future years might be subject to a windfall tax.
NH:
Second, the UK remains on an unsustainable fiscal trend, with the deficit
likely to stay high for an extended period and the UK’s public debt/GDP ratio
heading up to about 100% of GDP in the coming five or six years.
likely to stay high for an extended period and the UK’s public debt/GDP ratio
heading up to about 100% of GDP in the coming five or six years.
NH:
Third, if Labour’s political strategy works, risks of a hung parliament will rise
further, hence increasing the likelihood that the UK also is unable to
establish a path back to fiscal sustainability after the election — unless
under the extreme pressure of a major financial crisis.
further, hence increasing the likelihood that the UK also is unable to
establish a path back to fiscal sustainability after the election — unless
under the extreme pressure of a major financial crisis.
MJ:
Interesting. But I don’t see why people are suprised that the PBR was very politically driven
NH:
true
MJ:
Of course, we have the BoE meeting later as well
NH:
crikey
NH:
forgot all about that
NH:
we had better stay on air
NH:
I do have a little preview
MJ:
Would be good to see that
NH:
BoE interest rate decision & QE decision (12:00 GMT): The asset purchase target should be left at GBP200b and the bank rate at 0.5%. We do not expect announcements on bank reserve remuneration as changes are more likely once QE purchases have been completed. In the absence of any policy changes, we do not expect a MPC statement. Although November’s split vote and some recent speeches by MPC members point to growing divergences within the Committee, we doubt any of these will surface in a significant way at this stage. February’s MPC meeting, which will be informed by the next Inflation Report, remains the key focal point for policy.
NH:
ok
NH:
stop there
NH:
Do
NH:
you’re off
NH:
red card
NH:
you have ruined my gag
MJ:
Multiple life time bans
NH:
Great Britain downgraded to just ‘Britain’ at Moody’s
NH:
Bear with us
MJ:
Bazooka zapper being dusted off
NH:
sorry
NH:
just had a tech outage
MJ:
Classic ML internet blip
11:19AM
NH:
Right
NH:
just trying to a get link
NH:
to a story in the Times
NH:
about guaranted bonuses
NH:
being exempt from the super tax
NH:
but the web is down
NH:
but this
NH:
I think
NH:
will get you there
11:20AM
MJ:
Back to equities, what is moving out there? Banks are up
NH:
there are
NH:
ironically
NH:
the two state-owned ones
NH:
are the best performers
Lloyds Banking Group (LLOY:LSE): Last: 56.69, up 2 (+3.66%), High: 57.03, Low: 54.51, Volume: 101.29m
Royal Bank of Scotland Group (RBS:LSE): Last: 31.69, up 1.36 (+4.48%), High: 31.85, Low: 30.20, Volume: 36.83m
NH:
I think Lloyds has been upgraded by RBS
NH:
again ironically
MJ:
MJ:
I hope they recipricate
NH:
here’s the note
NH:
Reiterate Buy with new 100p TP to adjust for capital issuance = nearly 90% upside. Key points: 1) capital issuance drag coming to an end should allow investors to focus back on Lloyds’ underlying business fundamentals and improving RoA trends that we anticipate will begin to show with 2H09F results; 2) we continue to see a material GBP5bn increase in PiP by FY13F, despite a 20% decline in funded assets, with improving net interest margin & stable costs. Profit further benefits from the stabilisation of UK property prices and so impairment charges; 3) trend towards a more conservative balance sheet structure: with sharply reduced dependency on short term wholesale funding and comfortable capital levels whether measured vs RWAs or funded assets leverage. Valuation: new 100p TP Implies 2013F multiples of 12x earnings and 2.1x TCE. Currently, Lloyds is trading at P/TCE multiples of 1.4x, 1.3x and 1.0x for 2010, 2011 and 2012 respectively. But no dividend until at least 2012.
NH:
or highlights of
NH:
Barclays also a good market this morning
Barclays PLC (BARC:LSE): Last: 284.70, up 6.6 (+2.37%), High: 286.30, Low: 277.00, Volume: 19.53m
NH:
and all that
NH:
is in spite of the news
NH:
that Citigroup is about to tap shareholders for $20bn
NH:
to pay back all that Tarp money
MJ:
There was also a bit of bank-Dubai related RAW going round
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
NH:
go on
MJ:
That the UK banks might have agreed on the Dubai World restructuring
NH:
and that’s good news?
MJ:
Though I don;t think that would explain any of these moves
MJ:
Exactly
MJ:
We will keep an eye out for more on that
NH:
shall we move on
NH:
some people will be getting bored with banks
MJ:
we should
11:25AM
NH:
right features few and far between this morning
NH:
but there are a couple of interesting notes around
NH:
Caz are pushing Sky
NH:
BSkyB [BSY.L BSY LN] 544p Outperform (from In-line) Sector Neutral
Recommendation moved to Outperform, regulatory risk reducing, business momentum remains strong
Recommendation moved to Outperform, regulatory risk reducing, business momentum remains strong
NH:
We are upgrading Sky to OUTPERFORM, reflecting its strong growth prospects together with the potential for margin improvement. Furthermore, we note that the publication of Ofcom’s pay-tv review has been delayed from December/January to the end of March 2010. Given the General Election due by May, we speculate as to whether a change in Government might be considered a reduction in the regulatory risks facing Sky.
Despite reporting three sets of excellent results that have demonstrated accelerated revenue growth, Sky’s shares have struggled to perform. We believe this reflects the threat of increased regulation together with the investment made in volume growth.
Given recent statements from David Cameron and the recent shift in political backing from a News Corp controlled UK newspaper, it is tempting to jump to the conclusion that the regulatory and political environment may shift in favour of Sky during 2010.
Going forward, we expect reduced concerns over regulation and accelerating profit growth to lead to a re-rating of the shares. Business momentum remains strong with growing demand for Sky’s expanded services. Next news will be Sky’s Q2 results on 28 January 2010.
Despite reporting three sets of excellent results that have demonstrated accelerated revenue growth, Sky’s shares have struggled to perform. We believe this reflects the threat of increased regulation together with the investment made in volume growth.
Given recent statements from David Cameron and the recent shift in political backing from a News Corp controlled UK newspaper, it is tempting to jump to the conclusion that the regulatory and political environment may shift in favour of Sky during 2010.
Going forward, we expect reduced concerns over regulation and accelerating profit growth to lead to a re-rating of the shares. Business momentum remains strong with growing demand for Sky’s expanded services. Next news will be Sky’s Q2 results on 28 January 2010.
NH:
Valuation summary
Sky currently trades on 15.5x PER for calendar 2010E with a dividend yield of 3.5%. This reflects the prospect of strong top line growth and margin improvement driven by HD, broadband and telephony. In addition, investments in HD and broadband have reduced margins (15% in 2009A). We expect these margins to trend smoothly back towards 20% as these investments stabilise and the underlying products achieve critical mass. Together with high signal digit revenue growth, our forecasts imply a 3 year EPS CAGR of 20% and suggest Sky shares trade at 11.3x PER by 2012E. Sky’s business momentum has remained strong so far, supported by excellent management execution.
Sky currently trades on 15.5x PER for calendar 2010E with a dividend yield of 3.5%. This reflects the prospect of strong top line growth and margin improvement driven by HD, broadband and telephony. In addition, investments in HD and broadband have reduced margins (15% in 2009A). We expect these margins to trend smoothly back towards 20% as these investments stabilise and the underlying products achieve critical mass. Together with high signal digit revenue growth, our forecasts imply a 3 year EPS CAGR of 20% and suggest Sky shares trade at 11.3x PER by 2012E. Sky’s business momentum has remained strong so far, supported by excellent management execution.
British Sky Broadcasting (BSY:LSE): Last: 553.50, up 9.5 (+1.75%), High: 556.00, Low: 545.50, Volume: 1.44m
NH:
also
NH:
Citigroup
NH:
have turned seller of Wellstream
MJ:
Why so?
NH:
dunno
NH:
will get the note
NH:
but it’s interesting
NH:
they used to be big fans of the company
NH:
but not any more
NH:
and those bid rumours
NH:
have gone away
NH:
anyway
NH:
the note hasn’t and here it is
NH:
Summary — We downgrade Wellstream to Sell from Hold and cut our target
price to £4.35 from £5.75. Uncertain demand outside Brazil exposes 2010
earnings. The long-term margin may be reduced by installation – a critical but
margin-dilutive service required by clients. The stock looks expensive in our
view, trading at 13.4 times our 2011e earnings, a 17% premium to the sector
price to £4.35 from £5.75. Uncertain demand outside Brazil exposes 2010
earnings. The long-term margin may be reduced by installation – a critical but
margin-dilutive service required by clients. The stock looks expensive in our
view, trading at 13.4 times our 2011e earnings, a 17% premium to the sector
NH:
2010 Earnings Exposed — The weak backlog and order outlook for the
Newcastle plant targeting demand outside Brazil should hurt 2010 earnings.
We estimate Newcastle end-2009 backlog at £30m, just 28% of its 2010e
sales. We cut our 2010 EPS estimates by 31% mostly because of Newcastle
uncertainty. This risk is known but does not look priced in, with the stock
recovering after the trading update (17 Nov), and the market seemingly
“looking beyond 2010”. We look beyond 2010 too, and see margin dilution
Newcastle plant targeting demand outside Brazil should hurt 2010 earnings.
We estimate Newcastle end-2009 backlog at £30m, just 28% of its 2010e
sales. We cut our 2010 EPS estimates by 31% mostly because of Newcastle
uncertainty. This risk is known but does not look priced in, with the stock
recovering after the trading update (17 Nov), and the market seemingly
“looking beyond 2010”. We look beyond 2010 too, and see margin dilution
NH:
and here’s a bit on M&A
NH:
M&A Unrealistic — Price would likely be hard to agree upon. Petrobras and
other key customers might discourage consolidation in this space.
other key customers might discourage consolidation in this space.
MJ:
Is there any more on the M&A?
NH:
there is
NH:
one moment
NH:
We do not expect Wellstream to be acquired by any of its competitors for
several reasons. The key customers (e.g. Petrobras) would be reluctant to see
consolidation in the thinly supplied flexible pipe market, hence would likely
discourage a purchase of Wellstream by its key competitors. Competitors could
focus on their organic business in these uncertain times instead of distracting
themselves with M&A negotiations. Further, we believe a satisfactory price level
would not be easily achieved between a buyer and seller. Some players (e.g.
Saipem) have publicly stated they are not interested in acquiring flexible pipe
manufacturers, specifically Wellstream. Finally, our meeting with the company
did not give us reasons to believe that there are or have been any M&A
discussions.
several reasons. The key customers (e.g. Petrobras) would be reluctant to see
consolidation in the thinly supplied flexible pipe market, hence would likely
discourage a purchase of Wellstream by its key competitors. Competitors could
focus on their organic business in these uncertain times instead of distracting
themselves with M&A negotiations. Further, we believe a satisfactory price level
would not be easily achieved between a buyer and seller. Some players (e.g.
Saipem) have publicly stated they are not interested in acquiring flexible pipe
manufacturers, specifically Wellstream. Finally, our meeting with the company
did not give us reasons to believe that there are or have been any M&A
discussions.
11:29AM
NH:
Any Raw this morning, Miles?
MJ:
Story out there on that hardy perrenial – International Power
NH:
go on
MJ:
More GDF bid talk
International Power (IPR:LSE): Last: 284.80, up 0.5 (+0.18%), High: 285.50, Low: 281.80, Volume: 1.04m
NH:
so is it on
NH:
or off?
MJ:
Well
MJ:
According to Deal Reporter, the French gov is holding things up
NH:
really
NH:
they don’t want them to bid
NH:
why?
MJ:
The French state is GDF’s main shareholder
MJ:
And will not want to be seen as too cavalier after paying up for British Energy
NH:
that was EDF though
MJ:
Still French state
NH:
fair point
NH:
any more detail on this??
MJ:
There is a fair bit in the Deal Reporter article, I can whack a bit up
MJ:
The French State, which is GDF’s main shareholder with a 35.6% stake,
is believed to have put the shackles on the deal, the two bankers
claimed. The government is thought to be cautious after it was accused
of overpaying for British Energy – France paid GBP 12.47bn for the deal
in 2008. International Power is currently trading below 300p and a 400p
a share deal is seen as too expensive, the banker said. President
Sarkozy is also sensible to keep the unions happy in current economic
context, and financing a GBP 6bn deal with public money could trigger
social backlash, the two bankers said.
is believed to have put the shackles on the deal, the two bankers
claimed. The government is thought to be cautious after it was accused
of overpaying for British Energy – France paid GBP 12.47bn for the deal
in 2008. International Power is currently trading below 300p and a 400p
a share deal is seen as too expensive, the banker said. President
Sarkozy is also sensible to keep the unions happy in current economic
context, and financing a GBP 6bn deal with public money could trigger
social backlash, the two bankers said.
The case is rumoured to be under review by the French Government
Shareholding Agency (APE), said the bankers. A firm offer from GDF is
unlikely to arise before Christmas but “things could move forward in
January”, one of the bankers claimed. He could not see another bidder
getting involved at this stage, noting Centrica would not have the
financial strength. Centrica was previously reported alongside GDF as a
possible buyer for IP, although the UK utility is understood to be
looking for bolt on deals in the US.
MJ:
GDF has previously been reported to be in advanced informal talks with
International Power although these talks were today strongly downplayed
from the UK side.
International Power although these talks were today strongly downplayed
from the UK side.
“The two groups have been holding informal chats for a while and have
reached an agreement over a 400p a share price”, said a Paris-based
banker. This banker added that Lazard and BNP Paribas are acting for
GDF. This was seconded by another French banker not directly involved in
the matter.
NH:
hmmm
NH:
interesting
MJ:
The story that will not die
MJ:
Zombie RAW
NH:
but from that one gets the impression that GDF want to do this deal
MJ:
True
NH:
i think this still might happen
NH:
at some point
MJ:
Though having the French state as a stake holder has never been easy
NH:
true
11:34AM
NH:
Moving on
NH:
It seems Mike Lynch of Autonomy
NH:
is not the only guy
NH:
who is prepared to litter RNS
NH:
with a load of corporate guff
NH:
Frank Timis is at too
MJ:
really?
NH:
oh yes
NH:
African Minerals wins UN-designated International Year of Planet Earth Award 2009
MJ:
(tries not to fall over laughing)
NH:
African Minerals Limited (AIM:AMI), the mineral exploration and development company with significant iron ore and base metal interests in Sierra Leone, West Africa, is pleased to announce that it has been awarded the prestigious International Year of Planet Earth (IYPE) Award 2009 recognised by the United Nations.
African Minerals’ Tonkolili Iron Ore and Infrastructure Project was awarded “Most Effective Corporate Social Responsibility Project” on Friday 20th November 2009 at the Planet Earth Lisbon Event in Portugal.
The IYPE Awards were initiated in order to mark innovation, beneficial excellence and significant achievement by corporations and government departments in the areas of environmental enhancement and sustainability of the Earth’s resources, during the UNITED NATIONS-designated International Year of Planet Earth.
NH:
The award recognised that, as a socially responsible organization and one of the largest employers in Sierra Leone, African Minerals Limited is continually implementing social development programs within Sierra Leone to support deprived communities in its operational areas and to supplement government initiatives across the country. These programs are undertaken to assist the Sierra Leone government’s drive to reduce poverty and provide improved health care, education, infrastructure, sports and local government development and include:
*
The provision of safe drinking water in some of the company’s operational areas
*
Construction and maintenance of roads and bridges for communities
*
Support to sporting activities both at community and national levels
*
Various forms of support to the educational sector in Sierra Leone
*
Contribution to the development of social infrastructure in Marampa Chiefdom, Port Loko District
*
Support to Local Government in the Port Loko District Council
*
Support to the Rural Transport Sector in the Kalasongoia, Kafe Samiria & Samiaia Bendugu Chiefdoms
NH:
now, we all know
NH:
the master entrepreneur does a lot of work for charidee
NH:
but he is know
NH:
building bridges
NH:
roads
NH:
schools
NH:
safe drinking water
MJ:
Maybe that is why he hasn’t been returning my calls
MJ:
Too busy
MJ:
NH:
could be
NH:
but Frank has not always been eco friendly
NH:
if anyone remember Gabriel Resources
MJ:
What was that one?
NH:
hang on
NH:
The company was founded in 1995 by Romanian-Australian entrepreneur Frank Timiş, who has attracted controversy due to two convictions in Australia in the early 1990s for possession of heroin with intent to supply as well as allegations of other unsavory business-related activities. Timiş no longer has anything to do with the company, nor has had anything to do with Gabriel Resources for several years.
Gabriel, through a joint venture with the Romanian government, holds an 80% interest in a planned mining project in Roşia Montană.
The Rosia Montana mining project is the subject of numerous documentaries, including Mine Your Own Business, a film financed almost entirely by Gabriel Resources.
11:38AM
NH:
Right
NH:
Mr Fowke
NH:
the picture has not changed
NH:
we have had this debate before
NH:
I looked simple
NH:
and still look simple
NH:
there has been no change
NH:
I assure you
NH:
slightly overweight in that photo too
MJ:
Mr Fowke might be talking about chnages on the astral plane
MJ:
rather than how it looks
MJ:
Anyway
NH:
that’s true
NH:
or confused with Bryce
11:40AM
NH:
Miles
NH:
anything you want to look at?
MJ:
Well, we had a little look at the Evening Standard charity auction
MJ:
might be needing some contributions
NH:
(Fowke – financial shaman can be carded you know)
NH:
what for
MJ:
This looks rather tempting
MJ:
Lot 33: Join the Candy’s Design school: Nick and Christian Candy are not just London’s leading property developers but a driving force in the world of innovative design. Win a free place at their new Candy & Candy College of Design, starting in March 2010. (Current bid: £385.00)
NH:
hmm
NH:
that’s sound good value
MJ:
Just 385 quid
NH:
do we get to meet the great developers
MJ:
Its not clear
NH:
we could have a whip round with the readers
MJ:
Doesn’s specify its only for one. We could all go down
MJ:
Quid each please
NH:
Meet the Candy’s
MJ:
There is also more work experience for sale
NH:
on this auction?
MJ:
Yup
MJ:
Life on the Standard’s newsdesk is hectic and fast-paced. Could you handle a week there? Past winners have gained exclusive access to the the Old Bailey and City Hall. For one person over 18yo. Expires 20 December 2010. Daily hours will be varied and will average eight (8) hours per day, Monday – Friday. No drivers licence needed.
MJ:
Bryce pointed out that those are both public buildings
NH:
11:44AM
NH:
Right some breaking news
NH:
JJB Sports has a new CEO
JJB Sports (JJB:LSE): Last: 27.75, up 2.25 (+8.82%), High: 28.00, Low: 25.50, Volume: 2.82m
NH:
JJB Sports plc (‘JJB’ or ‘the Company’), one of the UK’s leading sports retailers, is pleased to announce the appointment of Keith Jones as Chief Executive. The Company will make a further announcement to confirm the date on which Keith will join the Company, which will not be later than 1 March 2010.
Keith, aged 45, is currently Group Retail Director at DSG international plc, the leading electrical retail group, where he has spent the past ten years in a variety of senior roles. Before that he held a number of roles within other retail groups, including Virgin and B&Q. He has an MBA from Manchester Business School.
11:45AM
NH:
Right
NH:
got some stuff on yesterday’s FTSE review
MJ:
So, that company’s whose name you can;t pronounce never made it
MJ:
due to the rules I hear
MJ:
How did that not get picked up before hand?
NH:
not sure, i guess brokers don’t read the FTSE groundrules
NH:
9.1 through to 9.3 if interested
NH:
and they say new shares alloted from a convertible
NH:
or a placing
MJ:
(We are talking about Petropavlovsk )
NH:
must be more than 10% of the exisiting share cap
NH:
to be included in a review
NH:
the POG convert was not that big
NH:
so the shares were counted
NH:
I understand the company is none too pleased
NH:
but thems the rules
NH:
and they are there in black and white
NH:
and have been for four years
NH:
anyway
NH:
that forced analysts to recall alot of the notes
MJ:
Bit unfortunate for the people who were pushing that one hard
NH:
they sent out on POG yesterday
NH:
yes
NH:
a few people embarassed by that
NH:
and as we noted last night
NH:
we did not know the rules
NH:
so don’t be smug Oldie
NH:
otherwise
NH:
zap for you
Warning to rude and abusive commenters – your ability to comment will be terminated immediately and permanently, without warning. Henceforth, FTAlphaville has instituted a One Strike and You Are Out policy. We’ve had enough. We are going to clean up these pixels once and for all.
NH:
right
NH:
here a note on the Index revew
NH:
with some details of what the trackers might have to buy
NH:
it is from SG
NH:
FTSE note
FTSE100, 250 & Smallcap potential changes: Aggreko or Petropav.could join, Rentokil leave FTSE100
FTSE will announce changes to its UK indices after the close tomorrow, 9 Dec, based on tonight’s (8 Dec) full market capitalisations. We have updated the attached selection list for this morning’s prices. Please see attached for a summary of potential changes and flows.
We calculate that 1 FTSE100 is close but not certain with 8 adds, 1 delete in All-Share and 5 further FTSE250 replacements.
NH:
FTSE100
Using prices from earlier today, Aggreko (AGK LN) or Petropavlovsk (POG LN).could join the FTSE100, replacing Rentokil Initial (RTO LN).
Using last nights close no FTSE100 change was needed so this change is not certain. Potential AGK demand would be 5.4m shares, 8.7 days while POG would be 3.4m shares, 2.6 days. There is only 1% between the two with AGK ahead an hour ago, POG in more recent prices. Potential RTO supply would be -36m shares, -6.3 days.
A 0.7% gain in Rentokil could prevent any change from happening as could a 1% move in either AGK or POG LN.
NH:
FTSE All-Share
In all, eight stocks could join the index with one deletion. All the All-Share adds are subject to liquidity checks and therefore FTSE will decide these companies do not pass, although we believe they do.
Adds
Booker (BOK LN) also into FTSE250.
Genesis Emerging Markets Fund (GSS LN) also into FTSE250
LMS Capital (LMS LN)
Impax Asian Environmental Markets (IAEM LN)
Clinton Cards (CC/ LN)
Minerva (MNR LN)
XP Power (XPP LN)
Standard Life UK Smaller Cos (SLS LN)
Deletes
Directors Dealing Investment Trust (DDIT LN)
NH:
FTSE250
There could be five further FTSE250 replacements with Booker and GSS joining the 250 and the All-Share.
Adds
Booker Group (BOK LN)
Genesis Emerging Markets Fund (GSS LN)
Unite Group (UTG LN)
Intec Telecom Systems (ITL LN)
Quintain Estates and Development (QED LN)
Deletes
Morgan Sindall (MGNS LN)
Vectura Group (VEC LN)
Chaucer Holdings (CHU LN)
Avis Europe (AVE LN)
Thames River Multi Hedge PCC GBP (TRMA LN)
11:50AM
NH:
Miles
NH:
time for a trip to small cap corner
MJ:
Yes please
NH:
and a company you have been following
NH:
Afren
MJ:
Ah yes
MJ:
Big upgrade this morning?
NH:
yes
NH:
from their Ebok prospect
NH:
in Nigeria
NH:
Afren has announced what it is describing as a ‘significant upgrade’ to Ebok volumetrics – or, in more prosaic terms, an upgrade in ‘technically recoverable volumes’ for Ebok West of 15mmbbl, and a total Ebok field recoverable number of 93mmbbl
NH:
now
NH:
a few people are taking this
NH:
with a pinch of salt
NH:
Well, you’ll have to forgive me here: not only is Afren one of the most aggressive reserve bookers in the sector (cf the immediate upgrade on Okwok on acquisition before drilling a single well, and the significant discrepancies between AFR internal reserve estimates and independently certified reserves…), but this stuff is worth about $4/bbl on our numbers, so we’re still not seeing any value in this, even if these reserve numbers turn out to be producible
NH:
I don’t understand the popularity of this stock, and sometimes being a lone voice is, well, just lonely, but we’re going to take comfort from a bit of Camus this morning: “la lutte elle-meme vers les sommets suffit a remplir un coeur d’homme. Il faut imaginer Sisyphe heureux.” So carry on as before: SELL
NH:
No i wonder
NH:
if Debbie has any thoughts on Afren
NH:
and this
MJ:
Shares?
NH:
hang on
NH:
small up by the looks of it
NH:
up 2.5p to 88p
NH:
and there are some positive notes out
NH:
today
NH:
such as this from Citi
NH:
Valuation impacts – We believe this morning’s positive drilling results have the
potential to add between £0.03/sh-£0.08/sh to our risked valuation of £0.99/sh
with the key variable relating to potential changes to the proposed development
plan for this part of the Ebok reservoir.
potential to add between £0.03/sh-£0.08/sh to our risked valuation of £0.99/sh
with the key variable relating to potential changes to the proposed development
plan for this part of the Ebok reservoir.
NH:
and Merrill
NH:
…and offer scope for further upside
Ebok appears to still offer significant upside as management are targeting a
further 74mmboe through the ongoing appraisal programme. A new appraisal well
(Ebok 6, 1.4p risked; 2.0p unrisked) targeting 8mmboe of resources in the South
Lobe of the field was spudded a couple of weeks ago and we expect results by
mid-Jan. The results of the achieved in the drilling campaign so far further de-risk
the additional upside that Ebok presents.
Ebok appears to still offer significant upside as management are targeting a
further 74mmboe through the ongoing appraisal programme. A new appraisal well
(Ebok 6, 1.4p risked; 2.0p unrisked) targeting 8mmboe of resources in the South
Lobe of the field was spudded a couple of weeks ago and we expect results by
mid-Jan. The results of the achieved in the drilling campaign so far further de-risk
the additional upside that Ebok presents.
NH:
A similar path for the Okwok field?
Importantly, the results validate Afren’s geological model for the area and allow
the technical team to further calibrate their seismic amplitude analysis. This is key
to the success in starting the appraisal of the neighbouring and recently acquired
Okwok field in coming quarters. Okwok (56% Afren) holds 70mmboe of
recoverable resources with 52mmboe of exploration upside already identified.
Raising NAV by 11p to 125p; re-iterate Buy rating
Reflecting the appraisal results and further de-risking other prospects in the Ebok
block, we raise our NAV by 11p/sh to a total of 125p. The stock trades at a c35%
discount to NAV. We see such a discount as unwarranted and re-iterate our Buy
rating. We set a PO of 125p – in-line with NAV – to reflect the NAV increase.
Importantly, the results validate Afren’s geological model for the area and allow
the technical team to further calibrate their seismic amplitude analysis. This is key
to the success in starting the appraisal of the neighbouring and recently acquired
Okwok field in coming quarters. Okwok (56% Afren) holds 70mmboe of
recoverable resources with 52mmboe of exploration upside already identified.
Raising NAV by 11p to 125p; re-iterate Buy rating
Reflecting the appraisal results and further de-risking other prospects in the Ebok
block, we raise our NAV by 11p/sh to a total of 125p. The stock trades at a c35%
discount to NAV. We see such a discount as unwarranted and re-iterate our Buy
rating. We set a PO of 125p – in-line with NAV – to reflect the NAV increase.
MJ:
I can’t help but find funny the first notes reference to Camus’ Myth of Sisyphus
NH:
oh ye
NH:
good isn’t it
MJ:
I was looking at Afren recently. Asking round about their next aqusition in Africa
MJ:
We might have a name, but still need to firm it up, so will hold back for now
MJ:
At the moment its just some random field
NH:
no problem
NH:
I agree with you
NH:
they are working on something
11:55AM
NH:
Right
NH:
a few people asking about UU’s
NH:
and the management departure today
NH:
not good new
NH:
seems to be the verdict of analysts
NH:
this from Citi
NH:
UNITED UTILITIES (UU.L; £4.93; 2M) – CFO to leave in
May
United Utilities has announced that Tim Weller, CFO, is to leave the company
in May to take a senior role at Cable and Wireless. No successor announced as
yet.
COMMENT
This is a blow for UU as Tim Weller has been well regarded in his role. UU has
until 6 January to decide on whether or not to accept Ofwat’s final price
proposals. We believe it still needs to raise about £250m either through asset
sales or equity issuance to preserve their credit metrics.
May
United Utilities has announced that Tim Weller, CFO, is to leave the company
in May to take a senior role at Cable and Wireless. No successor announced as
yet.
COMMENT
This is a blow for UU as Tim Weller has been well regarded in his role. UU has
until 6 January to decide on whether or not to accept Ofwat’s final price
proposals. We believe it still needs to raise about £250m either through asset
sales or equity issuance to preserve their credit metrics.
NH:
and here’s Evo
NH:
VO TAKE – The departure may signal a difference in view on financing policy (or it may not). Our view is that UU will cut DPS and not do a rights issue. If UU were to make a rights issue merely to artificially maintain DPS, we would downgrade the stock. The timing of this announcement prior to announcement of financing policy increases our suspicion.
DETAILS – UU has announced that Tim Weller, the CFO is to leave in May, to become CFO of Cable&Wireless Worldwide.
DETAILS – UU has announced that Tim Weller, the CFO is to leave in May, to become CFO of Cable&Wireless Worldwide.
NH:
VALUATION AND RECOMMENDATION – We believe UU will need to cut DPS for the 2011-15 (AMP5). This is in the price on the basis of comparison of yield with other water stocks. We do not believe rights issues are required. Asset sales already done and lower 2009/10 capex than previously anticipated keep our estimate of credit metrics (Moody’s basis) just within A-. Even if UU were pushed into BBB+, the incremental financing cost over AMP5 is miniscule. Our Valuation is based on a 2% discount to 3/2010 RAV, plus benefits of low debt costs over AMP5. The low debt cost results from: a high proportion of sub 2% real coupon; with most of the remaining debt being variable with sub 1% spreads, which has mostly been swapped to fixed over AMP5 at low rates.
11:57AM
MJ:
Right, it’s that time of the morning again…
MJ:
Cadbury Watch
NH:
(groans all round).
MJ:
Most importantly
MJ:
a rather large amount of chocolate has arrived on the desk
NH:
So the Cadbury defence has begun in earnest.
MJ:
Snow drops, a gift box,
MJ:
and all sent in a lovely hemp bag
MJ:
Which clearly helps stress Cadbury’s ethical credentials
NH:
I put the gift box in the FT’s charity box actually.
MJ:
…which clearly helps stress FT Alphaville’s ethical credentials
NH:
Erm. Yes. Well there was also a story in the WSJ clarifying where Hershey stands.
MJ:
I can whack that up
MJ:
: Hershey Co. and the philanthropic trust that controls it are nearing a final decision on whether to bid on candy maker Cadbury PLC, said several people familiar with the matter.
The two sides—Hershey management and the trust’s board—are tilting toward making a bid but haven’t made a final decision, these people said.
A key tension between the chocolate giant and the trust is whether to sacrifice the company’s investment-grade credit rating in order to challenge Kraft Foods Inc.’s existing $16.5 billion bid for Cadbury, the people said. Talks with third parties, such as Italian chocolate giant Ferrero SpA, have been put on hold, and there have been no recent talks with Swiss food giant Nestlé SA, the people added.
The two sides—Hershey management and the trust’s board—are tilting toward making a bid but haven’t made a final decision, these people said.
A key tension between the chocolate giant and the trust is whether to sacrifice the company’s investment-grade credit rating in order to challenge Kraft Foods Inc.’s existing $16.5 billion bid for Cadbury, the people said. Talks with third parties, such as Italian chocolate giant Ferrero SpA, have been put on hold, and there have been no recent talks with Swiss food giant Nestlé SA, the people added.
NH:
Key point here is that the talks with Ferrero have cooled.
MJ:
And the idea that Nestle haven’t been contacted recently runs counter to several other reports
MJ:
Which gets us on to some more interesting news from this morning
MJ:
NESTLE SPOKESMAN ROBIN TICKLE DECLINES TO COMMENT ON LINDT
*LINDT SPOKESWOMAN NINA KELLER COMMENTED BY E-MAIL :LISN SW
*LINDT SAYS IT’S COMMENTING ON RECENT SPECULATION:LISN SW
*LINDT & SPRUENGLI DENIES SPECULATION THAT NESTLE MAY BID
MJ:
This has been talked about for a while
NH:
so
NH:
Nestle going up market
NH:
crikey
NH:
we missed it
NH:
BOE statement
NH:
quick
NH:
get the flashes
MJ:
12:00 10Dec09 RTRS-BOE – SCALE OF QE PROGRAMME WILL BE KEPT UNDER REVIEW
12:00 10Dec09 RTRS-BOE – QE PROGRAMME WILL TAKE ANOTHER 2 MONTHS TO COMPLETE
12:00 10Dec09 RTRS-BOE – QE PROGRAMME WILL TAKE ANOTHER 2 MONTHS TO COMPLETE
MJ:
12:00 10Dec09 RTRS-BOE – SCALE OF QE PROGRAMME WILL BE KEPT UNDER REVIEW
12:00 10Dec09 RTRS-BOE – QE PROGRAMME WILL TAKE ANOTHER 2 MONTHS TO COMPLETE
12:00 10Dec09 RTRS-BOE – QE PROGRAMME WILL TAKE ANOTHER 2 MONTHS TO COMPLETE
MJ:
RTRS-BANK OF ENGLAND SAYS MPC KEEPS QUANTITATIVE EASING PROGRAMME UNCHANGED AT 200 BLN STG
12:00 10Dec09 RTRS-BANK OF ENGLAND HOLDS KEY UK INTEREST RATE AT 0.50 PCT (REUTERS POLL 0.5 PCT)
12:00 10Dec09 RTRS-BANK OF ENGLAND HOLDS KEY UK INTEREST RATE AT 0.50 PCT (REUTERS POLL 0.5 PCT)
NH:
statement
NH:
here
MJ:
QE unchaged
MJ:
yawn
NH:
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to continue with its programme of asset purchases totalling £200 billion financed by the issuance of central bank reserves.
The Committee expects the announced programme to take another two months to complete. The scale of the programme will be kept under review.
The minutes of the meeting will be published at 9.30am on Wednesday 23 December.
NH:
that’s it
NH:
short and sharp this month
NH:
BoE probably really from yesterday’s political budget
MJ:
Thrilling stuff from Threadneedle Street
MJ:
Suppose they are not there to entertain us
MJ:
Just getting some market reaction to that
MJ:
RTRS-STERLING STEADY, HOLDS GAINS VS DOLLAR, EURO AFTER BOE KEEPS RATES, ASSET-BUYING UNCHANGED
12:02 10Dec09 RTRS-STERLING AT $1.6310, EURO AT 90.35 PENCE
12:02 10Dec09 RTRS-STERLING AT $1.6310
NH:
FTSE 100 up 25 points at 5,229
12:03PM
NH:
Right
NH:
Miles where were we
MJ:
Just looking at Cadbury, but we had finished. Bit more on the PBR?
NH:
oh yes pls
NH:
I have a list of stock specific winners
NH:
for a bit later
NH:
but you go first
MJ:
BNP Paribas’ excellent currency team are very negative on the pound
MJ:
From Bangers to Boilers – but no support for sterling
The UK budget report provided few surprises and is likely
to be seen very much as a political rather than an
economic exercise. Overall, the report provided no
measures or details to address the concerns raised by
the rating agencies and investors, namely how the
government is going to tackle the rapidly deteriorating
fiscal position. Instead the Chancellor chose to announce
minor measures such as a boiler scrappage scheme.
The UK budget report provided few surprises and is likely
to be seen very much as a political rather than an
economic exercise. Overall, the report provided no
measures or details to address the concerns raised by
the rating agencies and investors, namely how the
government is going to tackle the rapidly deteriorating
fiscal position. Instead the Chancellor chose to announce
minor measures such as a boiler scrappage scheme.
Given that the government has decided to ignore the
opportunity to take steps to remove the risk of a
sovereign rating down grade we expect sterling to remain
under pressure over the medium term.
MJ:
meanwhile
MJ:
Deutsche Bank’s Jim Reid is questioning
MJ:
whether the PBR coincides with the end “sweet spot”
MJ:
As we feared in yesterday’s EMR, the UK’s pre-budget is a potentially game changing affair, not necessarily with immediate effect but with regards to the future landscape that we may all have to live within. With fiscal deficits around much of the western world at extreme levels, the authorities have little choice but to try to raise taxes at some point. We might look back upon Q2 and H2 2009 as the golden ‘sweet spot’ between potential economic disaster and working out how the bills are to be paid for the rescue of the system as we knew it.
MJ:
Although yesterday’s announcements were more political than revenue generating, its clear that the period of working out how we pay for years of excess has begun. When discussing exit strategies we need to be aware of the political/regulatory/tax ramifications as well as the monetary ones. We will surely live in a world over the next few years where the big hand of the Government plays an active role. We would note that in the mid 1970s the top rate of income tax in the UK was 83%, which reached a marginal rate of 98% when including any ‘unearned’ income. The recent years of low taxation may have been the exception rather than the rule. The hope would be that a more globalised marketplace than seen through history prevents the real penal tax rises anywhere around the world.
NH:
thanks for that
NH:
and here’s something from Liberum
NH:
that spells out
NH:
who are the winners from the Budget
NH:
and yes
NH:
there really are some
NH:
Pre-Budget Report
Damp Squib Darling
GDP forecasts were left largely unchanged (Fig 1). We believe Darling’s forecast of 3.5% for 2011-2012 may
be much too optimistic. Public sector net borrowing is broadly unchanged from the Budget 2009 forecast
(Fig 2). The pain of eventually reducing the deficit was not addressed. There will need to be tax rises and
spending cuts.
Damp Squib Darling
GDP forecasts were left largely unchanged (Fig 1). We believe Darling’s forecast of 3.5% for 2011-2012 may
be much too optimistic. Public sector net borrowing is broadly unchanged from the Budget 2009 forecast
(Fig 2). The pain of eventually reducing the deficit was not addressed. There will need to be tax rises and
spending cuts.
NH:
Green initiatives – Additional £150m of Warm Front funding is positive for eaga. Assuming a 2% margin
implies a 5% upgrade, this may be conservative if eaga self delivers some of the work. Tax relief on Feed-in
Tariffs is unlikely to have an impact on eaga although the budget suggests that the introduction of FITs is
imminent. eaga, Spice, Connaught and Mears could benefit from £50m boiler scrappage scheme, however
details are unclear. Tanfield could benefit from Electric cars being exempted from company car tax for five
years, with a 100 per cent first year capital allowance for electric vans.
implies a 5% upgrade, this may be conservative if eaga self delivers some of the work. Tax relief on Feed-in
Tariffs is unlikely to have an impact on eaga although the budget suggests that the introduction of FITs is
imminent. eaga, Spice, Connaught and Mears could benefit from £50m boiler scrappage scheme, however
details are unclear. Tanfield could benefit from Electric cars being exempted from company car tax for five
years, with a 100 per cent first year capital allowance for electric vans.
NH:
Digital Britain
NH:
Additional funding for Digital Britain – High-speed broadband (2MB) is to be extended to 90% of population
by the end of 2017, partially funded by 50p-a-month duty on landlines. This should be positive for MIPS growth
as there is more content consumption, and quicker deployment of digital services (e.g. Telecity), but could be
negative for land-lines (possibly KCOM Group).
by the end of 2017, partially funded by 50p-a-month duty on landlines. This should be positive for MIPS growth
as there is more content consumption, and quicker deployment of digital services (e.g. Telecity), but could be
negative for land-lines (possibly KCOM Group).
NH:
Bingo!
NH:
Bingo duty reduced – Duty will move from 22% to 20% from April 2010. This is good news for Rank Group,
with an annualised EBIT improvement of c. £2.5m. Discussions still ongoing for gaming machine taxation.
with an annualised EBIT improvement of c. £2.5m. Discussions still ongoing for gaming machine taxation.
NH:
Pubs
NH:
Pubs and restaurants: little impact – VAT will be increased back to 17.5% as expected on 1 January. There
had been speculation that VAT may move to 20%, so a small positive that nothing has been announced today.
We do not think that consensus expected a duty cut.
had been speculation that VAT may move to 20%, so a small positive that nothing has been announced today.
We do not think that consensus expected a duty cut.
NH:
Outsourcing
NH:
Efficiency driven outsourcing – Outsourcing inefficient prisons is one source of the £5bn of planned cost
savings. This could be positive for Serco and Interserve.
savings. This could be positive for Serco and Interserve.
NH:
Rail
NH:
Rail electrification confirmed – Lines between Liverpool, Manchester and Preston will be electrified. This is a
possible positive for Balfour Beatty.
possible positive for Balfour Beatty.
NH:
patents
NH:
Patent tax relief – Corporation tax on income from patents in UK reduced from 28% to 10% from 2013. This
could possibly be a small positive for technology companies, such as BTG and Qinetiq.
could possibly be a small positive for technology companies, such as BTG and Qinetiq.
NH:
Property
NH:
Empty property relief extended – The threshold for empty property relief is to be extended so that 70 per cent
of all empty properties will be exempt. Possibly positive for property companies with high vacancies, e.g. Segro
and Workspace
of all empty properties will be exempt. Possibly positive for property companies with high vacancies, e.g. Segro
and Workspace
NH:
Housebuilders
NH:
No help for the housebuilders – Existing stamp duty relief for properties under £175,000 has been extended.
As has the “Support for Mortgage Interest” scheme. The latter may help to keep repossessions at a low rate,
which has been helpful to the housing market so far. However no new measures have been announced which
may disappoint some.
As has the “Support for Mortgage Interest” scheme. The latter may help to keep repossessions at a low rate,
which has been helpful to the housing market so far. However no new measures have been announced which
may disappoint some.
NH:
and Telecity was mentioned above
NH:
and they are being pushed by Caz today
NH:
second biggest riser in the FTSE 250
Telecity Group (TCY:LSE): Last: 357.40, up 22.4 (+6.69%), High: 359.80, Low: 337.20, Volume: 150.34k
NH:
TelecityGroup [TCY.L, TCY LN] 335p Outperform
Overhang to ease as close period approaches, driving outperformance
We believe that as Telecity approaches its close period (from 1 January) ahead of its full year results, the near-term overhang of a placing by 3i and Oak Hill should ease causing Telecity’s shares to regain some of its recent underperformance against Equinix, the US-listed global data centre provider with presence in the US, Europe and Asia-Pacific, that is Telecity’s most comparable peer and most obvious competitor. Europe accounted for 22% of Equinix’s Q3 EBITDA and Equinix’s market cap of $4bn compares to Telecity’s £670m.
Overhang to ease as close period approaches, driving outperformance
We believe that as Telecity approaches its close period (from 1 January) ahead of its full year results, the near-term overhang of a placing by 3i and Oak Hill should ease causing Telecity’s shares to regain some of its recent underperformance against Equinix, the US-listed global data centre provider with presence in the US, Europe and Asia-Pacific, that is Telecity’s most comparable peer and most obvious competitor. Europe accounted for 22% of Equinix’s Q3 EBITDA and Equinix’s market cap of $4bn compares to Telecity’s £670m.
NH:
Placing overhang should ease as we approach Christmas
3i and Oak Hill each hold 16.5% of Telecity. This was previously 22.6% until 7 May when the two executed an accelerated book build. Both companies signed a 180-day lock-up period, which re-opened on 9 November. We believe that expectations of another placing have acted as a headwind to recent share price performance.
We believe that in the medium-term, further measured sell-downs are likely as 3i and Oak Hill look to monetise their investment and further increase liquidity of Telecity shares. However, we believe that 3i and Oak Hill will prove patient and that any placing would only be done an acceptable price. 3i has been involved in Telecity since its foundation in 1998 and its own balance sheet is now far more healthy than 7 months ago. We would also point to the fact that there has not been a placing in the last month to prove this patience, as 3i and Oak Hill have avoided competing with the large equity issuances seen across the market. We believe it likely that when 3i and Oak Hill do execute another placing, they may choose to again retain a stake, both to minimise the discount required and to benefit from further liquidity and the reduced overhangs the smaller stakes would present.
3i and Oak Hill each hold 16.5% of Telecity. This was previously 22.6% until 7 May when the two executed an accelerated book build. Both companies signed a 180-day lock-up period, which re-opened on 9 November. We believe that expectations of another placing have acted as a headwind to recent share price performance.
We believe that in the medium-term, further measured sell-downs are likely as 3i and Oak Hill look to monetise their investment and further increase liquidity of Telecity shares. However, we believe that 3i and Oak Hill will prove patient and that any placing would only be done an acceptable price. 3i has been involved in Telecity since its foundation in 1998 and its own balance sheet is now far more healthy than 7 months ago. We would also point to the fact that there has not been a placing in the last month to prove this patience, as 3i and Oak Hill have avoided competing with the large equity issuances seen across the market. We believe it likely that when 3i and Oak Hill do execute another placing, they may choose to again retain a stake, both to minimise the discount required and to benefit from further liquidity and the reduced overhangs the smaller stakes would present.
NH:
Telecity enters close period on 1 January before its FY results on 10 February. As we approach Christmas, the likelihood of a placing before entering the close period reduces. As we believe the possibility of a placing has acted as a drag on Telecity’s share price as we exited the lock-up period, it should logically recover as we enter the close period.
12:08PM
NH:
Right
NH:
are we done Miles?
MJ:
I think we are
NH:
actually I have a couple more things to mention
NH:
Goldman have been talking about the budget
NH:
this is from their UK economics team
NH:
“The Treasury has said it expects a significant reduction in bonuses paid out this tax year. It still thinks that the levy will bring in £550m. But that’s a pretty small dent in the deficit (it pays for about 7 hours of government spending). And it’s likely to be outweighed by the loss in income tax. Suppose, for example, that total bonus payouts would’ve been £6bn without the levy (this estimate is from the CEBR), with half that total paid in cash the other half in unvested equity. The Treasury says it expects actual payouts of £1.1bn (£550m/50%), a reduction of close to £5bn. With half that amount lost in cash payouts, the Treasury is effectively foregoing £1bn (40% x £2.5bn) in income tax. Net of this amount the levy is a revenue loser. ”
NH:
7 hours of government spending
NH:
there you have it
MJ:
Puts things into a clearer perspective
NH:
it does
NH:
will try and get the full note
NH:
and do a post on that
NH:
seems interesting
NH:
and finally
NH:
on a lighter note
NH:
Ryanair
MJ:
Go on…
NH:
some news on that calandar
NH:
Ryanair, the world’s favourite airline, today (10th Dec 09) confirmed that only 5,000 copies of its 2010 Cabin Crew Charity Calendar remain as it revealed that the Generous Germans have snapped up over a third of the 6,000 copies sold so far. The sexy calendar has once again proven hugely popular and has even been ‘blessed’ by residents of the Vatican City who have so far ordered over 30 copies.
With less than half the 11,000 calendar remaining the Generous Germans (33%) and the Benevolent Brits (20%) have proven the most ‘charitable’ followed by the Irish (15%). The popularity of Ryanair’s world famous calendar continues to spread and it is selling outside of Europe for the first time with orders streaming in from Africa, Australia, China, Japan and Mexico.
Ryanair’s Stephen McNamara said:
With less than half the 11,000 calendar remaining the Generous Germans (33%) and the Benevolent Brits (20%) have proven the most ‘charitable’ followed by the Irish (15%). The popularity of Ryanair’s world famous calendar continues to spread and it is selling outside of Europe for the first time with orders streaming in from Africa, Australia, China, Japan and Mexico.
Ryanair’s Stephen McNamara said:
NH:
“Ryanair’s cabin crew stunners hope to raise €110,000 to help disabled children and their efforts have received global approval and have been ‘blessed’ by residents of the Vatican City.
“Every year the calendar sells like hot cakes and at just €10 sales of the 2010 edition are already ahead of last year with just 5,000 remaining. Those who want to help charity and bring a smile to someone’s face all year long can buy the calendar onboard a Ryanair flight or directly from the Ryanair website today. With stunners every month the calendar is certain to be this year’s hottest stocking filler.”
“Ryanair’s cabin crew stunners hope to raise €110,000 to help disabled children and their efforts have received global approval and have been ‘blessed’ by residents of the Vatican City.
“Every year the calendar sells like hot cakes and at just €10 sales of the 2010 edition are already ahead of last year with just 5,000 remaining. Those who want to help charity and bring a smile to someone’s face all year long can buy the calendar onboard a Ryanair flight or directly from the Ryanair website today. With stunners every month the calendar is certain to be this year’s hottest stocking filler.”
NH:
right
NH:
i think we are done
NH:
thanks for tuning in
MJ:
And thanks for the comments
NH:
on the day after the great banker tax
NH:
I know some people must still be in shock
NH:
and Greece is being mentioned
NH:
on a slight tangent
NH:
I have a good note on Spain
NH:
from Citi
NH:
After the downgrade of Greece by Fitch yesterday, S&P today revised the outlook on
Spanish government bonds from Stable to Negative, indicating that the current AA+
rating may be cut some time in the next couple of years, “in the absence of more
aggressive actions by the authorities to tackle fiscal and external imbalances”. The
move was dictated by concerns about a deeper and longer deterioration in public
finances and more prolonged economic weakness than they had previously
expected. S&P had cut the Spanish rating from AAA to AA+ in January 2009. The
lack of any materialisation of bold policy actions to tackle the sizeable deficit and
economic imbalances is at the root of S&P’s worsened outlook for long-term debt
sustainability.
Spanish government bonds from Stable to Negative, indicating that the current AA+
rating may be cut some time in the next couple of years, “in the absence of more
aggressive actions by the authorities to tackle fiscal and external imbalances”. The
move was dictated by concerns about a deeper and longer deterioration in public
finances and more prolonged economic weakness than they had previously
expected. S&P had cut the Spanish rating from AAA to AA+ in January 2009. The
lack of any materialisation of bold policy actions to tackle the sizeable deficit and
economic imbalances is at the root of S&P’s worsened outlook for long-term debt
sustainability.
NH:
S&P noted that high private debt and an inflexible labour market are likely to lead to
a marked drop in potential real growth, to below 1% per year. Spain has been
growing by 3.8% annually on average in 1998-2007. Also, S&P highlighted that
“deflationary pressures could be more persistent in Spain than in most other
Eurozone sovereigns”. So S&P concerns seem to be mainly focused on the poor
medium-term outlook for nominal growth and its implications for future fiscal
consolidation.
a marked drop in potential real growth, to below 1% per year. Spain has been
growing by 3.8% annually on average in 1998-2007. Also, S&P highlighted that
“deflationary pressures could be more persistent in Spain than in most other
Eurozone sovereigns”. So S&P concerns seem to be mainly focused on the poor
medium-term outlook for nominal growth and its implications for future fiscal
consolidation.
NH:
It is important to note that the time horizon over which S&P will assess the situation
and decide whether a rate cut is appropriate is the next couple of years. In the
statement S&P said that “there is time for the government to forge a political
consensus supporting a credible fiscal consolidation”. Yet, the extent of the fiscal
tightening required is massive. It requires to see a credible fiscal consolidation that
can bring the primary balance (i.e., the public deficit net of interest expenditure) to
a surplus of 2% of GDP by 2012 as a necessary condition for avoiding a
downgrade.
and decide whether a rate cut is appropriate is the next couple of years. In the
statement S&P said that “there is time for the government to forge a political
consensus supporting a credible fiscal consolidation”. Yet, the extent of the fiscal
tightening required is massive. It requires to see a credible fiscal consolidation that
can bring the primary balance (i.e., the public deficit net of interest expenditure) to
a surplus of 2% of GDP by 2012 as a necessary condition for avoiding a
downgrade.
NH:
Spain has the largest primary deficit among all euro area members at the moment,
as a result of the fiscal stimulus adopted in the past couple of years and because of
the negative impact of the recession on the structural deficit (Figure 1). With a
cyclically-adjusted primary balance currently standing at around 8% of GDP, the
target set by S&P to avoid a downgrade implies a fiscal tightening of 10% of GDP
spread over three years. Such a large move in fiscal policy, we reckon, is very
unlikely to be achieved in such a short period of time by a government that has
already been weakened by a significant loss of consensus. In the 2010 draft
budget, the government has announced tightening measures worth 1% of GDP
(mainly indirect tax hikes) for 2010, which are already well short of S&P
requirements. Therefore, we reckon that a downgrade of the Spanish rating is likely
to happen in the course of next year, although we do not think the action is
imminent.
as a result of the fiscal stimulus adopted in the past couple of years and because of
the negative impact of the recession on the structural deficit (Figure 1). With a
cyclically-adjusted primary balance currently standing at around 8% of GDP, the
target set by S&P to avoid a downgrade implies a fiscal tightening of 10% of GDP
spread over three years. Such a large move in fiscal policy, we reckon, is very
unlikely to be achieved in such a short period of time by a government that has
already been weakened by a significant loss of consensus. In the 2010 draft
budget, the government has announced tightening measures worth 1% of GDP
(mainly indirect tax hikes) for 2010, which are already well short of S&P
requirements. Therefore, we reckon that a downgrade of the Spanish rating is likely
to happen in the course of next year, although we do not think the action is
imminent.
NH:
aidios
NH:
readers
MJ:
hasta luego
NH:
until tomorrow
NH:
oh
NH:
one more thing
NH:
some later RAW
NH:
volume picking up in Shanks Group
Shanks Group (SKS:LSE): Last: 128.30, up 0.8 (+0.63%), High: 128.60, Low: 126.10, Volume: 824.13k
NH:
counter bid??
NH:
raised off
NH:
don’t know at the moment
NH:
but vol now approaching a million
NH:
cya tomorrow
NH:
and Michael
NH:
I didn’t zap you
NH:
I wouldn’t dare
NH:
Monkey
NH:
off
NH:
sent off in injury time
NH:
oh
NH:
another interesting email
NH:
Dec. 10 (Bloomberg) — Pacific Investment Management Co., which runs the world’s biggest bond fund, is buying the debt of Abu Dhabi, Qatar and Ras Laffan Liquefied Natural Gas Co., said Michael Gomez, co-head of emerging markets at the fund manager.
Pimco added to its holdings of securities sold by governments and companies in the region as the Dubai debt crisis slashed prices of bonds sold by its state-controlled companies to record lows. Emerging-market debt fell from the highest since records began in 1993 after Dubai World on Nov. 25 asked lenders for a debt standstill. Restructurings may almost double to $46.7 billion of debt in the “near term” as more of Dubai’s businesses need help paying debt, Morgan Stanley said Dec. 8.
“We’re coming in and buying,” said Gomez, who is based at Pimco’s main office in Newport Beach, California, in an interview with Bloomberg Television. “In any selloff, we’ll be accumulating even more. We think they’re cheap.”
NH:
but no Doobai
NH:
that really is it
NH:
bye