FT Alphaville » Markets Live transcript 20 Jun 2011

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Markets Live transcript 20 Jun 2011

Posted by Neil Hume on Jun 20 11:03.

Markets Live chat transcript for the chat ending at 11:36 on 20 Jun 2011. Participants in this chat were: Neil Hume, FT bryce.elder

Hola

you ‘orrible markets rabble

welcome to Markets Live

a discussions of all things market

and some things that are only loosely related

Bryce is here

and can you give me a moment

while I turn the Alphaville TV

on to the test match

Oh good. Cricket.

While Neil’s doing that, I’ll give the FTSE update

We’re down 40 points

At 5675

Off the lows of the day

(117- 3. Anderson bowling)

yep

we are off the lows

not really sure why

everything is on hold now

ahead of the two Greek votes

confidence vote tomorrow

and the bailout vote

on June 27th

sorry

28th

and today’s main news is that the Eurogroup have said to Greece

you can have the money

if you agree to these new austerity measures

Details?

hang on

will have to get the statement

that came out in the early hours of the morning

these are the most important bits

However, given the difficult financing circumstances, Greece is unlikely to regain private market access by early 2012. Ministers agreed that the required additional funding will be financed through both official and private sources and welcome the pursuit of voluntary private sector involvement in the form of informal and voluntary roll-overs of existing Greek debt at maturity for a substantial reduction of the required year-by-year funding within the programme, while avoiding a selective default for Greece.

On these conditions, Ministers decided to define by early July the main parameters of a clear new financing strategy.

Ministers call on all political parties in Greece to support the programme’s main objectives and key policy measures to ensure a rigorous and expeditious implementation. Given the length, magnitude and nature of required reforms in Greece, national unity is a prerequisite for success.

there you go

so basically

Friday’s rally was premature

and not much has changed

will the Greeks pass this or not?

Um ……. possibly.

I wouldn’t be a bit surprised to see the schedule pushed back again.

quite

anyway a quick bit of comment on Greece

and lets’s push on

I detect a certain ennui on the part of the rabble

with things Greek

here’s the ever readable Gary Jenkins at Evo Securities

On Friday it appeared that Germany had been talking loudly and carrying a small stick as they backed down on their demand for burden sharing by bond holders, agreeing to a voluntary roll over of debt rather than maturity extensions. Following a meeting with French President Sarkozy on Friday Chancellor Angela Merkel said “What’s crucial is the participation of the private sector on a voluntary basis, and the Vienna Initiative is a good foundation, and I think we can put something forward on this basis”.

The Eurogroup statement stated that finance ministers agreed to the ‘pursuit of voluntary private sector involvement in the form of informal and voluntary roll-overs of existing Greek debt at maturity for a substantial reduction of the required year-by-year funding within the programme, while avoiding a selective default for Greece’. It remains a bit of a mystery why anyone would voluntarily agree to roll over the debt without any credit enhancements and we therefore find it questionable whether a ‘substantial reduction’ can be achieved this way.

Euro area finance ministers delayed the approval of the next tranche of funds for Greece when meeting last night. They want to see Greece approve the requested budget measures and privatisation plans before committing further funds. We expect a temporary agreement could be reached to provide funds if the Greek government fails to win tomorrow’s confidence vote or if it does not get parliamentary support for the budget measures (vote due 28th June). The alternative is a very messy default. One wonders whether the EU has done any work on increasing the size of the EFSF / ESM and announcing that it will be used to support Spain, Ireland and Portugal plus the European banking sector if required in the event that Greece does default.

Greek Prime Minister Papandreou’s new government was announced on Friday with the finance ministry now headed by Evangelos Venizelos. A vote of confidence in the government has been called and the first session of the debate took place yesterday with the final session scheduled for tomorrow 6pm (Greek time).

of course

Greece is not the only thing happening this week

we also have

FOMC rate decision on Wednesday followed by Bernanke’s press conference key

a sort of end of QE2 Party

I was pondering whether it’s worth another ML for that

the last one went well

and was quite fun

especially that auto text system

we found for the Q&A

if there’s interest from the rabble

we’ll do it

11:12AM

Right before we look at stocks a few questions to answer

Bryce

what’s Milky’s limit?

He was on ten an hour

Whichy should be plenty

oh dear

he’s used up half in the first 12 minutes

sorry make that six

and he’s not even mentioned Lloyds

yet

Well, limits are off for the moment.

And, providing he doesn’t do anything silly, they’ll stay that way.

So, let’s be honest, they won’t stay that way.

as for Telecom Plus – Nately not looked at that for a while. But when we have, we’ve not liked it

Type Telecom Plus into Google and see what it autosuggest autosuggests. I’ll say no more.

hang on

I want to try that

I think I know the answer

Anyway, let’s push on.

Risers or fallers?

(Milky they weren’t. that was the London listed stub that was briefly off 11%)

fallers of course

where shall we start

I know

welding

I love a bit of welding

Charter International Plc (CHTR:LSE): Last: 586.50, down 131.5 (-18.31%), High: 613.00, Low: 571.50, Volume: 2.35m

yes

big profits warning from Charter today

they are blaming there welding business ESAB

Europe has increasingly suffered from slowing economic trends against the background of Eurozone debt crises, austerity measures, and uncertainty with the result that conditions in welding markets have deteriorated.

Rising input costs, coupled with a more competitive environment have meant that the strong performance ESAB experienced in March has faded during the last two months. Against this background, ESAB’s trading performance for the first half is now expected to be in line with the second half of 2010. Although consumables volume growth has been strong, this has been driven by solid wire sales particularly to the automotive sector, whilst electrode volumes in Europe are down on last year. Other markets have performed better, with strong performances in Russia, Middle East and Asia. South America and India are a little behind last year in trading. Standard Equipment has shown a strong revival, with sales up 23% globally, albeit with cost pressures on margin. Cutting and Automation have recovered from the losses incurred in the first half of 2010, although trading has been weaker than expected.

basically blaming events outside their control

and that’s sparked a sell off

in the rest of the engineering sector

Bodycote PLC (BOY:LSE): Last: 330.40, down 21.7 (-6.16%), High: 346.00, Low: 327.40, Volume: 234.90k

Cookson Group PLC (CKSN:LSE): Last: 619.50, down 35.5 (-5.42%), High: 641.50, Low: 612.00, Volume: 2.17m

on the basis

that the lower quality end of the industrials always

warn first

however,

analysts aren’t buying this

they reckon the reason Charter has warned

is they hiked prices to aggressively

rivals

didn’t and they got all the business

for example

here’s what one analyst had to say

Charter (not covered) – a profit warning out of ESAB. Europe weak with rising costs and a more competitive environment. It does appear to us that these are issues within ESAB rather than European trading as every other company we see comments on the continuing strength in the region – Bodycote is a good example. We understand that downgrades are likely to be in the 13% to 15% region and come in at around 65p. As already said, we think this is a Charter issue rather than one having read across for the peer group. The message out of Lincoln Electric is very different – in its Q1 numbers it delivered $1.00 against consensus of 89c.

Hm.

So Charter’s excuses about costs and deterioration over the last few weeks may not be the portent they appear.

Interesting.

For welding, that is.

as interesting as it gets

anyway

the stock has been hammered whatever the real reason for the PW

and

there are some pretty grim downgrades

coming through

here’s Citi

Cost Cutting Should Help 2012 – A £30m cost saving program is being initiated with a 12-18 month timeline for delivery. To this end a £25m exceptional will be booked this year. The cost savings should reduce the 2012 forecast impact.
Howden Better – The Howden business appears to be trading c10% ahead of our expectations driven by the energy and oil & gas sectors. Further progress is expected looking out into 2H11.
Consensus Downgrades likely 10-15% in 2011E – Management commentary suggests an EBITA of c£150m and in turn this implies EPS in the 65-70p range for the year which versus consensus EPS of 76p (according to Reuters) suggests a 10-15% downgrade.
Share Price Weakness is No Surprise, P/E not that High – The stock is off significantly this morning and given the disappointing nature of today’s announcement this is not that surprising. However, an implied consensus P/E of c9x is not that aggressive versus our sector coverage capturing much of the weakness.

Howden

is that compressed air?

Charter really is the most exciting of businesses

Yup – Howden Compressors.

wow

so that bits OK

welding isn’t

So – that’s our annual mention of the welding industry out of the way.

Where now?

right

a reason for the rally in the market

11:25AM

apparently this just flashed up

We then appeared to have settled into a tight 1.4200/20 range until Bloomberg flashed up the following headline: *GREECE’S OPPOSITION AGREED ON UNITY GOVT

This caused an initial spike up to 1.4240 as short-term positions got squeezed.

but apparent;y it’s rubbish

The headline was somewhat misleading. “Last word on this headline kerfuffle: The comments come from an interview with Greek opposition (Nea Dimokratia) Economy Spokesman Mitarachi. He does not state that any agreement has been reached with the government, rather he sticks to the usual opposition talking points,” says G10 . FX Strategist Todd Elmer.

The headline on opposition agreeing to unity government appears to come from a comment that such an agreement was being discussed but ultimately was not reached,” he adds.

there you go

rubbish

but we are going to get more and more of this

FTSE update – the rally continues.

Now down 34 points

At 5861

And — if only to rejoin the left to the right — what’s this about an RBS placing?

Royal Bank of Scotland Group PLC (RBS:LSE): Last: 39.45, down 0.84 (-2.08%), High: 39.53, Low: 38.90, Volume: 33.49m

yes

RBS placing RBS

for RBS staff

346m shares

that’s why they were rubbish at the open

trying to get term sheet thingy now

Royal Bank of Scotland Group PLC (RBS:LSE): Last: 39.44, down 0.85 (-2.11%), High: 39.53, Low: 38.90, Volume: 33.52m

probably explains

why the other banks were worse first off

Lloyds Banking Group plc (LLOY:LSE): Last: 47.32, down 1.07 (-2.21%), High: 47.86, Low: 46.75, Volume: 46.74m

Barclays PLC (BARC:LSE): Last: 251.85, down 5.35 (-2.08%), High: 255.20, Low: 205.63, Volume: 12.19m

I wonder what 346m shares in RBS equates to?

1 per cent of the bank?

Less, I’d assume.

58bn in issue.

Though free float’s a bit tighter, obviously.

right

here’s the terms of that

I think it was all done at 39p

RBS is acting as a sole bookrunner on the below transaction:

Underlying: The Royal Bank of Scotland (“RBS”)
Selling shareholders: Computershare on behalf of RBS employees under deferred compensation arrangements
Listing: London Stock Exchange
Transaction structure: Accelerated Bookbuild of c. 354.6m secondary shares
Selling commission: No secondary commissions
Stamp duty is payable

Use of proceeds: There are no proceeds to RBS

Selling restrictions: Private placement exemption to qualified institutional investors in the US

Timetable: June 20th – Deal announced, books open
June 23rd – Settlement

deferred compensation arrangements

evil bankers being allowed to sell

after holding shares for a few years

is that what it means

or is this branch staff?

Guess so.

hang on a moment

just spotted one Paul Murphy

Former FT Alphaville editor and founder of the site. Now in charge of something called FT Tilt.

in the office

back at No1 Southwark Bridge

Striding purposefully towards lunch.

Good to see him back on these shores. Will try and get him to do a session some time soon.

Wednesday could be an idea

Ace.

I can’t make the session

and will be working at home

let’s see if he fancies dropping by

Right – anyway, let’s return to the market, shall we?

in other bank news

this just popped up

BN 06/20 10:32 PNC Agrees to Buy RBC Bank (USA) for $3.45 Billion
BN 06/20 10:31 *PNC SEES DEAL IS $112M DISCOUNT TO TANGIBLE BOOK VALUE

NC US
BN 06/20 10:31 *PNC SEES FUNDING DEAL WTIH CASH, DEBT ISSUANCE, PFD STK OFFER
BN 06/20 10:31 *PNC TO BUY RBC BANK (USA) FROM ROYAL BANK FOR $3.45 BLN

NC US
BN 06/20 10:31 *PNC SAYS DEAL ADDS AOBUT $19B DEPOSITS, $16B LOANS

NC US

it will give the Canadians more money to spend

possibly in the UK

and

Lloyds

lots of comments on Lloyds in the Sunday papers

the big strategy review is next week

and everyone is trying to get a line on it

the Telegraph reckon

we will hear news of more cost cutting

and that Halifax will be its lead brand

which might explain

why those incredibly annoying adverts are still on TV

the radio station ones

There’s a magnificent dubstep rework of the Halifax adverts doing the rounds.

Will dig it out in a bit.

which one is that

the one where the handle falls off the mug (very funny that)

or the Vanilla Ice car keys one?

All in combination. You need sound.

http://www.youtube.com/watch?v=1K9HlT9xN44

actually good point

what happened to Howard?

was he credit crunched by Eric Daniels?

http://en.wikipedia.org/wiki/Howard_Brown_%28Halifax_Bank%29

No record after 2008

MIA

Well, he was moved into PR.

Which is the same thing really.

Anyway, returning to Lloyds.

(MacRus – no. North of London)

yes

I have a bit of comment

on Lloyds

and what Antonio will say

next week

More speculation as Lloyds strategy day draws near
Over the weekend there was what looks like a well informed story in the Sunday
Telegraph about Lloyds new plans. Specifically the story highlighted that on the
30th June Lloyds will announce plans to:

• • Push the Halifax to become the group’s prime retail brand at the same
time as retaining the Lloyds and Bank of Scotland branch network;

• Set a long-term cost:income ratio target as low as 45pc;

• Provide a firm commitment to retaining Scottish Widows and Scottish
Widows investment partnership, its fund management arm;

• Detail an efficiency drive expected to yield as much as £2bn in costs
which will see the disappearance of thousands of jobs.

and we could add

talk down Lloyds again

and warn of lots of bad news

but I guess that’s obvious by now

In our view, there is a lot of negative speculation around the Lloyds strategy day.
People are expecting significant write-downs as the new CEO boosted
provisioning in Ireland, UK CRE and UK mortgages. This combined with broader
expectations around the sale of Widows, project Verde separation costs and a
further restructuring charge have hit the confidence in the book value and sent
the shares spiralling to 48p.

In our recent report “Back to basics” (8 June 2011), we set out our expectations
for cost cuts at £1bn and a significant stress test designed to give some
confidence in trough book value. The £1bn of cost cuts was consistent with the
results from investors polled at the start of June. With £1bn of cost savings we
estimate that Lloyds could still generate 9p of EPS by 2013 (8p ex 800 branches),
but would be left with a cost income ratio of 47%. If we increase the cost saves to
£2bn then this would boost the headline EPS to 10.2p and give a cost income
ratio of 42.5%.

In our view investors are generally accepting that the Lloyds franchise is capable
of generating an ROE > COE, justifying a multiple above book value. The
problem is that at the moment there is no confidence in the book value. If
management can stand up at the end of June, not imply big hits to book then the
shares should recover quickly to 56p (the 1Q11 T/NAV). If management set out a
credible plan to improve returns then (as in 2010) the shares should be capable
of justifying a multiple above book value.
With the market underweight and expectations extremely low, we reiterate our
stance that people are taking a risk being underweight ahead of the investor day
and with the stock trading at 1x our bear case EPS of 48p, we reiterate buy.

chew on that Milky

Lloyds Banking Group plc (LLOY:LSE): Last: 47.18, down 1.21 (-2.50%), High: 47.86, Low: 46.75, Volume: 47.68m

11:41AM

OK then

on to the day’s other big faller

Supergroup PLC (SGP:LSE): Last: 831.00, down 69 (-7.67%), High: 900.00, Low: 810.00, Volume: 328.00k

Right then.

And he hasn’t even started speaking.

nope

chairman first man up at midday

then some lunch

then the CEO

another PR disaster

big strategy day

bring all the analysts down to the HQ

but before all that

issue a statement that scares everyone

Yeah – difficult to make much of today’s statement.

The Group’s strategy remains on track, and trading across the Group as a whole is in line with management’s expectations. Within that, retail growth remains approximately at the same level as in Q4 but has seen a marked improvement over the last three weeks and is complemented by strong wholesale growth.

So – still quite rubbish but not quite so rubbish lately.

I’m not sure what that means.

nothing

it should have bounced back before now

and in anycase

the worrying thing is store openings

they have to open loads of them in the second half of the year

to meet targets

6-10 stores due to open in H1

but consensus forecasts are based on

20-25 new stores p.a.

so there’s a lot to do

and the above

may or may not include

the massive store on Regent Street

which they have confirmed the lease on today

And it seems to have lost a floor.

Could’ve sworn it was five floors.

Now it’s four, according to today’s statement.

We are delighted to announce that we have exchanged contracts, subject to landlord’s consent, for an iconic site in Regent Street which will become our flagship London Superdry store.

This part of Regent Street is set to fundamentally change with the opening of Hollister and Burberry flagships and the addition of a new Abercrombie & Fitch store, helping to transform a previously strong pitch in the heart of the West End into a major fashion location.

The store will comprise 59,000 gross sq ft (of which 38,000 sq ft is trading space over four floors), which will be used as an international showpiece and our London showroom. Our aim is to open towards the end of the financial year, although we are planning a phased approach for the site as a whole.

(Milky – Merrill. who else is that positive on Lloyds?)

yes

a floor seems to be missing

and only

38,000 sq ft

to fill with their range

i can’t believe the range is big enough for that

so what will they fill the store with?

a barbers?

bar?

some male pampering spa

(Milky – OFF)

I’m also baffled as to this phrase “London showroom”

ZAP

Warning to rude and abusive commenters – your ability to comment will be terminated immediately and permanently, without warning. Henceforth, FTAlphaville has instituted a One Strike and You Are Out policy. We’ve had enough. We are going to clean up these pixels once and for all.

Do clothes need a showroom?

Showrooms are where agree terms on the rustproofing and mag wheels. I just do not get this.

So whould we put some comment up?

yeah

bull and bear I guess

and make the point

that when Dunkerton starts speaking this afternoon

the stock could do anything

right

here’s

from Wayne Brown at Collins Stewart

The update does not re-assure on the timing of openings
The company has also confirmed that the opening programme for FY 2012E
will be H2 weighted with only 6-10 stores due to open in H1 (3 in Q1) with a
significant number of new stores to open before Christmas . One of our
chief concerns is that consensus forecasts are predicated on a faultless
execution of an aggressive development programme of 20-25 new stores
p.a. This statement provides confidence that all is-on track though H2
weighted, in-line with our below consensus expectations. With increased
variability in lead times, and differences in expected sales contributions from
site to site, the shares are likely to be volatile between quarterly updates

The group does not disclose LFL sales and the lack of visibility over
underlying retail momentum is unhelpful. The Regent Street flagship, which
is due to open towards the end of the financial year, will cover 59k gross sq
foot of which only 64% is trading space. The cost as well as the premium
attached to this site has not been disclosed but we believe is material. If
Supergroup manage to achieve their growth targets then the shares look
cheap, but the current rating sets expectations high. The anticipated opening
of 50 international franchised stores versus 44 in FY 2011 is encouraging.
Whilst the shares are likely to react positively today there is no substantial
new news to change our overall investment thesis. One should also remain
mindful that directors , who hold 65% of the shares, lock-ups expire in
September

and here’s Supergroup apologist Nick Bubb

who gets to sit next to Dunkerton at lunch

(actually I made that up)

SuperGroup (Buy): The bears have had a field day in recent weeks, with rumours of poor trading helping to drive down the SuperGroup share price to absurdly low levels. The short position is about 9% of the free float, but that can be quickly reversed and, in theory, if our current year PBT forecast is intact, the shares could double as quickly as they have halved. The message from the company today, in the detailed statement put out ahead of today’s Analysts Day at HQ in Cheltenham (which starts at 12 o’clock), is that things are on track in fact and they sound excited about prospects

The key news is that they have seen a “marked improvement” in UK Retail trading in the last three weeks and though the implication is that May was a weak month, the strong June trading is put down to the excellence of the new summer ranges, so the presentation today by James Holder the Brand Director will probably be the highlight of the analysts trip (although the company is also keen to trumpet its Overseas expansion). Our current year £76m PBT forecast (y/e April) may need to be revised down slightly, after the finals on 13 July, to allow for the pre-opening costs of the big new Regent Street flagship for Superdry, but it is broadly in the right area and a P/E of about 13x is much too low for a company growing at over 40% a year. The shares closed at 900p on Friday, but so far today have fallen back towards 850p…We have our 1725p price target under review, for obvious reasons, but it may not actually be that far away from fair value for the stock, after today’s very reassuring news, so we reiterate our Strong Buy on SGP.

there we go

it will be really interesting to see how things go this afternoon

I don’t think Supergroup really know what they are doing

when it comes to communicating with the market

11:53AM

Where now?

Power generators?

That’s certain to enliven the ROTR.

Who seem to have drifted off already.

Aggreko PLC (AGK:LSE): Last: 1,855, down 56 (-2.93%), High: 1,901, Low: 1,837, Volume: 373.50k

not aggreko

I think Charter is more interesting than temporary power supply

You may well be right.

So let’s jump through this quite quicky.

pls

So – trading remains pretty good.

But dollar weakness isn’t.

let me guess

no upgrades then

this stock massively valued

Bingo.

so a bit of profit taking kicks in

Exactly.

You can’t hold guidance when your PE’s in the 20s.

Numis provides the overview.

In today’s update management maintained guidance for the year with an underlying
trading improvement in Q2 offset by a weaker $. As such we have left our forecasts
unchanged. Although encouraged by the performance of the Local business where
revenues increased 17%, management re-iterated its dependency on the peak
summer season. The AIPP business continues to make strong progress with
underlying revenues +22% and a positive outlook leading to increased cap-ex. The
group now expects to spend £420m this year, which is £100m more than indicated
some 3 months ago. This underpins profit expectations for 2012 and beyond. While
we are great admirers of the management and business model we are conscious of
value. With the shares trading on an EV/EBITA of c.17x the stock is priced for high
growth and high returns. An EV/IC of c.5x suggests a post-tax ROIC of 16% and 6%
growth forever.

(@Big John – Yellow card)

please no more

we must be done with this

We are.

11:58AM

Right

before we get back to stocks

a quick trip down memory lane

it was 20-years ago today…

Finally, 20-years ago the then British Chancellor John Major proposed a new European currency to circulate alongside national currencies.

Major’s plan was a response to the proposal for a single currency and European bank. “The Conservative Government is sceptical about full monetary union and regards this new proposal as a way of putting forward a genuine alternative,” is how the BBC remembers it.

http://news.bbc.co.uk/onthisday/hi/dates/stories/june/20/newsid_2516000/2516891.stm

seems apt

given the Der Spiegel obit on the euro today

http://ftalphaville.ft.com/blog/2011/06/20/599301/an-obituary-for-the-common-currency/#comments

12:00PM

Time for something bullish

a riser

Inmarsat PLC (ISAT:LSE): Last: 586.50, up 22 (+3.90%), High: 599.00, Low: 578.00, Volume: 987.54k

Bryce can you explain pls

Curse of the market report, innit.

what, write it down

it goes up the next day

Exactly. Wrote on Friday about its problems with GPS

And, at about midnight, Lightsquared reportedly signs a network deal with Sprint

I see

Lightsquared being Philip Falcone’s plan to build a nation wide mobile phone network in the USA

using the existing system

and satellite broadband

Yeah – and there remains two bits of news here.

(@Shovel – nope. Had people asking about that today and we have no idea)

(Asking around though)

The Sprint tie-up

And the fact that the network seems to monkey around with military positioning systems.

that’s not good

So, while the former news is good news for the actual roll out of the network

the latter really needs to be resolved before it can operate.

hmm

more regulatory delays then

Possibly — Bloomberg did a big report on Friday

citing a federal public meeting

That said Lightspeed would broadcast into space

And screw up all sorts of mission critical GPS

All we know is that Lightspeed’s been given another fortnight to get its data in order

To submit to the Feds

I see

Anyway, that was Friday’s news

(@Mextor – where are you going?)

Let’s have a bit more on this Sprint deal shall we?

JP Morgan’s quite good on ISAT.

According to Bloomberg, Sprint and Lightsquared have agreed on a joint
network rollout deal stretching over 15 years worth US$20bn. We see this
as an important step for L2 since the company gains a large new customer
and shows the trust Sprint has in L2 that funding for the network is
available and that the GPS interference issues will be solved. We see the
announcement as positive for Inmarsat since it increases the probability
that the annual lease payments of US$115m are sustainable longer term.
We believe the L2 business could be worth 2GBP per Inmarsat share if the
spectrum lease payments are sustainable.

Sprint are in something of a challenged position, no?

The GPS interference issues are still unsolved, but Sprint’s agreement
adds further weight that a solution will be found and shows the
confidence Sprint has that this issue gets solved. L2 is currently running
several tests on the interference issue and has been granted an extension
of the filing period until 1 July 2011 to provide the results to the FCC.
The tests so far by other parties indicate that the GPS signals are
interfering with L2 frequency signals. We understand that the GPS
terminals are squatting on the Lightsquared frequencies, but the GPS
system is used by military and security services as well as positioning
systems and therefore to widely used to ignore as an issue. This is an
issue that has to be solved if the network were to allowed to operate. So
far, the FCC has granted L2 a waiver to build the network before the
interference issues are solved, but not to operate it.

after the T-Mobile/AT&T deal

Yeah – Sprint look subscale.

A distant third in the US, I think.

So they seem to be hammering away at 4G as some kind of solution

Build the fastest network rather than the biggest.

Hence the Lightsquared deal, I guess.

12:10PM

Time for some fantasy M&A?

Is there any other type?

at the moment, no?

every rumoured deal fails to materialise

and the companies no one ever talks about

Laird PLC (LRD:LSE): Last: 199.50, up 2.2 (+1.12%), High: 200.00, Low: 194.70, Volume: 1.12m

get bid for

Avis Europe PLC (AVE:LSE): Last: 310.70, up 0.2 (+0.06%), High: 313.40, Low: 310.50, Volume: 7.24k

here’s the latest idea

Betfair Group PLC (BET:LSE): Last: 826.00, down 24 (-2.82%), High: 845.00, Low: 825.00, Volume: 63.40k

should merge with

Sportingbet PLC (SBT:LSE): Last: 41.00, down 1.25 (-2.96%), High: 42.50, Low: 41.00, Volume: 1.21m

to create

Fairly Sporting

Ouch.

Also, that’s a rubbish idea.

and name

Betfair’s an exchange and Sportingbet’s a broker. It’s like saying Winterfloods should merge with LSE.

one runs a betting exchange, one if a fixed odds bookie

Exactly.

There ARE some synergies. But there really shouldn’t be.

So who’s idea’s this?

Numis

In this note we consider the merger of Betfair and Sportingbet to create what we
have whimsically, but tentatively, christened “Fairly Sporting”. Having considered
the strategic challenges facing both businesses, we believe that a merger would
create a better business than either company on its own, and more quickly than
could be delivered by the companies’ own strategic plans.

Betfair has a unique mechanism for pricing sporting odds, a cash pile and a relatively
low risk geographic business profile. We believe it needs a way to integrate fixed-odds
bets into its product range in order to match the depth of product on offer by
bookmakers and to give it a product with which to enter markets where new regulation
blocks betting exchanges.

personally I can’t see the guys at Betfair

buying into this one

but still

here’s the rest of the note

Betfair, by merging with Sportingbet, would in one step, have access to the first class
fixed-odds bookmaking product which it needs to round out its product depth and avoid
a lengthy, expensive and risky process of building it internally.

that said there’s one benefit

Sportingbet does have a large business in Spain and Greece

Sportingbet is a leading fixed-odds bookmaker. It is already a market leader in Spain
and Greece. However regulatory risks in those countries, and in Turkey which is the
largest single profit contributor, weigh heavily on the stockmarket valuation. As part of
Fairly Sporting, Sportingbet would have the opportunity to use the betting exchange as
a risk management tool which would allow it to confront competitive pressure on price
by always being able to offer market-leading odds at low risk to itself.

The acquisition of Sportingbet by Betfair at 60p per share (a 47% premium) in a mixture
of cash and shares would result in a 35% uplift in FY13E EPS for Betfair shareholders.
We believe that Fairly Sporting shareholders would have a fairly sporting chance of
making money from a re-rating. Valuing Fairly Sporting’s pro-forma FY12E numbers
on an EV/EBITDA multiple of 9x results in a per share valuation of 1,382p; a P/E
multiple of 13x, results in a per share valuation of 1,311p.

Does Betfair want a fixed odds platform?

It’s never mentioned.

There’s no reason I can see why it should.

(wicket – Swan. LBW, Sri Lanka 185-4)

The costs saved by the merger would be … what …. head office maybe?

Nah – not buying this at all.

don’t shoot the messenger

I’m just bringing you some fantasy M&A

in the absence of any RAW

RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.

today

right

we need to push on

another possible deal

Premier Foods PLC (PFD:LSE): Last: 26.16, down 0.95 (-3.50%), High: 27.08, Low: 26.00, Volume: 2.50m

apparently they might be about to sell another business

which leaves me wondering

what exactly will be left

anyway

here’s City on tis

Sharwood’s sale? – The Mail on Sunday ran an article over the weekend suggesting the privately-owned Veetee Group is preparing a bid for Sharwood’s. We note that the two most recent disposals that were picked up by the press, Quorn and the Canning business, resulted in Premier Foods issuing a formal statement in the wake of the press speculation which confirmed talks were occurring. As yet, there has been no statement from Premier Foods, though we acknowledge this does not preclude the possibility of a bid being prepared. We also note that Sharwood’s is a ‘Drive’ brand for Premier Foods, whilst so far disposals have concentrated on less core parts of the business.

Potential value – Premier Foods disclosed Sharwood’s sales as £65m in 2010 and £62m in 2009. We would therefore expect a sale value in the order of c£100-120m for the brand, based on historical sector multiples for local brands. Given current interest rates, we would expect a potential disposal to be dilutive to earnings, as has been the case for both Quorn and the Canning business, and on these metrics we would expect dilution to be low- to mid-single digit.

Deleveraging – We currently forecast Premier Foods’ average net debt to be just over £1bn for 2011. A potential disposal of Sharwood’s, therefore, would help bring this down. Importantly, it would also speed up Premier Foods’ ability to reach its self-imposed target of 3.25x average net debt/EBITDA.
Stock still looks cheap – The shares have been weak in the wake of the Investor Seminar in mid May as there has been no immediate catalyst for the stock. We expect H1 results on 5th August to refocus attention on the stock. Any further disposals made should be a positive catalyst – Premier Foods does not have the luxury of being able to accept a price that would be detrimental to its net debt/EBITDA situation. Despite being EPS dilutive, therefore, we would expect any disposal to be taken as positive for the deleveraging story, as was the case for Quorn and the Canning business. We retain our Buy rating and 40p price target.

12:18PM

Right

quick bit of HPC 2011

which seems to have bypassed the London area completely

By Scott Hamilton
June 20 (Bloomberg) — London home sellers raised asking
prices to a record in June as demand from overseas buyers for
luxury properties in the capital’s center began to “spill
over” into some suburbs, Rightmove Plc said.
Average prices in London jumped 1.8 percent from May to
438,622 pounds ($708,680), the London-based operator of the
U.K.’s biggest property website said in a report today.
Nationally, values increased 0.6 percent, according to
Rightmove, which added it doesn’t expect gains to be sustained.

While Britain’s property market is struggling to build
momentum as banks limit lending and budget cuts undermine
confidence, the exception is London where foreign buyers are
seeking homes in areas such as Kensington and Chelsea. Rightmove
said a lack of mortgages and a seasonal slowdown means national
values will probably fall about 7 percent in the second half
after an 8.1 percent gain in the first six months.

which brings us

to the Flowers plan mentioned by Ando

mental

and an ex-FSA boss involved with it as well

Queen of the quangos, no less.

Sir Callum McCarthy, the former chairman of the City regulator, is working on plans for a revolutionary mortgage business that he claims could kickstart the British housing market.

The complex scheme, backed by the controversial American private equity firm JC Flowers, would see savers frustrated by low interest rates bankroll first-time buyers struggling to get on the housing ladder.

Castle Trust would offer homebuyers a 20% deposit to buy a house in exchange for 40% of any profits made on the eventual sale. It would also share in any losses if house prices fall.

The cash to put up the deposits would come from bonds sold to retail investors, whose returns would be dictated by the performance of the Halifax house price index. The complex business model is believed to be unprecedented. McCarthy has yet to gain approval from the Financial Services Authority for the project, although it would not require a full banking licence.

there are many many levels

on which this is not a good idea

It’s not my place to give investment advice, but seriously ………

http://www.thesundaytimes.co.uk/sto/business/Finance/article651946.ece

and look at the people behind it

Other non-executives include former agriculture minister John Gummer and Dame Deirdre Hutton, an HM Treasury director and ex-deputy chair of the FSA. The plan is yet to receive FSA approval.

was this idea knocked up over lunch

Flowers and Callum trying to come up with ways to get the housing market moving

John Gummer. Best remembered for feeding his daughter a hamburger during the BSE panic.

Now he’s doing the equivalent with first-time-buyer mortgages.

This is terrible.

one more housing data point

CML numbers are out

here’s Howard Archer with a break down

The Council of Mortgage Lenders reported that gross mortgage lending improved modestly in May, having been held back in April by the later Easter this year and by the extra day’s bank holiday resulting from the Royal Wedding.

Specifically, gross mortgage lending climbed to £11.3 billion in May after dipping to £9.8 billion in April from £11.4 billion in March. Even so, it was still below the March level and up only 1.2% from the May 2010 level. Furthermore, the CML reported that “Despite a modest pick-up in overall lending activity during May, lending for house purchase is running below year earlier levels.”

Ongoing sluggish housing market activity underpins our belief that house prices will end up declining by some 10% overall by mid-2012 from their 2010 highs. This implies that they will fall by around 5-8% from current levels depending on which house price measure you take. Not only do economic fundamentals remain difficult overall for the housing market but the May survey from the RICS (Royal Institute of Chartered Surveyors) indicated that more houses are coming on to the market thereby diluting the possibility that a shortage of properties could provide significant support to house prices. And the RICS survey also showed that buyer enquires dipped in May.

so there’s obviously a gap

but I don’t think this idea is it

(@Good bye Big John)

ZAP

12:25PM

Crikey is that the time

we have a lunch at 12.45pm

at this place

http://www.northbankrestaurant.com/

so we better hurry

Well, it may have improved.

So – what’s moving?

Futura Medical PLC (FUM:LSE): Last: 85.75, up 1.75 (+2.08%), High: 92.75, Low: 85.75, Volume: 299.77k

Ok then. Pun amnesty on the right.

looks like their condom for occasional impotence will soon get the nod

You have 3 minutes, ROTR. No more.

Details then?

hang on

I will let

Matrix explain as we are running out of time

The relevant Notified Body within the EU has recommended CSD500 for review panel approval, which means that Futura Medical should finally be granted the CE mark within a few weeks. This is a major milestone for the business, and we are upgrading our target price to 181p from 137p and reiterating our BUY rating.

• CSD500 has been recommended to the review panel for final regulatory approval and CE mark after Futura resolved all outstanding points in the regulatory dossier; a decision is expected within the next month.
• The CE mark will trigger a milestone payment from Futura’s licensing partner, Reckitt Benckiser, which has exclusive global rights, and enable CSD500 to be launched in 29 European territories and others that recognise the CE mark.

• CSD500 is a latex-based condom, which contains a small amount of GTN (glyceryl trinitrate) on the inside of the condom, within the teat. The condom is being developed as a condom safety device to prevent condom slippage or breakage during intercourse and as a treatment for occasional impotence.

• In August 2007, SSL and Futura published the results of a user study for CSD500, which demonstrated that the product could help men to maintain a full erection when wearing a condom. The study compared the use of CSD500 with a standard condom, and the results of the study were highly statistically significant. Secondary endpoints were also positive. Importantly, the study was a gold-standard, double blind, cross-over study and formed part of Futura’s regulatory package for Europe. In these clinical studies, the product was able to induce efficacy in users within five minutes and demonstrated efficacy in a high number of patients, at a similar level to the branded product, Viagra.

sorry

this is the dysfunction condom

The Viagra condom, in tabloid terms.

http://www.futuramedical.com/content/products/csd_500.asp

a few more things to mention

Independent Resources PLC (IRG:LSE): Last: 46.50, up 17.5 (+60.34%), High: 49.50, Low: , Volume: 230.28k

is this report is confirmed

it will be very very good news

ndependent Resources plc (IRG:L) notes recent reports in the Italian media (Gazzetta di Modena, L’Informazione, Modena Qui, Resto del Carlino – all dated 18th June 2011) regarding its Rivara gas storage project in Northern Italy, for which it is currently seeking environmental approvals ahead of planned development. The DIRE wire service first broke the news by stating late on Friday that the Environmental Impact Assessment Commission (“VIA Commission”) a decision-making body of Italy’s Ministry of Environment had voted to allow the project to proceed.

The Company would welcome this development but has not received any formal confirmation of this event nor any details as regards the VIA Commission’s deliberations or prescriptions, if any. The Company is seeking to clarify the media reports and will provide an update once it is in a position to do so.

the sector watcher recently has been out and about

Ithaca Energy Inc (IAE:LSE): Last: 124.00, down 3.5 (-2.75%), High: 129.05, Low: 124.00, Volume: 71.44k

Highly encouraging meeting with IAE management last week. The group generated $38m of pretax profits last year from production of 4,500 b/d of oil and revenues of $135m. Opex of $22/bbl should remain relatively constant for the next few years. Despite operational issues with Jacky field, IAE should still exit 2011 at around 10,000 b/d as the Athena field comes onstream in Q4 and the recent Cook acquisition impacts. Hence profits this year and next should see significant growth. With Stella due onstream in 2013, group production should hit 20,000 b/d, ie one of the biggest North Sea producers in the sector. The group has a current cash balance $200m and an unused debt facility of $140m, hence it is very well funded. Moreover it has tax losses of $216m and hence is unlikely to pay tax for a number of years, especially with the ongoing capex on the Stella/Athena fields. Current EV/2P reserves of $7/bbl looks ludicrously low – I’d say it should be on double that. Issues with an Electric Submersible Pump (ESP) on the Jacky field are likely to be rectified soon, which should provide a short-term boost to an oversold share price. I’d expect to see further add-on deals like the HESS/Cook acquisition, ie making highly profitable use of its tax losses. Very good management team, this has to be a core North Sea holding.

12:30PM

and finally Bryce

I have an offer

you can’t refuse

Go on then.

We would love to invite someone from the FT to experience a helicopter flight over the City this Friday with internationally renowned FOREX trader and CEO of award winning trader coaching company, Knowledge to Action, Greg Secker.

Flying Trader Greg is a trained helicopter pilot, and on Friday 24th June, he will be flying his chopper 10,000ft above London whilst trading live on the foreign exchange markets. Anyone can join in as Greg sends his trades down to the City beneath him, with all brokerage commissions going to children’s charities Barnardo’s and The Ubuntu Education Fund.

Um …. no ta.

We would be delighted if you or one of your colleagues could join him! The itinerary has been confirmed as below – but if these hours don’t suit, and you are only able to join Greg for the flight, I’m sure we could arrange something around that.

3-4pm: Arrive at the trading floor in Fulham to watch the trades come in from Greg in his helicopter. Reps from the charities will also be there for interviews.

4pm: last trades come down, then you will be taken from trading floor to Chelsea Helipad

4.30pm: chance to go up for a 10 min flight with Greg. Then chance to interview Greg when he lands in Hotel Verta.

are scared of heights?

is that the reason?

Greg Secker’s one of those people who runs the “YOU CAN EARN A MILLION TRADING LIKE ME” courses, isn’t he?

yep

like Kriel

and the one who always writes in to complain

forgot his name

I’d rather not be stuck in a helecopter with someone who either believes in chartism, or is prepared to fake belief in it to sell it to innocent punters

Trapped in some conference hall in Basingstoke

And paying £999 for the privilege.

yes

it sounds awful

and why does it need to go to 10,000 feet

I’d want to be much lower

to see the sites

Wonder if you can see this site?

http://knowledgetoaction.blogspot.com/

Worth reading for any prospective clients of Mr Secker.

right

we’d better end this

the FTSE 100

has given up the rally

down 50 points at 5,664

Man the biggest faller

Man Group PLC (EMG:LSE): Last: 221.50, down 8.3 (-3.61%), High: 227.80, Low: 220.40, Volume: 3.25m

followed by

Royal Bank of Scotland Group PLC (RBS:LSE): Last: 39.05, down 1.24 (-3.08%), High: 39.67, Low: 38.90, Volume: 46.98m

and Lloyds

Lloyds Banking Group plc (LLOY:LSE): Last: 46.89, down 1.5 (-3.11%), High: 47.86, Low: 46.75, Volume: 52.30m

good day to you all

Ta, and afternoon.

This entry was posted by Neil Hume on Monday, June 20th, 2011 at 11:03 and is filed under Uncategorized. Edit this entry.

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Markets Live transcript 20 Jun 2011

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