Markets Live chat transcript for the chat ending at 11:19 on 24 Jun 2011. Participants in this chat were: Neil Hume, FT bryce.elder
NH
Hola rabble
NH
welcome to ML
NH
sorry we are late
NH
been following
NH
a complete shambles on AIM
NH
not seen anything like this ever
NH
actually it’s not AIM
NH
I take that back
NH
it’s the main market
BE
That’s saying something.
BE
Thought we’d seen everything down there.
NH
this is the stock
Invista Real Estate Investment Management Hldg PLC (INRE:LSE): Last: 19.00, down 11 (-36.67%), High: 28.00, Low: 18.00, Volume: 2.55m
NH
trading has been halted
NH
after the stock plunged
NH
and that followed news
NH
that the stock had gone ex-dividend today
NH
which apparently it can’t have done
NH
we can return to this later
NH
when I have figure out what the hell has gone on
NH
Hawkpoint may have some questions to answer
NH
anyway
NH
to the market
NH
and this sudden drop of 30 points
11:08AM
NH
We are being pointed in the direction of this
NH
RTRS-SHARES IN ITALIAN BANKS INTESA SP , UNICREDIT SUSPENDED FROM TRADING, INDICATED DOWN MORE THAN 3 PCT
Ā
Ā
BE
Both. Interesting.
NH
just email a couple of people
NH
to find out what’s happening
NH
So
NH
market update
NH
the FTSE 100 was up around 90 points before we came on air
NH
now up just 50 points at 5,725
NH
is this stress test news
NH
WittUK suggests
NH
and loads of Italian banks have failed
NH
any Milky
NH
your precious
NH
has been knocked a bit
Lloyds Banking Group plc (LLOY:LSE): Last: 45.40, up 0.13 (+0.29%), High: 46.57, Low: 45.36, Volume: 34.20m
Barclays PLC (BARC:LSE): Last: 243.45, up 0.1 (+0.04%), High: 249.58, Low: 242.95, Volume: 10.99m
Royal Bank of Scotland Group PLC (RBS:LSE): Last: 37.53, up 0.79 (+2.15%), High: 37.95, Low: 37.39, Volume: 27.78m
NH
JohandeWittUK – no excuse yellow card
NH
right
NH
now hearing
NH
two reasons for the Italian bank moves
NH
programme dislocating market
NH
Bank of Italy pronouncement
NH
sorry
NH
there’s a third
NH
Supergroup is bidding for the lot as a way of accessing retail outlets in Italy
Supergroup PLC (SGP:LSE): Last: 853.50, up 16 (+1.91%), High: 877.00, Low: 841.50, Volume: 66.27k
BE
Obviously.
NH
11:11 24Jun11 RTRS-EURO FALLS AROUND 20 PIPS TO $1.4231 ON NEWS THAT SHARES IN SOME ITALIAN BANKS SUSPENDED FROM TRADING
NH
(Monty – yes. I think that’s it. A complete shambles)
NH
market stabilising now
NH
FTSE 100 now up 63 points at 5,737
BE
Just trying to get up to speed on the Italian stress tests.
BE
And failing.
NH
(Milky – Unicredit have been suspended because they have launched a cash offer for Lloyds. Terms agreed with the UK govt. They are paying 80p a share)
BE
(Seriously, Neil. We’ve been close to a comet moment several times this week.)
NH
(Sorry. Trading robots please ignore earlier remark)
BE
Reading a stress-test note from Bank Intermonte in an attempt to get on top of this.
BE
Assuming this is what it is.
BE
At the time of last year’s stress test, the banking sector benefited from positive results as highlighted in
the previous table, and we believe that everything is in place for history to repeat itself, although the
conditions under which the simulation has been made this year are notably stricter. In the meantime,
however, the European macroeconomic scenario has improved significantly, and the simulation only
takes into account part of the losses suggested by market prices for government bonds held in banks’
portfolios.
the previous table, and we believe that everything is in place for history to repeat itself, although the
conditions under which the simulation has been made this year are notably stricter. In the meantime,
however, the European macroeconomic scenario has improved significantly, and the simulation only
takes into account part of the losses suggested by market prices for government bonds held in banks’
portfolios.
BE
UCG: we are lifting the estimated possibility of a rights issue at Unicredit from 35% to 50%. UCG is in a
borderline situation: based on our forecast for earnings generation, we would expect UCG to deliver
a cTier1 ratio in January 2013 of around 8.5%, which could be considered enough on a purely
regulatory basis, but is not up to the standards of industry best practice.
borderline situation: based on our forecast for earnings generation, we would expect UCG to deliver
a cTier1 ratio in January 2013 of around 8.5%, which could be considered enough on a purely
regulatory basis, but is not up to the standards of industry best practice.
NH
Right
NH
Unicredit off 9% now
NH
Intesa off 7.2%
NH
BMPS off 4.2%
NH
what is goiong on?
NH
FTSE now up just 40 points
NH
quick
NH
get the Milan office on the line
NH
what’s the speed dial
BE
We have a Milan office?
NH
yes
NH
well
NH
one person in Milan somewhere
NH
sorry
NH
just firing out emails
NH
to everyone I know
NH
while we wait
NH
for some replies
NH
RTRS-GREEK LAWMAKERS TO VOTE ON MID-TERM FISCAL PLAN JUNE 29, ON IMPLEMENTATION LAW JUNE 30 – PARLIAMENT
NH
which Italian bank is doing a cash call
NH
is that behind this?
NH
have the underwriters been lumbered with loads of stock
NH
I think it was 1% off the rights price
NH
UBI
NH
that’s the name
NH
milano assicurazioni fell 17% yesterday post announcement of rights issue being underwritten by cs/unicredi
NH
mediobanca, ubi’s underwriter
NH
hang on a moment
NH
it must be related to this
NH
European banks have until Friday to rerun their data for newly toughened European Union-wide stress tests that require them to be prepared for additional losses on sovereign bonds.
The European Banking Authority plans in mid-July to release results for the tests, which will assess whether 90 banks have enough capital to survive an economic and housing downturn.
The European Banking Authority plans in mid-July to release results for the tests, which will assess whether 90 banks have enough capital to survive an economic and housing downturn.
NH
The pan-EU regulator said it had required many banks to resubmit their data “to address inconsistencies and excessive optimism, including the treatment of sovereign exposures”.
People familiar with the process said banks in some countries, such as Germany, Spain and Portugal, had used much more benign assumptions than others, making it easier for them to pass. The EBA has now specified minimum standards to ensure that banks make proper provision for possible losses.
With Greece in crisis and the markets jittery about other EU nations, the EBA is keen to address the possibility of sovereign risk, though it does not officially acknowledge that a country could default.
People familiar with the process said banks in some countries, such as Germany, Spain and Portugal, had used much more benign assumptions than others, making it easier for them to pass. The EBA has now specified minimum standards to ensure that banks make proper provision for possible losses.
With Greece in crisis and the markets jittery about other EU nations, the EBA is keen to address the possibility of sovereign risk, though it does not officially acknowledge that a country could default.
NH
(WolverineX – thanks)
BE
Really? Not seeing much there capable of this degree of spook.
NH
sent back
NH
to recalculate
NH
massive hold
NH
cash calls to come
NH
possible scenario?
BE
Possible, I guess, though a cash call’s already partially in UCG’s price surely.
BE
As FJ notes, we’ve been here before.
NH
RTRS-UNICREDIT SPA SHRS INDICATED DOWN NEARLY 9 PCT, INTESA SANPAOLO SPA SHRS INDICATED DOWN 7 PCT
NH
this must be serious
NH
Bryce has just leapt to the Bloomie machine
NH
I can’t believe we are being blamed for this
NH
we are just watching the prices
NH
like everyone else
NH
Right
NH
some more thoughts
NH
this came out today
NH
Moody’s has changed its outlook on 13 mid-sized and smaller Italian banks to negative and warned it could downgrade the long-term debt ratings of 16 others following its announcement last week that it had put the country’s sovereign debt on review for possible downgrade.
The move by the rating agency follows sharp falls in the share prices of Italian banks in recent days. Its warning affects Italy’s largest retail bank, Intesa Sanpaolo, and Monte dei Paschi di Siena, its third-largest bank by assets. UniCredit, Italy’s largest bank by assets, has recently been downgraded by Moody’s.
The move by the rating agency follows sharp falls in the share prices of Italian banks in recent days. Its warning affects Italy’s largest retail bank, Intesa Sanpaolo, and Monte dei Paschi di Siena, its third-largest bank by assets. UniCredit, Italy’s largest bank by assets, has recently been downgraded by Moody’s.
NH
The Italian banking sector weathered the financial crisis better than other European economies due to its relatively conservative lending culture and high levels of savings among retail customers.
These remain strengths, but concerns about the possibility of contagion from Greece alongside low economic growth in Italy have cast a pall over the sector’s stock market performance.
This is coupled with investor worries about capital adequacy and governance in the midsized mutual banking sector, in particular Milanese mutual Banca Popolare di Milano, which is due to agree a €1.2bn ($1.7bn) capital increase this weekend at the request of the Bank of Italy.
These remain strengths, but concerns about the possibility of contagion from Greece alongside low economic growth in Italy have cast a pall over the sector’s stock market performance.
This is coupled with investor worries about capital adequacy and governance in the midsized mutual banking sector, in particular Milanese mutual Banca Popolare di Milano, which is due to agree a €1.2bn ($1.7bn) capital increase this weekend at the request of the Bank of Italy.
NH
Moody’s said its review for possible downgrade of Italian sovereign debt had triggered reviews for possible downgrade of banks and subsidiaries with relatively high long-term deposit and debt ratings, often in the double A or single A categories.
It has also placed the bank’s midsized Italian banks, which are considered less systemically important, on review pending policy changes related to governance and strategy.
It has also placed the bank’s midsized Italian banks, which are considered less systemically important, on review pending policy changes related to governance and strategy.
NH
shall we come back to this
NH
when we have some more?
BE
Yeah – as we currently have nothing specific.
BE
I’m very close to blaming evil speculators.
NH
(Shovel – form is temporary – class is forever)
NH
London – Moody’s downgrades senior debt ratings of Anglo Irish and Irish Nationwide one notch to Caa2
NH
downgrade raining in today
11:30AM
NH
Right then
NH
FTSE 100 is back up 63 points at 5,737
NH
perhaps
NH
Mervyn is helping to settle a few nerves
NH
big day for the BoE
NH
the launch of this new financial protection authority thing
BE
Has he said anything interesting?
NH
RTRS-BOE’S KING – WE CAN’T HOPE TO PREVENT FINANCIAL CRISES FROM HAPPENING, CAN FOSTER RESILIENCE
10:43 24Jun11 RTRS-BOE’S KING – UNCERTAINTY ABOUT EXPOSURE TO GREECE CAN LEAD TO CRISIS OF CONFIDENCE
10:43 24Jun11 RTRS-BOE’S KING – LOSS OF CONFIDENCE IS A BIGGER RISK THAN DIRECT EXPOSURE TO GREECE
10:51 24Jun11 RTRS-BOE’S KING – GREEK CRISIS IS NOT A CRISIS OF LIQUIDITY, IS CRISIS OF SOLVENCY
10:43 24Jun11 RTRS-BOE’S KING – UNCERTAINTY ABOUT EXPOSURE TO GREECE CAN LEAD TO CRISIS OF CONFIDENCE
10:43 24Jun11 RTRS-BOE’S KING – LOSS OF CONFIDENCE IS A BIGGER RISK THAN DIRECT EXPOSURE TO GREECE
10:51 24Jun11 RTRS-BOE’S KING – GREEK CRISIS IS NOT A CRISIS OF LIQUIDITY, IS CRISIS OF SOLVENCY
NH
he’s not wrong on the last one
NH
RTRS-BOE’S KING – DOES NOT WANT TO PUT A NUMERICAL LIMIT ON DIVIDEND PAY OUTS OR BANK SALARIES
11:03 24Jun11 RTRS-BOE’S HALDANE – 30-80 PCT OF COMMERCIAL PROPERTY LOANS COULD BE SUBJECT TO SOME FORBEARANCE BY BANKS
11:06 24Jun11 RTRS-BOE’S KING – NOT SURE GREEK SOVEREIGN CRISIS AND LEHMAN BROTHERS HAVE MUCH IN COMMON
11:09 24Jun11 RTRS-BOE’S KING – CONCERNED THERE COULD BE ATTEMPTS IN EUROPE TO STOP UK APPLYING CAPITAL REQUIREMENTS NEEDED TO MAKE SYSTEM SAFE
11:10 24Jun11 RTRS-BOE’S KING – A GROWING MAJORITY OF COUNTRIES IN EUROPE THINK APPROPRIATE TO HARMONISE MINIMUM BUT NOT MAXIMUM CAPITAL REQUIREMENTS
11:12 24Jun11 RTRS-FSA’S TURNER – WE FEEL GOOD ABOUT UK BANKS’ PROGRESS TO BASEL STANDARDS
11:13 24Jun11 RTRS-FSA’S TURNER – MAJOR BANKS HAVE MADE VERY SIGNIFICANT IMPROVEMENTS TO LIQUIDITY
11:13 24Jun11 RTRS-FSA’S TURNER – MORE PROGRESS ON LIQUIDITY REQUIRED IN SOME CASES, BUT CONFIDENT IT WILL TAKE PLACE OVER TIME
11:03 24Jun11 RTRS-BOE’S HALDANE – 30-80 PCT OF COMMERCIAL PROPERTY LOANS COULD BE SUBJECT TO SOME FORBEARANCE BY BANKS
11:06 24Jun11 RTRS-BOE’S KING – NOT SURE GREEK SOVEREIGN CRISIS AND LEHMAN BROTHERS HAVE MUCH IN COMMON
11:09 24Jun11 RTRS-BOE’S KING – CONCERNED THERE COULD BE ATTEMPTS IN EUROPE TO STOP UK APPLYING CAPITAL REQUIREMENTS NEEDED TO MAKE SYSTEM SAFE
11:10 24Jun11 RTRS-BOE’S KING – A GROWING MAJORITY OF COUNTRIES IN EUROPE THINK APPROPRIATE TO HARMONISE MINIMUM BUT NOT MAXIMUM CAPITAL REQUIREMENTS
11:12 24Jun11 RTRS-FSA’S TURNER – WE FEEL GOOD ABOUT UK BANKS’ PROGRESS TO BASEL STANDARDS
11:13 24Jun11 RTRS-FSA’S TURNER – MAJOR BANKS HAVE MADE VERY SIGNIFICANT IMPROVEMENTS TO LIQUIDITY
11:13 24Jun11 RTRS-FSA’S TURNER – MORE PROGRESS ON LIQUIDITY REQUIRED IN SOME CASES, BUT CONFIDENT IT WILL TAKE PLACE OVER TIME
NH
NOT SURE GREEK SOVEREIGN CRISIS AND LEHMAN BROTHERS HAVE MUCH IN COMMON
NH
nice one
NH
right
NH
on to some stocks
NH
what have we got
NH
I see Home Retail is down
Home Retail Group PLC (HOME:LSE): Last: 153.80, down 7.5 (-4.65%), High: 163.60, Low: 153.30, Volume: 2.40m
NH
after buying Habitat UK
NH
now
NH
why on earth would they want to do that?
BE
Because it’s cheap, I’d guess.
BE
Though it tends to be a bit of a curse to whoever buys it.
NH
is it
NH
three London stores
NH
and a brand
NH
for £25m
BE
A brand that steadfastly refuses to make any money.
BE
Not since Conran invented the duvet.
NH
will it help Argos?
NH
do they need the distraction?
BE
Synergies? Can’t see many.
BE
Can you shift Argos own brand to Habitat customers, and vice versa?
BE
I’d be surprised.
NH
you could try
NH
actually
NH
we have a bit of Nick Bubb on this
NH
Home Retail (Sell): In terms of the rumoured deal with Habitat, it’s perfectly logical for Argos to be buying good in-house brands from other struggling retailers, just as it did with Chad Valley and Woolworths and Schreiber and MFI, although it usually picks them up on the cheap. The mooted deal value of £20m to £30m seems a surprisingly large amount of money to pay for three London stores, plus the brand. But will this make a blind bit of difference to Argos’s calamitous LFL sales decline, given the pressure on big-ticket consumer spending? The answer is no.
NH
Any sales boost in the past from launching own-label brands has simply been lost in the wash, because core ranges like TVs, furniture and video games have not sold well. And we note the sly dig at Argos yesterday from Dixons at the analyst meeting, pointing out that the GFK Electricals market share figures exclude the outperforming Dixons themselves (as we noted recently). We still think that Home Retail will have to cut their dividend (though the yield appears to b 9% at 160p) and that the shares are heading for 130p.
NH
sorry
NH
that needed to be put in a quote box
NH
and i wanted to add this
NH
check out the divi
NH
on Game Group
The Game Group PLC (GMG:LSE): Last: 27.75, up 1 (+3.74%), High: 29.00, Low: 27.00, Volume: 1.10m
NH
Game (Neutral): Talking of dividend cuts…we note that another broker has come out today forecasting that Game will have to cut their dividend and given that the yield is now over 22% on a maintained 5.78p dividend, the share price at 26p (which has just gone ex the final) is telling us that this now become a consensus view, despite the company’s protestations to the contrary. We have our 40p target under review…
11:37AM
NH
shall we have a look at this Invista thing
NH
a wee bit complex
NH
but interesting
BE
Go on then.
Invista Real Estate Investment Management Hldg PLC (INRE:LSE): Last: 19.00, down 11 (-36.67%), High: 28.00, Low: 18.00, Volume: 2.60m
NH
so here’s the timeline
NH
then I will try and explain what’s happened
NH
first thing today
NH
this goes out
NH
INVISTA REAL ESTATE INVESTMENT MANAGEMENT HOLDINGS PLC (“INVISTA” OR THE “COMPANY”)
CAPITAL REDUCTION EFFECTIVE
NH
followed by this
NH
INVISTA REAL ESTATE INVESTMENT MANAGEMENT HOLDINGS PLC (“INVISTA” OR THE “COMPANY”)
FURTHER ANNOUCEMENT RE: RETURN OF CAPITAL
As announced earlier today, the return of capital involves a payment of 18 pence per ordinary share to those persons who are Shareholders on the register as at close of business today. As a result, Shareholders who acquire Invista shares today will not receive the return of capital.
NH
and then this
NH
INVISTA REAL ESTATE INVESTMENT MANAGEMENT HOLDINGS PLC
Trading on AIM for the under-mentioned securities has been temporarily suspended from 24/06/2011 10:50am pending clarification of the market position.
NH
so
NH
what looks to have happened is this
NH
The shares (Closed at 30p) and may or may not be ex an 18p distribution today – no one knows for certain and the shares have been all over the place
NH
but
NH
If the record date is today the ex date had to be last Wednesday
NH
but it could not be because the court had not approved the distribution (only sanctioned on Wednesday)
NH
You can not have a record date today and the shares go ex today – that is against the rules with T+3 settlement
Stock Exchange guidelines are that the record date should be the day before the effective date (which is the only definite day we know and it is today) so the shares should have gone ex on Tuesday last
NH
that’s from a broker
BE
Right. So what happens next?
NH
not sure
NH
does the LSE cancel all bargains
NH
start again on Monday
NH
Hawkpoint
NH
the advisers on this deal
NH
seem to have come up with a new rule
NH
that no one knows about
BE
Blimey. This is a shambles.
NH
yep
NH
lots of unhappy punters
NH
like this man
NH
Supposed to go ex return of capital today. Confirmed by their nomads
(hawkpoint) earlier in the week and flagged up bloomberg etc. Shares
opened relatively unchanged today at which point I knocked a whole
load out. Thought I better check my ground. Shock horror when broker
(CS) said shares had not gone ex and so rapidly covered my position.
Speak to Hawkpoint who are adamant it has gone ex. Ring up LSE who
said there is no official marker on the stock so it cannot have gone
ex today and so anyone buying will be entitled to return of capital.
Company then put an announcement saying anyone buying today won’t get
the dividend. Ring up the LSE and say they cannot say that without an
official ex announcement having been issued. Shares now suspended.
Total joke
(hawkpoint) earlier in the week and flagged up bloomberg etc. Shares
opened relatively unchanged today at which point I knocked a whole
load out. Thought I better check my ground. Shock horror when broker
(CS) said shares had not gone ex and so rapidly covered my position.
Speak to Hawkpoint who are adamant it has gone ex. Ring up LSE who
said there is no official marker on the stock so it cannot have gone
ex today and so anyone buying will be entitled to return of capital.
Company then put an announcement saying anyone buying today won’t get
the dividend. Ring up the LSE and say they cannot say that without an
official ex announcement having been issued. Shares now suspended.
Total joke
BE
Deary me.
NH
quite
11:44AM
NH
Since we have Sam on the show
NH
from sunny Monacco
NH
I guess we should look at RAB
RAB Capital PLC (RAB:LSE): Last: 9.50, up 1.4 (+17.28%), High: 9.70, Low: 9.40, Volume: 3.95m
BE
I thought RAB was gone?
NH
going
BE
Dead. Deceased. Fallen off the perch.
BE
What’s happened?
NH
proposed delisting
NH
and possible buyout
NH
at 10p a share
NH
Alongside the proposal to delist from AIM, the Board wishes to give RAB shareholders who wish to do so an opportunity to sell their shares for cash. The Board is therefore considering terms for a possible scheme of arrangement (the “Scheme”), under Part 26 of the Companies Act 2006, whereby RAB shareholders would be offered the opportunity to receive 10.0 pence in cash per RAB Share or to elect to receive shares in NewCo which will become the ultimate owner of RAB and will seek to maximise value from RAB’s remaining business.
For the purposes of the Buyout, Michael Alen-Buckley, Charles Kirwan-Taylor, Philip Richards and Christopher de Mattos (the “Continuing Directors”), are deemed to be non-independent and are leading the possible Buyout.
The remaining directors of RAB, Philip Moore, Adam Grant, The Rt Hon Lord Lamont of Lerwick and Derek Riches (the “Independent Directors”), have formed a committee to evaluate the possible Buyout on behalf of shareholders. The Independent Directors are being advised by Macquarie Capital (Europe) Limited.
BE
Right. So it’s an MBO for the stub.
BE
Possibly.
NH
yeah
NH
and they have plans for RAB
NH
it’s not going to die
NH
it will live on
NH
Future of RAB
The Board believes that the best chance of stabilising RAB is to delist from AIM. This will eliminate the administrative and regulatory overhead of the listing which will reduce costs and continuing disclosure requirements, and it will also allow the Company to pursue a more flexible strategy regarding the investment of surplus capital. Significant restructuring will be required, which will reduce the operational base of the Company substantially.
RAB is presently engaged in discussions with a third party for the possible sale of the investment management agreements for the RAB Energy Fund and the RAB Octane Fund. RAB has signed a letter of intent in respect of a possible transaction and is working towards signing a binding agreement before the end of June.
The Board does not anticipate that this transaction will raise material proceeds for the Company; however, assuming it goes ahead, RAB’s business will then comprise the management of the following funds:
BE
Well, you’ve got to protect a fine brand like that.
BE
One that will forever be linked in the mind with Northern Rock.
NH
(RAB employees – I met one was at a AV drinks party)
11:49AM
NH
Italian banks update
NH
Unicredit still off 8%
NH
the others have rallied however
NH
BMPS down just 2.65%
NH
did we just witness a mini flash crash?
BE
(@Sam: remember a lively lunch at the Coq with Mr Richards around that time. Charming man. Bracing views on a whole variety of subjects.)
BE
That seems to be the best explanation, largely because of the lack of other explanations.
BE
There’s lots of bad news around, but no trigger.
BE
So: borked sell? Misfiring robot?
NH
could be
NH
perhaps they took the Lloyds rumour seriously
11:51AM
NH
Right then
NH
what’s moving back in the UK?
NH
I know
NH
housebuilders
NH
the whole sector off the races
NH
following results from the housebuilder
NH
that’s the biggest outlier
NH
in terms of land bank
NH
performance
NH
dividends
Berkeley Group Holdings PLC (BKG:LSE): Last: 1,250, up 119 (+10.52%), High: 1,262, Low: 1,195, Volume: 1.64m
BE
And the others?
NH
up up up and away
Barratt Developments Plc (BDEV:LSE): Last: 110.10, up 4.1 (+3.87%), High: 111.20, Low: 107.60, Volume: 2.67m
Bovis Homes Group PLC (BVS:LSE): Last: 424.60, up 16.5 (+4.04%), High: 424.60, Low: 413.60, Volume: 44.07k
Redrow PLC (RDW:LSE): Last: 120.30, up 3.7 (+3.17%), High: 122.00, Low: 117.00, Volume: 69.75k
NH
I don’t get the read across here
BE
Likewise.
BE
Berkeley builds houses for the suburban stockbroker.
NH
in the south
NH
it’s not like the others
NH
anyway
NH
good results
NH
and Mr Pidgley’s is proposing to give
NH
£1.7bn to shareholders
NH
over the next 10 years
NH
payback
NH
from the cash call shareholders backed
NH
at the bottom of the market
NH
naturally
NH
there’s a new incentive scheme for management
NH
we don’t have details of that yet
NH
but I reckon it would make John Pluthero
NH
and the guys at CW blush
BE
Well, you can’t really argue with the cash this thing’s throwing off.
BE
Sure – a large slice will end up with management.
BE
But — unlike C&W — you can make a case for them deserving it.
NH
yes
NH
because this company
NH
has a consistent strategy
NH
it throws off cash
NH
and makes profits
NH
whereas C&W…
NH
right
NH
some comment on this
NH
here’s Robin Hardy at Peel Hunt
NH
series of special dividends with a cash value higher than the
current share price and NAV has been promised – £13 will be
paid over the next 10 years; this has an NPV of 810p. This
payment does not seriously hamper the ability to deliver still-high
profits and must, largely, be seen as a bolt-on to existing value in
the equity. We remain a buyer.
current share price and NAV has been promised – £13 will be
paid over the next 10 years; this has an NPV of 810p. This
payment does not seriously hamper the ability to deliver still-high
profits and must, largely, be seen as a bolt-on to existing value in
the equity. We remain a buyer.
NH
No great surprises on trading – PBT came in at £136m versus ours and
consensus £133m. The cash position was heavily reduced, following a big pickup
in land investment and was just £42m versus £316m a year before. NAV is
up 11% to 709p. An additional £260m of gross profit has been added into the
landbank through the heavier than expected investment in new sites.
consensus £133m. The cash position was heavily reduced, following a big pickup
in land investment and was just £42m versus £316m a year before. NAV is
up 11% to 709p. An additional £260m of gross profit has been added into the
landbank through the heavier than expected investment in new sites.
NH
Valuation basis sharply changed – We had previously valued the group
through a DCF on the expected gross profits embedded in the landbank. These
profits are still available, so that value, largely, remains in the equity and
available to investors. But the high cash return now on offer adds to this without
materially impacting on the delivery. Therefore, we will need to reassess how we
value the equity, but we can be fairly certain that our previous valuation on the
equity of 1,150p is too low. We have been ready to consider reviewing our Buy
stance on the stock but, with this additional block of value, we are unlikely to do
this and we remain a buyer.
through a DCF on the expected gross profits embedded in the landbank. These
profits are still available, so that value, largely, remains in the equity and
available to investors. But the high cash return now on offer adds to this without
materially impacting on the delivery. Therefore, we will need to reassess how we
value the equity, but we can be fairly certain that our previous valuation on the
equity of 1,150p is too low. We have been ready to consider reviewing our Buy
stance on the stock but, with this additional block of value, we are unlikely to do
this and we remain a buyer.
BE
(@Vintage: I think they timed land purchases more or less perfectly, and don’t need any more right now. Think it’s more of a supply/demand argument.)
BE
And here’s RBS
BE
Overall balance sheet underpinned, long term land bank value enhanced and Berkeley is now
driving to harvest its land holdings after its timely land bank build. This is driving a new cash
return plan totalling £13.00 per share with 434/433p on or before September 2015,
September 2018 and September 2021, (the cash return equates to 822p at a 7.0% discount
rate or 682p at an aggressive 10% discount rate – the former looks sufficiently aggressive in
our view given the drive to cash rather than re-investment). The valuation of the rump clearly
will be driven by the macro environment over this period and how much of the eventual equity
base Berkeley Group management seeks to negotiate with shareholders – a 10% to 15%
range, to our mind, looks a negotiating range for shareholders relative to 15% agreed on the
last capital return plan.
driving to harvest its land holdings after its timely land bank build. This is driving a new cash
return plan totalling £13.00 per share with 434/433p on or before September 2015,
September 2018 and September 2021, (the cash return equates to 822p at a 7.0% discount
rate or 682p at an aggressive 10% discount rate – the former looks sufficiently aggressive in
our view given the drive to cash rather than re-investment). The valuation of the rump clearly
will be driven by the macro environment over this period and how much of the eventual equity
base Berkeley Group management seeks to negotiate with shareholders – a 10% to 15%
range, to our mind, looks a negotiating range for shareholders relative to 15% agreed on the
last capital return plan.
BE
On our existing forecasts (prior to the analysts meeting and consideration of the capital return dynamics and the rump shareholding negotiated with management) Berkeley Group has net
asset values FY11 709p, FY12F 792p and FY13F 879p and EPS at 85.2p for FY12F and
94.4p for FY13F.
asset values FY11 709p, FY12F 792p and FY13F 879p and EPS at 85.2p for FY12F and
94.4p for FY13F.
NH
good story this one
NH
Pidgley calls the market perfectly again
NH
he’s done it a few times now
NH
ask shareholders for cash at the bottom of the market
NH
gets it
NH
invests a rock bottom prices
NH
and flogs on
BE
Competent management doing what proves to be the exactly right thing.
BE
It’s rare how often we see that.
NH
almost unheard of
NH
but credit
NH
where credit is due
NH
the UK’s best housebuilder by a mile
NH
Focused on London and the South East, Berkeley’s strategy reflects the cyclical nature of property development and seeks to optimise returns for shareholders over the long term in a sustainable and safe way. In February 2009, Berkeley announced a placing which raised net proceeds of £49.7 million which, together with existing cash resources, has enabled the Group to acquire in excess of £500 million of new land and invest an additional £250 million into construction and a new private rental fund in the period to 30 April 2011.
This investment has positioned Berkeley with an enviable land bank and the Board has considered various strategic options forrealisingits value over the delivery phase taking into account a number of factors which are relevant to Berkeley’s business model. Firstly, that Berkeley has a natural size at which it can efficiently add value to the land bank. Secondly, that property development is cyclical and effective management of operational and financial risk is a key requirement of any strategy. Thirdly, the need to provide visibility on both the timing and quantum of returns to shareholders. Finally, a strategy which facilitates investment in land opportunities and construction over the next two years to create long term shareholder value.
NH
Itzman – YELLOW
12:02PM
NH
Quick market update
NH
we are falling again
NH
now up just 40 points at 5,714
NH
Italian banks starting to sell off again
NH
and back in the UK
NH
ahead of the big strategy
Lloyds Banking Group plc (LLOY:LSE): Last: 44.20, down 1.07 (-2.36%), High: 46.57, Low: 44.14, Volume: 58.76m
BE
(@Itzman: this is my eighth hour of Markets Live this week, and to my knowledge my first major grammar bork. I respectfully suggest you stick your criticisms up your bum.)
NH
BE
Yeah – it’s not going to say much is it?
BE
At least, Goldman don’t reckon it is.
BE
They play the deathly phrase “evolution not revolution”
BE
When Lloyds really, really, really needs revolution.
BE
Based on press reports, management comments and our analysis, we
believe Mr. Horta-Osório’s vision for the group will constitute “evolution,
not revolution” relative to the current strategy. Specifically, we expect:
Costs and efficiency to be key areas of focus with the incoming CEO
potentially outlining measures to boost efficiency beyond the £2 bn of
previously announced HBOS-related synergies; Competition to be
another key area of focus with management likely to provide an update on
Project Verde and possibly outlining measures to facilitate customer
account switching; Wealth, Insurance and the Halifax operations to be
building blocks in the group’s future growth strategy; the group’s
International operations to be highlighted as an area of potential
realignment.
believe Mr. Horta-Osório’s vision for the group will constitute “evolution,
not revolution” relative to the current strategy. Specifically, we expect:
Costs and efficiency to be key areas of focus with the incoming CEO
potentially outlining measures to boost efficiency beyond the £2 bn of
previously announced HBOS-related synergies; Competition to be
another key area of focus with management likely to provide an update on
Project Verde and possibly outlining measures to facilitate customer
account switching; Wealth, Insurance and the Halifax operations to be
building blocks in the group’s future growth strategy; the group’s
International operations to be highlighted as an area of potential
realignment.
BE
Relative to LBG’s extensive list of previously published financial targets,
we expect the incoming CEO to maintain guidance on balance sheet
reduction and steady state credit costs, boost cost reduction targets and
eliminate, reduce or push out targets for margins, efficiency and returns
we expect the incoming CEO to maintain guidance on balance sheet
reduction and steady state credit costs, boost cost reduction targets and
eliminate, reduce or push out targets for margins, efficiency and returns
NH
I doubt that
NH
he’s probably slash guidance again
BE
Wouldn’t be surprised. NIM guidance still looks unrealistic
NH
it does
NH
and Antonio loves nothing more
NH
than some kitchen sinking
BE
Get all the bad news in the price, in preparation for that big Santander takeover around Christmas.
NH
yeah
BE
[Robots: IGNORE.]
NH
bring it on
NH
Antonio is a spy
NH
Santander man
NH
put into Lloyds to destroy the business
NH
and sell it
BE
So Santander can use their bulletproof balance sheet to absorb HBLloyds.
BE
It’ makes perfect sense.
12:09PM
NH
Right
NH
to the small caps
NH
and yesterday’s mystery
Chariot Oil and Gas Ltd (CHAR:LSE): Last: 154.75, up 12.25 (+8.60%), High: 156.82, Low: 145.86, Volume: 1.57m
NH
we are still no closer to finding out
NH
what caused the sell off
NH
my view
NH
Citigroup wrote a CFD for someone
NH
that person is suffering
NH
and is being forced to sell
NH
their selling caused margin calls elsewhere
NH
hence the fall
NH
as for farm out
NH
BP is being mentioned as a potential partner
NH
anyway
NH
Collins Stewart supportive today
NH
Heads Of Terms, But No Farmout Details
Chariot has been working for several months to secure farmout agreements
covering its Namibian acreage position and announced yesterday that
Heads of Terms have been signed covering two licences. The details of
these agreements have not yet been released, however, and discussions
regarding a third agreement are ongoing.
Chariot has been working for several months to secure farmout agreements
covering its Namibian acreage position and announced yesterday that
Heads of Terms have been signed covering two licences. The details of
these agreements have not yet been released, however, and discussions
regarding a third agreement are ongoing.
Stock Off 19% In A Weak Market
Frustration surrounding the ongoing delays to completion of the farmout
process, combined with an emergency release of oil stocks and a weak
general market saw Chariot sell off strongly yesterday, closing down 19%. In
a ‘risk-off’ environment companies with 100% exposure to exploration are
clearly vulnerable to changes in sentiment.
NH
Farmout Value Should Be Supportive Of Market Value
Whilst approval of a farmout will provide an independent validation of the
company’s acreage position, we have been concerned the implied value of
the farmout would not underpin the company’s equity value. Following the
sell-off we believe there is now a much greater likelihood the farmout will be
supportive of the market value.
Whilst approval of a farmout will provide an independent validation of the
company’s acreage position, we have been concerned the implied value of
the farmout would not underpin the company’s equity value. Following the
sell-off we believe there is now a much greater likelihood the farmout will be
supportive of the market value.
Retain Buy Rating And 350p Target Ahead Of Drilling Program
Chariot aims to commence drilling in 4Q 11, although a rig contract has not
yet been signed and will likely follow completion of the farmouts. We see the
potential for a period of limited newsflow between completion of the farmout
and commencement of the drilling program. We expect anticipation of the
drilling program, targeting world-scale resource potential, to be the driver of
stock performance later this year and retain our Buy rating and 350p target.
NH
High Risk, But Upside Potential Outweighs Risk
With no current production or reserves, Chariot remains the highest risk
investment opportunity within our coverage universe. However we believe
the scale of the opportunity, particularly after the recent sell-off, outweighs
this risk.
With no current production or reserves, Chariot remains the highest risk
investment opportunity within our coverage universe. However we believe
the scale of the opportunity, particularly after the recent sell-off, outweighs
this risk.
NH
have UBS said anything about the farm out
NH
they are the super bulls here
BE
Nope – not that I’ve seen.
BE
They’re shop, aren’t they?
NH
they are
BE
And extremely positive. 510p target.
NH
WHAT!
BE
Anyway – no. Nothing from UBS today.
NH
and for Pursuit watchers
Pursuit Dynamics PLC (PDX:LSE): Last: 331.00, up 11 (+3.44%), High: 337.23, Low: 322.75, Volume: 147.93k
NH
this release
NH
was missed by a few people yesterday
NH
Pursuit Dynamics PLC (AIM: PDX), the developer and exploiter of the PDX platform technology, announces that options have been exercised by Quantum Holdings Limited over 800,000 new ordinary shares of 1p each in the Company (“Ordinary Shares”) under the Company’s Service Provider Share Option Plan. Application has been made to the London Stock Exchange for these shares to be admitted to trading on AIM, which is expected to take place on 24th June 2011.
NH
but it’s interesting
NH
basically the CEO Roel Pieper
NH
has exercised options over stock
NH
that stock has not been sold
NH
but is being held in escrow
NH
to settle a legal case with Alfred Mann family tryst
NH
which if true is good news
NH
any small cappy stuff from you Bryce?
BE
(@Milky: and I’m guessing those were both scarce resources to start with.)
BE
No – nothing big.
BE
Or small.
NH
right
NH
I have been called into a meeting
NH
Italian ambassador
NH
on a conference call
NH
see ya on Monday
BE
Yup – I think we’ve wrapped up for the week.
BE
Thanks for all your comments.
BE
Hope we’ve provided some entertainment, if nothing else.
BE
See you all on Monday morning.