Markets Live chat transcript for the chat ending at 12:20 on 17 Nov 2010. Participants in this chat were: Neil Hume, FT bryce.elder
NH
Morning rabble
NH
apologies for being late
NH
bit tired this morning
NH
because I made the mistake of staying up to follow that eurogroup press conference
NH
which added precisely nothing to the sum of human knowledge
NH
other than the fact a special mission has been dispatched to Ireland
NH
to get them to take some cash
NH
Bryce
NH
are you in?
BE
I am. Hello Neil, and hello rabble.
BE
I kept up with Irish happenings solely by reading Lorcan’s twitterscope overnight.
NH
yes
NH
that’s was very good
NH
we should have just plonked the up on the site
NH
and gone to bed
NH
anyway
NH
the Irish situation remains much as it did yesterday
NH
The Troika has been launched
NH
European Commission, ECB and IMF officials
NH
all sent to Dublin
NH
although given their conflicting aims
NH
I wouldn’t be on them coming up with anything
BE
Hm. Aren’t you in Ireland later today?
BE
As if they don’t have enough problems already.
NH
yes
NH
heading out with the special forces from the IMF
NH
and probably every other financial hack in the western world
NH
supposed to be presenting at a Uni tonight
NH
on the markets
NH
could be fun
NH
if the budget is brought forward
NH
which I doubt
NH
I might hang around
NH
and send some stuff in from there
BE
Good idea. Hang around in the student union to “judge the mood”
NH
will I be able to get some cheese?
BE
You have to queue up at a leisure centre for your cheddar, apparently.
BE
So feel free.
NH
I see
NH
i’m bang in the middle of dublin
NH
by trinity
NH
so I might struggle
NH
right let’s get off Ireland
NH
and to something else
11:10AM
NH
Now you might have thought
NH
ML was a Kate and William free zone
NH
but you were WRONG
BE
BE
Go on then. What tenuous market angle are we going to crowbar in here?
NH
it’s not tenous at all
NH
there will be winners from a Royal Wedding
NH
there will
BE
I guess ………….
NH
so we have Portmerion
BE
What? Who?
NH
The Royal Wedding provides a real opportunity for a grand celebration next year at a time of a period of austerity and hard hitting public spending cuts. It should provide a boost to tourism and the retailers, including both the fashion and food retailers. In respect of our corporate stocks, we would single out Portmeirion and Stanley Gibbons as beneficiaries of the wedding.
NH
and Stanley Gibbons
NH
comemorative stamps
BE
I see.
NH
Portmerion unchanged at the moment
NH
trading at 388p
NH
and Stanley
Stanley Gibbons Group PLC (SGI:LSE): Last: 148.00, up 0.5 (+0.34%), High: 147.50, Low: 147.50, Volume: 3.51k
NH
Flapi good point
Intercontinental Hotels Group PLC (IHG:LSE): Last: 1,078, down 3 (-0.28%), High: 1,085, Low: 1,073, Volume: 222.34k
NH
they could be a big winnder
NH
but perhaps more interesting will be the company
NH
that blames Kate and Will
NH
for a profits warning
NH
in the past I would have said Blacks Leisure was a nailed certainty
NH
not sure anymore
NH
what about Thorntons?
NH
poor choc sales on the wedding
BE
What about the newspaper publishers? Can they absorb the cost of all those commemorative pull-out specials, set to be forced on an ambivalent nation?
NH
nope
Daily Mail and General Trust (DMGT:LSE): Last: 544.00, down 2.5 (-0.46%), High: 547.50, Low: 542.50, Volume: 135.74k
NH
(mention Chopper. you mean abuse surely?)
Trinity Mirror PLC (TNI:LSE): Last: 78.00, down 0.5 (-0.64%), High: 79.50, Low: 78.00, Volume: 151.77k
Pearson (PSON:LSE): Last: 928.00, down 2 (-0.22%), High: 931.50, Low: 923.50, Volume: 490.72k
NH
hang on
NH
we don’t do royal specials
NH
at least I hope we don’t
NH
a picture
NH
fair enough
NH
but not a load of waffle about what it means
BE
Personall, I hope John Authers and Martin Wolf will be called upon to put this even into historical perspective.
NH
(er why would he do that?)
NH
(chopper)
BE
(@Mr Barber: yes boss. Right on it.)
11:18AM
NH
OK moving on the market
NH
lets have a look where things stand
NH
first up the equity market
NH
reflecting the fact that we still don’t know what’s going in Ireland
NH
the market is becalmed
NH
FTSE 100 off 4 points at 5,677
BE
A fairly placid reaction to the rebranding of Europe as Greater Germany.
NH
true
NH
rather surprised by it though
NH
i thought we would get another sell off
NH
on the back of the Chinese inflation news
NH
did you see this?
NH
17Nov10 RTRS-CHINA CABINET: WILL MAKE MOVES TO STABILISE PRICES
09:19 17Nov10 RTRS-CHINA CABINET: WILL TAKE FORCEFUL MEASURES TO CURB CONSUMER PRICES
09:20 17Nov10 RTRS-CHINA CABINET: WILL ENSURE ADEQUATE SUPPLY OF OIL PRODUCTS, ESPECIALLY DIESEL
09:20 17Nov10 RTRS-CHINA CABINET: TO INCREASE SUPPLIES OF GRAIN, OIL AND SUGAR FROM RESERVES
09:21 17Nov10 RTRS-CHINA CABINET: WILL IMPOSE TEMPORARY CONTROLS ON KEY PRODUCT PRICES, SUCH AS DAILY NECESSITIES
09:19 17Nov10 RTRS-CHINA CABINET: WILL TAKE FORCEFUL MEASURES TO CURB CONSUMER PRICES
09:20 17Nov10 RTRS-CHINA CABINET: WILL ENSURE ADEQUATE SUPPLY OF OIL PRODUCTS, ESPECIALLY DIESEL
09:20 17Nov10 RTRS-CHINA CABINET: TO INCREASE SUPPLIES OF GRAIN, OIL AND SUGAR FROM RESERVES
09:21 17Nov10 RTRS-CHINA CABINET: WILL IMPOSE TEMPORARY CONTROLS ON KEY PRODUCT PRICES, SUCH AS DAILY NECESSITIES
BE
Yes. Though I guess China was yesterday morning’s worry.
BE
We’ve moved on since then.
NH
i think this is a very real concern
NH
and yesterday’s sell off was more on that than Ireland
NH
inflation is getting near the 5% level in China
NH
when it becomes an issue
NH
now you can blame it all on the rising food prices
NH
and say this will come back
NH
but i’m not so sure
NH
did you Sean Darby
NH
the top rated Noumra stratrgist
NH
(chopper – rubbish. they asked for a meeting with us. we didn’t reply. not true)
NH
took his bullish rating off China A shares
NH
have a look at this
NH
We are closing out our China A share
recommendation initiated on 23 June
2010. While monetary conditions are
loose and the stock market inexpensive,
nervousness over policy tightening is
likely to overshadow the underlying
micro-appeal of the market. We are
currently reviewing our regional asset
allocation.
recommendation initiated on 23 June
2010. While monetary conditions are
loose and the stock market inexpensive,
nervousness over policy tightening is
likely to overshadow the underlying
micro-appeal of the market. We are
currently reviewing our regional asset
allocation.
NH
The likelihood of a reintroduction of price controls on food is growing. The recent run-up
in agriculture prices worldwide and signs of hoarding appear to have pushed the
authorities to reconsider draconian measures. Coupled with rationing of electricity
supply and rising demand for diesel, inflationary pressures are becoming far more
pronounced. While authorities are resisting the call for tightening, rising commodity
prices and potential weather disruptions are likely to be unfavourable. A much larger,
under-reported, unregulated ‘underground’ or ‘informal’ economy at perhaps 10% of
GDP (approximately same size as Malaysia) is more important than investors believe.
in agriculture prices worldwide and signs of hoarding appear to have pushed the
authorities to reconsider draconian measures. Coupled with rationing of electricity
supply and rising demand for diesel, inflationary pressures are becoming far more
pronounced. While authorities are resisting the call for tightening, rising commodity
prices and potential weather disruptions are likely to be unfavourable. A much larger,
under-reported, unregulated ‘underground’ or ‘informal’ economy at perhaps 10% of
GDP (approximately same size as Malaysia) is more important than investors believe.
NH
here’s some more
NH
good stuff
NH
(chopper – we didn’t decline. we just haven’t replied)
NH
Although some way from the high prices experienced in 2007-08, the q-q changes
in spot commodity and intermediate prices such as petrochemicals are likely to
quickly pass through into the economy.
Price controls are another form of ‘national service’ where companies are forced by
the authorities not to raise prices or to run certain operations at a loss in the
national interest. Companies become unprepared to produce goods at a loss and
then fail to supply. This can actually exacerbate the shortages later on. Such
command style economic principles generally mean much lower multiples over
time on the sector and stocks. They provide a disincentive for investors to finance
and there are also considerable problems in enforcing such price discipline over
the country. Price controls tend to mean larger, informal black markets, which
resolve to supply goods in short supply at much higher price levels
in spot commodity and intermediate prices such as petrochemicals are likely to
quickly pass through into the economy.
Price controls are another form of ‘national service’ where companies are forced by
the authorities not to raise prices or to run certain operations at a loss in the
national interest. Companies become unprepared to produce goods at a loss and
then fail to supply. This can actually exacerbate the shortages later on. Such
command style economic principles generally mean much lower multiples over
time on the sector and stocks. They provide a disincentive for investors to finance
and there are also considerable problems in enforcing such price discipline over
the country. Price controls tend to mean larger, informal black markets, which
resolve to supply goods in short supply at much higher price levels
NH
On many estimates, China’s own informal or underground economy can represent
up to 10% of GDP. With such a large part of the economy outside government
regulatory control or failing to report to taxes, the fact that the underground
economy is not as dependent on monetary support may mean that its demand may
be more inelastic. Hence, monetary tightening may have little impact nor would any
form of tax hike or regulation.
Ironically, the loose monetary conditions and undervalued exchange rate are also
playing their part in raising domestic prices. The difficulty for investors is that
unpredictable weather during winter may lead to shortages as was seen in 2009.
This may mean more draconian measures than investors are discounting.
up to 10% of GDP. With such a large part of the economy outside government
regulatory control or failing to report to taxes, the fact that the underground
economy is not as dependent on monetary support may mean that its demand may
be more inelastic. Hence, monetary tightening may have little impact nor would any
form of tax hike or regulation.
Ironically, the loose monetary conditions and undervalued exchange rate are also
playing their part in raising domestic prices. The difficulty for investors is that
unpredictable weather during winter may lead to shortages as was seen in 2009.
This may mean more draconian measures than investors are discounting.
NH
and Nomura arent’ the only ones worried
NH
RBS is spooked too
NH
They reckon another rate rise is nailed on before the end of the year
NH
The fall in commodities has picked up after China reported a 4.4%y/y CPI inflation figure on 11-Nov, up from 3.6% and above 4.0% expected. The chart below shows that this was the highest inflation since Aug-08. Inflation reached a peak in 2008 of 8.7%y/y, the highest inflation since 1996. China experienced crippling inflation in the early 1990s, peaking at 27.7% in 1994 in the data available since 1994 on Bloomberg. Our Chinese economist has in the past notes that inflation above 5% becomes a significant policy concern in China.
The fall in commodities has picked up after China reported a 4.4%y/y CPI inflation figure on 11-Nov, up from 3.6% and above 4.0% expected. The chart below shows that this was the highest inflation since Aug-08. Inflation reached a peak in 2008 of 8.7%y/y, the highest inflation since 1996. China experienced crippling inflation in the early 1990s, peaking at 27.7% in 1994 in the data available since 1994 on Bloomberg. Our Chinese economist has in the past notes that inflation above 5% becomes a significant policy concern in China.
After the China inflation data last week, our economist Ben Simpfendorfer wrote that the data “put China’s recent bout of policy tightening, including another reserve ratio hike, into context”.
The inflation rise in China is largely due to food prices (10.1%y/y). Non-food prices rose 1.6%y/y, mainly on rising housing costs. Ben wrote, “Food prices are volatile, but if the current trend is sustained, then the CPI is on track to reach 6.0%y/y in early 2011. The PBOC has limited ability to target food prices, but will be worried by a worsening in inflation expectations, and the odds of another 25bp hike in the policy rate, the 1-year lending rate, before end-2010 is high.”
NH
The inflation problem is a double edged sword for Asian currencies
The inflation problem is a double edged sword for Asian currencies. Clearly the need for policy tightening creates potential for policymakers to accept higher exchange rates. And higher interest rates will emphasis the carry in Asia. However, after surging since mid-year Asian currencies had factored in a lot of the positive story. They are now factoring some of the risks to that story. The risks are that policy makers in the region are forced to tighten more aggressively to put the inflation genie back in the bottle and thus may cause a sudden and large downturn in growth in the region. At a time of weak growth outlooks in the West, a slowing in demand in Asia would be a blow to global risk appetite.
NH
Our view is that the main trend over the next year will continue to support Asian currencies and capital flow to the region. Growth can not be let run unfettered in the region. But policymakers also have considerable room to ease policy if it gets it wrong and a growth slows too much. As such, this pullback in Asian currencies, commodities and commodity currencies will ultimately be an opportunity to buy for the year ahead. However, this side of year end, policy tightening fears in Asia, sovereign debt crisis boiling away in Europe, and growing disenchantment with the Fed’s QE policy suggests risk is still high of further retracement in the weak USD and risk-on trade of the pervious few months. Our estimation is that the recent pullback in risky assets and recovery in the USD maybe just a first wave in a period of correction that lasts well into December. Although with the close proximity of key supports in commodities and equities noted above, don’t expect that correction to be all one way traffic.
Our view is that the main trend over the next year will continue to support Asian currencies and capital flow to the region. Growth can not be let run unfettered in the region. But policymakers also have considerable room to ease policy if it gets it wrong and a growth slows too much. As such, this pullback in Asian currencies, commodities and commodity currencies will ultimately be an opportunity to buy for the year ahead. However, this side of year end, policy tightening fears in Asia, sovereign debt crisis boiling away in Europe, and growing disenchantment with the Fed’s QE policy suggests risk is still high of further retracement in the weak USD and risk-on trade of the pervious few months. Our estimation is that the recent pullback in risky assets and recovery in the USD maybe just a first wave in a period of correction that lasts well into December. Although with the close proximity of key supports in commodities and equities noted above, don’t expect that correction to be all one way traffic.
NH
there you go
NH
(Chopper not betting on GKP. can’t believe I even entertained the idea)
BE
Miners unmoved on this though.
NH
really
Xstrata Plc (XTA:LSE): Last: 1,331, up 19 (+1.45%), High: 1,334, Low: 1,293, Volume: 3.42m
BHP Billiton PLC (BLT:LSE): Last: 2,324, up 6 (+0.26%), High: 2,329, Low: 2,291, Volume: 3.42m
Kazakhmys PLC (KAZ:LSE): Last: 1,444, up 23 (+1.62%), High: 1,448, Low: 1,393, Volume: 1.03m
Eurasian Natural Resources Corporation PLC (ENRC:LSE): Last: 922.50, up 3 (+0.33%), High: 924.50, Low: 909.00, Volume: 678.39k
BE
As I say, yesterday’s worry.
NH
actually on China, I see there is one related faller today
Fidelity China Special Situations PLC (FCSS:LSE): Last: 114.20, down 3.9 (-3.30%), High: 118.70, Low: 114.00, Volume: 551.33k
NH
looks like Bolton’s wonder fund
NH
is becoming back to earth a bit
NH
was trading at a big premium to NAV
BE
Mostly financials, this thing, isn’t it?
NH
yeah
NH
companies like
NH
HSBC
NH
who exotic
NH
and China Telecom
NH
Brilliant Automotive
NH
pretty big stuff
NH
talking of HSBC
NH
I have some 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
Rumour doing the rounds in HK that they would like to buy Citi’s 20p% stake in Akbank, Turkey. Would cost cUSD5bn, and makes much better sense than S Africa for them. But together with the ongoing uncertainty on ‘too big to fail’ bank capital buffers, suggests that the step rise in dividend is more likely March 2012 than 2011.
HSBC Holdings PLC (HSBA:LSE): Last: 660.00, down 5 (-0.75%), High: 666.40, Low: 659.10, Volume: 7.64m
NH
(opamp – has that been priced yet?)
BE
(@Chopper: We’re asked if we want to meet company directors a dozen times a week. Generally, we don’t accept unless there’s a specific story attached, because such meetings are not that useful to getting a paper published each evening and GKP, believe it or not, is treated like any other company. Conversation ends here. Ta.)
11:29AM
NH
Right
NH
to some stocks
NH
we have a deal today
NH
and it has an Irish flavour
NH
Greencore is merging with Northern Foods
NH
which makes all those yummy ready meals for M&S
NH
to create
NH
wait for it
NH
drum roll
NH
Essenta Foods
NH
now I have no idea
NH
who dreamt that up
NH
and what it means
NH
is it Irish?
BE
Number 1 hit for Essenta is a Philips …. er … something.
BE
NH
or is this just a Diageo made up name?
BE
Some kind of x-ray device.
NH
let’s hope that some branding specialist wasn’t paid hundreds of thousands to come up with that
NH
pretty uninsprising
NH
and there’s every chance that Essenta will not actually be born
NH
because Northern foods are trading so far through the terms of the merger
NH
that the market is betting on a counter bid
NH
Greencore = EUR1.331 = 113p, ratio is 0.4479 = 50.61p. NFDS trading at 56p at the moment, ie 10.6% thru.
Northern Foods P L C (NFDS:LSE): Last: 56.25, up 11 (+24.31%), High: 57.00, Low: 52.50, Volume: 24.02m
NH
that’s the math
BE
And who would be a potential counterbidder?
NH
well
NH
private equity
NH
they has seemingly acquired everything in this space
NH
save Premier Foods obviously
NH
over the past few years
NH
so they have to be the counter bidders
NH
and they must be looking
NH
furthermore if there is one sort of deal that gets busted apart
NH
it’s nil premium merger
BE
Hm.
BE
The other possibility I’ve heard is that it’s only trading through the terms because of the short interest getting stopped out.
NH
possible
BE
So counter-bid chat may be premature.
NH
well Charlie Mills at Credit Suisse
NH
is looking for one
NH
The proposed 50-50 merger with Greencore looks financially and
commercially an excellent deal with significant synergies. It may also
excite interest in the group from other parties.
■
The merger will be on a 50-50 basis bringing together Greencore’s
sandwiches, salads, ready meals, soups, sauces pickles, cakes, etc
with Northern’s ready meals, pizza and biscuits. Total sales will be
£1.7bn with around three quarters of revenues in own label.
commercially an excellent deal with significant synergies. It may also
excite interest in the group from other parties.
■
The merger will be on a 50-50 basis bringing together Greencore’s
sandwiches, salads, ready meals, soups, sauces pickles, cakes, etc
with Northern’s ready meals, pizza and biscuits. Total sales will be
£1.7bn with around three quarters of revenues in own label.
NH
The cost savings of £40m compare with Northern Foods PBT of £37m
and Greencore £34m (consensus), and at face value would be 40%
accretive to Northern’s earnings. However as own label producers we
would be very surprised if even half of these could be delivered to the
bottom line.
■
The decision to merge may well encourage third parties to look at
Northern (remember it has extensive interests in industries dominated
by private equity – notably Biscuits and Frozen Foods).
and Greencore £34m (consensus), and at face value would be 40%
accretive to Northern’s earnings. However as own label producers we
would be very surprised if even half of these could be delivered to the
bottom line.
■
The decision to merge may well encourage third parties to look at
Northern (remember it has extensive interests in industries dominated
by private equity – notably Biscuits and Frozen Foods).
NH
The 10% yield also will go as a result of this. The group is indicating
cover of 2-2.5x, which would imply the yield will halve post merger.
cover of 2-2.5x, which would imply the yield will halve post merger.
NH
missed that on the divi
NH
deals disguises big divi cut
NH
I have a bit more on this
NH
if you are interested
BE
(Essenta Foods is an anagram of “Toe of Sadness.”)
NH
BE
But I’m sure the analysts have more insightful comment than that.
BE
Give us a look.
NH
this is from JP Morgan
NH
Northern Foods and Greencore announce their merger. This makes
strategic sense, in our view. We believe Northern’s growth and
profitability are dependent upon its ability to control costs including
passing on input costs to the UK food retailers in a timely manner.
The merger will put together two complementary businesses in
private label convenience food and brands (Fox’s biscuits and
Goodfellas pizza). It is expected to delivery cost synergies of £40m.
These will incur a one-off cash cost of £45m. We expect a positive
share price reaction. Assuming a 50:50 split of the cost saving and a
one-third retention rate, FY 2012E PE would move from 6.5x to 5.7x.
strategic sense, in our view. We believe Northern’s growth and
profitability are dependent upon its ability to control costs including
passing on input costs to the UK food retailers in a timely manner.
The merger will put together two complementary businesses in
private label convenience food and brands (Fox’s biscuits and
Goodfellas pizza). It is expected to delivery cost synergies of £40m.
These will incur a one-off cash cost of £45m. We expect a positive
share price reaction. Assuming a 50:50 split of the cost saving and a
one-third retention rate, FY 2012E PE would move from 6.5x to 5.7x.
NH
Essenta Foods: The combined group will be called Essenta Foods.
Essenta Foods will be domiciled in Ireland. It will be traded on the LSE.
Northern shareholders will receive 0.4479 of new Greencore shares for
every Northern share. On this basis, Northern and Greencore
shareholders will each hold approximately 50% of the enlarged share
capital. The merger will combine two complementary businesses in
private label convenience food with brands in biscuits (Fox’s) and
Frozen Pizzas (Goodfellas) and delivery £40m per annum of cost
synergies. The merger is expected to complete in Q2 2011.
Essenta Foods: The combined group will be called Essenta Foods.
Essenta Foods will be domiciled in Ireland. It will be traded on the LSE.
Northern shareholders will receive 0.4479 of new Greencore shares for
every Northern share. On this basis, Northern and Greencore
shareholders will each hold approximately 50% of the enlarged share
capital. The merger will combine two complementary businesses in
private label convenience food with brands in biscuits (Fox’s) and
Frozen Pizzas (Goodfellas) and delivery £40m per annum of cost
synergies. The merger is expected to complete in Q2 2011.
NH
Synergies: The recommendation includes targeted cost synergies of £40m
per annum to be realised within three years. The realisation of these
synergies will incur a one-off cash cost of £45m. These synergies will
include £15m of overhead cost savings, £20m from purchasing and supply
chain improvements, £5m from financing and tax efficiencies. At least half
of these synergies will be realized in year one. Approximately 90% of
these synergies will be delivered by the end of the second year. The full
amount of the synergies will be realised by the end of the third year.
per annum to be realised within three years. The realisation of these
synergies will incur a one-off cash cost of £45m. These synergies will
include £15m of overhead cost savings, £20m from purchasing and supply
chain improvements, £5m from financing and tax efficiencies. At least half
of these synergies will be realized in year one. Approximately 90% of
these synergies will be delivered by the end of the second year. The full
amount of the synergies will be realised by the end of the third year.
Management: Anthony Hobson (currently Chairman of Northern) will
become Chairman, Patrick Coveney (currently CEO of Greencore) will
become CEO and Simon Herrick (currently FD of Northern) will become
FD.
NH
I guess
NH
this is a pretty awful industry to be in
NH
but one you can survive
NH
if you are not leveaged to the hilt
NH
and buy all sorts of mental swaps
NH
a la
Premier Foods Public Limited Company (PFD:LSE): Last: 18.00, up 0.59 (+3.39%), High: 18.35, Low: 17.59, Volume: 2.63m
BE
Yup. Hard to drive any kind of margin when supplying a cartel. We’ve made the point ad nauseum.
NH
I wonder if the Chinese might have a look
NH
wasn’t one of their big companies
NH
recently looking at United Biscuits
NH
United Biscuits, the company behind KP Nuts, Twiglets and Jaffa Cakes, faces a £2bn Chinese takeover in a move that could spark a political storm.
China’s leading consumer group, Bright Food, has emerged as one of the frontrunners to acquire UB, which is being sold by its private equity owners Blackstone and PAI. A takeover would attract attention from politicians worried about the increasing number of British companies falling under foreign control.
There was an outcry last year when the American multinational Kraft snapped up Cadbury after launching a hostile bid.
NH
that’s from the Guardian
NH
Chinese supplying M&S
NH
imagine that
BE
Yes. Much less palatable than Blackstone Group and PAI Partners supplying M&S.
BE
I can see why this might “spark a political storm”
BE
(sigh)
NH
Daily Mail anyone
11:40AM
NH
OK can’t resist a few Irish gags
NH
first
NH
Adventures in Irish reportage
NH
HT Sam Jones
NH
and also this
NH
RTRS-GERMAN INTERIOR MINISTER SAYS WE HAVE A NEW SITUATION ON TERROR RISK
11:09 17Nov10 RTRS-GERMAN INTERIOR MINISTER SAYS SITUATION HAS CHANGED DUE TO CONCRETE INDICATIONS OF PLANNED ATTACK
11:11 17Nov10 RTRS-GERMAN INTERIOR MINISTER SAYS POLICE RAISING SECURITY MEASURES AT TRAIN STATIONS AND AIRPORTS
11:15 17Nov10 RTRS-GERMAN INTERIOR MINISTER SAYS THERE ARE CLEAR INDICATIONS OF PLANNED ATTACK IN GERMANY
11:09 17Nov10 RTRS-GERMAN INTERIOR MINISTER SAYS SITUATION HAS CHANGED DUE TO CONCRETE INDICATIONS OF PLANNED ATTACK
11:11 17Nov10 RTRS-GERMAN INTERIOR MINISTER SAYS POLICE RAISING SECURITY MEASURES AT TRAIN STATIONS AND AIRPORTS
11:15 17Nov10 RTRS-GERMAN INTERIOR MINISTER SAYS THERE ARE CLEAR INDICATIONS OF PLANNED ATTACK IN GERMANY
NH
presented without comment
NH
that one
11:41AM
NH
Where now?
BE
It’s my turn to have no prices at the moment.
BE
Reuters just shut down and is refusing to revive, no matter how much I kick it.
BE
So …. er…. what’s moving?
NH
GlaxoSmithKline
Glaxosmithkline Plc (GSK:LSE): Last: 1,238, up 24.5 (+2.02%), High: 1,244, Low: 1,225, Volume: 4.75m
NH
I think they have some new wonder drug
BE
Ah yes – the lupus treatment.
NH
Lupus
NH
i though Greg Hutchings ran that
NH
or did
NH
is it a disease?
BE
Um …. the thing with lupus is there hasn’t been a properly new treatment since the 50s or something.
BE
So Glaxo’s new thing got the nod
BE
In spite of some unconvincing test data
NH
Lupus erythematosus is a category for a collection of diseases with similar underlying problems with immunity.[1] Symptoms of these diseases can affect many different body systems, including joints, skin, kidneys, blood cells, heart, and lungs. Four main types of lupus exist — systemic lupus erythematosus, discoid lupus erythematosus, drug-induced lupus erythematosus, and neonatal lupus erythematosus. Of these, systemic lupus erythematosus is the most common and serious form of lupus.
BE
And in spite of the fact that some people seemed to kill themselves after taking it.
NH
about par for the course isn’t it?
BE
It is, I guess.
BE
Anyway, we’re not talking about a huge positive in the sheme of things for Glaxo
NH
true
BE
But after the very negative briefing from the FSA last week, I think there’s just a bit of relief in the price that another pipeline drug has been boshed.
NH
indeed
NH
and it is at least a new drug
NH
something the pharma industry has been struggling to find
NH
having picked all the low hanging fruit over the past four decades
NH
here’s Collins Stewart
NH
Annus Horribilis nearing an end, reiterate Buy, PT1500p
GSK has not been short of headwinds and one-offs this year (Avandia, legal hits, etc), with the anticipated ‘stronger second half’ yet to arrive. An almost unanimous recommendation for GSK’s first bona fide NME blockbuster prospect in living memory should herald the start of a new phase for the company, with a solid and sustainable mid-term outlook in view, and market perceptions softening over generic Advair risk, with Teva’s recent comments supporting our view hurdles (to generics) have been consistently underrated.
NH
Benlysta recommended, set to be first lupus treatment in 50 years
Benlysta (50p NPV/sh on peak GSK sales of £1.2bn: the drug is a ~50/50 share with HGSI) received a 13-2 vote in favour of approval last night from the FDA’s advisory committee (PDUFA 9/12/10 though may slip on label drafting). Additional votes included a 10-5 vote in favour of “substantial efficacy”. An EU decision is likely mid-11. Our forecasts assume c.120k patients captured worldwide (c.35% penetration into the non-NSAID treated segment) and average pricing of c.$30k.
NH
’11 offers significant pipeline optionality for GSK
A number of GSK catalysts are coming into 12-month view that could materially alter the pharma business mid-term outlook: Avodart REDUCE approval for prostate cancer prevention, Tykerb vs Herceptin data (NEOALLTO due ’10, presaging ‘11s more important ALTTO data), Darapladib (25p NPV/sh at 10% risk-weight), and Relovair (we currently assume c.2/3 Advair franchise retention long-term through Advair/Relovair
NH
Buybacks, restructuring potential to impact the bottom-line
We currently forecast a 2% ’10-’14 (ex-H1N1) sales CAGR for GSK but note recent comments from Witty that future restructuring benefits should fall more heavily to the bottom line and a re-initiation of buybacks could translate to boosted EPS growth. Ex-Q2’10’s legal charge we see ’10-’14 EPS CAGR of 6%, with potential upside to high-single digits on a restart of modest buybacks/restructuring benefits.
BE
Just checked. First new treatment formally approved for lupus in the US since 1958, apparently.
BE
Quick line from BarCap on the numbers.
BE
In our GSK
model, we carry revenues of �1.4bn by 2018E based on use in a substantial
proportion of patients due to modest yet durable efficacy and good
tolerability, and the drug is worth c.3% of our equity valuation. The
FDA’s deadline for deciding whether or not to approve the drug is set
currently at 9 December, although we see some risk of a short delay given
there is less than a month for the FDA to finalise the label and any
postmarketing requirements in light of the panel discussion.
model, we carry revenues of �1.4bn by 2018E based on use in a substantial
proportion of patients due to modest yet durable efficacy and good
tolerability, and the drug is worth c.3% of our equity valuation. The
FDA’s deadline for deciding whether or not to approve the drug is set
currently at 9 December, although we see some risk of a short delay given
there is less than a month for the FDA to finalise the label and any
postmarketing requirements in light of the panel discussion.
NH
(Chopper????)
BE
(@NH: I think he’s been at the cooking sherry again. Best ignore.)
NH
11:48AM
NH
Dart Thrower
NH
i was really hoping we could get through the show
NH
without a visit to the wonderful world
NH
of credit checking
NH
but you had to go and spoil things
Experian PLC (EXPN:LSE): Last: 749.00, up 45.5 (+6.47%), High: 758.00, Low: 706.00, Volume: 1.81m
BE
Ok, so what’s this rather curious acquisition machine been up to now?
BE
Results?
NH
I haven’t looked
NH
give me a second
BE
H1 looks okay. Beat at the headline.
BE
Trends improving on the guidance.
NH
yep
NH
would agree with that
NH
as would Oriel
NH
Accelerating top line. Organic revenue growth to +8% in Q2 from +6% in Q1.
Took revenue to US$2.0bn for half, ahead of consensus.
Growth coming from US, UK and Asia Credit Services, Decision Analytics and
Marketing Services.
Growth in Interactive was a little slower on less growth from the low margin lead
generation businesses.
EBIT margin on continuing improved by 10bp to 24.3%. EBIT of US$484m, in line with
consensus.
PBT (benchmark) US$450m beat consensus by US$20m on lower interest. Benchmark
EPS +10%.
Outlook for full year is for top line growth in line with H1 and a modest improvement in
margins.
We expect consensus PBT to move up by 2-3%, but the higher rates of revenue growth
will feed through to estimates further out.
This is a strong performance, showing recovery and benefits of growth initiatives.
Stock trades on 17x year to March 11 and 15x for the following year: that is not
demanding for the improving dynamics. We reiterate our BUY rating
Took revenue to US$2.0bn for half, ahead of consensus.
Growth coming from US, UK and Asia Credit Services, Decision Analytics and
Marketing Services.
Growth in Interactive was a little slower on less growth from the low margin lead
generation businesses.
EBIT margin on continuing improved by 10bp to 24.3%. EBIT of US$484m, in line with
consensus.
PBT (benchmark) US$450m beat consensus by US$20m on lower interest. Benchmark
EPS +10%.
Outlook for full year is for top line growth in line with H1 and a modest improvement in
margins.
We expect consensus PBT to move up by 2-3%, but the higher rates of revenue growth
will feed through to estimates further out.
This is a strong performance, showing recovery and benefits of growth initiatives.
Stock trades on 17x year to March 11 and 15x for the following year: that is not
demanding for the improving dynamics. We reiterate our BUY rating
BE
Super. And here’s Deutsche Bank.
BE
EBIT of US$484m in-line with our forecast of US$483m and market at US
$481m (last year at US$442m). Organic growth for Q2 at 8% versus market
at 5% and our forecast of 6.4%, within this core US credit services turned
positive at +3 to 4%, and the first time since Sept quarter 2008, that this
division has shown growth (Q2 -3%). Mortgages has helped but there is
strong underlying improvement and momentum. UK credit services on an
upward path at -2% vs Q2 -6%. G18 growth initiatives added around 2% to
organic growth, ahead of company’s guidance for 1% contribution. EBIT
margin at 24.3%, versus our forecast of 24.7% and up 10bp (vs our forecast
of +50bp) from 24.2% last year. Margins in decision analytics and interactive
down YoY. Company had flagged that margins would be down in H1 YoY
due to 1) some negative operational leverage 2) Investment in growth markets
3) some payroll costs coming back particularly in the US. Cashflow
conversion (EBIT to op cashflow) strong at 79% vs 83% last year
$481m (last year at US$442m). Organic growth for Q2 at 8% versus market
at 5% and our forecast of 6.4%, within this core US credit services turned
positive at +3 to 4%, and the first time since Sept quarter 2008, that this
division has shown growth (Q2 -3%). Mortgages has helped but there is
strong underlying improvement and momentum. UK credit services on an
upward path at -2% vs Q2 -6%. G18 growth initiatives added around 2% to
organic growth, ahead of company’s guidance for 1% contribution. EBIT
margin at 24.3%, versus our forecast of 24.7% and up 10bp (vs our forecast
of +50bp) from 24.2% last year. Margins in decision analytics and interactive
down YoY. Company had flagged that margins would be down in H1 YoY
due to 1) some negative operational leverage 2) Investment in growth markets
3) some payroll costs coming back particularly in the US. Cashflow
conversion (EBIT to op cashflow) strong at 79% vs 83% last year
BE
Outlook statement is positive with second half organic growth expected to
be at c7%, in line with H1 (we are at 7% market at 4-7%) and to make
modest margin improvement. We don’t expect consensus EBIT numbers
to change (we are top of the range at US$1,048m vs market at US$1,017m)
but FD is guiding for the interest charge to fall from a previous guidance of
US$90m to 100m to a range of US$75m to US$85m, so PBT and EPS numbers
will rise modestly.
be at c7%, in line with H1 (we are at 7% market at 4-7%) and to make
modest margin improvement. We don’t expect consensus EBIT numbers
to change (we are top of the range at US$1,048m vs market at US$1,017m)
but FD is guiding for the interest charge to fall from a previous guidance of
US$90m to 100m to a range of US$75m to US$85m, so PBT and EPS numbers
will rise modestly.
BE
A solid set of numbers and supports our view of a 6-8% top-line growth
business. We expect share buybacks to be an on-going feature and forecast
that by March 2012 EXPN can buyback 17% of market cap to be at 2x net
debt/EBITDA.
business. We expect share buybacks to be an on-going feature and forecast
that by March 2012 EXPN can buyback 17% of market cap to be at 2x net
debt/EBITDA.
11:52AM
NH
Time for some macro stuff
NH
oh actually
NH
before we do that
NH
been looking a bit more closely
NH
at this Nat King Coal deal
BE
And?
NH
this is the Nat Rothschild deal
NH
to bring Indonesia coal assets to London
NH
well
NH
let’s just say
NH
there are some colourful characters involved
NH
and this all looks to be a ruse
NH
to get access to cheaper funding
NH
I picked this up from the FT
NH
Bakrie Group will become the largest shareholder in Vallar, with a 43 per cent stake, and will have the right to nominate three directors. Vallar will be renamed Bumi plc.
Analysts said the move was “financially engineered” to shift assets abroad and seek international capital under a new name. The group has a poor reputation at home, facing allegations of evading taxes, which it denies.
Analysts said the move was “financially engineered” to shift assets abroad and seek international capital under a new name. The group has a poor reputation at home, facing allegations of evading taxes, which it denies.
NH
It has also had difficulties in the past with creditors after a protracted debt restructuring in 2000 and a further crisis in 2008 following the collapse in the value of shares that had been used as collateral for loans.
Mr Bakrie has been accused of orchestrating the departure of a government reformist, former finance minister Sri Mulyani, who left for the World Bank in May, just months into a five-year term in office. Mr Bakrie denied any involvement in her departure.
Mr Bakrie has been accused of orchestrating the departure of a government reformist, former finance minister Sri Mulyani, who left for the World Bank in May, just months into a five-year term in office. Mr Bakrie denied any involvement in her departure.
NH
“financially engineered”
NH
It has also had difficulties in the past with creditors after a protracted debt restructuring in 2000 and a further crisis in 2008
BE
Ok – this gives us a clearer idea why the Rothschild name’s so important to this thing
BE
It’s a rebranding.
NH
in one
NH
it’s like the Caviar train
NH
a veneer of western respectability
NH
plonked on some assets from far away
NH
add a few noddies
NH
and away you go
11:56AM
NH
Right
NH
macro corner
NH
we have had the MPC minutes today
NH
and some employment data
NH
MPC was pretty much in line with what we thought
NH
The vote split (1-7-1)
NH
Posen in favor of further QE and the Sentance pushing for a rate hike
NH
the rest voting nothing
BE
Yes – everyone continues to sit in exactly the same spot on the fence as last month.
NH
yep
NH
Here’s Archer
NH
A key thing to note is that there was no change in the voting pattern within the MPC in November, with no members joining Adam Posen in voting for more Quantitative Easing or Andrew Sentance in wanting a small interest rate hike. Furthermore, the minutes concluded that most members “stood ready to adjust policy in either direction as necessary.”
NH
For now at least, we see no reason to change our view that the Bank of England is most likely to keep interest rates down at 0.50% until at least late-2011. This reflects our belief that growth will slow appreciably in the first half of 2011 but that a double dip will be avoided. We currently forecast the first interest rate hike to 0.75% to come in the fourth quarter of 2011, but would not be at all surprised if any hike was delayed until 2012. Whenever interest rates do finally start to rise, they are likely to remain very low compared to past norms, as monetary policy will need to remain loose for an extended period to offset the impact of the major sustained fiscal squeeze.
Meanwhile, the Bank of England is clearly keeping the door open to further Quantitative Easing should growth falter markedly over the coming months as the fiscal tightening increasingly bites.
BE
Hm.
BE
HSBC picks up on the inflation projections out this morning
BE
Which suggests we’ll hit 3.6% by the first quarter.
NH
I’d agree with that
NH
and it won’t come down much next year either
NH
in spite of the output gap
BE
The release of the minutes of the November Monetary Policy Committee (MPC) meeting and the October labour
market bulletin proved, at least by recent UK standards, fairly unremarkable this morning, and overall served to
reinforce the perception that the bulk of the MPC appear highly reluctant to move policy in either direction during the
short-term.
market bulletin proved, at least by recent UK standards, fairly unremarkable this morning, and overall served to
reinforce the perception that the bulk of the MPC appear highly reluctant to move policy in either direction during the
short-term.
BE
Market discussion prior to the release had centred on the possibility of at least one member joining long-standing hawk
Andrew Sentance in voting for an immediate rate hike, but such speculation proved ill-founded with the same 1-7-1 voting
pattern, and the same dissenters (Messrs Posen and Sentance), being revealed. There were a number of subtle changes to the
language of these minutes relative to last month’s vintage, but any amendments which did emerge were entirely in line with the
language and overall tone of the November Inflation Report, released last week.
Andrew Sentance in voting for an immediate rate hike, but such speculation proved ill-founded with the same 1-7-1 voting
pattern, and the same dissenters (Messrs Posen and Sentance), being revealed. There were a number of subtle changes to the
language of these minutes relative to last month’s vintage, but any amendments which did emerge were entirely in line with the
language and overall tone of the November Inflation Report, released last week.
BE
Inflation is heading higher in the short-term – to 3.6% in Q1 2011 according to the new Inflation Report projections released
this morning, compared to the 3.0% that had been assumed back in August – and such a move is seen as an impediment to an
early resumption of QE. Equally, the degree of spare capacity suggests that strong growth can continue for a while yet without
threatening price stability, although inflation expectations will continue to be carefully monitored over the comings months.
There was a little more concern expressed over the potential for strong growth in the emerging world, and the knock-on effect
for commodity prices, to drive inflation higher in the short-term and potentially dislodge expectations. But whether such
commodity-driven price pressures would represent a truly inflationary episode given the implications for household disposable
income (especially due to the weak level of pay growth) is something of a moot point and one which is likely to be the focus of
further debate over the coming months.
this morning, compared to the 3.0% that had been assumed back in August – and such a move is seen as an impediment to an
early resumption of QE. Equally, the degree of spare capacity suggests that strong growth can continue for a while yet without
threatening price stability, although inflation expectations will continue to be carefully monitored over the comings months.
There was a little more concern expressed over the potential for strong growth in the emerging world, and the knock-on effect
for commodity prices, to drive inflation higher in the short-term and potentially dislodge expectations. But whether such
commodity-driven price pressures would represent a truly inflationary episode given the implications for household disposable
income (especially due to the weak level of pay growth) is something of a moot point and one which is likely to be the focus of
further debate over the coming months.
BE
The Bank of England also released the numerical parameters behind November’s Inflation Report projections alongside the
latest minutes. These showed that the degree of uncertainty surrounding their inflation and growth projections remained as
high as in the August report (in the case of inflation almost twice as great as had been the case prior to 2007). The risks to the
two-year ahead inflation forecast remained skewed quite decisively to the upside. However even accounting for this potential
upside risk (by looking at the Bank’s mean projection), the projections still suggest that inflation will be well below the 2%
target over the medium term and that monetary policy will remain on hold as a result. Recent strong GDP data appear to have
reduced the downside risk to the Bank’s near-term growth forecast, although the risks to the two year ahead forecast remain
skewed firmly to the downside.
latest minutes. These showed that the degree of uncertainty surrounding their inflation and growth projections remained as
high as in the August report (in the case of inflation almost twice as great as had been the case prior to 2007). The risks to the
two-year ahead inflation forecast remained skewed quite decisively to the upside. However even accounting for this potential
upside risk (by looking at the Bank’s mean projection), the projections still suggest that inflation will be well below the 2%
target over the medium term and that monetary policy will remain on hold as a result. Recent strong GDP data appear to have
reduced the downside risk to the Bank’s near-term growth forecast, although the risks to the two year ahead forecast remain
skewed firmly to the downside.
BE
The main surprise in the headline labour market figures was a slight reduction in claimant count measure of unemployment,
against the consensus expectation for a further increase. The claimant count fell by 3.7k in October – the first decline since
July – more than reversing the revised 1.3k increase recorded in September. However, this decline appears at odds with the
continued reduction in vacancies and weakening of hiring intentions in business surveys. This longevity of this increased
outflow from the claimant count is therefore doubtful, and with inflows into the claimant count continuing to rise in October,
further increases in claimant count unemployment still appear likely over the coming months.
against the consensus expectation for a further increase. The claimant count fell by 3.7k in October – the first decline since
July – more than reversing the revised 1.3k increase recorded in September. However, this decline appears at odds with the
continued reduction in vacancies and weakening of hiring intentions in business surveys. This longevity of this increased
outflow from the claimant count is therefore doubtful, and with inflows into the claimant count continuing to rise in October,
further increases in claimant count unemployment still appear likely over the coming months.
NH
as for employment
NH
it was the usual mixed bag
BE
Together with the doubtful trend in the claimant count, the broader measure of employment – which continues to show a
decent level of growth – also demands a closer inspection given the very lop-sided nature of the gains registered over the past year. Employment rose by a reported 167k in the three months to September, but full time employee jobs fell by 62k,
part time employee jobs rose by 94k and self-employment rose by a stellar 112k, again questioning the underlying strength
of the top-line changes in the jobs data. Of course, part-time and temporary work can often prove a prelude to full time jobs
growth, while business start-ups can prove unusually brisk at the beginning of a new business cycle. But the very concentrated
nature of this jobs growth does at least partially help to explain why wage growth has remained so muted during this period of
strong jobs growth (a factor explicitly highlighted in this month’s MPC minutes), and why we do not automatically equate this
headline employment increase with strong consumer spending over the coming months.
decent level of growth – also demands a closer inspection given the very lop-sided nature of the gains registered over the past year. Employment rose by a reported 167k in the three months to September, but full time employee jobs fell by 62k,
part time employee jobs rose by 94k and self-employment rose by a stellar 112k, again questioning the underlying strength
of the top-line changes in the jobs data. Of course, part-time and temporary work can often prove a prelude to full time jobs
growth, while business start-ups can prove unusually brisk at the beginning of a new business cycle. But the very concentrated
nature of this jobs growth does at least partially help to explain why wage growth has remained so muted during this period of
strong jobs growth (a factor explicitly highlighted in this month’s MPC minutes), and why we do not automatically equate this
headline employment increase with strong consumer spending over the coming months.
BE
That was all from HSBC, including the employment stuff.
NH
ok
NH
very good
NH
that sorts that out
NH
shall we go small cap now?
BE
Please.
12:01PM
NH
The end
NH
looks increasing near for Regal Pets
NH
in fact if it was a dog
NH
it might have been put down by now
NH
toady’s news is that it has been forced to shut down gas production in Ukraine
BE
Oh dear. Poor Regal.
NH
the only legal dispute in the Ukraine has not been solved
NH
and all that cash I thought they had
NH
well apparently
NH
it all has to go to the rig supplier
NH
so they haven’t got any money at all
NH
and Frank Timis has been selling down
The world’s greatest living natural resources entrepreneur. He also does a lot of good work for charity. Known to like a vodka.
Regal Petroleum Plc (RPT:LSE): Last: 14.25, down 0.5 (-3.39%), High: 14.75, Low: 13.75, Volume: 3.71m
NH
surprised the stock is not down further
NH
here’s the sector watcher
NH
Things appear to be going from bad to worse for RPT, with the group being forced to close down its gas production in the Ukraine. An ongoing environmental dispute with the government authorities has not yet been resolved, despite RPT’s hopes that it had, and as a result production will be suspended from today. Whilst this may ultimately come back onstream, it feels like yet another nail in the RPT coffin. The group had cash of £40m at end-June and is expected to sell a Romanian asset for around £13m in H2. With a current market cap of £47m this implies a negative EV, however we understand much of the cash is earmarked for Saipem, the rig contractor. With the CEO recently departing and the shares falling from 90p at the start of the year to under 15p yesterday, it feels like there’s could still be more downside from here.
NH
and while we are talking small cap oil
NH
a bit of RAW
NH
concerning
Premier Oil PLC (PMO:LSE): Last: 1,836, up 5 (+0.27%), High: 1,838, Low: 1,819, Volume: 81.99k
NH
but as predator not prey
NH
According to Merrill’s today, Premier Oil has arranged US$1.1bln of 5-year loans to refinance debt and take advantage of favourable bank market conditions. Also today PMO is rumoured to potential be seeking an acquisition in the North Sea. The timing of both, post the recent rumoured bid interest from KNOC, could clearly be viewed as a defence move. Potential M&A targets for PMO itself could include ENCORE and NORECO, or some of their assets which they share with PMO, amongst others.
Encore Oil Plc (EO.:LSE): Last: 114.75, down 0.25 (-0.22%), High: 116.00, Low: 114.00, Volume: 388.89k
NH
might be worth following
BE
Yeah – this seems to be via management guidance.
BE
Here’s what UBS write today.
BE
To acquire or be acquired?
Premier now holds $1.1bn cash and equivalents plus undrawn facilities. We
believe the company could be looking to make an acquisition, probably in the
North Sea where it has substantial tax loss benefits. Given Premier’s history of
making successful acquisitions, we believe this pattern is repeatable. As a potential
takeout candidate, Premier could be attractive to KNOC; recent press report
indicate KNOC is in takeover talks with PMO however this is denied by PMO
management
Premier now holds $1.1bn cash and equivalents plus undrawn facilities. We
believe the company could be looking to make an acquisition, probably in the
North Sea where it has substantial tax loss benefits. Given Premier’s history of
making successful acquisitions, we believe this pattern is repeatable. As a potential
takeout candidate, Premier could be attractive to KNOC; recent press report
indicate KNOC is in takeover talks with PMO however this is denied by PMO
management
NH
thanks
12:05PM
NH
Just having a look around
NH
been told to look at Wh Ireland
NH
Manchester based stockbroker
W H Ireland Group PLC (WHI:LSE): Last: 43.50, no change, High: 43.50, Low: 43.50, Volume: 0.00
NH
they have a newish CEO
BE
Nice folk, generally.
NH
a guy called Paul Compton
NH
who used to be a deal maker extrodinare at Collins Stewart
NH
he ran their small cap M&A/IPO stuff
NH
anyway
NH
what’s interesting is that a stake builder has appeared
NH
ORA Capital
NH
now Ora
NH
is run by another stockbroker
NH
former stockbroker Richard Griffiths
BE
Interesting. How much has he bought?
NH
9%
NH
however,
NH
i don’t think he is interesting in bidding through ORA
NH
that’s his investment vehicle
NH
I gather he thinks it cheap
NH
because the company has a fair bit of assets under mangement
12:09PM
NH
Hang on
NH
some breaking news
NH
in the small cap world
NH
HMV GROUP PLC – DISPOSAL OF WEST END, LONDON STORE
12:02 17Nov10 RTRS-HMV GROUP PLC – 360 OXFORD STREET LONDON STORE SOLD TO FOREVER 21 FOR £13.75M
12:02 17Nov10 RTRS-HMV GROUP PLC
NH
that will please Mr Mamut
BE
Wow. 360 Oxford Street is the landmark store, isn’t it?
HMV Group PLC (HMV:LSE): Last: 46.75, up 0.5 (+1.08%), High: 47.50, Low: 45.50, Volume: 106.97k
NH
it is
NH
pretty good price
NH
I make that very nearly 10% of the market cap
NH
but that is probably the only decent asset they have
BE
Who’s Forever 21?
NH
I have heard of this
NH
a US retailer
NH
massive over there
NH
run by a South Korean family
NH
very aggressive marketing I believe
BE
The chain, originally known as Fashion 21, was founded in Los Angeles, California in 1984 by South Korean Dong-Won Chang and his wife, Jin Sook. The first store opened on April 21, 1984. It was located at 5637 N. Figueroa St. in the Highland Park district of Los Angeles. The store was only 900 square feet (84 m2). It is still in operation and bears the chain’s original name. Trendy designs seen in South Korea were sold and targeted to the Los Angeles Korean American Community. However, people from many other ethnicities began noticing the fashion forward designs, and the store became increasingly popular. By the end of the first year, sales had risen from $35,000 to $700,000. Fashion 21 eventually expanded at the rate of a new store every six months and changed the Fashion 21 brand name to Forever 21.
NH
crikey it is cheap
NH
Primark cheap
BE
Harpo: we stand corrected. This is the Bond Street store, not the original HMV up the road with all the sub-Hard Rock tat on the walls.
NH
OK then
NH
so what’s the main store worth?
NH
or don’t they own it?
BE
Er … pass. I guess a few analyst types will be asked exactly that later today.
BE
(@Nick1212: so what’s the one at number 150? A mirage? A counterfeit?)
12:14PM
NH
Right
NH
I have a lovely little story
NH
all the way from the media conference
NH
Morgan Stanley are hosting in Barcelona
BE
Go on. This sounds good.
NH
it comes from Tim Bradshaw
NH
our digital media correspondent
NH
and its the old Havas for Aegis story
Aegis Group PLC (AGS:LSE): Last: 131.10, up 3.2 (+2.50%), High: 131.80, Low: 127.30, Volume: 4.38m
NH
here we go
NH
this is as relayed by Tim
NH
I’m at the Morgan Stanley TMT conference in Barcelona where they are
trying to dispell rumours that just because Havas and Aegis’ CEOs have
both pulled out of the conference at short notice, the pair are about
to announce a deal.
trying to dispell rumours that just because Havas and Aegis’ CEOs have
both pulled out of the conference at short notice, the pair are about
to announce a deal.
NH
Havas’ pullout on Monday is a genuine mystery – especially as the CEO
is Spanish and apparently lives here in Barcelona.
But Jerry Buhlmann of Aegis was sitting on a plane ready to come out
here last night when it was cancelled due to fog at heathrow. (Andrew
Parker and I were delayed 5 hours but made it in the end.) So it
genuinely is for travel reasons that Aegis couldn’t make it.
is Spanish and apparently lives here in Barcelona.
But Jerry Buhlmann of Aegis was sitting on a plane ready to come out
here last night when it was cancelled due to fog at heathrow. (Andrew
Parker and I were delayed 5 hours but made it in the end.) So it
genuinely is for travel reasons that Aegis couldn’t make it.
NH
Even Maurice Levy of Publicis can’t make it from Paris, but i don’t
think that means he’s buying Havas.
think that means he’s buying Havas.
BE
Oh – you’re kidding.
NH
Aegis shares are up on the gossip, you may have noticed (haven’t had
time to check FT.com sorry) but analysts I spoke to says that just
demonstrates what an appetite there is for a deal among investors -
even if it isn’t quite happening yet.
time to check FT.com sorry) but analysts I spoke to says that just
demonstrates what an appetite there is for a deal among investors -
even if it isn’t quite happening yet.
NH
and that readers
NH
is how rumours start
BE
I thought Bollore couldn’t afford it on his own, and Aegis had no particular interest in talking to Havas.
BE
I thought that was how it’s been for about a decade.
NH
doesn’t stop investors dreaming
NH
OK
NH
the rabble are obviously bored with us
NH
so let’s end this
NH
I have a flight to catch in a bit
NH
thanks for logging on
NH
FTSE 100 now down 10 points at 5,671
BE
Yes – and thanks for your heckling this morning.
BE
Join us tomorrow for more of thhe same.
BE
Good afternoon, all.
NH
hang on
NH
one more thing
NH
we didn’t mention Actelion
NH
that Swiss biotech we have been looking at for weeks
BE
No. We didn’t.
BE
Is there anything actually new to say?
NH
well
NH
they did put out a statement
NH
after Bloomie said Amgen were interested
NH
so that’s a start
NH
we thought the company had gone all shy on public markets
NH
still
NH
here’s a good summary from Olivetree
NH
Bloomberg last night ran a story saying Amgen is considering imminently making a move on Actelion, and that Actelion management are discussing potentially protective measures with the likes of Roche, Bristol Myers and J&J. Actelion has this morning issued a statement to say that “as part of its ordinary course of business – the company is in regular dialogue with other industry participants. No further comment will be made.”
NH
In recent roadshows, Actelion management have been happy to tell long-funds that they would only START considering any approaches where prices start in the mid-60′s (vs 50 current share price). If the story here regards them selling a minority stake to defend vs Amgen a similar argument should hold, so the bottom line is despite their lack of interest in a full takeout, the basic valuation should remain in excess of the 50-ish current share price. Even if a full-control premium isn’t to be priced in, there should be upside to the shares from current levels. However, it remains clear from those roadshows that there remains a split between the mgmt and the board (where one would be happy to sell but the other not) – this isn’t going to be a particularly straightforward process and the alleged defensive nature of the Actelion response shouldn’t come as a surprise. The concern here will be that Actelion sell a blocking stake at no premium. Given it has always been hard to understand the rationale for the buyer of such a stake to pay a meaningful premium (when this is just a story of trying to access a small share of Actelion’s Tracleer cashflows for the next 5 years), there will no doubt remain some concern of the valuations being talked here.
NH
As an aside, Amgen has $17bn in cash and securities ($3bn of net cash), it generated $5.8bn of free cash flow in 2009 and consensus has it making $15bn revenue in FY2010. It markets 5 of the world’s best selling biotech drugs. At $65, Actelion would have an EV of $7.2bn, so pretty affordable for Amgen. Of course there is always going to be the debate as to why Amgen would want Actelion, all their commentary about M&A has revolved around their patent cliff in 2015-16, which of course Tracleer (85% of Actelion revenues) wouldn’t help them with given it too comes off patent in 2015 – but this is a similar story to all the other potential bidders who have been cited in recent weeks. Epogen and Neupogen, which between them make up $5bn of Amgen annual sales, are both likely to come off US patent in 2013 – which gives some rationale for trying to own the c$1.6bn revenues Tracleer would bring over this period.
NH
that’s it
NH
see you tomorro
NH
bye