Markets Live chat transcript for the chat ending at 11:24 on 7 Jun 2010. Participants in this chat were: Neil Hume, FT Bryce Elder
NH
Good morning
NH
and welcome to Markets Live
NH
FT Alphaville’s daily markets chat
NH
and I’m back
NH
refreshed from a week in sunny Norfolk
NH
Bryce is here
BE
Hello
BE
Back to my traditional role as sidekick.
NH
so, what did I miss?
BE
Hm.
BE
euro falling below 1.20
BE
Pru/AIA collapsing
BE
BP yielding 10% (in theory)
BE
and Rockhopper upgrading its reserve estimate after a mini flash crash
NH
hmmm
NH
so plenty to chat about
BE
Indeed.
BE
Although, having said that, there’s not so much about today
BE
Market pretty steady considering the awful finish on Wall Street Friday
BE
and an equally poor performance from Asian markets overnight
NH
yes, Nikkei had its biggest fall of the year
BE
FTSE 100 only down 38 points at the moment
BE
5087
BE
And the euro has rallied strongly from its low
BE
1.197
BE
and the futures now indicate a flat start for Wall Street
NH
Right
NH
I guess these German industrial numbers have helped
BE
Guess so.
BE
Details?
NH
RTRS-GERMAN APRIL MANUFACTURING ORDERS +2.8 PCT M/M (DOMESTIC +2.9 PCT, FOREIGN +2.8 PCT)
11:00 07Jun10 RTRS-GERMAN MANUFACTURING ORDERS DATA COMPARES WITH REUTERS CONSENSUS FORECAST FOR +0.2 PCT M/M
11:00 07Jun10 RTRS-GERMAN APRIL CAPITAL GOODS ORDERS +2.2 PCT M/M (DOMESTIC +0.5 PCT, FOREIGN +3.4 PCT)
11:00 07Jun10 RTRS-GERMAN APRIL INTERMEDIATE GOODS ORDERS +4.2 PCT M/M (DOMESTIC +5.9 PCT, FOREIGN +2.1 PCT)
11:00 07Jun10 RTRS-GERMAN APRIL CONSUMER GOODS ORDERS -1.2 PCT M/M (DOMESTIC -2.2 PCT, FOREIGN -0.5 PCT)
11:00 07Jun10 RTRS-RECOVERY IN GERMAN INDUSTRY IS CONTINUING AND FIRMING – ECONOMY MINISTRY
11:00 07Jun10 RTRS-GERMAN MANUFACTURING ORDERS DATA COMPARES WITH REUTERS CONSENSUS FORECAST FOR +0.2 PCT M/M
11:00 07Jun10 RTRS-GERMAN APRIL CAPITAL GOODS ORDERS +2.2 PCT M/M (DOMESTIC +0.5 PCT, FOREIGN +3.4 PCT)
11:00 07Jun10 RTRS-GERMAN APRIL INTERMEDIATE GOODS ORDERS +4.2 PCT M/M (DOMESTIC +5.9 PCT, FOREIGN +2.1 PCT)
11:00 07Jun10 RTRS-GERMAN APRIL CONSUMER GOODS ORDERS -1.2 PCT M/M (DOMESTIC -2.2 PCT, FOREIGN -0.5 PCT)
11:00 07Jun10 RTRS-RECOVERY IN GERMAN INDUSTRY IS CONTINUING AND FIRMING – ECONOMY MINISTRY
BE
Is this the weak euro effect?
NH
looks that way
NH
market rallying now
NH
FTSE only down 30 points at 5,096
NH
I must be a lucky charm
BE
Hm.
BE
Meanwhile, the usual soothing comments came out of the G20 at the weekend
BE
and they also ditched plans for a global banking levy
NH
although, I note the UK, looks set to push ahead with it
NH
which will please Vince Cable
BE
Cable’s Unilateral Tax.
NH
and also
NH
there was a very interesting story in the Sunday Times
NH
about the FSA stress testing the banks for a Euro crisis
NH
City watchdog fears euro disaster
Financial Services Authority probes banks’ exposure to the eurozone as sovereign default concerns grow
Financial Services Authority probes banks’ exposure to the eurozone as sovereign default concerns grow
NH
THE City watchdog is stress-testing Britain’s biggest banks over fears they could be hit by the growing financial problems of the eurozone
NH
A “risk map” of Europe has been drawn up by senior officials at the Financial Services Authority, examining potential problems on a country by country basis.
Banks have been asked to model a number of disaster scenarios, including Greece defaulting on its loans. Analysts estimate that British banks have a total exposure of more than £100 billion to Greece, Portugal and Spain alone
Banks have been asked to model a number of disaster scenarios, including Greece defaulting on its loans. Analysts estimate that British banks have a total exposure of more than £100 billion to Greece, Portugal and Spain alone
BE
Oh. A risk map.
BE
That’d be interesting to see.
BE
Would the UK be included?
NH
NH
I wonder if it would be a heat map?
BE
Can we “Freedom of Information” that, I wonder?
NH
NH
anyway
NH
I wonder
NH
(Taxloss stop it you naughty boy)
NH
if the stress test
NH
could mean
NH
more capital raisings
NH
although
NH
in terms of the Euro
NH
worth putting its fall into context
NH
ie
NH
Indeed, as Bloomberg notes on Monday, even as the euro weakened 2.5 per cent last week against the dollar, to less than $1.20 for the first time since March 2006, it is still higher than its $1.1837 close on January 4, 1999, its first Monday of trading after its introduction, and stronger than the $1.1842 monthly average since inception.
NH
that was from Gwen’s post earlier
BE
actually
BE
A big note out on the banks today
BE
from Evolution
BE
looking at the costs of new taxes etc
BE
they downgraded Barclays to sell
BE
although they did have an absurd price target
BE
EVO TAKE – We cut substantially our Barclays estimates (2011 EPS cut by 44%), and cut our TP by 30%, from 482p to 340p. We downgrade the stock to Sell (from Buy)
BE
DETAILS – Barclays seems to be one of the most affected in our universe by the new taxation: we calculate a negative impact of £1.9bn p.a. (25% of profits). This has another negative knock-on effect; due to lower earnings retention, and the potential increased capital consumption of its BlackRock stake, we now calculate a £3bn capital deficit by 2012. We cut our 2011 EPS by 44%, our TP by 30% to 340p, and downgrade to Sell.
BE
VALUATION AND RECOMMENDATION – Barclays added to our Core Sell. BARC trades below tNAV and shows 12% upside, but despite this upside we see the stock as a very unattractive investment option: its upside is well below the upside of the sector (30%) and the average upside of our Core Buy ideas (57%). BARC has outperformed Eurobanks by 20% YTD; given the difficult regulatory environment, we cut to Sell and include it in our Core Sell portfolio.
NH
thanks for that
NH
Barclays a bit weaker
Barclays PLC (BARC:LSE): Last: 285.88, down 2.72 (-0.94%), High: 286.40, Low: 276.35, Volume: 17.96m
NH
as with all the other banks
Royal Bank of Scotland Group PLC (RBS:LSE): Last: 43.10, down 0.39 (-0.90%), High: 43.15, Low: 41.40, Volume: 50.15m
Lloyds Banking Group plc (LLOY:LSE): Last: 54.79, down 0.65 (-1.17%), High: 54.82, Low: 52.88, Volume: 50.74m
NH
that Barclays comment
NH
comes from a wider note
NH
that looks at the costs of new taxes and funding
NH
here’s a quick taster
NH
We expect a Big Squeeze, but not a Big Mess: in our view, a failure of the
euro is the only scenario in which an investor buying banks now would not
make money in 6-12 months – and this scenario has absolutely marginal
probability, in our view. A Greek default seems likely, but we do not expect
any other Western European Sovereign default. We prepare our forecasts for
the Big Squeeze (accelerated fiscal consolidation plus new taxation) and cut
our 2011 EPS by 20% (27% for Spain). Despite this, the sector RORWA still
improves steadily, to 107bp (2011) and 126bp (2012). Valuations are
extremely attractive and we see 33% upside. We remain positive, but turn
cautious on investment banks. Core BUY: SAN, ING, STAN, LLOY, BNP,
Ageas. Core SELL: CASA, BARC, UBS. NBG, POP.
euro is the only scenario in which an investor buying banks now would not
make money in 6-12 months – and this scenario has absolutely marginal
probability, in our view. A Greek default seems likely, but we do not expect
any other Western European Sovereign default. We prepare our forecasts for
the Big Squeeze (accelerated fiscal consolidation plus new taxation) and cut
our 2011 EPS by 20% (27% for Spain). Despite this, the sector RORWA still
improves steadily, to 107bp (2011) and 126bp (2012). Valuations are
extremely attractive and we see 33% upside. We remain positive, but turn
cautious on investment banks. Core BUY: SAN, ING, STAN, LLOY, BNP,
Ageas. Core SELL: CASA, BARC, UBS. NBG, POP.
11:16AM
NH
Right
NH
geting some flashes through
NH
from the Pru AGM
NH
starting with
NH
RTRS-PRUDENTIAL CHAIRMAN SAYS BOARD HAS TOTAL CONFIDENCE IN THE CHIEF EXEC AND HIS MANAGEMENT TEAM
BE
So, at least the man’s got backing from somewhere.
BE
Vote of confidence. That’s nice.
NH
11:15 07Jun10 RTRS-UK’S PRUDENTIAL CHAIRMAN SAYS SAYS WAS RIGHT TO PULL OUT OF ASIA BID, APOLOGISES FOR COSTS INCURRED
11:15 07Jun10 RTRS-UK’S PRUDENTIAL CHAIRMAN SAYS BOARD BELIEVED THAT IT WAS AN ACQUISITION WORTH MAKING “AS PART OF OUR WIDER STRATEGY”
11:16 07Jun10 RTRS-UK’S PRUDENTIAL CHAIRMAN SAYS GROUP STRATEGY REMAINS UNCHANGED
11:15 07Jun10 RTRS-UK’S PRUDENTIAL
11:16 07Jun10 RTRS-UK’S PRUDENTIAL
NH
apologies for costs
NH
it’s going to take more than that
NH
the costs were almost half a billion
NH
you can’t just say sorry
NH
and hope that’s alright
NH
there has to be a scarifice
BE
I’d imagine there does.
BE
Claiming Credit Suisse was responsible for trying to push a transaction is a ludicruous excuse.
BE
That’s their business.
NH
indeed
BE
It’s like blaming Oddbins for selling you vodka.
NH
as does the argument
NH
that a 10% fall in the market killed the deal
NH
which of course
NH
is nonsense
NH
it was ludicrously overvalued
NH
and how in the hell
NH
AIG now expect to float AIA
NH
at close to the revised Pru price I have no idea
NH
but apparently Blackstone have told they can
NH
in spite of the wave of Chinese bank fund raisings coming down the slip way
BE
Hm. Blackstone’s own float was not exactly easy sailing, was it?
NH
be careful of investment bankers
NH
offering advice
NH
NH
right some more flashes
NH
it’s just after 11.00am
NH
and that means
NH
it’s time for the FSA’s daily crime watch update
NH
and today seens Rowan Dartington
NH
fined half a million pound
NH
and this all related to the deal
NH
that would have seen Astaire buy Hoodless Brenan
NH
but now won’t
NH
The Financial Services Authority (FSA) has today fined Rowan Dartington & Co Limited £511,000 for failing adequately to protect and segregate client money for over two years.
Under the FSA’s client money rules, firms are required to keep client money separate from the firm’s money in segregated accounts with trust status. This protects client money in the event of the firm’s insolvency.
The systems and procedures firms use are critical in protecting their clients’ monies. Rowan Dartington put in place a new software system in May 2007 but failed to properly test and implement it, which led to a breakdown in Rowan Dartington’s reconciliation processes. The resulting problems meant that the firm could not rely on the accuracy of its internal books and records, and so could not be confident it was segregating the right amount of its clients’ money. It also contributed to Rowan Dartington being unable at the time of the FSA’s investigation to demonstrate the recoverability of up to £1.4 million of its own net assets in its accounting records.
Under the FSA’s client money rules, firms are required to keep client money separate from the firm’s money in segregated accounts with trust status. This protects client money in the event of the firm’s insolvency.
The systems and procedures firms use are critical in protecting their clients’ monies. Rowan Dartington put in place a new software system in May 2007 but failed to properly test and implement it, which led to a breakdown in Rowan Dartington’s reconciliation processes. The resulting problems meant that the firm could not rely on the accuracy of its internal books and records, and so could not be confident it was segregating the right amount of its clients’ money. It also contributed to Rowan Dartington being unable at the time of the FSA’s investigation to demonstrate the recoverability of up to £1.4 million of its own net assets in its accounting records.
NH
In a series of breaches between May 2007 and September 2009, Rowan Dartington also placed its clients’ money at risk by failing to segregate client money for contingent liability business, including spread bets and options. The firm also failed to properly ensure it had the correct trust letters from its banks and counterparties.
NH
anyway
NH
why did that Netech Pharma
NH
insider case fail on Friday?
NH
any news on that?
BE
That remains something of a mystery.
BE
Just to remind, they were acquitted
BE
Jury didn’t go for it.
NH
hmmm
NH
and if you missed that news
NH
here was the release
NH
Andrew King, a finance director, and Michael McFall, a lawyer, were today acquitted of insider dealing.
The case was brought by the Financial Services Authority (FSA) and heard at the Southwark Crown Court.
NH
Andrew Rimmington was also on trial on the same charges but Judge Testar discharged the jury from considering the case against him midway through proceedings, for personal reasons. Given the verdicts against Mr McFall, the FSA has offered no evidence against Mr Rimmington and not guilty verdicts have been entered in respect of him.
BE
So. Six-week trial.
BE
Charges of dealing shares in in the days ahead of a takeover.
BE
And the jury finds them innocent.
BE
Hm.
BE
I was wondering if this might clip the wings of THE WORLD’S TOUGHEST REGULATOR
BE
But … well, we’ll see.
NH
and what were the personal reasons?
NH
anyway
NH
let’s move on
NH
to BP
11:27AM
NH
news over the weekend that the new containment system
NH
has captured around 10,500 barrels of oil;
NH
around half the amount that’s spewing out of the well
NH
and yet
NH
this just hit the tape
NH
RTRS-NORDEA SAYS HAS DECIDED ITS FUNDS TO DIVEST BP SHARES
11:12 07Jun10 RTRS-NORDEA SAYS SOME 20 OF ITS FUNDS ARE DIRECTLY AFFECTED BY DECISION ON BP SHARES
11:12 07Jun10 RTRS-NORDEA
BE
Right.
BE
Nordea.
BE
They appear to hold …. wait for it ….. 602,768 shares
NH
wow
BE
Across all their funds.
NH
wow again
BE
That’s 0.00%.
NH
BP has 18.8bn shares in issue
BE
Nordea sold 1.5m back on the first day of May.
BE
Perhaps in anticipation of the leak.
BE
Anyway, questions on the right (as usual) about BP dividend.
BE
Neil – do you reckon they can hold?
NH
nope
NH
I reckon it goes
NH
they can still afford it
NH
but politically if they ever want to drill again
NH
in the waters off the US
NH
it gets clipped
NH
here’s one way it might work
NH
a broker sent this earlier
NH
S$10bn could be saved by cutting the next four quarterly dividends – ie the last three in 2010 and the first quarter divi in 11e. This cash saving would chime to US socio-political rhetoric demanding no dividend payment until the liabilities have been met. Doesn’t Total look a good story ?
NH
BP pay 14 cents a quarter
NH
or they have done for the past few years
BE
Yes – this seems to be the way the wind’s blowing.
BE
Though I don’t think the reaction would be too bad from the coupon clippers if BP were to “defer” for a quarter.
NH
no
NH
and even if they cut to 5%
NH
it would still be more than Shell
NH
and let’s face it
NH
the market is pricing that in
NH
what it can’t price in
NH
are the medium term impacts
BE
Is it time for the daily update of sellside buy notes arguing that it’s all in BPs price?
NH
why not
BE
Here’s Oddo. And they reckon it’s all in the price.
NH
I’ve heard that before
BE
Encouraging news on the oil slick in the Gulf of Mexico – Opinion raised to Buy (1) and TP adjusted to 620p
BE
The conference call on Friday reassured the market about BP’s commitment to
compensate the victims of this incident and satisfy shareholders at the same
time. Whereas BP has the financial means to keep its dividend stable, we are
lowering (temporarily) our estimated dividend per share by 30% for 2010, out of
caution, from $0.14 to $0.10/quarter, which is a still very comfortable yield of 7%
on the current share price (vs. 9.5% if kept stable). Other than that, the group
has been able to stem the subsea leak this weekend (10 kboe/d is currently
being captured) and additional operations should enable the company to
capture all the leaking oil in the next few days. As result, we think this is a good
moment to take a more aggressive stance on the share: we switch to Buy (1) on
the share and are cutting our TP from 710p to 620p in order to factor in the
expenditure relating to cleaning up the oil slick.
compensate the victims of this incident and satisfy shareholders at the same
time. Whereas BP has the financial means to keep its dividend stable, we are
lowering (temporarily) our estimated dividend per share by 30% for 2010, out of
caution, from $0.14 to $0.10/quarter, which is a still very comfortable yield of 7%
on the current share price (vs. 9.5% if kept stable). Other than that, the group
has been able to stem the subsea leak this weekend (10 kboe/d is currently
being captured) and additional operations should enable the company to
capture all the leaking oil in the next few days. As result, we think this is a good
moment to take a more aggressive stance on the share: we switch to Buy (1) on
the share and are cutting our TP from 710p to 620p in order to factor in the
expenditure relating to cleaning up the oil slick.
BE
A reassuring conference call
Friday’s conference call was reassuring broadly speaking. The group underlined
its commitment to compensate the victims of the oil slick and underlined that it
was also very determined to satisfy its shareholders. BP has not ruled out the
possibility of reviewing its dividend (the decision will be taken by a board meeting
shortly before the Q2 results release scheduled for the end of July). Whereas BP
has the financial means to keep its dividend stable whilst compensating the
victims of the oil slick at the same time, we are lowering (temporarily) our
estimated dividend per share by 30% for 2010, out of caution, from $0.14 to
$0.10/quarter, which is still a very comfortable yield of 7% on the current share
price (vs. 9.5% if kept stable). A decision to make no change to the dividend
would be good news in our opinion.
Friday’s conference call was reassuring broadly speaking. The group underlined
its commitment to compensate the victims of the oil slick and underlined that it
was also very determined to satisfy its shareholders. BP has not ruled out the
possibility of reviewing its dividend (the decision will be taken by a board meeting
shortly before the Q2 results release scheduled for the end of July). Whereas BP
has the financial means to keep its dividend stable whilst compensating the
victims of the oil slick at the same time, we are lowering (temporarily) our
estimated dividend per share by 30% for 2010, out of caution, from $0.14 to
$0.10/quarter, which is still a very comfortable yield of 7% on the current share
price (vs. 9.5% if kept stable). A decision to make no change to the dividend
would be good news in our opinion.
BE
Leak will soon be under control
BP has (finally) been able to partially block the underwater leak thanks to a lower
marine riser package (LMRP). This is enabling the group to capture some 10,000
boe/d of oil and another operation should soon enable it capture the oil that is
still leaking through the valves of the cap. The total leak is estimated at 12-19
kboe/d according to the scientific experts. The final sealing of the well will be
completed in mid-August when two relief wells are completed (currently being
drilled).
BP has (finally) been able to partially block the underwater leak thanks to a lower
marine riser package (LMRP). This is enabling the group to capture some 10,000
boe/d of oil and another operation should soon enable it capture the oil that is
still leaking through the valves of the cap. The total leak is estimated at 12-19
kboe/d according to the scientific experts. The final sealing of the well will be
completed in mid-August when two relief wells are completed (currently being
drilled).
BE
TP adjusted from 710p to 620p, recommendation lifted to Buy (1)
We have adjusted our estimates to factor in the clean-up operations and the
compensation to victims, namely a charge of $ 5bn for 2010 (based on a daily
spending rate of $ 25m per day, which will come down gradually from August
when the most costly subsea operations are finished) and of $ 2bn for 2011. We
also add an estimated provision of $ 15bn to our valuation. Based on an adjusted
beta from 0.94 to 0.99 our target price comes to 620p. We think the risk/reward
is sufficiently attractive to lift our recommendation to Buy (1). The company has
lost $ 70bn of its market cap since the beginning of the incident on April 20,
namely $ 30bn related to the fall in the markets (on the basis of peer
performances) and $ 40bn implicitly related to the oil slick. We think this amount
is overdone since the lion’s share of the litigation provisions is not likely to paid
out for a number of years. The CEO also reassured during the interview saying
that he would not step down. We think BP has the means to deal with this
historic crisis and that it is time to approach this stock from a value point of view.
We have adjusted our estimates to factor in the clean-up operations and the
compensation to victims, namely a charge of $ 5bn for 2010 (based on a daily
spending rate of $ 25m per day, which will come down gradually from August
when the most costly subsea operations are finished) and of $ 2bn for 2011. We
also add an estimated provision of $ 15bn to our valuation. Based on an adjusted
beta from 0.94 to 0.99 our target price comes to 620p. We think the risk/reward
is sufficiently attractive to lift our recommendation to Buy (1). The company has
lost $ 70bn of its market cap since the beginning of the incident on April 20,
namely $ 30bn related to the fall in the markets (on the basis of peer
performances) and $ 40bn implicitly related to the oil slick. We think this amount
is overdone since the lion’s share of the litigation provisions is not likely to paid
out for a number of years. The CEO also reassured during the interview saying
that he would not step down. We think BP has the means to deal with this
historic crisis and that it is time to approach this stock from a value point of view.
BE
Your turn.
NH
right
NH
here’s Morgan Stanley on the dividend condundrum
NH
BP can pay the dividend today…
In spite of the credit agencies recently downgrading BP, the
balance sheet is in rude health and cashflow from the existing
portfolio remains robust, in our opinion. There were some
valuable datapoints to add to the cash flow debate from the
investor briefing.
• Management confirmed under the current trading
environment that BP is generating ‘significant
additional cash flow’. Our own estimate of CFO for
2010 is US30bn, while BP consistently argues it is
breakeven at $60/bbl.
In spite of the credit agencies recently downgrading BP, the
balance sheet is in rude health and cashflow from the existing
portfolio remains robust, in our opinion. There were some
valuable datapoints to add to the cash flow debate from the
investor briefing.
• Management confirmed under the current trading
environment that BP is generating ‘significant
additional cash flow’. Our own estimate of CFO for
2010 is US30bn, while BP consistently argues it is
breakeven at $60/bbl.
NH
BP’s board will consider a number of factors before making the
decision on the Q2 dividend (we expect the Q1 dividend to be
paid out as normal on June 21st). The unfortunate events in the
Gulf of Mexico will certainly mean that BP will want to have a
stronger balance sheet than previously – something that is
likely to be the case for all deepwater players until the new
regulations become clearer. Also, the Board are likely to look at
scenarios where oil prices may fall further – particularly if they
believe in a more cautious global macro recovery. We estimate
assuming the current macro conditions for the rest of the year,
incorporating the cash outflow for acquisitions (namely Devon,
and the North Sea swap with Total) and cash costs for the
clean-up of Macondo of $5.5billion leaves BP’s gearing at 24%.
Assuming an oil price of 60/bbl (the bottom-end of BP’s
planning assumptions) would move gearing >25%.
decision on the Q2 dividend (we expect the Q1 dividend to be
paid out as normal on June 21st). The unfortunate events in the
Gulf of Mexico will certainly mean that BP will want to have a
stronger balance sheet than previously – something that is
likely to be the case for all deepwater players until the new
regulations become clearer. Also, the Board are likely to look at
scenarios where oil prices may fall further – particularly if they
believe in a more cautious global macro recovery. We estimate
assuming the current macro conditions for the rest of the year,
incorporating the cash outflow for acquisitions (namely Devon,
and the North Sea swap with Total) and cash costs for the
clean-up of Macondo of $5.5billion leaves BP’s gearing at 24%.
Assuming an oil price of 60/bbl (the bottom-end of BP’s
planning assumptions) would move gearing >25%.
NH
The other huge uncertainty is political pressure – we think this
may increase on both sides of the Atlantic. In the UK, BP has
on a number of occasions including last Friday’s call
highlighted its responsibility to pensions – we believe of the
40% shareholders that are based in the UK, 20% fall into the
income category – at the minimum, BP should receive support
behind closed doors for maintaining the dividend from the UK
government.
More obvious is the increasing political unrest in the US – with
the suggestions last week from certain senators that it would be
inappropriate for BP to pay the dividend while the clean-up
costs are ongoing. While President Obama this weekend did
not go as far – it was clear from his comments that the US
Administration continues to watch BP closely.
may increase on both sides of the Atlantic. In the UK, BP has
on a number of occasions including last Friday’s call
highlighted its responsibility to pensions – we believe of the
40% shareholders that are based in the UK, 20% fall into the
income category – at the minimum, BP should receive support
behind closed doors for maintaining the dividend from the UK
government.
More obvious is the increasing political unrest in the US – with
the suggestions last week from certain senators that it would be
inappropriate for BP to pay the dividend while the clean-up
costs are ongoing. While President Obama this weekend did
not go as far – it was clear from his comments that the US
Administration continues to watch BP closely.
NH
there’s lots more in the Long Room
NH
on the BP conference call on Friday
BE
(@Ptolemy: Shell’s yielding 5.85% according to Bloomberg.)
NH
(I thought 6.5% sounded high)
NH
right
NH
we need a BP share price
NH
small rally
NH
dead cat
NH
BP Plc (BP.:LSE): Last: 442.40, up 9.05 (+2.09%), High: 448.00, Low: 428.00, Volume: 34.05m
NH
and that’s probably because
NH
this containment riser thing failed before
NH
because of slush
NH
and it could again
BE
Yes. But it’s a heated dome this time, apparently.
BE
Jon Stewart did a joke on Friday about BP “building the leak nicer places to live”
11:38AM
NH
Just back to the Pru AGM for a moment
NH
the CEO has taken the stand
NH
to make his defense
NH
RTRS-UK’S PRUDENTIAL CEO SAYS INTENDS TO CONTINUE TO INVEST IN ASIA TO ACCELERATE GROWTH
11:35 07Jun10 RTRS-UK’S PRUDENTIAL CEO SAYS REGRETS “CONSIDERABLE STRAIN ON RELATIONS WITH SHAREHOLDERS”
11:36 07Jun10 RTRS-UK’S PRUDENTIAL CEO SAYS WILL NOW START PROCESS OF RESTORING SHAREHOLDER CONFIDENCE
11:35 07Jun10 RTRS-UK’S PRUDENTIAL
11:36 07Jun10 RTRS-UK’S PRUDENTIAL
NH
hmmm
NH
I wonder how he does that
NH
by going?
NH
walking the plank
NH
anyway
NH
Pru shares are
Prudential Plc (PRU:LSE): Last: 550.50, down 5.5 (-0.99%), High: 553.00, Low: 539.50, Volume: 3.10m
NH
and ahead of the meeting today
NH
they slipped out a trading statement
NH
which showed the business in Asia continuing to fire on all cylinders
BE
As some wag pointed out last week, given Tom Albanese can remain CEO after everything he screwed up, Thaim has no reason to worry.
BE
So anyway, here’s Panmure on the trading statement.
BE
Ahead of the AGM the company has released a surprise statement confirming
that despite the obvious corporate distraction of the doomed AIA deal, sales
in April/May have improved from an already impressive Q1. Group wide
sales for the first 5 months of 2010 at £1,355m APE (+27%) show sales
acceleration to +28% from +26% in Q1 driven by record Asian sales in April
and May 2010. Asset management net inflows have slowed but this is set
against a tough comparative. Management trust may take time to restore but
the business at least remains on track. Buy.
that despite the obvious corporate distraction of the doomed AIA deal, sales
in April/May have improved from an already impressive Q1. Group wide
sales for the first 5 months of 2010 at £1,355m APE (+27%) show sales
acceleration to +28% from +26% in Q1 driven by record Asian sales in April
and May 2010. Asset management net inflows have slowed but this is set
against a tough comparative. Management trust may take time to restore but
the business at least remains on track. Buy.
BE
Surprise sales announcement – Today’s AGM statement included a surprise
announcement concerning sales for April and May. Group sales on an APE basis at
£1355m (+27%) show an acceleration in sales in April and May over Q1 2010 (+26%)
particularly in Asia and the US. Whilst the unusual announcement might be seen by
some as an attempt to defuse some of the likely criticism the Board will undoubtedly face
over the handling of the AIA deal today, we welcome the clarification that the business
remains on track.
announcement concerning sales for April and May. Group sales on an APE basis at
£1355m (+27%) show an acceleration in sales in April and May over Q1 2010 (+26%)
particularly in Asia and the US. Whilst the unusual announcement might be seen by
some as an attempt to defuse some of the likely criticism the Board will undoubtedly face
over the handling of the AIA deal today, we welcome the clarification that the business
remains on track.
BE
Asia – For the first 5 months of 2010 sales were £579m APE (+33%) with sales in April
and May at record levels up 38% (Q1 2010 sales were +30%). Growth was described as
being broad based which is positive.
US – For the first 5 months sales were £454m (+41%) which compares to Q1 life and
pensions sales at £255m (+38%).
and May at record levels up 38% (Q1 2010 sales were +30%). Growth was described as
being broad based which is positive.
US – For the first 5 months sales were £454m (+41%) which compares to Q1 life and
pensions sales at £255m (+38%).
BE
UK – as expected sales in the UK remain depressed at £322m (+4%) but this shows a
bit of a slowdown from Q1 2010 where sales were at £193m (+7%). In our view this
represents a major challenge to Pru given the uncertainty of the position of the UK
operation throughout the AIA deal. In April and May sales we estimate that sales in the
UK were flat.
AIA purchase not to be revived – It would appear that newspaper reports that Pru
may revive its doomed AIA deal later this year are wide of the mark. Also we find it hard
to believe that Mark Tucker, former CEO, would return.
bit of a slowdown from Q1 2010 where sales were at £193m (+7%). In our view this
represents a major challenge to Pru given the uncertainty of the position of the UK
operation throughout the AIA deal. In April and May sales we estimate that sales in the
UK were flat.
AIA purchase not to be revived – It would appear that newspaper reports that Pru
may revive its doomed AIA deal later this year are wide of the mark. Also we find it hard
to believe that Mark Tucker, former CEO, would return.
BE
Recommendation – We remain buyers of Prudential. We think that the AIA adventure
has highlighted Prudential’s undervalued Asian operation and that over time this under
value will be realised. We remain slightly concerned over the UK performance but this
should recover as the AIA deal fades from memory and Pru confirm that the UK
operation is needed for ratings, cash flow and dividend.
has highlighted Prudential’s undervalued Asian operation and that over time this under
value will be realised. We remain slightly concerned over the UK performance but this
should recover as the AIA deal fades from memory and Pru confirm that the UK
operation is needed for ratings, cash flow and dividend.
NH
thanks for that
11:43AM
NH
So
NH
tomorrow is FTSE reshuffle day
NH
actually it’s Wednesday
NH
but the prices are based on Tuesday’s close
NH
and at the moment
NH
the company with the name we can’t spell
Petropavlovsk PLC (POG:LSE): Last: 1,253, up 29 (+2.37%), High: 1,263, Low: 1,203, Volume: 735.59k
NH
looks set to go in
NH
well, according to Bloomberg it does
NH
now that’s interesting
BE
Is it? Surely it’s just a reflection of the gold price?
NH
partly
NH
but they have also announced today
NH
an equity partner for their iron ore business
NH
that the plan to respiin off
NH
this time in Hong Kong
BE
IPO tourism.
NH
here’s some comment on that deal
NH
from Liberum
NH
Petropavlovsk (“POG”) has announced it has agreed a US$60m equity investment in its iron ore assets by Hong Kong investors, Asia Resources Fund and CEF Holdings. The investment values POG’s iron ore assets at US$860m (£3.28/shr), which is lower than the US$1.5bn that the FT reported last month POG was seeking, but we believe is significantly more than the market currently ascribes to its iron ore. This US$60m will fund POG’s share of capex for Phase 1 of the K&S iron ore development; on 23 March POG agreed terms with Industrial and Commercial Bank of China for debt financing of up to 85% of K&S’ Phase 1 capex which is currently estimated at US$400m. Consequently this investment will ensure that POG is not subsidising its iron ore assets with its gold operations’ cash flows, where US$167m of capex is slated for 2010. The equity investors have a put option to sell the investment back to POG after 2 years at entry cost plus accrued interest of 8% pa.
NH
Our view is that this equity investment means that POG is one step closer to listing its iron ore assets – POG states “a possible listing of [the iron ore division] on the HK stock exchange is one of a number strategic options for the non-precious metals division”. Valuing POG’s iron ore at £3.28/shr would take our estimated fair value to £17.31/shr (POG’s gold operations are equivalent to £14.0/shr at 1.5x NAV with a US$1,000/oz LT gold price). In the light of the postponement of Ferrous’ IPO last week, we think this development should be received positively, particularly since the company appears to putting in place sensible and separate funding strategies to finance the growth of its gold and iron ore divisions. We reiterate our BUY recommendation.
NH
Now
NH
that news pushed up the price of POG shares today
NH
below a strike price for some warrants
NH
which have probably been excercised now
NH
and will add £100m to their market cap
BE
Oh. That’s capricious.
BE
That’s enough to bump it ahead of Informa in the rankings today.
NH
hmmm
NH
not sure what to say
NH
but it does look as if POG
NH
could be a FTSE 100 company
BE
No. I’m not sure what to say either.
BE
Blue-chip POG.
NH
and moving swiftly on
NH
let’s head to small cap corner
11:48AM
NH
First up
NH
inevitably
NH
is GKP
Gulf Keystone Petroleum Ltd (GKP:LSE): Last: 73.50, down 1 (-1.34%), High: 75.00, Low: 72.25, Volume: 917.90k
BE
Oh. Really?
BE
What’s The FASTEST GROWING SUPERMAJOR done today?
NH
results out
NH
but also
NH
Establishment of Employee Benefit Trust and Intentions regarding Share Option Grants and Awards under the Executive Bonus Scheme
NH
now that’s much more interesting
NH
because their exploration success this year
NH
Todd gets 5m shares
NH
It is recommended that the Trustee make discretionary awards for 2009 on the same terms as the Company’s Executive Bonus Scheme (“Executive Bonus Scheme”) such that no more than one third of the maximum number of common shares set out below will be considered for award in each year. The maximum number of common shares available under the Executive Bonus Scheme for 2009 for the Directors is set out below.
Todd Kozel 5,000,000 common shares
Ewen Ainsworth 1,000,000 common shares
John Gerstenlauer 1,000,000 common shares
Ali Al-Qabandi 1,000,000 common shares
Mehdi Varzi 100,000 common shares
Lord Peter Truscott 100,000 common shares
In total, it is recommended that the Trustee award 11,519,000 common shares for 2009 under the Executive Bonus Scheme to Directors and employees.
BE
Oh yes. Lord Truscott.
BE
Still best remember for the “cash for amendments” affair.
NH
indeed
NH
Peter Derek Truscott, Baron Truscott (born 20 March 1959 in Newton Abbot, Devon)[1] is a British petroleum and mining consultant, independent member of the House of Lords and writer. He was a Labour Member of the European Parliament from 1994 to 1999 and was elevated to the peerage in 2004. He has written on Russia, defence and energy, and works with a variety of companies in the field of non-renewable resource extraction. Previously somewhat low-profile in British politics, he made headlines in 2009 as one of four Labour peers named by the Sunday Times as being willing to accept money to help companies amend bills that would have an adverse effect on them.[2]
NH
that’s his Wiki page
BE
Not that that has any bearing on THE FASTEST GROWING etc.
NH
none at all
NH
here are some more incentives
NH
The Remuneration Committee of the Company, following extensive review by external advisers, has proposed structured option grants under the existing Share Option Plan with stretching performance criteria known as the Long Term Incentive Performance Conditions. It will be recommended that the Trustee grant the following Directors share options (“LTIP Share Options”) over the number of common shares shown below, at a price to be determined but not substantially less than the market price of the shares at the time of grant.
Todd Kozel 9,766,473 common shares
John Gerstenlauer 1,953,295 common shares
Ewen Ainsworth 1,953,295 common shares
The LTIP Share Options will be available for exercise in equal tranches over 3 financial years and be subject to the following performance conditions:
NH
and here’s another odd thing
NH
* Todd Kozel and Ali Al-Qabandi are shareholders in Gulf Keystone Petroleum Company LLC which owns 40,000,000 common shares
BE
Yes. That’s always been a curiosity.
BE
And since we’re on the subject of THE FASTEST GROWING etc.
BE
Did we ever get permission to print that email response from their advisors?
NH
yes we did
NH
they even sent some bios
NH
I have stuck them up in the LR
NH
but here’s taste of the email
NH
from
Van Odell
Van Odell
NH
DGA Kurdistan Team Leader
NH
here’s the top few pars
NH
I won’t put the rest up
NH
because that’s reserved for LR members
NH
not muppets
NH
Dear Mr. Hume,
In response to the Alphaville Blog (May 25,2010) concerning the report by Dynamic Global Advisors (DGA) on the Shaikan discovery (January 11, 2010), the posting is misleading on several points. Note that the author never contacted DGA for verification, information or statements.
First let me address the inflammatory statement by the author “However we would caution that there still remains material geological risk, especially AS THE RESERVES HAVE NOT YET BEEN FULLY AUDITED BY A REPUTABLE RESERVOIR ENGINEER.”
The Senior Advisor for Petroleum Engineering at DGA who evaluated the resources has more than 27 years experience in worldwide exploration and production. He is an expert in reservoir and production engineering, operations reserve/resource estimation, Monte Carlo simulation and field studies. He is a well qualified reservoir engineer.
In response to the Alphaville Blog (May 25,2010) concerning the report by Dynamic Global Advisors (DGA) on the Shaikan discovery (January 11, 2010), the posting is misleading on several points. Note that the author never contacted DGA for verification, information or statements.
First let me address the inflammatory statement by the author “However we would caution that there still remains material geological risk, especially AS THE RESERVES HAVE NOT YET BEEN FULLY AUDITED BY A REPUTABLE RESERVOIR ENGINEER.”
The Senior Advisor for Petroleum Engineering at DGA who evaluated the resources has more than 27 years experience in worldwide exploration and production. He is an expert in reservoir and production engineering, operations reserve/resource estimation, Monte Carlo simulation and field studies. He is a well qualified reservoir engineer.
BE
For further on this subject, I draw LRers attention to Lorcan’s sterling work on the subject
NH
moving on
11:55AM
NH
A quick bit of comment on Regal Petroleum
NH
which has news out this morning
NH
that merrill lynch seemed to think
NH
was very important
Regal Petroleum Plc (RPT:LSE): Last: 36.50, up 4.25 (+13.18%), High: 38.50, Low: 34.50, Volume: 4.90m
BE
Go on.
NH
Potentially transformational
update
update
NH
Regal has this morning provided a positive update on its Ukrainian operations,
with the incremental newsflow centering around SV-66 flow rate of 1.4kboe/d
(222mcm/d gas and c.10bbl/d of condensate). This is the highest initial flow rate
delivered from Regal’s new generation wells and 80% above our estimates
(760boe/d for B-sands only). According to management, better than expected
results are driven by revised completion techniques, while even higher production
rates (up to 3kboe/d) could be achieved, were Regal successful in removing
infrastructure bottlenecks. Total production on 5 June was c.3kboe/d, while on our
estimates, Regal has an additional c.800boe/d shut-in capacity.
with the incremental newsflow centering around SV-66 flow rate of 1.4kboe/d
(222mcm/d gas and c.10bbl/d of condensate). This is the highest initial flow rate
delivered from Regal’s new generation wells and 80% above our estimates
(760boe/d for B-sands only). According to management, better than expected
results are driven by revised completion techniques, while even higher production
rates (up to 3kboe/d) could be achieved, were Regal successful in removing
infrastructure bottlenecks. Total production on 5 June was c.3kboe/d, while on our
estimates, Regal has an additional c.800boe/d shut-in capacity.
NH
Key focus on the coming well results…
Although more time is required to understand whether SV-66 rate is sustainable
over a longer period and whether consistently higher flow rates could be achieved
from other wells, the results are very promising. We also welcome the
management’s decision to initiate a detailed review of the completion techniques
(that involves external consultants) to improve the flow rates across MEX-GOL
and SV fields. The key focus will be on the coming well results as Regal is
planning to complete three workovers and two new wells by the year end.
Although more time is required to understand whether SV-66 rate is sustainable
over a longer period and whether consistently higher flow rates could be achieved
from other wells, the results are very promising. We also welcome the
management’s decision to initiate a detailed review of the completion techniques
(that involves external consultants) to improve the flow rates across MEX-GOL
and SV fields. The key focus will be on the coming well results as Regal is
planning to complete three workovers and two new wells by the year end.
NH
The cheapest stock the sector
We reiterate our Buy recommendation and 70p/sh PO. Based on our estimates,
Regal is the cheapest stock in our E&P universe on both NAV and reserves
valuation trading at: (1) a c.56% discount to total NAV vs the peer average
discount of 30%, and (2) US$0.7/2P boe, vs the Euro E&P average of US$9/boe.
We think this strong valuation outweighs the key financing and Ukrainian natural
gas price risks associated with Regal and potentially leaves open the possibility of
an M&A transaction.
We reiterate our Buy recommendation and 70p/sh PO. Based on our estimates,
Regal is the cheapest stock in our E&P universe on both NAV and reserves
valuation trading at: (1) a c.56% discount to total NAV vs the peer average
discount of 30%, and (2) US$0.7/2P boe, vs the Euro E&P average of US$9/boe.
We think this strong valuation outweighs the key financing and Ukrainian natural
gas price risks associated with Regal and potentially leaves open the possibility of
an M&A transaction.
11:57AM
NH
OK
NH
we have Libor
NH
3mth dollar and euro
NH
have edged up
BE
Flashes please.
NH
RTRS-LIBOR THREE-MONTH DOLLAR RATES FIX AT 0.53719 PCT VS 0.53656 PCT ON FRIDAY -BBA
11:55 07Jun10 RTRS-LIBOR THREE-MONTH EURO RATES FIX AT 0.64750 PCT VS 0.64000 PCT ON FRIDAY -BBA
11:55 07Jun10 RTRS-LIBOR THREE-MONTH STERLING RATES FIX AT 0.72563 PCT VS 0.72625 PCT ON FRIDAY -BBA
11:55 07Jun10 RTRS-THREE-MONTH DOLLAR LIBOR/OIS SPREAD AT 30 BPS VS 29 BPS – REUTERS DATA
11:55 07Jun10 RTRS-THREE-MONTH EURO LIBOR/OIS SPREAD AT 23 BPS VS 23 BPS – REUTERS DATA
11:55 07Jun10 RTRS-THREE-MONTH STG LIBOR/OIS SPREAD AT 21 BPS VS 21 BPS – REUTERS DATA
11:55 07Jun10 RTRS-LIBOR THREE-MONTH EURO RATES
11:55 07Jun10 RTRS-LIBOR THREE-MONTH STERLING RATES
11:55 07Jun10 RTRS-THREE-MONTH DOLLAR LIBOR/OIS SPREAD AT 30 BPS VS 29 BPS – REUTERS DATA
11:55 07Jun10 RTRS-THREE-MONTH EURO LIBOR/OIS SPREAD AT 23 BPS VS 23 BPS – REUTERS DATA
11:55 07Jun10 RTRS-THREE-MONTH STG LIBOR/OIS SPREAD AT 21 BPS VS 21 BPS – REUTERS DATA
BE
Ta.
NH
it’s almost midday
NH
anything you want to look at Bryce
BE
Well, there were a couple of rumours while you were away
BE
Including the old Tate/Bunge story.
NH
spin off the sugar business
NH
or sell it
BE
The idea being that Bunge’s cashed up
BE
Although there are lots of other things for them to buy.
BE
(@Midlander: read Friday’s transcript, my good man)
BE
Anyway, BarCap doen’t think much of the tale.
BE
Tate & Lyle has been at the centre of press speculation, be it a potential acquisition
of National Starch or a takeover bid on the group by Bunge. We do not believe that
any of this is going to happen and therefore see the recent stock performance as
unjustified. We remain 3-Underweight.
of National Starch or a takeover bid on the group by Bunge. We do not believe that
any of this is going to happen and therefore see the recent stock performance as
unjustified. We remain 3-Underweight.
BE
Tate is the least strategic fit for Bunge – Following the sales of its Brazilian fertilizer
business in Brazil, which is due to close in Q2 2010, Bunge will receive around $3.5bn of
net proceeds. The company has indicated that it intends to use $1.5bn to pay down its
debt and keep around $2b to fund growth in its core businesses or to enter new
categories. If Bunge were to expand into corn wet milling we believe that Tate would be
strategically and financially the least attractive target for Bunge given its size and its
sugar and sucralose businesses.
business in Brazil, which is due to close in Q2 2010, Bunge will receive around $3.5bn of
net proceeds. The company has indicated that it intends to use $1.5bn to pay down its
debt and keep around $2b to fund growth in its core businesses or to enter new
categories. If Bunge were to expand into corn wet milling we believe that Tate would be
strategically and financially the least attractive target for Bunge given its size and its
sugar and sucralose businesses.
BE
A bid for National Starch unlikely – AkzoNobel, the owner of National Starch, has
recently communicated renewed interest from potential buyers for this business. We
believe that a combination of National Starch and Tate makes strategic sense given the
“new” strategy of the group to focus on food ingredients. However, we think potential
antitrust issues might arise, notably in the US. Moreover, this likely would require a
capital increase for Tate, which does not seem to fit with management comments that
they will focus on organic growth and bolt-on acquisitions.
recently communicated renewed interest from potential buyers for this business. We
believe that a combination of National Starch and Tate makes strategic sense given the
“new” strategy of the group to focus on food ingredients. However, we think potential
antitrust issues might arise, notably in the US. Moreover, this likely would require a
capital increase for Tate, which does not seem to fit with management comments that
they will focus on organic growth and bolt-on acquisitions.
BE
Valuation – The stock trades on 6.8x EV/Ebitda for 2010, which is in line with UK
branded peers. We believe a 10% discount is justified given the commodity nature of
Tate’s businesses. We keep our 380p target price unchanged.
branded peers. We believe a 10% discount is justified given the commodity nature of
Tate’s businesses. We keep our 380p target price unchanged.
NH
thanks for that
NH
interesting story nonetheless
NH
I don’t really have any RAw
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
NH
other than a story
NH
that the Chinese were set to revalue the yuan
NH
by 3-5 per cent
NH
but the euro had to remain about $1.20
NH
by the end of the g20 meeting
NH
obviously it didn’t
NH
currently trading at $1.1972
NH
are you hearing anything?
BE
Nah – quiet Monday, this.
BE
Volumes very low.
BE
The Chloride story was done to death by the weekend press, and I’ve nothing to add there.
Chloride Group PLC (CHLD:LSE): Last: 289.50, up 3.5 (+1.22%), High: 290.00, Low: 285.00, Volume: 771.55k
NH
looks like a bump is coming there
NH
but will it be enough to get the deal over the line
NH
three shareholders in Cholride
NH
pretty much call the shots
NH
right
NH
what else is moving
RSA Insurance Group PLC (RSA:LSE): Last: 120.30, up 2.3 (+1.95%), High: 120.30, Low: 116.60, Volume: 3.38m
NH
being pushed by Goldman
BE
Ah yes. So it is.
BE
Source of opportunity
While RSA has outperformed the sector by 5% since the beginning of the
year, on a P/E basis it is trading at 8.8x 2011E (with 2011E P/TNAV of 1.3x
for an RoTNAV of 17%). In our view, this presents an opportunity to gain
exposure to RSA’s strong balance sheet and its ability to sustain consistent
underwriting margins at an attractive valuation. Furthermore, rates across
most lines of business are maintaining positive pricing momentum, which
should help relieve margin pressures. RSA is on the GS SUSTAIN Focus
List as a long-term leader in insurance. We upgrade RSA to Buy from
Neutral, with a 12-month price target of 164p.
While RSA has outperformed the sector by 5% since the beginning of the
year, on a P/E basis it is trading at 8.8x 2011E (with 2011E P/TNAV of 1.3x
for an RoTNAV of 17%). In our view, this presents an opportunity to gain
exposure to RSA’s strong balance sheet and its ability to sustain consistent
underwriting margins at an attractive valuation. Furthermore, rates across
most lines of business are maintaining positive pricing momentum, which
should help relieve margin pressures. RSA is on the GS SUSTAIN Focus
List as a long-term leader in insurance. We upgrade RSA to Buy from
Neutral, with a 12-month price target of 164p.
NH
(Outlaw – very good)
BE
(And TheWord – please don’t quote entire passages of Joseph Heller.)
BE
(It may be quiet, but it’s not THAT quiet.)
NH
I was also looking at International Personal Finance
BE
Aha! The emerging markets doorstep lender.
International Personal Finance Plc (IPF:LSE): Last: 208.00, down 1.5 (-0.72%), High: 210.30, Low: 204.40, Volume: 512.82k
BE
I’m guessing this is on its Hungary exposure, yes?
NH
they very one
NH
and recall
NH
Hungary
NH
was responsible for that very nasty
NH
profit warning last year
NH
that they bounced back from
NH
very quickly
BE
Ah yes. A total breakdown in the management reporting structure.
BE
Business went haywire for months and no-one in London noticed.
NH
yes
NH
and cue a big restructuring
NH
which according to Numis
NH
means the business is now better prepared
NH
in Hungary at least
NH
Concerns about Hungary have returned with Hungary being the prime driver of the profits warning last year. The Hungarian business is now substantially smaller (we forecast average receivables through H1 this year of £59.8m) with the weakest third of the book having been removed. Only the highest quality customers are receiving new credit and new advances are being made under tighter lending criteria making average advances smaller relative to incomes. Poland remains the key market where the economic conditions remain robust
NH
We expect Q2 to be a strong quarter for credit quality and we expect an improved performance from Romania despite the economic concerns as the shift in the balance between mature and immature customers more than compensates for the weak economic environment. In Mexico we expect an improved performance as the economy performs better than last year and the continued shift from immature to mature customers also improves profitability. This year we forecast £91m of profits from Eastern Europe excluding Hungary and Romania where we expect profits of £3.1m and £1.7m respectively and we forecast £6.6m of profits from Mexico. With head office costs of £13.3m our pre-tax forecast for this year is £89.1m an increase of 44.4%, EPS of 25.2p, a PE of 8.3x. Some recovery next year should see EPS increase to 33.5p a PE of 6.3x but this forecast still assumes a substantially elevated level of impairment.
BE
Ok – cheers.
NH
anything else
BE
(TheWord: much as I’d like to bring you a chapter a day of the 20th century’s finest satirists, it’s really not our brief.)
BE
Oh, there’s been another FSA press release
NH
another?
BE
making up for the bank holiday last week, it seems.
NH
BE
FSA fines Close Investments Ltd £98,000 for client money breaches
The Financial Services Authority (FSA) has fined Close Investments Limited (CIL) £98,000 for failing to properly protect and segregate client money.
BE
Between January 2008 and January 2010, CIL failed to hold client money in segregated accounts with trust status. The firm also failed to implement and maintain adequate controls over its client money as required by FSA rules. In particular, for two years CIL failed to verify that certain accounts had been appropriately set up as client money accounts.
NH
quite a little profit centre the FSA
BE
And it’s “failing to properly protect and segregate client money” again
BE
Which, in terms of an all-purpose stick to beat any dog, seems to be the FSA’s Criminal Justice Act.
12:12PM
NH
Right
NH
it seems like things are getting a little feisty
NH
at the Pru AGM
NH
The Chairman has had to call for order
NH
after a shareholder
NH
called them a shambles
NH
and said the should all go
NH
to loud applause
NH
now I’m guessing the outburst
NH
was triggered by this
NH
RTRS-RPT-UK’S PRUDENTIAL CHAIRMAN SAYS PRU PLANS TO MAINTAIN DIVIDEND POLICY GOING FORWARD, DESPITE ASIA BID COSTS
12:04 07Jun10 RTRS-UK’S PRUDENTIAL CHAIRMAN SAYS WE SEE NO REASON WHY ANY DIRECTOR OF PRU PLC SHOULD RESIGN
12:04 07Jun10 RTRS-UK’S PRUDENTIAL
NH
er
NH
hang on a minute
NH
no reason?
NH
is McGrath the most blinkered man in the UK
BE
I can give you a few reasons.
NH
hasn’t he learnt anything from this debacle
BE
No. No, it appears he hasn’t.
NH
you’ve all failed and you can’t even see it
NH
that’s another comment
NH
it makes you wonder what someone has to do at the Pru
NH
to get the chop
BE
So – it seems that turning the ire towards Credit Suisse hasn’t been an entirely successful strategy.
NH
nope
NH
you can’t simply blame the advisers
BE
Right. Quick FTSE update and then we’re done?
NH
hang on
NH
right
NH
down just 20 points now at 5,104
NH
looks like we could turn positive this afternoon
NH
the forint has also rallied sharply
NH
and Hungarian banks are even in positive territory
NH
Friday must just have been
NH
one of those Friday sell offs
NH
(Yes midlander)
BE
Well, the Hungarian government’s said they’ll live within terms of their CVA
BE
(Or whatever the sovereign equivalent of a CVA is called.)
NH
hang on
NH
we have some Moody’s comment on Hungary
NH
Comments by Hungarian officials last week are negative for Hungary’s credit, Moody’s ratings agency said on Monday.
NH
Officials in Hungary’s new centre-right Fidesz government rattled investors last week with comments suggesting the country was close to a Greek-style economic meltdown. [ID:nLDE6550I7]
“The statements are a credit negative because they bring renewed attention to Hungary’s high public and external debts, which, by threatening to drive up interest rates and push down the exchange rate, endanger Hungary’s economic recovery,” Moody’s analyst Dietmar Hornung said in Moody’s weekly credit outlook.
“The new government’s apparent willingness to adopt unorthodox measures to stimulate economic growth is also sparking concerns. In our view, these uncertainties threaten to further impair Hungary’s creditworthiness,” Hornung added, saying Hungary’s Baa1-rated government bonds are on negative outlook.
12:18PM
BE
Sorry – something’s caught Neil’s attention.
BE
So, while he scrapes his jaw off the desk, I’ll bring you a bit more BP dividend comment
BE
This time, from the ever-bullish JP Morgan
BE
In our view, BP’s dividend has become the primary focus point for many
investors and, unfortunately, certain US politicians too. BP’s board
meeting ahead of the Q2 2010 results (Tuesday 27 July) will likely
conclude with a show of hands from those ‘in favour’ or ‘against’ declaring
a 14 cents dividend with respect to Q2. We hope that by then the Macondo
well will have been capped and the board will be more fully informed on
BP’s likely cost exposure to this incident.
investors and, unfortunately, certain US politicians too. BP’s board
meeting ahead of the Q2 2010 results (Tuesday 27 July) will likely
conclude with a show of hands from those ‘in favour’ or ‘against’ declaring
a 14 cents dividend with respect to Q2. We hope that by then the Macondo
well will have been capped and the board will be more fully informed on
BP’s likely cost exposure to this incident.
BE
We remain strongly in favour of maintaining the current dividend of 14
cents pcq. BP’s dividend is the ultimate bond with its shareholders – we
see it as a core covenant that is rationally defined and must be protected
from political influence. Table 1 shows the key arguments for and against
maintaining the dividend. In our view, corporate ‘bashing’ has become all
too easy political narrative to distract from failed regulation and flawed
economic policies. If US political rhetoric continues, we would like the
British government to raise a diplomatic ‘red flag’ regarding the sanctity of
UK incorporated entities. Such political interference is an issue that has
profound implications for all industries, not just the oil industry
cents pcq. BP’s dividend is the ultimate bond with its shareholders – we
see it as a core covenant that is rationally defined and must be protected
from political influence. Table 1 shows the key arguments for and against
maintaining the dividend. In our view, corporate ‘bashing’ has become all
too easy political narrative to distract from failed regulation and flawed
economic policies. If US political rhetoric continues, we would like the
British government to raise a diplomatic ‘red flag’ regarding the sanctity of
UK incorporated entities. Such political interference is an issue that has
profound implications for all industries, not just the oil industry
BE
In the meantime, we would like BP to better inform certain US politicians
that a cessation of dividends would not, in any way, unlock additional
resources to resolve this incident. All that can be done is being done – the
dividend is not a diversion of resources in any shape or form. We would
also like BP to keep underlining that the rest of its global operations are
performing very well since they pay for the clean up and the dividend.
that a cessation of dividends would not, in any way, unlock additional
resources to resolve this incident. All that can be done is being done – the
dividend is not a diversion of resources in any shape or form. We would
also like BP to keep underlining that the rest of its global operations are
performing very well since they pay for the clean up and the dividend.
BE
BP’s absolute and total commitment to contain the well, clean up the spill,
compensate fully all affected local businesses and inhabitants and to return
the Gulf Coast to where it was is the only practical solution. In our view, a
dividend default is not and does not form any part of the optimum solution
to this tragic event. We wait to see what BP’s board decides.
compensate fully all affected local businesses and inhabitants and to return
the Gulf Coast to where it was is the only practical solution. In our view, a
dividend default is not and does not form any part of the optimum solution
to this tragic event. We wait to see what BP’s board decides.
BE
Neil – are you back with us? Do I need to administer smelling salts?
NH
sorry
NH
back now
NH
staggering that
NH
simply staggering
BE
Too staggering, in fact, for public consumption.
BE
And, on that mysterious bombshell, let’s wrap this up.
NH
yes
NH
FTSE down 16 points now
NH
the ML effect has failed
NH
miserably on my return
NH
ROTR
NH
pls pull your finger out tomorrow
BE
Bad rabble.
BE
Nevertheless, thanks for all your comments today.
NH
(not market sensitive Monkey)
NH
right
NH
I am off to lunch
NH
see you all tomorrow
NH
bye
BE
Good afternoon, all.