FT Alphaville » Markets Live transcript 15 Jul 2010

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Markets Live transcript 15 Jul 2010

Posted by Neil Hume on Jul 15 11:02.

Markets Live chat transcript for the chat ending at 11:30 on 15 Jul 2010. Participants in this chat were: Neil Hume, FT Bryce Elder

Good morning

hola

bonjour

velcome

it’s 11.03am

and drum roll pls

it is time for Markets Live

FT Alphaville’s daily markets round up

as usual Bryce is here

Good morning everyone.

Right

let’s have a quick market update

and then move on to the world of fund management

So. Gartmore then.

sort of

we will come to that

but before

we have some news from an Alphaville favourite

Antony Bolton

Oh good. The retired Anthony Bolton.

What’s he doing now?

he’s in China

and taking on the likes of Hugh Hendry

it should make for an entertaining

celebrity fund manager death match

11:05AM

Right

market wise, what’s happening?

Ok. We’re down.

Again.

Not by much though.

Off 14.3 points at 5239

everything on hold ahead of the JP Morgan numbers

which should be out around lunchtime. Possibly while we’re on air.

we will hang around

any idea where forecasts are?

Well, there was a whisper number doing the rounds this morning.

80 cents, versus a consensus of 70c.

and this is something else that came my way this morning

Looking at what happened at the last set of numbers from JPM

Market has been pumped on low volume on each of the last 3 occassions ahead
of their numbers, only to then get dumped on high volume.

A case of a little bit of history repeating? Reminder of expectations:

(sorry, this’ll be messy)

Consensus | Current Q2 (Jun) | Next Q (Sep) | Current Yr | Next Yr

Rev’s $25.87bn $25.78bn $105.33bn $106.51bn

EPS $0.72 $0.81 $3.12 $4.67

Q2 FICC revenues expected to be $4.1bn (down 25%) q/q and core
equity trading expected to be $980m (down 33% q/q).

Now, the obvious ones to watch on this side of the pond are Barclays, Deutsche and Credit Suisse.

and Barclays are weak pre JP

Barclays PLC (BARC:LSE): Last: 306.20, down 7.35 (-2.34%), High: 313.00, Low: 303.70, Volume: 10.63m

11:09AM

Back to Bolton

and this morning

the UK’s answer to Warren Buffett

has detailed the exposure of his China Special Situations Fund

and the headline news

is that Bolton

believes China’s goldern for exports is coming to an end

and now it’s going to be about the domestic economy

and he has been loading up on stocks which should benefit

banks mainly

hang on this

from FT.com

Anthony Bolton, the fabled British stockpicker, is staking his reputation on a £460m ($702m) bet that the Chinese economy is shifting away from exports and towards domestic consumption.

Until late last year, Mr Bolton planned to retire to the Caribbean, but decided to set up the Hong Kong fund because of his belief in the prospects of China’s economy.

Mr Bolton’s bullish stance pits him against big-name investors such as Hugh Hendry, head of Eclectica Asset Management, and Marc Faber, author of The Gloom Boom & Doom Report, who are betting that the Chinese economy will crash.

Mr Bolton’s portfolio selection will be closely analysed by other investors seeking to emulate his previous success. During his 28 years running Fidelity International’s Special Situations fund in London, he delivered an annualised return of 19.5 per cent.

bout one fifth of Mr Bolton’s fund is allocated to stocks in the consumer discretionary sector. By contrast, the consumer discretionary sector makes up just a twentieth of the MSCI China index against which his fund is benchmarked.

His biggest sector holding is in financial stocks, which account for a third of the fund – a lower proportion than in the benchmark. Mr Bolton said he was confident that last year’s lending binge by Chinese banks would not lead to a dangerous rise in bad debts.

there’s lots more on

http://www.ft.com/cms/s/0/e112ce16-8fe3-11df-91b6-00144feab49a.html

Nice.

This pitches him directly against Hugh Hendry, of course.

yep

and it would it not be good

for the two to go head to head

on Newsnight

Hendry would win the battle, no doubt.

but would he win the war?

the China consumer angle is a pretty bold punt

As noted on the right, Hendry’s a pup compared with Bolton.

and Sparts notes

Bolton loves the falling knife

he can’t get enough of it

From Citywire

Legendary Fidelity investor Anthony Bolton believes BP now represents a once in a lifetime opportunity for investors to buy in.
Bolton, who now runs the Fidelity China Special Situations trust, said that he has searched hard for a way to buy into BP in his China trust but has conceded it is not a China theme.
He said: ‘You have to take this as a top down view because I am not as close to BP as I used to be. But I have thought long and hard to see if there is anyway I could include BP in the fund but I really can’t find a way to make it into a China play. I think investors are being given a classic once in a lifetime opportunity to buy BP.

‘Most of the time it is the case that when something really negative happens investors worry about if and the reality is not as bad as the worrying. Okay they have to pay a lot of money out but my view is BP will survive and will prosper. This will just be considered a very poor chapter in its history.’

of course

if the PetroChina bought a 10% stake

BP might be a China play

(Stomper: Hendry was 13 when Bolton started. He was investing in Pannini stickers. Not really a fair comparison.)

So should we have a look at The Knife?

i guess so

BP Plc (BP.:LSE): Last: 400.25, down 0.75 (-0.19%), High: 403.20, Low: 392.90, Volume: 12.03m

a bit weaker

on concerns about the cap

whether they can close it

this is the best round up I have seen

from the Washington Post

A new piece of equipment designed to control the gushing Gulf of Mexico oil well sprung its own leak Wednesday night, the latest setback to BP’s efforts to put an end to the environmental disaster.

BP said that the leak in what is known as the choke line could be repaired and that its effort to close the damaged well, and shut down the flow of oil permanently, would resume. But video streams from the seafloor showed a chaotic plume of oil and gas continuing to surge from one of the outlets on the 75-ton cap installed earlier this week.

It was unclear late Wednesday whether the leak would be a momentary hitch in the much-anticipated “integrity test” on the well, or if it would put the operation in grave peril. But the plumbing failure showed once again that nothing has come easy in the long campaign to kill the Macondo well, which blew out April 20 and destroyed the Deepwater Horizon rig, killing 11 workers.

There’s also the US applying a seven-year ban.

yep the House pushing for that

but then again not only does BP have an awful safety record

it apparently backs terrorists

as it happens

the company has rowed back on some of the comments about Libya

Has it?

yep

BP confirmed on Thursday it had lobbied the British government in late 2007 over a Prisoner Transfer Agreement with Libya because it was concerned a slow resolution would impact an offshore drilling deal with Libya.

“BP told the UK government that we were concerned about the slow progress that was being made in concluding a Prisoner Transfer Agreement with Libya,” BP said in a statement on Thursday.

We were aware that this could have a negative impact on UK commercial interests, including the ratification by the Libyan government of BP’s exploration agreement.”
BP said, however, it was not involved in discussions regarding the release of Lockerbie bomber Abdel Basset al-Megrahi.

“The decision to release al-Megrahi in August 2009 was taken by the Scottish government. It is not for BP to comment on the decision of the Scottish government. BP was not involved in any such discussions about the release of al-Megrahi,” it said.

I think the less that comes out of BP’s press office the better

Yes. This is simply inviting another fight on another front.

Hayward had the right idea, oddly enough. Straight bat.

say nothing

but don’t go sailing

that wasn’t a particularly smart move

anyway

while we are on the knife

a note out from Citi today

which is quite good

although the title is somewhat unfortunate

a good sub would have taken it out

BP Relief Is at Hand

yes

not good that

anyway

here’s the note

Approaching control of the Macondo well — BP is ahead of schedule on the relief
well targeted to kill the original Macondo well. The ‘Capping Stack’ device, which
is to be tested tomorrow, may allow control even earlier. Ending the risk of further
spillage is an important step in rehabilitating the stock

Focus shifts to damages — While we anticipate well control costs will reduce into
September, this is only the end of the beginning. Focus will shift to paying
damages and trying to assess potential penalties. The quantum of penalties and
punitive damages that BP is forced to pay is key since they are not tax deductible.
We would argue that the market still continues to discount the higher end of
potential fines.

Robust valuation and financially sound — With net debt to equity peaking towards
27%, c. $7bn gross cash position and cashflow generation of $33-41bn per year,
BP remains well capitalised and liquid enough to deal with the consequences of
the spill.

BP remains a Buy — Our sum-of-the-parts analysis supports valuations above
600p per share. Our blended target price remains 590p/sh. We adjust our
estimates to incorporate cash costs associated with the Macondo clean up

I’m waiting for the Taxloss gag

(Dinker: isn’t that John Wayne?)

11:23AM

Right – where to?

Code is asking about Dimension Data

we could take a look at

that

Sure

reseller of Cisco kit right?

Yup. South African based, with several unsuccessful attempts to expand into established markets.

Have to admit, there had been talk for some time about an IT sector deal …..

there has

I thought it might be Logica

although Arm has obviously been mentioned

Yup. I for one simply forgot this thing existed.

big deal – £2.1bn

120p cash offer from Nippon Telegraph

Yup – though that’s quite a small premium.

it is

And we’re trading a wee bit through the terms.

Dimension Data Holdings Plc (DDT:LSE): Last: 121.80, up 20.2 (+19.88%), High: 122.00, Low: 119.60, Volume: 58.01m

it is

and probably not a bad punt

premium is not great

the irrevocables are soft

they lapse in the event of an offer 10% higher

and there will be others looking

given DD’s emerging markets exposure

BT been mentioned as a buyer in the past

Yeah – but that was old BT. The one with a Global Services division that was about to march across the world.

Things didn’t quite work out like that.

so not BT then

No, but the list of others is long as it is vague.

and Nippon

was certainly a bolt out of the blue

Hitachi, HCL, Infosys, Cap Gem, IBM and Oracle have all been mentioned to me this morning as potential counterbidders.

All make sense on paper, apparently.

Though that doesn’t mean much.

actually today’s agreed deal has a pretty heroic closing date

they reckon the deal gets done by the end of October

given the exchange controls in South Africa

and CFIUS

this could take much longer

Well, there’s nearly no chance of competition problems.

(Splasher – people haven’t go anything to say)

Right

JP Morgan news breaking

11:30AM

here we go

*JPMORGAN 2Q EPS $1.09 INCLUDING 36C CUT IN RESERVES, 14C CHARGE

RTRS-JPMORGANCHASE REPORTS SECOND-QUARTER 2010 NET INCOME OF $4.8BILLION, OR $1.09 PER SHARE, ON REVENUE1 OF $25.6BILLION
11:29 15Jul10 RTRS-AUTO ALERT – JPMORGAN CHASE & CO Q2 SHR $1.09
11:29 15Jul10 RTRS-AUTO ALERT – JPMORGAN CHASE & CO Q2 REVENUE $25.6 BLN
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO Q2 REVENUE FELL 8 PCT TO $25.6 BLN
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO Q2 SHR VIEW $0.67, REV VIEW $25,587.45 MLN — THOMSON REUTERS I/B/E/S
11:29 15Jul10 RTRS-JPMORGAN CHASE – RETAIL FINANCIAL SERVICES AND CARD SERVICES NET CHARGE-OFFS AND DELINQUENCIES IMPROVED FROM THE PRIOR QUARTER
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS TIER 1 COMMON AT $108.2 BILLION, OR 9.6%
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS PROVISION FOR CREDIT LOSSES WAS $3.4 BILLION
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS TIER 1 COMMON ( 1 ) AT $108.2 BILLION, OR 9.6%; CREDIT RESERVES AT $36.7 BILLION
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS RESULTING FIRMWIDE ALLOWANCE FOR LOAN LOSSES TO END-OF-PERIOD LOANS RETAINED(1)WAS 5.34%
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS LOAN LOSS COVERAGE RATIO AT 5.3% OF TOTAL LOANS
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS TOTAL CONSUMER PROVISION FOR CREDIT LOSSES WAS $3.9 BILLION, COMPARED WITH $8.5 BILLION
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS CONSUMER NET CHARGE-OFFS(1)WERE $5.5 BILLION
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS WHOLESALE PROVISION FOR CREDIT LOSSES WAS A BENEFIT OF $572 MILLION
11:29 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS FIRM’S NONPERFORMING ASSETS TOTALED $18.2 BILLION AT JUNE 30, 2010
11:30 15Jul10 RTRS-JPMORGAN CHASE & CO SAYS TIER 1 CAPITAL RATIOS WERE 12.1% AT JUNE 30, 2010

Okay

we need to have a look through that

At the headline it looks like a beat by a country mile.

market rallying big time on that

FTSE almost flat on the day now

that’s what 40 cents above the whisper number

there must be a funny in there somewhere

must be

It’s an unbelievable number. Literally.

revenue does look a bit light

so yes

there must be something in there

ex items is 87 cents

so perhaps it is not such a large bet

(Oilwatcher: judging by the indexes, the consensus appears to disagree.)

hang on

let’s get the statement

So that’s still a big beat against the 71c forecast.

Though the whisper was a lot closer to the mark.

here we go

Jamie Dimon, Chairman and Chief Executive Officer, commented on the quarter: “Our net income
increased to $4.8 billion, including the benefit from a $1.5 billion reduction of loan loss reserves –
which we do not believe represents normal ongoing earnings – partially offset by a charge of $550
million for the U.K. bonus tax.”

loan loss reserves

http://files.shareholder.com/downloads/ONE/963700498x0x387162/6502ad5a-3a37-4ada-85d2-c9d445a36fc1/2Q10_Earnings_Press_Release_FINAL.pdf

The provision for credit losses was a benefit of $325 million, compared with an expense of $871
million in the prior year. The current-quarter provision reflected a reduction in the allowance for
loan losses, largely related to net repayments and loan sales. The allowance for loan losses to endof-
period loans retained was 3.98%, compared with 7.91% in the prior year. The decline in the
allowance ratio was due largely to the consolidation of asset-backed commercial paper conduits in
accordance with new accounting guidance, effective January 1, 2010. Excluding these balances,
the current-quarter allowance coverage ratio was 6.49%. Net charge-offs were $28 million,
compared with $433 million in the prior year. Nonperforming loans were $2.3 billion, down by
$1.3 billion from the prior year and $481 million from the prior quarter.

that explains it I think

still the market likes it

FTSE 100 now flat at 5,254

and Barclays

now trading 4p lower at 309.5p

Okay. We can go back to JPM once wiser folk have had time to read the small print.

In the meantime, where now?

Gartmore

Good idea.

Oh – hang on, we didn’t quite wrap up on Dimension Data though.

yes

Did you have any comment just to finish that one off?

I have something from Deutsche

one of the few people to follow this stock

Earlier today Nippon Telegraph and Telephone Corp (NTT), Japan’s largest
phone company, announced the acquisition of Dimension Data via a cash
offer of 120p/share, a ~20% premium to yesterday’s close, for a total
GBP2.1bn. This values DDT at approximately 8.5x EV/EBIT and 18.5x PER,
which is inline with the group midcycle (post dotcom) valuation. Also, given
our ~10% revenue growth 11/12 and 10-15% earnings growth driven from
emerging market exposure, the price at first glance looks pretty fair.

Rationale: in our view the deal makes strategic sense from at least 2 perspectives:
(1) the cross-selling opportunities by combining NTT’s global
infrastructure with Dimension Data’s specialist IT infrastructure services,
and (2) for NTT to get access to the African enterprise IT/telecom infrastrucure
market and especially the Internet Solutions division, which provides
connectivity, cloud, communications and carrier services to global corporations
in Africa.
On the risk side, it remains to be seen how this may affect the Cisco relationship,
althought the press release seem to suggest that it should remain
in place. In fact, we believe many Cisco offerings are complementary to
telcom services and therefore should be synergistic.
From an IT services perspective, it is clear to us that consolidation will continue
driven by overdue consolidation, telecom operators and hardware
players interest in services, and industry trends such as cloud computing.

Valuation: with the group’s shares now trading at the acquisition price level,
we retain Hold with no target price. Risks include the deal not closing,
macro recovery faltering and limited margin expansion potential persist.
J

there you go

right Gartmore

11:38AM

shars down 6.6p at 104p

following the departure of one of their start fund managers

a French guy whose name I can’t spell

so I will call him Rambo for short

Suits me. Rambo.

And Rambo’s off, yes?

yep

to clear his name

Guillaume Rambourg, the star hedge fund manager at Gartmore under investigation by the Financial Services Authority for breaches of internal trading rules, has quit the company.

Mr Rambourg was suspended in March by Gartmore pending the outcome of an internal investigation by law firm Clifford Chance into possible breaches of company trading procedures.

Although he was reinstated as an analyst in April after the investigation concluded that there was “no suggestion of dishonesty” in his actions, a separate probe by the FSA, triggered by the suspension, is still continuing.

Mr Rambourg said on Wednesday: “I have taken the very difficult and personal decision to resign from Gartmore after more than 14 years so that I can devote all of my attention to co-operating with the FSA’s investigation and regain approved status.

Now

the key questions here are

how much money follows Rambo out the door

and whether Roger Guy

their other star follows him

and they both set up a new shop in Geneva

away from the intrusive regulation of the FSA

They did bring in a Rambo replacement though. Darrell O’Dea.

who?

Formerly of Tomas Pinto and Threadneedle. Nope, I dunno either.

And it’s worth highlighting here that both Rambo and Guy have a lot of Gartmore stock.

sorry

I don’t

Hang on – I’ll bloomberg for the exact figures. In the meantime, any comment?

yep

here’s something from Merrill

they are very gloomy about Rambo’s departure

nothing about a revenge fund though

The largecap team runs two large hedge funds which, according to Bloomberg,
had AUM of around $2.4bn as at 31/5/10,down from $3.2bn at the end of March,
largely due to redemptions. Overall, at IPO, they accounted for around 18% of
AUM, including some separate accounts and a UCITS absolute return fund.
It is hard to estimate exactly the impact which Mr Rambourg’s unfortunate
departure will have on AUM, but absent commentary from the company we would
presume that especially the hedge funds will see further outflows, possibly of the
quantum they have already seen. It is worth stressing that in Roger Guy and
Darrell O’Dea, the funds will still have two extremely well regarded managers.
Although Gartmore have a range of extremely marketable products aside from
the largecap European hedge fund products, we believe that this will slow asset
gathering elsewhere, simply because of the amount of time which will be taken up
dealing with investors in the European products.

We will review our estimates, but would expect to have to make material cuts to
numbers, especially in FY 11, where a full year’s impact will be felt. The largest
factor here is the likely hedge fund outflows, but dull markets overall and investor
risk aversion will also be factors. We would see eps for FY 11 possibly falling to
something in the low to mid ‘teens. Even on this sort of earnings, Gartmore
would look very cheap, on a single digit p/e, but we would expect the shares to
open weakly, as this news adds further uncertainty to the investment case. We
retain our Buy, but think that the situation, which we have for a while suggested is
a long term one, will be modestly termed out by yesterday’s announcement. We
will review our price objective in the context of lower earnings.

and I also have something from Canaccord

Guillaume Rambourg’s decision to resign means that Gartmore can put one element of the associated damage to the share price behind it. The European Large Cap team will continue to be led by Roger Guy but we expect interest to continue to focus on net flows across the group.
• Following market falls, our target price (based on previously-reduced forecasts) suggests some upside. However, sector-wide share price falls leave our hierarchy of preferences – and our views on likely catalysts – little changed. We remain cautious on Gartmore ahead of its interim results announcement.

Last night’s announcement notes that Guillaume Rambourg decided to resign ‘to devote his attention to concluding the FSA investigation into his conduct and to allow Gartmore to put these matters behind it.’ A previous Gartmore announcement in June 2010 had said that the FSA had confirmed that it was only investigating Guillaume Rambourg and not any other individuals or Gartmore itself.
• Yesterday’s brief statement also said that Roger Guy will continue to lead the European large Cap team
• The last update on AUM came in Gartmore’s Q1 IMS. The £126 million of net inflows achieved during Q1/10 was followed by £1.2 billion of net redemptions in the wake of the Rambourg incident. Despite Rambourg’s focus on alternative strategies, the outflows were substantial across the board.

• At that time, Gartmore’s management was confident that the majority of Rambourg-related redemptions had already occurred. However, it seemed that momentum had certainly been lost.
• On the business front, investors have been wary of European equity strategies. In addition, competition has intensified in another area of Gartmore’s focus – absolute return funds.
• Our current forecasts incorporate net outflows of £1.5 billion in 2010, reflecting management’s optimism that the Rambourg fall-out has been contained. We base 2011 estimates on neutral flows.
• Gartmore is scheduled to report its interim results on 17 August 2010.

Valuation
• Gartmore’s shares have fallen by 50% over the last six months and by 22% in the last three – although its share price has risen by 4% over the last month outperforming many of its peers. It still trades at a significant discount to those peers, though, on a 2010 PE of 6.2 times with no immediate yield support.
• In our view, the share price should reflect Gartmore’s exposure to significantly greater downside risk. The lack of a dividend until 2011 and a potential stock overhang further limit the shares’ attractions as well.

So its cheap

but with reason

Gartmore also has a bit of debt

some of which falls due in 2012

I think

Ok, here’s the overhang

Both actual and potential.

Rambo has 11.82m Gartmores as of March. Roger’s got 17m. Stakes of 3.85% and 5.56% respectively.

and the other big overhang

is the former private equity backer

Hellman

they one a massive slug

which they can now slot I believe

Yup. 24.3% holding.

And the lock-up is off.

ouch

that’s some overhang

as for Guy

I guess he has taken a fair bit of cash out of Gartmore

so would he really be that worried by the rest

perhaps he would

perhaps he will stay

but he is on the record expressing his frustrations about compliance the firm

11:48AM

FTSE 100 up now

3.5 points stronger at 5,257

where now?

Smallcap corner? Or a bit of Ocado?

Ocado first

the PR team are getting their act together

and showing some fight

Yeah – I saw the quotes in the Guardian this morning.

“analysts don’t understand how popular the service is with users”

Oh – hang on, sorry.

That’s not Ocado.

That’s from this.

http://www.halplotkin.com/cnbcs146.htm

Grebey says some analysts don’t understand how popular the service is with users, particularly the fact that Webvan drivers bring the groceries right into each customer’s kitchen, including taking them out of their delivery containers and placing individual items on a counter or table top.

“That’s really the special sauce of our home delivery,” Grebey adds. “Customer response has been very positive.”

My mistake.

oh no

did he really say that?

So what’s the Ocado fightback?

it’s the same

exactly the same

analysts don’t get it

they are used to following big high street retailers

not cutting edge distribution businesses

so here are the quotes from today

“A source close to the company insisted Fairfield’s failure was irrelevant: “It’s an oil well in the North Sea. It is a depleting asset and a finite resource.” He said the grocer’s directors were “really bored” with what they believed was negative media coverage and that they remained “pretty confident” they would get their float away.”

So they are really bored with all the bearish comment

which in fact means

we’ll keep our heads down and hopes this goes away

which it won’t

“A source close to the grocery company said the analysts do not “get it” because they are used to assessing the prospects of traditional high street retailers rather than new online business models such as Ocado. He added that overseas investors had given the company “an amazing reception”.”

and there we have it

I wonder if Grebey is a buyer

I doubt he has the liquidity.

and what does amazing mean?

amazing in as much as they were taken aback by the negativity?

Investors are amazed. They’ve been rendered literally speechless by the presentation.

anyway

that’s enough for today on Ocdao

but I am sure there will be more

11:54AM

Right

time for small cap corner

and a big hat tip to the Sector Watcher

who in a roundabout way nailed the bid for Caledon today

Caledon Resources PLC (CDN:LSE): Last: 44.50, up 8.5 (+23.61%), High: 48.00, Low: 36.00, Volume: 1.67m

So, what’s he saying today?

he’s pushing Frank

Seriously?

yes

We are upgrading our NAV-based target price by 30% from £4.90/share to £6.50/share, on the back of Tuesday’s announcement that African Minerals had entered into a binding Memorandum of Understanding with Shandong Iron & Steel Group Co Limited (SISG) in respect of its iron ore project at Tonkolili.
The 25% investment values the project at ~US$6 billion, equivalent to about £11.17 per share, a ~190% premium to Monday’s closing price of £3.80. We think it is reasonable to assume that SIGS, as an iron and steel maker, might have paid a premium for access to such a large-scale ore body able to deliver such a high-grade concentrate.

We continue to view African Minerals as significantly undervalued despite the strong rise in the share price recently.
We are reducing our completion risk from 60% to 50% on the basis that:
· The investment from SISG will fully fund the project through Stages 1 and 2 (to 25 mtpa of direct shipping ore);
· The new take or pay off-take agreement with SISG gives production a more certain route to market.
The agreements are both conditional on satisfactory due diligence by SISG. Upon the final agreements being signed we would look to reduce our completion risk from 50% to 40%, with the remainder representing construction and operational risk in ramping up the project to capacity. A 40% completion risk would value the company at £7.87/share.
Next Catalysts: Hurdles yet to clear include: completion of the Stage 2 DFS expected by the end of Q4/10; signing of the agreements with SISG; and completion of construction, which we expect by the end of Q3/11 for Stage 1 and the end of Q4/12 for Stage 2.
Action Points: Quite why the stock slipped back over Wednesday and today is a mystery in terms of the valuation. I guess plenty of people were waiting for this and feel the news flow must now quieten down. Iron Ore is a bit dull right now and investors are not looking much beyond the next quarter so a bit of profit taking is understandable. We recommend you take advantage of the weaker share price and buy the stock.

( you could be right Taxloss)

so that’s that covered

other things of interest in the small cap world

obviously there is Chromex

but we don’t know who the bidder is

and we aren’t taking any credit for that

because we missed the tech deal

anyway

as rumoured Bowleven has put out a decent drilling update

BowLeven PLC (BLVN:LSE): Last: 150.00, up 14 (+10.29%), High: 159.75, Low: 146.00, Volume: 3.44m

here’s some comment from Canaccord on that

Bowleven – BLVN LN
Initial news from the IE-3 appraisal well offshore Cameroon looks encouraging although the release is fairly light on detail. Whilst the company says that the well encountered multiple hydrocarbon-bearing reservoirs, there is no mention of gross or net pay and no indication of size or whether or not the well met pre-drill expectations. However it is encouraging to note that BLVN is planning to run four separate Drill Stem Tests (DSTs), implying an expectation of reasonable flow-rates. Whilst our current NAV for BLVN is only 123p/share (vs 136p close yesterday) this assumes only a risked valuation for the IF discovery. On an unrisked basis we reach a NAV in excess of 300p/share if we include both IE and IF. Hence on the basis of today’s news we are cautiously optimistic on BLVN and continue to be BUYers.

on Chromex

We believe there are other bidders

and they might pay up to 40p

again no names

sorry

More than enough – thanks.

11:59AM

Someone on the right’s making reference to a Telecity bid rumour

Dunno about that. Haven’t heard.

data warehouses

Yup. And one of its main US competitors just took out another one earlier this month.

Namely EMC buying Greenplum.

http://www.eweek.com/c/a/Database/Will-EMC-Greenplum-Acquisition-Spark-Data-Warehouse-Consolidation-474692/

Now, whether that makes a bid more or less likely I’ve no idea.

thanks for that

Well, just marking the story. That’s all.

I have some more 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.

Good.

but this needs to be taken with a mountain of salt

Go on then.

NOKIA/MSFT: craziest story I’ve heard in a while.
- Locals saying that Paul Allen (MSFT Co-Founder) has moored his yacht up in
Helsinki…somehow they are getting the bid spec. going on this.
- Let’s completely ignore the fact that Paul Allen left the MSFT board in
November 2000.
- Emoticon

now I am kinda thinking

that rumour must be related to this

hear MS placing 21mln Nokia at 6.70

Righty ho. The Nokia + Microsoft thing has been low-grade noise for a couple of weeks.

12:03PM

How is Muppet fund doing

I only ask because

Supergroup

is up almost 10% post results

and a dividend promise

Hm.

Maiden results.

up 78p at 878p

You have to knock out the lightbulbs for all maiden results.

come on

you have to admit those Japanese eight ball t-shirts

are flying off the shelves

looks

this thing listed in March at 500p

it is now worth almost 9

and it doesn’t even have an internet distribution arm yet

imagine the price it would be with a massively expensive warehouse

in the Hertforshire countryside

and analysts Got this company

Well, it did give some bloke who shifted their snides on eBay £500k and a seat on the board.

Which, when you get down to it, summarises most internet strategies.

In answer to your initial question, Supergroup’s the Muppetfund star performer.

(And, perhaps not coincidentally, is the only company in there you don’t hate.)

Fund’s up 2.21% since inception, 0.89% today.

yes

we must be showing some serious outperformance

although you’re right

I don’t hate Supergroup

I own a pair of their shoes

that have some Japanese writing on them

Whereas I live next to Westfield, so hate nearly everything retail.

So anyway, do we have any comment on Superduck?

Nick Bubb stayed positive this morning, I note.

plenty

Supergroup has delivered on the promises made in the prospectus and whilst details on
current year expectations are thin on the ground, we expect consensus to upgrade. The
shares have done brilliantly and remain a BUY.
 At the IPO, management promised £25.7m of PBT and the answer is £26.5m, ahead of
our £26m.

They got there a slightly unusual way, with more EBIT from the wholesale business than
we expected, but slightly less from retail. We think this was probably more to do with our
inexperience at modelling the company rather than anything more fundamental.
 New store plans look intact and there are currently 11 stand alone womenswear
concessions. Womenswear is an area of extreme potential.
 We will learn more about expectations for the current year at the analysts meeting.
 The shares have gone up 60% since the float and if the usual parameters of ‘travelling
and arriving’ were applied, there could be some profit taking today. Any weakness would
be a buying opportunity as the rating still barely reflects the growth potential here. BUY.

that was Oriel

and here’s Singer

No formal data been given on current trading, however management state that the year has started well and is in line with management expectations. The UK store roll out is on track with a planned c.20 new stores per year. The online offer has been expanded with multi-language and multi-currency options. The wholesale order book for Aut/Wint 2010 indicates another record season is on the cards.

The investment case centres on the multi-channel growth strategy and SuperGroup’s high margin, low capital, business model. In time, there is scope for scale efficiencies to deliver extremely high return dynamics and considerable cash generation. SuperGroup has developed several channels to market, including (1) stand alone retail stores, (2) concessions in House of Fraser, (3) a rapidly growing web channel and, (4) a wholesale operation both in the UK and, increasingly, overseas. Given the relative immaturity of the business there are many opportunities within each of these channels to grow the business further. Management continue to look to expand the womeswear ranges (34.4% of sales) and see this expansion as a major opportunity for the business going forward.

On the back of today’s results we do not expect any huge changes to the current year consensus of £41.2m (vs SCMe £42.5m). SuperGroup trades on a cal’11 PER of 15.0x, more than half the rating of ASOS yet with similar growth potential (3yr EPS CAGR 33%). For growth investors in ASOS a switch to SuperGroup looks sensible in order to leverage the rating differential.

half the rating of Asos

get a warehouse

and they will be on 30 times

That comparison suggests what? That Asos is ridiculously overvalued too?

how dare you suggest that

actually i was thinking about adding Asos

and Blinkx to the portfolio

both are annoying me

Asos rises after the CEO slots a load of stock

and Blinkx

well it was once part of Autonomy

which seems reasons enough

And did you see the RNS today?

they have inherited that trait from their parent company

announcing EVERYTHING

You never fall far from the tree.

SAN FRANCISCO, CALIF.—July 15, 2010—blinkx, the world’s largest and most advanced video search
engine, today announced that Samsung Electronics Co., Ltd., a global leader in semiconductor,
telecommunication, digital media and digital convergence technologies, has selected blinkx for
participation in SamsungApps.

Under the terms of the agreement, blinkx has developed a video app for the Android platform, which
will be promoted through SamsungApps on Samsung’s new, highly acclaimed Galaxy S handset. The
blinkx app, blinkx Beat, is the only video app to be featured in the elite SamsungApps offering.

blinkx Beat for SamsungApps is a never-ending playlist of the most popular videos from the around
Web—hilarious bloopers, amazing stunts, ridiculous pranks and cute animals—a riveting channel of
snackable video delivered straight to your smartphone. The blinkx Beat app also allows users to search
across blinkx’s entire index for mobile-compatible videos while on the go.

“We’re thrilled to have been chosen as one of Samsung’s featured apps for the global launch of its new
Android phone. Through SamsungApps, Samsung improves the consumer experience by carefully
selecting and promoting a world-class showcase of apps for its handsets, each developed by leaders in
their respective verticals, so that users have immediate access to a rich array of functionality,” said
Suranga Chandratillake, founder and CEO, blinkx.

“Blah blah blah blah,” he added.

it is definately going in after that

RNS puff

RNS abuse

(I made up that last bit.)

But shares are up 25% on it.

Blinkx Plc (BLNX:LSE): Last: 65.50, up 12.75 (+24.17%), High: 67.00, Low: 53.00, Volume: 8.24m

Insanity.

on that

Yes. Insanity.

I’m backing up the truck.

agreed

and add some SuperGroup

Dealt at 65.5p.

And doubling down on Supergrass.

12:14PM

Wow – look at the time.

Anything we haven’t mentioned?

don’t think so

not sure why Essar is up

14.8p higher at 443p

Only faller yesterday.

right

There’s some story going round that Essar might buy Shell’s forecourt business in Europe.

Though I’ve no idea if that’d fold into Essar Energy or the main group, if it happened.

Muppet on Horizonte not much to add from this morning’s paper really

they have been

trying to raise some cash ahead of reverse deal

£5m at 10p I hear

nickel business or asset comes into the company

not sure why there has been an announcement

perhaps the deal has been abandoned

Announcing would mean suspension

And they rarely like to do that.

very true

Dragging heels perhaps.

(Taxloss: it’s like Superdrug except for tee-shirts. Tee-shirts with a big number-8 on them, mostly. It’s very exclusive. Debenhams sells it.)

I think that’s a bit harst

anyway it is popular at the moment

whether it lasts I have no idea

but if you want a really good clothing retailer in London

might I suggest

Cordings

for the more discerning gentleman

they have a sale on

and Phil from Locaation, Location, Locations

wears it

Hm. “Frankie says relax” tee-shirts were popular once, but I don’t remember Holly Johnston putting an IPO together.

http://www.cordings.co.uk/

Right. We’re waffling now.

he should have

Right. We’re waffling now.

And I’m repeating myself.

(Taxloss: does it look like there’s a script?)

Hang on – Neil’s on the phone.

Not sure whether to hang on for potential raw or close this

right

i’m off

two things

Telecity

Aha.

apparently there is something happening

the rumours is

and this is very RAW

they have been in talks with a buyer

for a three months

apparently

500p a share on the table

again this is raw

finalising the deal, apparently

and that is very raw

no idea of the buyer

but we should probably put a call into the company

We should.

This does sound like a credible story.

As per the article posted earlier, there’s potential consolidation in this market.

yep

and scarcity value

and the premium

doesn’t sound the usual nonsense

TeleCity Group Plc (TCY:LSE): Last: 402.60, up 6.7 (+1.69%), High: 403.90, Low: 394.00, Volume: 194.38k

and one final thing

going back to the Man Group bid rumours

the rumour bidder

is supposed to be Bank of New Yorl Mellon

Man Group Plc (EMG:LSE): Last: 218.90, down 0.2 (-0.09%), High: 220.50, Low: 217.30, Volume: 2.95m

Hm.

and the company gave an interesting

interview last night

NEW YORK, July 14 (Reuters) – Bank of New York Mellon Wealth Management wants to expand more U.S. and overseas markets through a stream of new hires and takeovers, Chief Executive Lawrence Hughes told Reuters on Wednesday.
Hughes, who ascended to the division’s top job in May, also says BNY Mellon Wealth will continue adding financial advisers and boost its ranks of new business-generating staff by 15 percent this year.

“We’re very interested in expanding organically and through acquisition,” Hughes said in the interview. “We made a pretty substantial investment in growing our own sales force and we’re also interested in strategic acquisitions in markets that make sense for us.”
BNY Mellon Wealth, product of numerous money-manager takeovers such as Mellon’s purchase of The Boston Co in 1993, took a breather as parent companies Bank of New York and Mellon integrated their own 2007 merger.
Last month, BNY acquired a C$3.5 billion Canadian investment adviser called I(3) Advisors, part of the bank’s plans to “accelerate” its global expansion. More deals in fast-growing markets will follow.

Right

i’m off to look into this Telecity rumour

sounds interesting

and sort of credible

thanks for logging in everyone

Though still very, very raw.

Thanks for your comments.

Join us again tomorrow, same time.

oh hang on a couple more bits of research

pun of the day goes to merrill

Don’t stop b(ow)lievin’

Yellow.

And that’s employing Howard Webb-style leniency.

Light oil discovery at IE field opens up new opportunities
Bowleven announced that the IE-3 (Cameroon, Block 7) appraisal has confirmed
pressure communication in the main Isongo (Miocene) gas reservoir and, more
importantly, has encountered multiple stacked oil and gas/condensate columns in
the deeper Isongo 2 and 3 Sands. Of these columns, we highlight an estimated
150ft pay light oil column in the Isongo 2 Sands that could transform the IE field in
both size and value. We see this as an outstanding result that de-risks the
development of the IE field and opens up new opportunities oriented to oil instead
of gas in the block. To put the result in perspective, the previous IF oil discovery
(94 mmbbls of resources) hit 100ft of gross pay in thin beds and Isongo sands.

Testing IE ahead of high impact Sapele (block 5) well
Now Bowleven will move to test extensively the deeper IE columns through four
drill-stem tests (DST). These tests – due to take some 40 days – should allow
Bowleven to delineate the size of the new discoveries, gain knowledge of the flow
potential of the discoveries and have a better understanding of the recovery
potential. Potentially this could lead to high-grading the IE development plan. Post
the IE tests, the rig will move to block 5, where Bowleven is set to drill the high
impact Sapele well (risked 5p; unrisked 25p).

Raising NAV by 23p to 201p; re-iterating Buy rating
Reflecting the IE results we are upping our NAV/PO by 23p (9p for the IE
appraisal and 14p for the oil discovery) to a total of 201p. Bowleven remains one
of our top picks in the E&P space and today’s results confirm that there is still
more upside to the story. We maintain our Buy rating on the stock.

and so

someone mentioned afren

and here is a bit more comment from Merrill

Increasing interest in high impact Nigeria’s block OML 115
Afren has announced the acquisition of a further 7.5% stake in Nigeria’s block
OML 115 – acreage surrounding the Ebok and Okwok fields – from EER, taking
Afren’s stake in the block to 40% (Oriental Energy owns the remainder). Whilst
the deal is small from a financial point – we estimate it at that it is important that the partners’ interests are now aligned across the broader
area covering Ebok/Okwok/OML115, as it should allow Afren (and Oriental) to
move ahead in a smoother way on the forthcoming 2 well exploration & appraisal
programme on Okwok/OML115 in 2H10.

OML115: the sleeping giant?
Block OML115 is, in our view, one of the key potential sources of upside in Afren,
given that it shares similar characteristics to the adjacent Ebok/Okwok fields and
the nearby giant Zafiro field (on the Eq Guinea side of the border). Reserve
auditors NSAI indicate unrisked mean prospective resources at OML115 at
206mmboe (almost twice the discovered resources in Ebok). Previous indications
from Oriental and the extensive technical analysis carried by Afren since the initial
acquisition of OML 115 in Jan-10 point to this prospective resource estimate
erring on the conservative side. The first well in the block is expected to spud in
4Q10, following a well in Okwok.

Attractive opportunity; reiterating Buy rating
We continue to believe that Afren offers an attractive risk/reward profile over the
medium term and the exploration campaign in 2H10 will be key to crystallise the
upside. We see the c20% underperformance of the shares versus peers since 1-
Jun on the back of the Black Marlin Energy deal (see Expanding into East Africa,
4-Jun-2010) offering an attractive opportunity to investors. We maintain our Buy
rating and 145p PO

right

we are done

I have a meeting

cya

bye

This entry was posted by Neil Hume on Thursday, July 15th, 2010 at 11:02 and is filed under Uncategorized. Edit this entry.

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Markets Live transcript 15 Jul 2010

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