FT Alphaville » Markets Live transcript 9 Mar 2010

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Markets Live transcript 9 Mar 2010

Posted by Neil Hume on Mar 09 11:03.

Markets Live chat transcript for the chat ending at 12:12 on 9 Mar 2010. Participants in this chat were: Neil Hume, FT Bryce Elder

Hola

and welcome to Markets Live

FT Alphaville’s daily markets round up

and happy first birthday

to the bull market

one years old today

Morning everyone.

yep, it was a year ago today that the S&P hit 666 intraday

and it felt like the world was about to end

so how is the bull market today?

having a bit of sulk

FTSE down 36 points

Gradual slide from its 18-month high

looks to be feeling a bit tired.

Needs a rest.

hmmm

sterling being kicked again, though

back below the psychologically important $1.50 level

after some pretty awful trade data, which seems to put into doubt

the idea that weak sterling will help rebalance the UK economy

Oh noes. Not the psychologically important $1.50 level ….

GBK close to its lows for the day

$1.4945

that’s cable obviously

and a euro thingy buys 0.9079p

actually this trade data

was pretty shocking

exports fell sharply in January

while imports

came off just a touch

Give us Archer’s take then.

Please.

hang on

just scanning the note

for a mention of the weather

don’t think I can see anything

There is no getting away from the fact that the January trade data are disappointing and also worrying for hopes that the economy can rebalance over the coming months. The total trade deficit widened to a 17-month high in January as exports worryingly fell appreciably and imports declined modestly. This suggests that net trade is set to be a drag on the economy in the first quarter of 2010 as it was in both the fourth and third quarters of 2009. Specifically, net trade lopped 0.2 percentage point off GDP growth of 0.3% quarter-on-quarter in the fourth quarter of 2009 and contributed 0.3 percentage point to the third quarter contraction of 0.3% quarter-on-quarter.

The biggest disappointment in the January trade data was a 6.2% month-on-month drop in traded goods excluding oil.

(M43cap – because the price used to be transmitted by the first ever transatlantic cable.)

Even allowing for the fact that both exports and imports could well have been limited in January by the very bad weather hitting the UK and other countries, the fact that exports fell appreciably more than imports is worrying news and it heightens concerns as to whether or not net trade can make a decent positive contribution to growth going forward and help the economy to rebalance.

hang on

Weather is mentioned

excellent

We are still hopeful that net trade will make a positive contribution to UK growth in 2010 as car imports wind down as the car scrappage scheme comes to an end and overall imports are limited by likely gradually improving domestic demand. Meanwhile, exports will hopefully be lifted by a competitive pound and improved global growth and trade. Unfortunately though, this is very far from guaranteed, and current signs that Eurozone growth is struggling for momentum is a serious worry for UK exporters.

So all pretty dismal stuff then.

yep

not good

but hey

if the weather improves

then I am sure exports will

Hm.

right

let’s cut to ther wider market

11:10AM

and let’s just reflect for a moment on Pearson

Pearson plc is the parent company of the Financial Times, publisher of FT Alphaville.

Pearson (PSON:LSE): Last: 1,000, up 1.5 (+0.15%), High: 1,006, Low: 996.50, Volume: 909.05k

(Tartan: yes, but a small one. See yesterday’s transcript.)

look at that £10

and guess what

I have no cheap SAYE shares

and nor does Bryce

Nope.

Didn’t pick up any of that free money

Dolts.

yes, not good

anyway

what else is mocing today?

Well, there’s a few results stories around obviously.

(Tuna – a smaller mortgage and more free cash flow would help also)

not sure

some results out

International Power

Inmarsat

Shanks has ended takeover talks with private equity

and then there is UK Coal

and its odd takeover statement

or what about

the banks note from Jonathan Pierce

very pessmistic

Ok – let’s start at the end.

Doom and gloom for the banks please.

(Tuna – i wish Tuna, I wish. Give up my Sky subscription)

11:13AM

So Pierce

is the highly rated banks guy at Credit Suisse

and he really doesn’t like the UK banks

thinks they are up with events

and he seems frustrated that no one can see the large elephants in the room

such as new liquidity rules

funding constraints

And this seems to have encouraged some folk to take some cash off the table.

Royal Bank of Scotland Group PLC (RBS:LSE): Last: 38.09, down 1.38 (-3.50%), High: 39.80, Low: 38.05, Volume: 34.43m

Lloyds Banking Group PLC (LLOY:LSE): Last: 52.85, down 0.8 (-1.49%), High: 54.04, Low: 52.80, Volume: 85.23m

Barclays PLC (BARC:LSE): Last: 338.70, down 6.3 (-1.83%), High: 347.00, Low: 335.50, Volume: 27.14m

hmmm

right

want to see some of the note

Sure

Elephants in the room

Investment thesis rests on revenue: Normalising profits for impairment
leaves ROTE close to COE. But shares imply ROTE above COE by 2013.
To buy the banks, one must assume revenues rise from here, in our view;

The balance sheet is key: While the precise timing of new liquidity
requirements is unclear, we believe banks must improve balance sheet
structures over the next 3-4 years. This will be difficult through term issuance
alone, and we believe that balance sheet footings will have to shrink
markedly (£200-530bn or over 10%) to compensate;

Revenue headwind of £4-10bn: Applying a 2% margin to this asset
reduction implies a loss of 10-25% of net interest income. Granted, margins
should improve, but absolute revenue will stagnate, in our view.

De-leveraging also driven by capital: It’s not about DTA’s, minorities or
other easily dismissible items – the issue is RWA which we think could inflate
35% on new BIS rules. In particular, we are still concerned by CCR RWA
which we think could increase several-fold, pre-mitigation

Things could be worse: If market conditions deteriorate, fixing the balance
sheet will be even more costly. Shrinking assets will get harder anyway – QE
substantially helped banks (particularly liquid assets) and that has ended.

We think the sector is at best fair value for now. In relative terms,
Barclays (Outperform) is our favourite bank with a 375p target price (from
350p). LBG is Neutral with a 50p target (unchanged). RBS is Underperform
with a 35p target (unchanged).

So – RBS at 35p

yep

actually

anymore on this Barclays fund raising rumour?

the last I heard

is the £6bn was done

and some usually sensible people had heard the rumour

they might not have believed it

but they had heard it

Hm. There’s nothing firmer out there at the moment it seems.

The rumour’s out there, but there remains the tricky question of “why?”

well

looking at 2012

and the impact of the Basel III rules

Barc will be facing a capital shortfall

as will the rest of the sector

but there are ways it can be plugged

flogging the stake in Blackrock

would be one way

(Tuna – spanish waiter)

Yeah – but £6bn now is more likely to draw attention to the issue than fix it, I’d argue.

Seems too early and too little.

true

probably nonsense

but anyway

11:20AM

There is a better bit of RAW going round this morning

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.

Excellent – what’s that?

Temenos

Aha!

banking software

competes with Misys

Strange software outfit, seemingly controlled by US investor ValueAct Capital.

Yeah – sort -of. Temenos is the number one, while Misys is an also ran.

a bit smaller though

Temenos is

Temenos market share is 14% or thereabouts. Clear #1. Misys is about #6.

Anyway, what’s the rumour?

that it is being stalked

SAP is the name in the frame

now as you all know

I am no expert on software companies

Autonomy aside

so I don’t know if that makes sense

and SAP is probably the most boring companu in Europe

Indeed. Up there with Bunzl.

So the story is SAP interested

could pay up EUR40

but I note

that SAP just parted company with its CEO

has a dual-headed structure now

and is sort of lukewarm towards acquisitions

Co-CEOs Bill McDermott and Jim Hagemann-Snabe

Although they have made a big play, most recently at this year’s CeBit, that there’s no disruption from the change at the top

(Sorry shovel – CHF 40)

Strategy remains in order

And this would make some sense

go on

Temenos is priced at about 15 or 16 times 2010 earnings, which is not that expensive for a software company.

Never mind one that’s got a laundry list of tier-one customers

And SAP would be going up against its old foe Oracle, which is #2 or thereabouts

hmmm funny you should mention that

because Oracle being mentioned as a potential gatecrashed

should SAP and Temenos ever get it together

Plausible I guess.

Although I’d also have an eye on Indian companies such as Infosys and Tata

Which are the ones who have been making real inroads.

yes, they always get run up the flag pole

anyway

these rumours aren’t helping Misys

which has taken a bit of kick today

Misys PLC (MSY:LSE): Last: 235.20, down 8.4 (-3.45%), High: 241.90, Low: 234.50, Volume: 1.94m

and that’s because Citi have slapped a sell rating on them

Timing — We continue to disagree with MSY on timing. In our January note, we
argued that US Healthcare stimulus is unlikely to drive EHR adoption by 65% to
85% in just 5 years. At the BankFusion (BF) launch, MSY set another tough target
– 250 BF clients live, which would make it the fastest core banking rollout ever.

WIP — Front-end of BF looks encouraging but back-end (core data layer) is
unproven. This seems to be reflected in a market launch where Bankmaster
customers get whole new product, while Midas/ Equation customers receive a
“wrapper”.

Proof-in-pudding — BF has signed 8 clients so far – mainly small banks/ branch
which seems to suggest that customers are testing the system before a major rollout.

Healthcare Update — Since our last note, the US government has worked on
initiatives to speed up the process of bringing certified software to market. While
this should bring the date for fully certified product forward by c2-3 months (fall
2010), it means we view a take-off in demand as unlikely until CY11.

SELL — At 25x CY10E and 19.5x CY11E (on our below consensus EPS) the stock
looks to be pricing in these ambitious targets. We believe the stock will be
sensitive to short-term newsflow on both strategies and that any disappointment
could test this generous valuation – SELL.

That comes after Misys held an investor meeting last week about the Bankfusion product.

what?

Which apparently looks pretty good.

But Misys has basically starved development of its banking arm for years, so it has a mountain to climb to regain even the second- and third-rate banks that used to be its customers

Right – think I’ve nerded out enough now.

DLC – thanks for you comment. Interesting and I guess Temenos

would not be a big acquisition for SAP

right

we need a Temenos price

So we’re up 2.1% at 29.15 Swiss francs

right,

bored with banking software

I could never be bored of banking software, but I’m just a bit weird like that. Anyway, let’s move on.

let’s

11:30AM

Ok – how about UK Coal?

Oh yes

bid rumours in the Mail today

which prompted this statement

from the company

UK COAL has noted the speculation in today’s Daily Mail relating to a purported proposal for a cash offer for the Group. UK COAL is not aware of any such proposal from the Group’s major shareholder or any other source.

http://www.thisismoney.co.uk/markets/article.html?in_article_id=500806&in_page_id=3#ixzz0hfkZ8x8d

so far, so clear

but then things get a little more complex

The Group is at a very early stage of investigating an approach it has received which could address the Group’s exposure to the volatile performance of its deep mines through a merger transaction. It is emphasised that this proposal is highly conditional and at a very preliminary stage and no view can be expressed as to whether a transaction will result.

As has been reported to the market, the Group has encountered continuing difficulties in the performance of its deep mines in recent months, which is having a material impact on its financial position. At Daw Mill, as previously reported, preparation for production at the new face was hindered by difficult geological conditions and, as a result, the start of production on the new face is now expected during April rather than around the end of March. The exposure of the Group to the volatile performance in its deep mines is a significant concern to the directors and mitigating the effects of this exposure, by operating improvements or structural means, is a priority.

it is in talks

but to merger its deep coal assets

possible buyers for that

could be ATH

or Hargreaves Services

but the point here is

UK Coal needs to get rid of these assets

they are putting a huge strain on cashflow

in fact such a strain

that another cash call is not beynd the realms of possibility

so no one should expect a fancy price of the assets

although it would be good if they went

UK COAL PLC (UKC:LSE): Last: 57.50, up 5 (+9.52%), High: 60.00, Low: 54.75, Volume: 9.19m

But is this half-story worth 9.5% on yesterday’s price?

pass

but these mines are a drain

that’s for sure

Hang on – didn’t we spend much of last week talking about the coal price going through the roof?

we did

And how the weaker pound would benefit exporters such as … er .. UK Coal

just scratching around for some comment on UK Coal

nothing fresh

but I do have something from Evo Secs

dated March 4

Indeed, assuming that the work to access the Beeston and Deep Soft seams at
Kellingley and Thoresby is successful, and that UK Coal overcomes the problems
at Daw Mill, it should be in a position to build output significantly over the
remainder of 2010. This should offer significant benefits in 2011.

We recognise that the group is currently cash-constrained and is working hard to
reduce unnecessary expenditure and working capital commitments. If, however,
UK Coal needs to raise cash then we believe that it could sell property assets,
albeit that selling now would not offer the ability to extract maximum value

While we recognise the market’s near-term cash flow concerns, we note that the
company is working hard to keep costs under control and reduce working capital
requirements. We believe that this will be enhanced by the recent appointment of a
new director of mining who has been charged with improving the operating
performance of the business.

(@John: yes, fair point. Coking versus thermal.)

right

I have some break down

on deep mines vs suface mines at UK Coal

so this year deep mines expected to produce 5.7m tonnes

of the deep stuff

vs 1.3m of the light stuff

but expected to lose £100m

OKay

bored with Coal

Fair enough.

11:39AM

and as one deal begins

another ends

Shanks Group

Shanks Group PLC (SKS:LSE): Last: 103.80, down 16.6 (-13.79%), High: 106.50, Low: 95.90, Volume: 8.90m

Hm. Not a healthy reaction.

Although I guess they’re not back to 90p, which is where they were when the offer first went in.

indeed it could have been worse

in fact

some people think Carlyle might return

and go hostile

and note

Shanks remains in an offer period

because Carlyle have not issued a statement

we have only had comment from Shanks

The Board of Shanks Group PLC (“Shanks” or the “Group”) announces that it has ended discussions with Carlyle Europe Partners III Participations S.à r.l. SICAR, a fund managed by The Carlyle Group (“Carlyle”), about a possible offer for Shanks.

As previously announced, the Group has been in discussions with a private equity firm, subsequently confirmed as Carlyle, since its approach in October 2009. During this period, Shanks engaged constructively with Carlyle and their advisers, who were granted extensive access both to information on the Group and its key personnel across Europe. At a meeting yesterday between the Chairman of Shanks and Carlyle, a final price indication of 120p cash per share was proposed by Carlyle for all the issued share capital of Shanks. The Board of Shanks has subsequently met and concluded that it is unwilling to recommend an offer at such a level and accordingly that further discussions with Carlyle are not in the interests of Shanks shareholders.

The Group remains committed to a focused strategy around its three principal growth areas of recycling, organic processing and UK PFI. Whilst trading conditions for the waste industry across Europe remain challenging reflecting the weak macro-economic environment, the Board is very confident in the Group’s longer term prospects. A combination of compelling drivers for the waste industry, improved operational and balance sheet gearing and recent decisive action by the strengthened management team positions the Group for attractive medium term growth.

So 120p offer

not surprising they rejected that

shareholders wanted 150p

and I think Carlyle tried the old something came up in DD

as the reason for the lower

indeed DD took a long time in this deal

which nearly always is a huge warning sign

from what I have been hearing

the deal really collapsed because of funding

and pressure from Carlyle’s US HQ

That’s an interesting theory.

Carlyle was short of funding?

well not sure

but it looked very tight/ambitious

anyway

I have a bit of comment on this

from the new merger research function at JP Morgan Cazenove

Shanks has rejected an indicative offer of 120p/share from Carlyle
following extensive discussions. Discussions have now ended with the
Board arguing that Carlyle’s offer “failed to offer a price which
properly reflects the value of the Group [and] the Board is confident
that the Group can deliver attractive growth in shareholder value over
the medium term.”

The discussions began in October when Carlyle made an unsolicited
approach to Shanks with an indicative offer of 135p/share. In
December, when the Board announced the indicative bid, it said that an
offer of 150p/share or more “would deliver an appropriate value to
shareholders”.

This announcement will clearly disappoint investors, although given
Shanks’ current share price of 120p, risk of a lower or no bid has
already been partly discounted.

We expect the share price to be weak today although we would not
expect the shares to fall back to pre-talk levels at 90p. We continue to
believe that the company is well placed to benefit from the growth of
the pan-European waste market, and in particular the opportunities
from the UK PFI market and would not rule out medium term interest
from other parties. If the shares open very weak, we could see this as a
potential medium term buying opportunity.

The next scheduled newsflow will be its full year results on 20 May
although Shanks could provide an update on its sale of its equity stakes
in its UK PFI contracts in the interim.

there you go

Yeah – Goldman makes the same point on price

We estimate that a price of 120p/share is equivalent to an EV/EBITDA
multiple of 6.5x, based on Reuters consensus EBITDA of £108 mn
(2009/10E). This is significantly below historical M&A multiples in the
sector (between 8x and 10x).
Shanks had previously indicated that it would be prepared to accept an
offer in the region of 150p/share, following Carlyle’s initial approach, which
was based on an indicative offer of 135p/share. We estimate that a price of
150p is equivalent to an EV/EBITDA multiple of 7.6x EV/EBITDA (2009/10E,
consensus).

11:46AM

market update

FTSE 100 now off 42 points at 5,564

and the GBK

$1.4942

moving on

any of these results statements interesting?

Bleh … well, Liberty’s break-up plan is not getting the reaction management would have hoped.

but that’s more down to the results, though

weaker than expected

Yeah – NAV’s a bit light.

Liberty International PLC (LII:LSE): Last: 488.80, down 17.7 (-3.49%), High: 497.80, Low: 485.40, Volume: 2.61m

And the split stuff had been very well flagged

indeed

two companies

shopping centres

and other stuff, mainly in London

Yeah – with the London one looking an weird beast with legacy commitments to Great Portland and all sorts

Right

I have a note from Collins Stewart on this

they say sell Liberty

Full year results were announced this morning and NAV disappointed coming in at 464p. This is slightly below our estimate of 483p that we thought was on the bearish end of estimates. The reason is in line with our thesis for this stock in that their portfolio didn’t fall as much as its competitors during the downturn and is now not rebounding as hard (partly due to the lack of large lot size transactions). Their portfolio value only increased 2% in H2 2009. We were estimating a 4% increase but we expect the market was looking for more. EPS was broadly in line with expectation at 18.3p (our estimate was 19.9p). Dividend of 16.5p was exactly in line with expectation.

Today’s disappointing NAV should see the stock to come off as a result toward our 419p price target. We reiterate our SELL recommendation in what remain challenging occupier markets. Liberty reported that nearly half of their shopping centre leasing deals have been completed on short term lettings where the rent shortfall is closer to 35%.

And there’s a detailed piece from Harm Meijer at JP Morgan

Who’s always worth reading

Liberty Int: Weaker-than-expected results and demerger
confirmed. Liberty Int reported an Adj NAV of 464p vs. JPMe 503p
(-7.7%), Adj EPS of 18.3p vs. 17.6p and dividend of 16.5p (vs. JPMe
6.5p). Management makes a case for future yield compression by
pointing to the yield spread. We see future valuation gains indeed, but
the 5.7% initial yield on UK shopping centres (purchasers’ costs
included) does not strike us as very attractive. Separately, the company
confirmed the demerger plans today and while we were unable to find
costs associated with this, the proposal makes sense in our view.
Overall: we believe potential valuation gains and merger benefits are
largely priced in: UW.

Operationally weaker. The shopping centre gross rental income fell by
6% over the year vs. JPMe -5%, while occupancy (incl. 1.5% under
offer) amounted to 97.8% vs. JPMe 98.5%. The better-than-expected
Adj EPS of 18.3p was the result of other income (insurance recovery of
£5m) and slightly lower overhead costs. New shopping centre lettings
were 20% below the last passing rent with short-term lets being 35%
lower. Failures in the shopping centre portfolio have reduced to 1% per
quarter.

-10.6% revaluation. Liberty Int. published a revaluation of -10.6% over
2009, which was below our estimate of -6%. The UK shopping centre
portfolio dropped 10.4% in value, while Capital & Counties UK fell
7.8%. The US portfolio was significantly devalued by 20.8%, but the
company said it continues to explore a tax efficient solution to reduce
its US activities over time.

thanks for that

11:51AM

More results

John is asking about Inmarsat

which have also filed results today

Inmarsat plc (ISAT:LSE): Last: 757.00, down 18 (-2.32%), High: 783.50, Low: 750.50, Volume: 599.76k

(in that it launches them, not the share price.)

it looks to be in line

stock off a little of profit taking

quite pricey this stock

Yeah – and the main disappointment seems to be there’s no upgrades to justify it.

yep

it’s one of those stories

but not bad figures at all

just no upgrades

here’s JP Morgan Caz

No new revenue guidance at this stage but full year dividend growth of
10%, 5% above expectations, provides a positive message in this respect.
Inmarsat has declared a 2nd interim dividend of 20.63 cents (+13%)
which will be paid in the current tax year.

Outlook: “We believe demand…….is continuing to expand…….we
believe the group can continue to deliver solid revenue growth in 2010”.
Group capex guidance of $160-170m for 2010 looks to be c. $20m higher
than our current estimate on an underlying basis. We do not expect to see
any further material estimate changes at this stage

For 2010E, we estimate Inmarsat is trading on an EV/EBITDA of 10x, a
PER of 26x, an equity free cash flow yield of 7% with a normalised free
cash flow multiple of 18x and a 3.2% dividend yield. Given their recent
performance, some profit-taking is possible. However, we continue to
believe Inmarsat’s rating can be more than justified given its sustainable
growth and possible spectrum value. Inmarsat remains a geared play on
the US$ broadly with a 3:2 relationship in theory.

so 26 times prospective

but a big dollar earner

and there is always the prospective of a takeover bid

Well, quite. There’s ALWAYS the prospect of a takeover.

Without there actually being a takeover.

How long have we been waiting for that …. two years at least.

one day

it will happen

Harbinger will swoop

one day

Hm. Wonder if we’ll be alive to see it.

Anyway, let’s push on.

11:56AM

Just flcking through my notes

for some other stuff to look at

Imperial Tobacco

being whacked by a UBS downgrade

Okay … What’s the gist of that?

valuation i think

more interesting is a note that’s come out of Deutsche today

on the anniversary of the market nadir

their view is

hang on

will get it

Positioning a key driver of market and sector performance since March lows. We have
emphasized previously the relative dearth of new flows into or out of equities since
the lows of last March. This has meant that the positioning of existing equity investors
(mutual funds and long-short equity hedge funds in particular) vis-à-vis the market and
across sectors has been a key driver of returns.

Anatomy of the correction: Net short in futures at all-time high. In terms of
fundamentals, following the relatively uninterrupted rally of 70% from the March lows,
there was a growing consensus for a correction (-10%). In the event, the sequence of
three shocks in quick succession (China tightening; Greece sovereign risk; and
Washington policy risk) trumped much-better-than-expected Q4 earnings, resulting in a
peak-to-trough 9% sell-off. We argued that the selldown was a temporary correction
and an economic recovery was far from being priced into US equities (US Equity
Strategy, What’s Working? February 10, 2010)

). In terms of flows and positioning, the
sell-down saw notable outflows from mutual funds (1.4% of AUM); mutual funds and
hedge funds reduced exposure to the market by 8 and 20 percentage points,
respectively; and most notably, the S&P 500 net futures short position increased by
~60k contracts, to an all-time high. The latter short was bigger than last March, which
saw the S&P fall 15% over the month

The underweight positioning overhang remains. Equity flows turned modestly positive
over the last two weeks, but have further to recover in cumulative terms. Mutual fund
positioning turned up from underweight to neutral. However, long-short equity hedge
funds positioning remains more than 10 percentage points underweight relative to
November-December levels and 15- 20 pp below pre-financial crisis levels. Most
importantly, the record net short S&P 500 futures position as of Tuesday last week had
barely begun to be covered

After the correction: Target 1250 on futures unwind by April payrolls. Our estimate of
the implications of an unwinding of the net futures short position to average levels is
S&P 500 upside to 1250. The key fundamental catalyst for the unwinding of positions
remains, in our view, a recovery in the labor market. We expect March payrolls will be
up a strong +350k (underlying recovery and a snowstorm snap-back) but the market
will likely only get more confident with a second increase in payrolls in April. Given Q4
2009 earnings of $77 at an annualized rate (ex-Tarp charges), 1250 would imply a
multiple of 16.2x on these earnings—in the vicinity of our estimate of fair value (16.4x)

(Lawnmower – writen notes on a pad. Today’s show isn’t scripted. we ran out of time).

11:59AM

Anything you want to add Bryce

(In fact, none of the shows have a script any more. This is all seat of the pants stuff.)

Well, we forgot to mention the BRC data.

oh, i missed that

Or at least, didn’t mention it.

No surprises really.

Snow.

Feb sales up 2.2% on a same store basis, but against very soggy comps

Cautious tone.

But below the line, DIY looks very weak

the UK economy is mush

True.

I’m wondering if Home Retail will be able to say anything bright in its upcoming results …

Home Retail Group plc (HOME:LSE): Last: 266.20, down 1.4 (-0.52%), High: 270.50, Low: 266.20, Volume: 2.44m

well

it might be able to sell Homebase to BestBuy

that would be positive

other than that

they will get murdered by the cab;e rate

Hm. For avoidance of doubt, we should emphasise that the Homebase suggestion is extremely raw.

Meanwhile, before we close …

it is

but not without some merit

Hm.

Meanwhile

Reckitt Benckiser is small up

Reckitt Benckiser Group Plc (RB.:LSE): Last: 3,516, no change, High: 3,540, Low: 3,515, Volume: 567.30k

Actually, flat now.

Anyway, they had a big investor conference thing yesterday.

and

The most interesting bit was cash generation

where they talking about that skag drug they have

Still no generic skag on the horizon apparently.

a shame

But back to the cash generation – the general tone seemed to be hinting at a return to shareholders.

not a huge acquisition then

of someone like Colgate

Well, that would be option two I guess.

Here’s … er … hang on … I’ve forgotten which broker sent this …

Oh – Bryan Garnier

Cash Generation is “like no other” and Capex requirements are low –
audience not so aware of this. Capex requirements are limited (around £100m
per annum) and with utilization capacity at around 50% allowing for huge
internal expansion without a need for further investment. Cash conversion is
“like nothing else in the peer group” according to CFO Colin Day. Cash
conversion is constantly above 100% of adjusted operating profit. Net working
capital should stay around -16% of sales. £200m net cash (FY09) allows for
significant return to shareholders. Dividend now at 50% payout ratio, but also
allows for special dividend and share buy-back for cancellation.

And finally, Logica’s getting a push from Evo

Logica Plc (LOG:LSE): Last: 123.50, up 3.2 (+2.66%), High: 124.20, Low: 121.10, Volume: 7.34m

With a c8% 2010 FCF yield and cyclical lead indicators starting to turn
positive in 4Q09, we upgrade Logica from Neutral to Buy with a new price
target of 150p. The shares trade at a discount to historic norms and to
the Euro peer group.

That’s the upshot of that one.

That’s me done. What about you Neil?

Anything minnow?

a couple of small cap things

Delta

Delta PLC (DLTA:LSE): Last: 190.25, down 1 (-0.52%), High: 192.00, Low: 190.25, Volume: 2.62m

Ah.

Crystal Amber has bought more stock

above the Valmont offer price of 185p a share

a further 350,000 shares at 1.918, lifting holding to 3.55%.

and remember the secret millionaire?

Of course. That guy with the stables and the hat.

yep the one who has mortgaged everything he has got against a company called Eatonfield

well

there is some good news

well sort of

raised £100,000 at 1p

which gives the company

enough cash until the end of March

still needs to find another £1.1m

to unlock the potential of the company

Yes, but he never gives up.

indeed

He says so here

http://www.roblloydgroup.co.uk/

Okay

that’s it

I have a lunch to get to

with some brokers

the FTSE 100 is down 38 points at 5,568

and cable is $1.4966

right

that’s it from me

And from me.

Good afternoon everyone.

thanks for logging in

and see you all tomorrow

bye

This entry was posted by Neil Hume on Tuesday, March 9th, 2010 at 11:03 and is filed under Uncategorized. Edit this entry.

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Markets Live transcript 9 Mar 2010

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