Markets Live chat transcript for the chat ending at 12:31 on 11 Jan 2011. Participants in this chat were: Neil Hume, FT bryce.elder
NH
Hola Rabble
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welcome to another ML
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an hour
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actually more like 90 mins
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of market related chat
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before we begin
NH
had anyone heard from Taxloss
NH
the floods are coming for him
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he needs an ark
NH
Brisbane lord mayor is urging residents near Brisbane river to evacuate immediately. Sandbagging will be ineffective. Floods too powerful.
BE
Oh.
BE
Poor Taxloss.
BE
Unless he checks in before the end of today’s show, we’ll have to send a rescue party.
NH
a tinnie
NH
isn’t that what they call the tin boats out there
NH
anyway
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let’s push on
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and head to Westminster for a moment
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because Diamond Bob
NH
is taking one hell of beating in front of the Treasury Select Committee
11:07AM
NH
You can follow the exchanges here
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http://blogs.ft.com/westminster/2011/01/bob-diamond-at-treasury-select-committee/
NH
and here are some of the highlights
NH
RTRS-BARCLAYS PLC CEO DIAMOND SAYS BARCLAYS BANK NOT TOO BIG TO FAIL
10:07 11Jan11 RTRS-BARCLAYS PLC CEO DIAMOND SAYS UNIVERSAL BANKING MODEL GREAT STARTING POSITION
10:07 11Jan11 RTRS-BARCLAYS PLC CEO DIAMOND SAYS NO BANK SHOULD EVER BE A BURDEN ON THE TAXPAYER
10:07 11Jan11 RTRS-BARCLAYS PLC CEO DIAMOND SAYS SYSTEM MUST BECOME SAFER
10:07 11Jan11 RTRS-BARCLAYS PLC CEO DIAMOND SAYS BANKS NEED CAPACITY TO ABSORB LOSSES
10:10 11Jan11 RTRS-BARCLAYS PLC CEO DIAMOND SAYS ANY DISCUSSION THAT BARCLAYS COULD GET IN TROUBLE IS SURPRISING
10:12 11Jan11 RTRS-BARCLAYS PLC CEO DIAMOND SAYS IT’S NOT OK FOR TAXPAYERS TO HAVE TO BAIL OUT BANKS, BANKS SHOULD BE ALLOWED TO FAIL
10:07 11Jan11 RTRS-BARCLAYS PLC
10:07 11Jan11 RTRS-BARCLAYS PLC
10:07 11Jan11 RTRS-BARCLAYS PLC
10:07 11Jan11 RTRS-BARCLAYS PLC
10:10 11Jan11 RTRS-BARCLAYS PLC
10:12 11Jan11 RTRS-BARCLAYS PLC
NH
and some Tweets I picked up
NH
I like this
NH
Legal semantics: MP Chuka Umunna accuses #Bob Diamond of avoiding taxes. Diamond replies that Barclays does not “evade” taxes.
NH
and this
NH
Why will Diamond Bob not admit that Barclays enjoys an implicit UK taxpayer guarantee?
BE
This is all playing out exactly as expected, really.
NH
good theatre though
BE
The MPs are shouting “CASINO BANKING” and “OBSCENE BONUSES” and suchlike at Bob.
NH
RTRS-BARCLAYS PLC CEO DIAMOND TELLS MPS THE BANK WAS CAREFUL OF RISKS WHEN IT BOUGHT LEHMAN BROTHERS
11:03 11Jan11 RTRS-BARCLAYS PLC CEO DIAMOND SAYS THE BANK SHOULD CONTINUE TO LOOK AT REMUNERATION
11:07 11Jan11 RTRS-BARCLAYS PLC CEO DIAMOND SAYS THERE IS STILL WORK THE BANK COULD DO TO PUSH ITS SHARE PRICE UP
11:03 11Jan11 RTRS-BARCLAYS PLC
11:07 11Jan11 RTRS-BARCLAYS PLC
NH
true
NH
but oddly it Tories leading the attack
NH
in particular the MP for Bury St Edmunds
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David Ruffley
have been the local Member of Parliament for Bury St Edmunds, Stowmarket, and Needham Market since 1997 and enjoy representing this historic and beautiful Suffolk constituency.
I hope that my website will give you an insight into how I work on your behalf as the local MP. I have also provided information on Parliamentary and Opposition matters that you may find useful.
BE
Which emphasises that it’s just theatre.
BE
Just populist noisemaking.
NH
still not adverse to a bit of public banker baiting
NH
why not
BE
But it signies nothing deeper than a set-up-the-applause answer on Question Time.
NH
true
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but it’s kept the whole of Fleet Street busy this morning
NH
everyone running a live blog
BE
It’s a worthy enough pursuit to make Bob sweat a bit, but it’s not exactly going to change anything.
NH
nope
NH
and his share price is rising today
Barclays PLC (BARC:LSE): Last: 288.83, up 12.13 (+4.38%), High: 291.90, Low: 283.00, Volume: 38.86m
NH
obviously that’s been helped by the rise in Portuguese bond prices
NH
Barc have big exposure there
NH
and also a very punchy note from Merrill
NH
Barclays worth 500p a share
NH
15% RoNAV by 2012, no capital raise – increase PO to 500p
Investor perception around Barclays is dominated by concerns surrounding ROE
and capital. We are more bullish. At a 9.7% fully loaded Basel 3 core tier by 2012
we think capital is more than adequate and capable of soaking up further shocks
such as adverse Lehman claims. Whilst there is restructuring to do, we believe
that Barclays can get to a RoE > CoE more easily than the market thinks. We
have increased our PO from 370p to 500p. Our 2012 SoTP stands at 585p, at
0.6x 2010E BV and 5.1x 2012E P/E we think the shares have substantial upside.
Investor perception around Barclays is dominated by concerns surrounding ROE
and capital. We are more bullish. At a 9.7% fully loaded Basel 3 core tier by 2012
we think capital is more than adequate and capable of soaking up further shocks
such as adverse Lehman claims. Whilst there is restructuring to do, we believe
that Barclays can get to a RoE > CoE more easily than the market thinks. We
have increased our PO from 370p to 500p. Our 2012 SoTP stands at 585p, at
0.6x 2010E BV and 5.1x 2012E P/E we think the shares have substantial upside.
BE
Anything about the restructuring story that UBS was pushing yesterday?
NH
hang on
BE
The creation of a bad bank?
NH
Roadmap to a 15% RoNAV (12.5% ROE)
Adding the £100bn B3 RWA’s, Barclays ‘10 RoNAV falls to 6.6%. In our view,
investors would benefit from a roadmap on how Barclays can boost returns,
without diluting earnings. In this report we do a deep dive analysis across
Barclays – in our view, it is doable more readily than the market thinks.
Adding the £100bn B3 RWA’s, Barclays ‘10 RoNAV falls to 6.6%. In our view,
investors would benefit from a roadmap on how Barclays can boost returns,
without diluting earnings. In this report we do a deep dive analysis across
Barclays – in our view, it is doable more readily than the market thinks.
NH
Three key steps to boost the 6.6% RoNAV to 15% by 2012/3
(1) BarCap: Equities was a large drag on RoE and costs in 2010; but we estimate
the non-equity CIR to be sub 60%. Also, we estimate that legacy assets are
holding back the BarCap ROE by 5pp in ‘10. Holding income and achieving a
61% CIR, whilst ring fencing legacy assets could boost the group RoNAV by
3.1%. (2) UK Bank: combining Retail, B-Card and Corporate suggests that some
modest cost control and a return to the rate of ‘06 bad debts adds 2.5% to
RoNAV. (3) Non UK GRCB: We estimate non UK to make a loss of £1.3bn in
2010; seeing this back to breakeven adds c.2.3% to RoNAV – exiting for T/NAV
and reinvesting the capital in the UK would provide a further 1% boost, we think.
(1) BarCap: Equities was a large drag on RoE and costs in 2010; but we estimate
the non-equity CIR to be sub 60%. Also, we estimate that legacy assets are
holding back the BarCap ROE by 5pp in ‘10. Holding income and achieving a
61% CIR, whilst ring fencing legacy assets could boost the group RoNAV by
3.1%. (2) UK Bank: combining Retail, B-Card and Corporate suggests that some
modest cost control and a return to the rate of ‘06 bad debts adds 2.5% to
RoNAV. (3) Non UK GRCB: We estimate non UK to make a loss of £1.3bn in
2010; seeing this back to breakeven adds c.2.3% to RoNAV – exiting for T/NAV
and reinvesting the capital in the UK would provide a further 1% boost, we think.
BE
Fair enough.
BE
Here’s a sum of the UBS one for those who missed it.
NH
actually Merrill reckons 2011 will be the year of the bank
NH
which is just as well
NH
because according to the WSJ
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Lloyds and RBS have been sounding out buyers for the government stake
NH
quite who would want it
NH
with the IBC still hanging over the sector is anyones guess
NH
but apparently that’s what’s happening
BE
Ok then. Give us a look at their thinking.
NH
one moment
NH
cheap apparently
NH
If 2010 was a year of consolidation, 2011 is the year for delivery – stay bullish
We think that the bigger picture issues of funding and investment banking are likely to be resolved favourably for the UK banks
– leaving the strong bottom-up drivers of margins, normalising bad debts and potential dividends to drive the investment case.
With the domestic UK banks trading on ~5x 2012e P/E, and with confidence building on both the recovery and banks’ capital
needs, we are very bullish on the outlook. We like all the UK banks – we prefer domestic names over the UK-Asian banks
We think that the bigger picture issues of funding and investment banking are likely to be resolved favourably for the UK banks
– leaving the strong bottom-up drivers of margins, normalising bad debts and potential dividends to drive the investment case.
With the domestic UK banks trading on ~5x 2012e P/E, and with confidence building on both the recovery and banks’ capital
needs, we are very bullish on the outlook. We like all the UK banks – we prefer domestic names over the UK-Asian banks
NH
7 key themes for UK banks over 2011
Seven themes for 2011: [1] The continuing UK economic recovery despite austerity measures – which should lead to [2]
modestly higher interest rates (positive for margins). [3] Housing markets will likely be dull, with little change on 2010, but we
do see some structural downside protection. [4] Capital is not a problem for the UK banks – recent comments from the BoE
imply that the banks may be better positioned than the market believes. [5] Funding/sovereign issues will remain visible – but
we think UK banks should complete funding plans via a combination of issuance, deposit growth and some deleveraging. [6]
Seven themes for 2011: [1] The continuing UK economic recovery despite austerity measures – which should lead to [2]
modestly higher interest rates (positive for margins). [3] Housing markets will likely be dull, with little change on 2010, but we
do see some structural downside protection. [4] Capital is not a problem for the UK banks – recent comments from the BoE
imply that the banks may be better positioned than the market believes. [5] Funding/sovereign issues will remain visible – but
we think UK banks should complete funding plans via a combination of issuance, deposit growth and some deleveraging. [6]
NH
as for the IBC
NH
Merrill says
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it will be a complete damp squibb
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Lloyds won’t be forced to sell HBOS
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and RBS won’t be forced to get rid of its invesment banking ops
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just the usual fudge after a long review
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We expect the Independent Banking Commissions’ proposals to focus on product pricing and transparency and fees – not
splitting up banks
splitting up banks
NH
The UK remains in recovery mode – and looks set to soak up the effects of austerity measures. The private sector looks to have strongly added jobs over 2-3Q; asset quality indicators (impairments, personal/corporate delinquencies) continue to improve. For banks, mortgage spreads remain high, while funding spreads compare favourably with European peers. We think that 2011 can continue to deliver on these themes – improving sentiment around the UK. US economic data (PMI, house prices, credit trends) confirms that the recovery is well under way; Asia continues to deliver strong economic growth, including strong loan growth and asset quality trends in Hong Kong.
NH
and just one more things on the banks
NH
Citi are pushing
NH
HSBC today
NH
they like the new mangement
NH
and like the Hong Kong and Asian exposure
HSBC Holdings PLC (HSBA:LSE): Last: 688.40, up 16 (+2.38%), High: 693.00, Low: 683.50, Volume: 11.38m
NH
Upgrading to Buy — We like the new management. We expect higher dividends:
34c in 2010 to 65c in 2013e. Strong growth in HK and Asian businesses are an
increasing driver while US run-off portfolio is de-levering. Better macro in both
North and South America is driving lower loan losses and 4-5% upgrade in 2011-
12 EPS.
Gulliver’s To Do List — Asia is at the centre of global trade and investment flows
and wealth accumulation. We believe HSBC can leverage its strength in Greater
China, the rest of Asia and global connectivity. In businesses such as GTS and FX
where it is already strong, market share revenue opportunity of $3bn exists
($1.5bn pre-tax profit).
34c in 2010 to 65c in 2013e. Strong growth in HK and Asian businesses are an
increasing driver while US run-off portfolio is de-levering. Better macro in both
North and South America is driving lower loan losses and 4-5% upgrade in 2011-
12 EPS.
Gulliver’s To Do List — Asia is at the centre of global trade and investment flows
and wealth accumulation. We believe HSBC can leverage its strength in Greater
China, the rest of Asia and global connectivity. In businesses such as GTS and FX
where it is already strong, market share revenue opportunity of $3bn exists
($1.5bn pre-tax profit).
NH
What About The West? — The UK and Americas need to be re-engineered, in
our view. In the UK, the focus should be on efficiency improvements: reducing cost
ratios in the European PFS and CMB divisions to peer averages would, combined,
have added $1.0-1.5bn to group PBT. In the Americas, the franchise is weak but a
macro upswing helps.
On Valuation — The shares lagged UK and global banks in 2010 and trade at a
PE of 11x 2011E versus an average c14x and a P/TB of 1.6x 2011E versus 2.1x
average. Our new target price of £8.50 is close to long term average multiples. On
a SOTP basis, we estimate a higher valuation is justifiable (£9.50). 2011E dividend
yield of 4% is expected to increase 1ppt per annum.
our view. In the UK, the focus should be on efficiency improvements: reducing cost
ratios in the European PFS and CMB divisions to peer averages would, combined,
have added $1.0-1.5bn to group PBT. In the Americas, the franchise is weak but a
macro upswing helps.
On Valuation — The shares lagged UK and global banks in 2010 and trade at a
PE of 11x 2011E versus an average c14x and a P/TB of 1.6x 2011E versus 2.1x
average. Our new target price of £8.50 is close to long term average multiples. On
a SOTP basis, we estimate a higher valuation is justifiable (£9.50). 2011E dividend
yield of 4% is expected to increase 1ppt per annum.
NH
there you go
NH
HSBC worth 850p
NH
but could be worth a quid more
NH
in fact that’s just one of several very very bullish price targets kicking around today
NH
someone reckons Wolseley is worth £45
NH
yep £45
Wolseley Plc (WOS:LSE): Last: 2,164, up 107 (+5.20%), High: 2,175, Low: 2,080, Volume: 1.02m
BE
Right then.
BE
That’s Citi isn’t it?
NH
I believe so
NH
£45 a share
NH
for a builders’ merchant
BE
Though the price target’s the most interesting bit, quite frankly.
BE
The rest of it is …. well … here’s the summary. Judge for yourself.
BE
great 2010 — Wolseley was comfortably the best performing stock in our
coverage universe in calendar 2010, rising by 64% against a 5% decline for the
sector average. Over the year our EPS estimates for the group have increased by
c. 20% for 2011e and 2012e.
coverage universe in calendar 2010, rising by 64% against a 5% decline for the
sector average. Over the year our EPS estimates for the group have increased by
c. 20% for 2011e and 2012e.
BE
Much more to come, especially in North America – A more detailed look at
US/Canadian peers reveals a sizeable gap in margin and RoE performance over
the last 5 to 10 years. While some of the difference is down to mix we believe the
gap has become too big and that the new management team is determined to
rectify this. This should be the key business driver for the medium term.
US/Canadian peers reveals a sizeable gap in margin and RoE performance over
the last 5 to 10 years. While some of the difference is down to mix we believe the
gap has become too big and that the new management team is determined to
rectify this. This should be the key business driver for the medium term.
BE
European businesses should also improve – While we do not see a quick fix in
France, we think both the UK and Nordic operations look well set to grow their
margins in the next few years even without much help on the macro front.
France, we think both the UK and Nordic operations look well set to grow their
margins in the next few years even without much help on the macro front.
BE
Balance sheet still offers potential — Without a much more aggressive capex or
working capital program being started in the next 6-12 months, we struggle to see
how the group will not be close to zero geared by July 2011e. Over the next couple
of years the balance sheet should move into a strong net cash position unless the
group is more aggressive on deals and/or organic expansion.
working capital program being started in the next 6-12 months, we struggle to see
how the group will not be close to zero geared by July 2011e. Over the next couple
of years the balance sheet should move into a strong net cash position unless the
group is more aggressive on deals and/or organic expansion.
BE
Increased forecasts – We have upped our margin forecasts for the group and in
particular the US in this note and following the IMS last year. This has led to our
EPS for 2011e rising by 10%.
particular the US in this note and following the IMS last year. This has led to our
EPS for 2011e rising by 10%.
BE
More to go for – Given we believe in more North American margins upside than
we thought previously, we feel there is another leg up in the share price to come.
Our 12 month target is upped to £30 (on revised forecasts and target multiples) but
we believe with a little bit of help from the macro environment and a more
aggressive use of the balance sheet the stock could get to £45 inside three years.
we thought previously, we feel there is another leg up in the share price to come.
Our 12 month target is upped to £30 (on revised forecasts and target multiples) but
we believe with a little bit of help from the macro environment and a more
aggressive use of the balance sheet the stock could get to £45 inside three years.
NH
hmm
NH
have almost blow itself up with leverage
BE
Yup – those who don’t learn from history etc etc.
NH
indeed
NH
I can’t seem they messing with the balance sheet again
NH
right
NH
before we move on to the wider market
NH
a link to the WSJ story
NH
on Lloyds and RBS trying to find buyers for HM Treasury shares
NH
RBS, Lloyds Start Touting U.K.’s Shares
NH
LONDON—Eager to throw off the yoke of government ownership, the U.K.’s two partially state-owned banks have been quietly moving to stir investor interest in U.K. government holdings of their stocks.
Royal Bank of Scotland Group PLC and Lloyds Banking Group PLC, which are 84% and 42% taxpayer owned, respectively, as well as other investment banks, have been encouraging investor interest in the two banks’ stock to lay early groundwork for the sale of shares currently held by the U.K. Treasury, people close to the matter say. In some cases, these discussions involve sovereign-wealth funds in China and Singapore, they say.
The government invested £65.8 billion ($102.3 billion) in the two banks to keep them from collapsing amid the financial crisis.
NH
that’s the idea
NH
flog it to some dumb SWF
BE
All very softly softly at the moment though.
NH
yeah
NH
but there’s bond to be some mug out
NH
we can slot 10% to
BE
Sure. Stuff it to a sovereign.
11:24AM
BE
Ok – we seem to have hit the ground running this morning.
NH
indeed
NH
a day of worring about sovereign debts in the eurozone is more than enough
NH
and so
NH
the market heads higher today
NH
presumably on relief the ECB had to buy a load of PIIGS debt
NH
although
NH
that clearly doesn’t really change anything
NH
and Portugal will have to go for a bailout
NH
still makes tomorrow’s auction interesting
NH
what yield would you demand
NH
knowing the ECB is in the market buying?
BE
Good question.
NH
oh
NH
and the Japanese
NH
apparently they want PIIG debt
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better than JGB’s
NH
and they have enough of those
NH
anyway
NH
net result
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FTSE 100 is flying
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up 71 points at 6,028
NH
and in credit land
NH
• Sovereigns – Greece 1028bp (-4), Spain 358bp (-5), Portugal 545bp (-9), Italy 252bp (-6), Ireland 670bp (-1), Belgium 256bp (+2), France 109bp (-2)
NH
The recent correction has been curtailed this morning as banks recover some of their lost ground. Alcoa got the US earnings season off to a solid start after it beat expectations. The sovereign market is expected to stay nervous ahead of tomorrow’s crucial Portuguese government bond auction. Japan’s statement that it will be buying additional EU government debt has helped sentiment, at least temporarily
NH
that was from Markit BTW
NH
Ok
NH
back to stocks
11:28AM
BE
so what’s leading us up this morning?
NH
ARM
NH
been back up to 500p
NH
bit lower now
Arm Holdings Public Limited Company (ARM:LSE): Last: 493.80, up 28.8 (+6.19%), High: 499.40, Low: 480.10, Volume: 3.07m
NH
retail been buying it I believe
NH
after it was tipped by Jim ‘Mad Money’ Cramer
BE
Oh you’re kidding.
NH
No
NH
i’m not
NH
possible the worst thing that could have happened for such an overvaled stock
BE
So, for the sake of completeness, what does Cramer say? What’s his argument?
NH
one moment
NH
NH
Next Takeover Targets
On the heels of Qualcomm’s (QCOM_) recent acquisition of Atheros Communications (ATHR_), Cramer offered up seven speculative networking stocks that could be the next takeover target. He said each of these names is great on their own merits, as well as a potential acquisition target.
NH
7. ARM Holdings (ARMH_) – Cramer said the 200% gain in this stock since Oct. 16, 2009 may just be the beginning for this mobile chip designer that’s in everything from smart phones to the iPad. ARM is expansive, trading at 50 times earnings with only a 20% growth rate, but Cramer said the stock is still far too small given the company’s role in the mobile Internet .
BE
Yeah, whatever.
NH
BE
It’s expensive but it’s SMALL so IT MIGHT GET BIGGER.
NH
like arguing a company which is bust is cheap because it’s a penny share
BE
Cramer wants locked away. I’m not being hyperbolic. I genuinely wish he was locked away somewhere quiet where he couldn’t ramp this nonsense.
NH
50 times prospective
NH
NH
ship em on board
BE
Meanwhile, to inject an element of sanity into the argument ….
BE
There is Arm-related news
NH
is there any need for that?
BE
Well, this is positive at the margin.
NH
go on
NH
I fear this will be a bit nerdy
BE
Bingo.
BE
Look forward to another argument about what constitutes a platform.
BE
Intel is close to winding up extensive legal disputes surrounding its microprocessor business following an agreement to pay rival chipmaker Nvidia $1.5bn.
The deal represented an out-of-court settlement between the two Silicon Valley companies and is similar to one reached with another neighbour, AMD, in November 2009.
BE
Intel’s rivals have been named as victims of its alleged monopolistic practices in investigations by regulators in Japan, Korea, Europe and the US.
Intel’s chips are in four out of every five PCs sold and its settlements with AMD and Nvidia end its rivals’ complaints that Intel has used its superiority to try to exclude them from the market.
NH
so why is that good news?
NH
I missing something here
BE
Well – put on your propeller hat now.
NH
(City – ARM is a great company. Shame about the valuation. The same cannot be said of Autonomy)
BE
The settlement gives Intel access to NVidia’s graphics patents….
BE
However, it doesn’t give Nvidia access to Intel’s X86 patents.
NH
I am losing it now
BE
The exclusion is significant because it reinforces that Nvidia’s plans to enter the processor market won’t involve a pact with Intel. Instead, Nvidia is focusing on a new plan to make general-purpose chips based on designs licensed from ARM.
BE
In fact, Nvidia CEO last night was at pains to point out “it’s a foregone conclusion” that ARM is going to be the “standard microprocessor of the future”.
NH
I see
NH
a bit clearer
BE
But, really, does that mean Arm’s worth 50x today versus 48x yesterday?
BE
It’s not really price that sensitive, is it. Surely to hell.
NH
right
NH
done with chips
NH
still on the tech front
NH
I notice the PR for Autonomy
NH
have finally found a positive note
NH
that they are pushing around
Autonomy Corp Plc (AU.:LSE): Last: 1,551, up 15 (+0.98%), High: 1,595, Low: 1,505, Volume: 914.50k
BE
Who from?
NH
can’t remember
BE
Big house then.
NH
Bryan Garnier
BE
Oh.
NH
We initiate coverage of Autonomy with a DCF-derived target price of
1,900p, giving 22% upside potential. This report aims to demonstrate
that concerns over future growth, which negatively impacted the share
price in 2010, are overdone. Our analysis shows Autonomy is well
placed to accelerate growth going forwards, thanks to positive market
catalysts (regulations), a solid Cloud revenue base, and a strong trend
with OEMs. BUY.
1,900p, giving 22% upside potential. This report aims to demonstrate
that concerns over future growth, which negatively impacted the share
price in 2010, are overdone. Our analysis shows Autonomy is well
placed to accelerate growth going forwards, thanks to positive market
catalysts (regulations), a solid Cloud revenue base, and a strong trend
with OEMs. BUY.
NH
another mental price target
Autonomy Corp Plc (AU.:LSE): Last: 1,551, up 15 (+0.98%), High: 1,595, Low: 1,505, Volume: 914.50k
NH
it really is the day for a mad price target
NH
ARM worth £10 next
NH
(Freebooter missed that. Do you have a link?)
BE
Though since we raise the point
BE
And have made the 
happy by putting up the buy recommendation.
happy by putting up the buy recommendation.NH
yes
NH
almost like mentioning the Binman
NH
self defeating
BE
So let’s balance that with a comment from Paul Morland at KBC
BE
Management have suggested a 50% chance of hitting
original guidance of $900m in sales for 2010. This suggests
that sales in-line with lowered guidance of $870m is likely to
disappoint. With no more than a 10% chance of Autonomy
beating guidance and the dramatic slowdown in growth this
implies, we move to Sell.
original guidance of $900m in sales for 2010. This suggests
that sales in-line with lowered guidance of $870m is likely to
disappoint. With no more than a 10% chance of Autonomy
beating guidance and the dramatic slowdown in growth this
implies, we move to Sell.
BE
Autonomy needs to beat new guidance: We believe that if Autonomy fails to
beat its new sales guidance of $870m, introduced at the time of the warning on
6 October, the shares are likely to fall from current levels. Since we ascribe only
a 10% chance of an upside surprise, we have a negative view on the stock.
beat its new sales guidance of $870m, introduced at the time of the warning on
6 October, the shares are likely to fall from current levels. Since we ascribe only
a 10% chance of an upside surprise, we have a negative view on the stock.
NH
balance
NH
very important
11:42AM
NH
Right
NH
from the biggest riser
NH
to the biggest faller
NH
no surprises for guessing which stock
Smith And Nephew Plc (SN.:LSE): Last: 680.00, down 32 (-4.49%), High: 700.50, Low: 675.00, Volume: 13.83m
BE
Ah yes.
BE
The CEO doesn’t comment on rumour and speculation.
NH
(RonDavies – yellow. stop posting under different names. once more and you get life)
NH
no
NH
apparently its company policy
NH
not to give any guidance on these evil rumours
NH
even though the workforce might quite like to know something
NH
to set their minds at ease
NH
S&N TIGHTLIPPED AT CONFERENCE- CEO Illingworth obviously stating that the company will not comment on any market rumours…hwoever he did say that the orthopedic industry will undergo some further consolidation and any potential deals will undergo antitrust issues….
NH
S&N CEO Illingworth was broadly quoted from the JPM Conference last night, saying they see further consolidation in the sector, that such consolidation will see anti-trust concerns, and that he would not comment on the JNJ rumours. He said the company understands its obligations under UK listing guidelines, and they have been in direct contact with the panel – the implication given there is still no statement must be that there is nothing to say at present.
NH
that’s a bit of feedback
NH
for the broker who tuned in to here Illingworth talk hips and knees
NH
anyway
NH
we can assume
NH
if anyone obeys the Takeover Panel rules anymore
NH
that because J&J didn’t make a statement yesterday
NH
they are not interested in bidding
NH
at the moment
NH
perhaps in a month they will be
NH
and there will be another uproar
NH
in the meantime
NH
no bid
NH
and the share price comes back
NH
with analysts telling clients to book profits
NH
for example Investec
NH
Whilst the lack of comment from either Smith & Nephew or Johnson &
Johnson yesterday with regard to bid speculation isn’t definitive, it does
suggest that a bid isn’t pending in the short term. We remain of the view that
Smith & Nephew is a potential takeover target, but, with the shares now
slightly ahead of our price target, we move from a Buy to a Hold
recommendation this morning and, given the strong run, suggest that
investors consider taking some profits.
Johnson yesterday with regard to bid speculation isn’t definitive, it does
suggest that a bid isn’t pending in the short term. We remain of the view that
Smith & Nephew is a potential takeover target, but, with the shares now
slightly ahead of our price target, we move from a Buy to a Hold
recommendation this morning and, given the strong run, suggest that
investors consider taking some profits.
NH
Separately, Stryker increases guidance for 2010 and ups 2011 – after hours
last night, Stryker (NR), one of Smith & Nephew’s peers, upped its expectations
for 2010 results and upped its guidance for 2011. Q4 2010 orthopaedic implants
sales increased by 4.3% underlying (from 1.3% in Q3) whilst MedSurg sales
increased by 15.4% (from 16.3% in Q3). The net result is that full year underlying
sales growth was 7.8%, at the top end of the range and Stryker expects to
modestly beat previous earnings guidance. Guidance for 2011 underlying sales
growth (ex currency and acquisitions) is for 5% to 7%. This supports our view that
trading conditions are stable and gives us confidence with regard to our FY2011E
Smith & Nephew forecasts
last night, Stryker (NR), one of Smith & Nephew’s peers, upped its expectations
for 2010 results and upped its guidance for 2011. Q4 2010 orthopaedic implants
sales increased by 4.3% underlying (from 1.3% in Q3) whilst MedSurg sales
increased by 15.4% (from 16.3% in Q3). The net result is that full year underlying
sales growth was 7.8%, at the top end of the range and Stryker expects to
modestly beat previous earnings guidance. Guidance for 2011 underlying sales
growth (ex currency and acquisitions) is for 5% to 7%. This supports our view that
trading conditions are stable and gives us confidence with regard to our FY2011E
Smith & Nephew forecasts
BE
Hm.
BE
I was taken by this quote in the Telegraph
BE
From a Panel spokesperson
BE
“We have a very fierce set of disclosure rules, some say the fiercest in the world. If there is speculation about a potential deal and price movement at any stage we would naturally investigate as a matter of urgency.”
NH
De La Rue anyone?
NH
it’s all very well having a fierce set of rules
NH
but if you are prepared to accept the management excuse for not saying anything
NH
ie there was a positive broker note out that could explain the rise
NH
what on earth is the point?
BE
I’d like to know who thinks UK Takeover Panel rules are “the fiercest in the world”
BE
As “some people” apparently do.
NH
well they do make people say stuff, occasionally
NH
in the US
NH
you can have weeks of speculation
NH
and no one says a thing
NH
till the deal is done and dusted
NH
everyone seems to be paranoid about being sued
NH
if they say they are in talks
NH
and then it all goes wrong
BE
Hm.
BE
Bit more comment, this time from Numis
BE
Smith & Nephew presented at the JP Morgan conference last night, and the first
question the CEO fielded was on the recent bid speculation. He acknowledged that
if a rumour is judged to have a meaningful impact on the share price, then the
takeover panel may require a company to disclose any relevant inside information
in a statement. Whilst we would argue that recent rumours have moved the share
price meaningfully (around 20%), we infer that the takeover panel has not (yet?)
reached the same conclusion. He also commented that bid rumours have been
around since he’s been at the Smith & Nephew (10 years) and that the company has
never commented on rumours or speculation. Whilst we would not preclude the
possibility of a bid emerging, we are comfortable with our Reduce recommendation
at these levels. Separately, Stryker pre-announced a strong set of Q4 numbers, with
orthopaedic growth of 4% in Q4 showing a rebound from 1% in Q2 and Q3. In the
absence of bid speculation, we believe that these results would be taken well by the
market.
question the CEO fielded was on the recent bid speculation. He acknowledged that
if a rumour is judged to have a meaningful impact on the share price, then the
takeover panel may require a company to disclose any relevant inside information
in a statement. Whilst we would argue that recent rumours have moved the share
price meaningfully (around 20%), we infer that the takeover panel has not (yet?)
reached the same conclusion. He also commented that bid rumours have been
around since he’s been at the Smith & Nephew (10 years) and that the company has
never commented on rumours or speculation. Whilst we would not preclude the
possibility of a bid emerging, we are comfortable with our Reduce recommendation
at these levels. Separately, Stryker pre-announced a strong set of Q4 numbers, with
orthopaedic growth of 4% in Q4 showing a rebound from 1% in Q2 and Q3. In the
absence of bid speculation, we believe that these results would be taken well by the
market.
NH
and on De La Rue
De La Rue Plc (DLAR:LSE): Last: 828.00, no change, High: 834.00, Low: 826.00, Volume: 148.71k
NH
I reckon
NH
there will be no bid
NH
top three shareholders are backing the new man
NH
as such I reckon they will tell the French to get stuffed
BE
You’re probably right.
NH
they don’t want to sell
NH
a bit like the shareholders at Capital Shopping Centres
NH
where Simon Property Group has pulled out today
Capital Shopping Centres Group PLC (CSCG:LSE): Last: 384.70, down 7.8 (-1.99%), High: 390.00, Low: 371.00, Volume: 2.63m
BE
Been surprised how static the DLAR shareholder list has been.
BE
Usually you’d expect a few arbs and hedges to get in, to put a bit of pressure on management.
NH
nope
NH
top three rock solid
NH
they won’t sell for anything near 905p
NH
and the French can’t afford that much more
NH
so no deal
BE
Indeed. The usual bid churn simply hasn’t happened.
NH
as for CSC
NH
not surprised they are holding up
NH
if Simon makes good on its promise and sell its 6% stake
NH
the South Africans will hoover it up
NH
no problems
NH
they want all their cash well away from SA
NH
hang on
NH
I have some comment
NH
from Olivetree on this bid
NH
What I wrote on CSCG:
It came as no surprise to us to see Simon walk away from bidding for Capital Shopping Centres, the CSCG management has made it perfectly clear that the company is not for sale, and that major shareholders back this stance. Other than paying a ludicrous price for the asset, similar to the 625p value outlined by CSCG in its defence document last week, Simon had no option but to walk. In keeping with major shareholders’ support of the target’s valuation, we would expect these big holders to vote in favour of the Trafford Centre acquisition at the forthcoming EGM, contrary to Simon’s desires. Simon will likely sell its CSC stake as a result of this, but we sense there is sufficient demand for this stock from South African institutional shareholders to ensure this doesn’t act as too much of an overhang on the stock from here. It is very likely that the Trafford Centre deal is approved, and with Peel Holdings as a major shareholder, CSC is unlikely to be seen as a takeover target again anytime soon.
It came as no surprise to us to see Simon walk away from bidding for Capital Shopping Centres, the CSCG management has made it perfectly clear that the company is not for sale, and that major shareholders back this stance. Other than paying a ludicrous price for the asset, similar to the 625p value outlined by CSCG in its defence document last week, Simon had no option but to walk. In keeping with major shareholders’ support of the target’s valuation, we would expect these big holders to vote in favour of the Trafford Centre acquisition at the forthcoming EGM, contrary to Simon’s desires. Simon will likely sell its CSC stake as a result of this, but we sense there is sufficient demand for this stock from South African institutional shareholders to ensure this doesn’t act as too much of an overhang on the stock from here. It is very likely that the Trafford Centre deal is approved, and with Peel Holdings as a major shareholder, CSC is unlikely to be seen as a takeover target again anytime soon.
NH
in fact on the Trafford deal
NH
most of the SA investors
NH
couldn’t care less
NH
in fact some haven’t either glanced over the paper work
NH
(wokinpark – ghost bid that got the price fo 425p)
11:54AM
NH
Right
NH
lots of questions about HMV
NH
and the Russia
NH
Mamut is now up to 6%
Hmv Group PLC (HMV:LSE): Last: 25.50, up 0.5 (+2.00%), High: 26.00, Low: 24.75, Volume: 2.42m
NH
although
NH
given the amount of HMV stock in the market
NH
he’s not being very aggressive
NH
he could be at 20%
NH
if he wanted
NH
but no
NH
buys a scrap here and there
BE
Yup. And I’m sure there’s no shortage of willing sellers.
NH
(wokinpark – we never thought it would happen)
BE
Someone on the right was mentioning a Deutsche Bank note yesterday
NH
ah yes
NH
46p target price
NH
does it exist
BE
Well, no.
BE
It’s a note that runs LBO maths on the entire global retail sector.
BE
And runs for 332 pages.
NH
gawd
NH
and HMV gets a mention
BE
It does – along with, I reiterate, every other shop in the world.
BE
Here’s the bit on HMV, which is on page 166.
BE
HMV (Hold)
BE
Conclusion: Based on our screening, we believe HMV is an attractive stock at
current levels for a potential LBO. Our analysis suggests that the acquisition
price in which a private equity investor would achieve a 5 year average 15%
ROE under our assumed capital structure and operating assumptions is 46p.
This is 77% above the current stock price, following the recent profit warning.
current levels for a potential LBO. Our analysis suggests that the acquisition
price in which a private equity investor would achieve a 5 year average 15%
ROE under our assumed capital structure and operating assumptions is 46p.
This is 77% above the current stock price, following the recent profit warning.
BE
The positive outcome reflects our assumption that the EBITDA margin will
decline only 40bps from the FY2011E level of 5.7% over the forecast period.
This assumes that the HMV UK division does not require further downsizing
beyond the c.40 store closures that have been recently announced, and
assumes the business continues to be profitable (2016E EBIT margin of
2.3%). The division currently achieves sales/sqft of £690 and EBIT/sqft of £24.
Given the structural pressures to both the music and DVD categories (70% of
these sales) the margin outcome could prove to be materially lower than our
forecast. The uncertainty over medium term earnings, and the limited
possibility of exiting through IPO, would make such an LBO high risk, in our
view.
decline only 40bps from the FY2011E level of 5.7% over the forecast period.
This assumes that the HMV UK division does not require further downsizing
beyond the c.40 store closures that have been recently announced, and
assumes the business continues to be profitable (2016E EBIT margin of
2.3%). The division currently achieves sales/sqft of £690 and EBIT/sqft of £24.
Given the structural pressures to both the music and DVD categories (70% of
these sales) the margin outcome could prove to be materially lower than our
forecast. The uncertainty over medium term earnings, and the limited
possibility of exiting through IPO, would make such an LBO high risk, in our
view.
Hmv Group PLC (HMV:LSE): Last: 25.50, up 0.5 (+2.00%), High: 26.00, Low: 24.75, Volume: 2.42m
NH
thanks for that
NH
fantasy M&A
NH
we like a bit of that
BE
Though, as fantasy M&A goes, it’s nearly unreadable.
NH
it is
NH
prefered the Bloomberg take
NH
(RonDavies they set up a chain of bookshops that went bust. I’m sure Waterstone and Mamut have fond memories of it.)
12:01PM
NH
Moving on
NH
and backwards
NH
Wolseley
NH
aside from the £45 price target
NH
I’m guessing the stock
NH
has also been bouyed by Howdens Joinery
NH
this is the old MFI kitchens business
NH
which has warned on profits
NH
warned they will be above expectations that is
Howden Joinery Group PLC (HWDN:LSE): Last: 119.10, up 13.6 (+12.89%), High: 119.70, Low: 111.70, Volume: 3.62m
NH
now
NH
this is basically a builders’ merchant that sells the bits to make a kitchen
NH
and trading is very very strong
NH
quality business
NH
not sure why demand is so good though
NH
any thoughts
BE
Um ……… No.
BE
I don’t know why the joinery market would be healthy.
NH
people not moving houses
BE
Seems counter-intuitive.
NH
so they are having new kitchens?
NH
dunno
NH
pure guesswork
NH
anyway
NH
here’s a note from Investex
NH
which might provide some insight
NH
Forecast upgrades driven by further margin
expansion
Howden has surprised by publishing an unexpected full-year pre-close
update, indicating that FY10E PBT will “comfortably” exceed current market
expectations. With UK Depot sales in line with our forecast, this is driven
primarily by continued gross margin expansion, which could be some 50bp
higher than previous guidance. While the shares remain cheap in a sector
context, our more cautious Hold stance is predicated on a less rosy outlook
for consumer expenditure on bigger-ticket discretionary items.
expansion
Howden has surprised by publishing an unexpected full-year pre-close
update, indicating that FY10E PBT will “comfortably” exceed current market
expectations. With UK Depot sales in line with our forecast, this is driven
primarily by continued gross margin expansion, which could be some 50bp
higher than previous guidance. While the shares remain cheap in a sector
context, our more cautious Hold stance is predicated on a less rosy outlook
for consumer expenditure on bigger-ticket discretionary items.
NH
Summary: Howden has published a positive profit ‘warning’, effectively a FY
pre-close update, saying that FY10E PBT will be “comfortably” above market
expectations. The current range is £88m – £94m, with our forecast at £92m. This
appears to be driven primarily by gross margin, with FY depot sales of £795m in
line with our forecasts after c 6% total sales growth in the last three periods,
broadly in line with previous sales growth. We expect consensus to move up to
c.£99m, with FY11E moving more, up from current range of £95m – £102m
(Investec E £99m) to c £105m. Pro forma FY10E PBT of £99m would give EPS of
c.10.8p, compared with our current forecast of 10.0p; and pro forma FY11E PBT
of £105m would give EPS of c.11.4p, compared with our current forecast of
10.8p. We place our forecasts and target price (based on EV/EBITDA) under
review.
pre-close update, saying that FY10E PBT will be “comfortably” above market
expectations. The current range is £88m – £94m, with our forecast at £92m. This
appears to be driven primarily by gross margin, with FY depot sales of £795m in
line with our forecasts after c 6% total sales growth in the last three periods,
broadly in line with previous sales growth. We expect consensus to move up to
c.£99m, with FY11E moving more, up from current range of £95m – £102m
(Investec E £99m) to c £105m. Pro forma FY10E PBT of £99m would give EPS of
c.10.8p, compared with our current forecast of 10.0p; and pro forma FY11E PBT
of £105m would give EPS of c.11.4p, compared with our current forecast of
10.8p. We place our forecasts and target price (based on EV/EBITDA) under
review.
NH
(on S&N the reason the company won’t say anything now is that there WAS an approach before Xmas when the price spiked 9% in one day and they should have said something then. they didn’t and no one is saying anything now)
BE
(Still on S&N, it’s also plausible that they’re in another set of talks at the moment that are sensitive and would be affected negatively by saying anything now.)
NH
(merger with Biomet)
BE
(Well yes. That must be the assumption.)
BE
(Which would be a reverse takeover, so the shares would have to be suspended.)
BE
(Hypothetically.)
NH
(and do you think anyone will admit to that)
BE
(No. Hypothetically.)
BE
(We should stop talking in asides and move on.)
12:07PM
NH
and so
NH
to the retail sector
NH
and Marks
Marks and Spencer Group PLC (MKS:LSE): Last: 380.30, down 3.7 (-0.96%), High: 386.50, Low: 376.00, Volume: 7.45m
NH
now I thought the trading statement looked good
NH
a resillient performance over the Xmas period
NH
and then I discover
NH
that Marks has changed the reporting dates
NH
so the Like for like figures
NH
get flattered by three or four days of sales
NH
after Xmas
BE
That’s a bit slick.
NH
well they have a marketing expert in charge now
NH
LFL has also been boosted by a c.3% positive impact to GM
due to the inclusion of the first five days of the Sale in Q3.
due to the inclusion of the first five days of the Sale in Q3.
NH
there you go
BE
So. Not like for like then.
BE
Otherwise, as you say, the numbers look okay.
BE
+3.8% in clothes
BE
+1.8% in food.
NH
not bad I guess
NH
no upgrades coming through
NH
can’t see the price going anywhere for a while
NH
right
NH
some comment from Seymour Pierce
NH
Marks & Spencer (BUY) – Q3 trading update
MKS.L (384p, Target Price 450p) Market cap: £6,140m
The Q3 trading statement to 1st January was better than expected and the company encouragingly states that existing guidance on profits for the 2010/11 remains unchanged. The figures, however, include five days of the Sale compared to the previous year, which are forecast to have added c.3% points to the sales on General Merchandise offset by c.3% points from the wintry weather. Total UK sales increased by 4.0% vs. SP forecast of 2.6% including LFL sales of +3.8% on General Merchandise (SP forecast: +3.0%) and +1.8% on Food (SP forecast: +0.5%). International sales were up by 4.5% vs. SP forecast +3.0%, reflecting a good performance across most of the company’s markets but offset by continuing difficult conditions in its core markets of Ireland and Greece.
MKS.L (384p, Target Price 450p) Market cap: £6,140m
The Q3 trading statement to 1st January was better than expected and the company encouragingly states that existing guidance on profits for the 2010/11 remains unchanged. The figures, however, include five days of the Sale compared to the previous year, which are forecast to have added c.3% points to the sales on General Merchandise offset by c.3% points from the wintry weather. Total UK sales increased by 4.0% vs. SP forecast of 2.6% including LFL sales of +3.8% on General Merchandise (SP forecast: +3.0%) and +1.8% on Food (SP forecast: +0.5%). International sales were up by 4.5% vs. SP forecast +3.0%, reflecting a good performance across most of the company’s markets but offset by continuing difficult conditions in its core markets of Ireland and Greece.
NH
Following this update we are not making any changes to our 2010/11 pre-tax profit forecast of £730m, slightly above consensus. At this level, the stock is rated at 11.6x earnings supported by a dividend yield of 4.3%. Marc Bolland’s proposed shake up of the company has not been a ‘damp squid’. It will be more revolutionary rather than evolutionary and the market will come to appreciate this over the next twelve months. We reiterate our Buy recommendation and believe that the Bolland strategy will lead to further upside to earnings toward the £1bn level over the next three years
NH
and talking of Seymour Pierce
NH
has anyone seen the research note
NH
put out on their new merger partner
BE
Er. Steady.
NH
Gerova Financial
NH
an er
NH
interesting read
BE
Let’s not go there, shall we.
NH
NH
no
NH
readers can go to Zerohedge instead
BE
Er …. yes. But we didn’t send you there, right?
NH
no
BE
We’ve never read the note. Never seen it. Don’t send your lawyers this direction, thanks.
12:12PM
NH
Ok time for another big number
NH
brace yourself
BE
Braced.
NH
AstraZeneca
NH
to do $73bn share buyback
BE
Er …… right.
NH
and its market cap
NH
$63bn
BE
So – more than its shares in issue.
BE
That’s cunning.
NH
eating itself
NH
which is probably not a bad idea
NH
given it’s a virtual drug company
NH
it has nothing in the pipeline
NH
anyway
NH
once more
NH
it’s Citi coming up with the big number
NH
Potential cash return outweighs known issues — We view AZN’s potential to
return its market cap to investors over the next decade as outweighing the lack of
earnings growth as a consequence of known patent expirations and the
unimpressive recent R&D track record, all of which we see as discounted in the
current valuation. Also AZN has a better chance than most of continuing to exceed
market earnings expectations. We are 5-15% ahead of cons. EPS 2012E-15E.
return its market cap to investors over the next decade as outweighing the lack of
earnings growth as a consequence of known patent expirations and the
unimpressive recent R&D track record, all of which we see as discounted in the
current valuation. Also AZN has a better chance than most of continuing to exceed
market earnings expectations. We are 5-15% ahead of cons. EPS 2012E-15E.
NH
Balance sheet firepower, $73bn cash mountain coming to shareholders? —
With net cash on the balance sheet and management’s track record in returning
excess funds to shareholders, we see ample opportunity for acceleration of share
buybacks. We model $3bn in ‘11 and beyond, which could be topped up in ‘11 if a
c.$2bn disposal of Astratech were to occur. AZN has returned $34bn through
dividends and buybacks over the last 10 years. We see a potential $73bn as being
returned to shareholders over the next 10 years, more than today’s market cap.
With net cash on the balance sheet and management’s track record in returning
excess funds to shareholders, we see ample opportunity for acceleration of share
buybacks. We model $3bn in ‘11 and beyond, which could be topped up in ‘11 if a
c.$2bn disposal of Astratech were to occur. AZN has returned $34bn through
dividends and buybacks over the last 10 years. We see a potential $73bn as being
returned to shareholders over the next 10 years, more than today’s market cap.
NH
Upgrading to Buy, 3,400p target price — AZN trades on a 23% discount to the
peer group 2011E PE (ex-NOVOb). We think that this discount could start to close
modestly as the trough earnings year of 2012 approaches. A 15% discount (8x)
applied to our 2012E EPS forecast implies a TP of 3,400p.
peer group 2011E PE (ex-NOVOb). We think that this discount could start to close
modestly as the trough earnings year of 2012 approaches. A 15% discount (8x)
applied to our 2012E EPS forecast implies a TP of 3,400p.
NH
personally
NH
I can’t see that as a great reason to invest
NH
but perhaps I’m wrong
NH
it is a cash cow
BE
Does anyone have any decent studies on whether stock repurchases are actually value accretive?
BE
They never seem all that successful.
BE
I’m sure some academic somewhere has looked at this.
NH
right
BE
Market doesn’t seem convinced by the idea either.
AstraZeneca PLC (AZN:LSE): Last: 3,012, up 46.05 (+1.55%), High: 3,013, Low: 2,977, Volume: 912.70k
NH
let’s bring this to a close. Rabble seem pre-occupied today
NH
a couple of bits of RAW before we do
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
rumours that Cobham might be interested in Meggitt
Cobham PLC (COB:LSE): Last: 222.40, up 2.5 (+1.14%), High: 224.50, Low: 219.00, Volume: 6.47m
Meggitt PLC (MGGT:LSE): Last: 379.70, up 3.7 (+0.98%), High: 383.10, Low: 378.90, Volume: 648.32k
NH
other than that
NH
something called SRA International in the US
NH
getting loads of interest from punters over here
NH
not sure why
NH
but the stock has been rising
12:18PM
NH
now a bit of small cap corner
NH
via the sector watcher
NH
Bahamas Petroleum
Bpc Ltd (BPC:LSE): Last: 15.00, up 2 (+15.38%), High: 15.25, Low: 14.00, Volume: 7.23m
NH
great name huh
BE
Bahamas Petroleum? What does that do? Is it a biotech?
NH
NH
BPC has signed an agreement with Osprey Navigation to acquire 2D seismic in it’s four 100%-owned southern Bahamas licences using the M/V Osprey Explorer. The group believes that the 2011 survey will define drillable prospects, and is a follow-up to a 200 sq km survey acquired last year. BPC believes its extensive acreage has the potential to contain multiple super-giant traps, which according to its website suggests in excess of 500 million barrels of oil each.
NH
Whilst there has been limited exploration to date in the region (and none recently), there are producing fields in nearby Cuba, south-central Florida and Mexico. Moreover the group is in the process of bringing Statoil into its licences as a partner, providing some validation for the assets
NH
. BPC has already been picked up by the bulletin boards and is a retail-driven stock, hence the wild moves in the share price last year – from a low of 2.7p/share to a high of 18.75p/share, against a current price of 13p/share (and a market cap of £127m). Doesn’t have much cash (c£2m) and hence likely to raise some at some point this year – unless it does further farm-outs on attractive terms. Unlikely to see drilling before next year but the group is a classic exploration-led E&P, and worth keeping an eye on. Not for the faint-hearted but I’d be tempted to tuck a few away.
BE
Aha. “Retail driven stock” that’s been “picked up by the bulletin boards”
NH
£127m market cap and just £2m of cash and a few licenses
NH
perfect for Muppet Alpha one
A term of endearment used to describe BB share promoters on FT Alphaville.
FT Alpha’s fantasy investment portfolio. We employ a modifed version of cartoonist Scott Adams’s bet on the bad guys for stock selection.
NH
back up the truck Bryce
NH
lets have loads
BE
It’s time to play the music, It’s time to light the lights ….
BE
Yup – will add.
NH
Right
NH
don’t think there is anything else
NH
FTSE 100 up 76 points at 6,032
Bpc Ltd (BPC:LSE): Last: 15.00, up 2 (+15.38%), High: 15.25, Low: 14.00, Volume: 7.29m
NH
talking of BP
NH
they might need a new chairman
NH
look at this
Bp PLC (BP.:LSE): Last: 496.76, up 10.41 (+2.14%), High: 497.05, Low: 490.00, Volume: 9.72m
NH
Jan. 11 (Bloomberg) — Carl-Henric Svanberg, BP Plc’s chairman and the former chief executive officer of Ericsson AB, is the top candidate to become chairman of Swedish truckmaker AB Volvo, Dagens Industri reported, citing sources.
The board nomination committee of Ericsson will propose Volvo CEO Leif Johansson as new chairman in the Swedish maker of mobile phone networks, the newspaper said, citing unidentified sources.
NH
surely he can’t do both
NH
in that he hasn’t done the exisiting job very well
BE
Hm.
BE
This is the overly academic guy
NH
yep
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the one who sounded like Dr Evil
NH
so at the height of the Macondo crisis
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he couldn’t appear on US TV
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so they sent Hayward
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with his English accent
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and he got the flak instead
BE
In retrospect, they may have done better with Dr Evil.
NH
BE
Right – just before we close ….
NH
Brace yourselves, jordan and alex reid to separate
BE
I assume that flash is from Bloomberg.
BE
Anyway, we should mention if only in passing CSR on this legal settlement.
NH
i thought it seemed a lot of cash
NH
but the price is up
Csr PLC (CSR:LSE): Last: 404.20, up 48.2 (+13.54%), High: 407.20, Low: 370.00, Volume: 1.25m
BE
Here’s Merrill, which makes the point that CSR’s cheap.
BE
Settlement with Broadcom removes uncertainty
CSR and Broadcom have announced today that they have settled all outstanding
litigation including the cases between SiRF and Broadcom that were ongoing
when CSR acquired SiRF in 2009. CSR will pay Broadcom US$5m initially and a
further US$12.5m per annum for five years. In return both companies have
agreed not to sue the other or third parties including customers for infringement
for five years. The settlement will reduce CSR’s ongoing legal costs by at least
$10m annually, according to the company.
CSR and Broadcom have announced today that they have settled all outstanding
litigation including the cases between SiRF and Broadcom that were ongoing
when CSR acquired SiRF in 2009. CSR will pay Broadcom US$5m initially and a
further US$12.5m per annum for five years. In return both companies have
agreed not to sue the other or third parties including customers for infringement
for five years. The settlement will reduce CSR’s ongoing legal costs by at least
$10m annually, according to the company.
BE
Cost is broadly neutral
Once we take into account the reduced legal fees, we believe the cost of this
settlement is broadly neutral to CSR, which we view as positive. If we assume
US$10m of legal fees saved for the next three years, we estimate the present
value of the settlement at $28m or 3% of CSR’s market capitalisation. However,
this ignores the depressed value of the SiRF assets when CSR acquired the
business due to the litigation. SiRF’s market value had fallen by more than
US$100m on announcements around the Broadcom legal action prior to CSR
acquiring it.
Once we take into account the reduced legal fees, we believe the cost of this
settlement is broadly neutral to CSR, which we view as positive. If we assume
US$10m of legal fees saved for the next three years, we estimate the present
value of the settlement at $28m or 3% of CSR’s market capitalisation. However,
this ignores the depressed value of the SiRF assets when CSR acquired the
business due to the litigation. SiRF’s market value had fallen by more than
US$100m on announcements around the Broadcom legal action prior to CSR
acquiring it.
BE
Reduced distraction
The presence of this litigation has been a drain on management time and
impacted customer negotiations over the past two years to the extent that it is
likely that CSR lost some business as a result.
The presence of this litigation has been a drain on management time and
impacted customer negotiations over the past two years to the extent that it is
likely that CSR lost some business as a result.
BE
Valuation attractive at 8x P/E ex cash
With CSR trading on 8x 2011 P/E ex cash and with 45% of the company’s market
value in cash today (US$457m) we continue to rate the stock a Buy and maintain
our 450p price objective (26% potential upside).
With CSR trading on 8x 2011 P/E ex cash and with 45% of the company’s market
value in cash today (US$457m) we continue to rate the stock a Buy and maintain
our 450p price objective (26% potential upside).
BE
And someone – thewrexhamite – was wanting comment on Interserve.
BE
Another one of those services companies we have such a high opinion of.
BE
Statement looked dull.
BE
So here’s some dull UBS comment to match.
BE
Trading in line, but order book and revenue cover slightly weaker
Overall trading is in line with expectations, with stronger H2 coming through as
had been previously guided by management. Forward looking indicators are less
rosy, with order book down to c£5bn from £5.5bn and visibility on 2011 revenue is
lower at around 70% vs 80% cover last year. We expect much of the difference
relates to weaker UK construction order book. Whilst management guides to 2011
being flat with 2010, we are more bearish and expect we are c10% below
management guidance for 2010 and we stay Sellers.
Overall trading is in line with expectations, with stronger H2 coming through as
had been previously guided by management. Forward looking indicators are less
rosy, with order book down to c£5bn from £5.5bn and visibility on 2011 revenue is
lower at around 70% vs 80% cover last year. We expect much of the difference
relates to weaker UK construction order book. Whilst management guides to 2011
being flat with 2010, we are more bearish and expect we are c10% below
management guidance for 2010 and we stay Sellers.
NH
and before we go. on the back of today’s note from Unicredit on the utility stocks
NH
just seen this
NH
January 11 (Press Association) — Power giant E.ON today
announced price rises of 9% for electricity and 3% for its gas
customers from next month, blaming “rising industry costs”.
The firm said the increase will add 16p a day to its dual
fuel customers, adding that wholesale energy prices have soared
by 35% since last Spring.
Managing director Graham Bartlett said: “It’s been over
two years since we last increased our prices, and, unlike other
companies, we held off from increasing them during the
incredibly cold temperatures we saw in late November and
December.
announced price rises of 9% for electricity and 3% for its gas
customers from next month, blaming “rising industry costs”.
The firm said the increase will add 16p a day to its dual
fuel customers, adding that wholesale energy prices have soared
by 35% since last Spring.
Managing director Graham Bartlett said: “It’s been over
two years since we last increased our prices, and, unlike other
companies, we held off from increasing them during the
incredibly cold temperatures we saw in late November and
December.
NH
and if you missed the Unicredit note
NH
they reckon prices for household utility bills
NH
could double in the near future
NH
In our view, the cost pressures from environmental and social programs and rising network
charges will mean that household bills will continue to increase in real terms for many years to
come. This excludes the impact of commodity price movements which could increase tariffs
even further. We believe that these increases will make it harder for supply companies to
pass on their costs to customers and will negatively impact the margins they can achieve
going forward. We also believe that this will be exacerbated by the issue of affordability – with
customers likely having to spend more of their disposable income on their energy bill in the
future.
charges will mean that household bills will continue to increase in real terms for many years to
come. This excludes the impact of commodity price movements which could increase tariffs
even further. We believe that these increases will make it harder for supply companies to
pass on their costs to customers and will negatively impact the margins they can achieve
going forward. We also believe that this will be exacerbated by the issue of affordability – with
customers likely having to spend more of their disposable income on their energy bill in the
future.
NH
According to our analysis, a typical UK energy bill could rise from the current level of
GBP 1000 per year to over GBP 2000 per year by 2015. As investment occurs, bills could
double every five years until 2020, in our view. According to DECC, “fuel poverty” is defined
as any household that needs to spend 10% or more of its income to adequately heat the
home. Since 2004, the number of households defined in this way has increased every year.
Given the uncertain macroeconomic outlook, we do not believe that wages will increase
anywhere near as much as energy bills – meaning that more households will be defined as
fuel poor.
GBP 1000 per year to over GBP 2000 per year by 2015. As investment occurs, bills could
double every five years until 2020, in our view. According to DECC, “fuel poverty” is defined
as any household that needs to spend 10% or more of its income to adequately heat the
home. Since 2004, the number of households defined in this way has increased every year.
Given the uncertain macroeconomic outlook, we do not believe that wages will increase
anywhere near as much as energy bills – meaning that more households will be defined as
fuel poor.
NH
and that’s bad for Centrica
Centrica PLC (CNA:LSE): Last: 334.30, up 0.5 (+0.15%), High: 336.20, Low: 331.50, Volume: 1.94m
NH
We believe that the consensus view currently assumes that energy suppliers will be able to
earn a long-run margin of 6-7%. In our view, rising environmental costs and higher network
charges will cause energy bills to rise significantly over the next few years – at a significantly
higher rate than household incomes. We therefore believe that suppliers will find it ever
harder to pass on their input costs to the detriment of margins. In our models, we assume a
long-run margin of 5%.
earn a long-run margin of 6-7%. In our view, rising environmental costs and higher network
charges will cause energy bills to rise significantly over the next few years – at a significantly
higher rate than household incomes. We therefore believe that suppliers will find it ever
harder to pass on their input costs to the detriment of margins. In our models, we assume a
long-run margin of 5%.
NH
Right
NH
I have a lunch
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must dash
NH
see you tomorrow Rabble
NH
thanks for logging on
BE
Cheers for all your comments. Afternoon all.
Interserve PLC (IRV:LSE): Last: 263.00, up 29 (+12.39%), High: 267.75, Low: 239.00, Volume: 1.45m
NH
Brewin Dolphin
NH
Interserve – Michael Parkinson/James Woodrow – (0845 059 6529/6638)
Year End Trading Update – Recommendation: Under Review (Previously ADD – since 15/11/10) 12m Price Target: Under Review (Previously 220p) Current Price: 234p – Market Cap: £285.9m
· Trading in line with expectations – Overall trading is reported to be in line with the Board’s expectations. Our 2010 forecast of PBT of £68m/EPS of 38p is line with consensus and is unchanged following this morning’s statement.
· £0.5bn of contract wins – £0.5bn of new contract wins have been announced across a range of sectors, taking the order book to over £5bn, £1.5bn of which relates to 2011 (over 80% of our 2011 revenue forecast).
· Strong cash performance – Year end debt of £53m is well below our forecast of £81.5m due to a strong working capital performance and lower than forecast net capex. Average net debt was less than £45m.
NH
2011 expected to be flat on 2010 – 2011 is expected to be flat on 2010. Our forecast of a reduction in PBT to £60.5m/EPS 33.2p could be too pessimistic. We will review our forecasts in detail following this statement.
· Shares look good value – The shares trade on a 2010 P/E of little more than 7x and have a yield of 7.7% at the current level. The lower than expected net debt is a clear positive. We expect to increase our 12m Price Target following a review of forecasts.
NH
and we are done