Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 2/10/11

with 3 comments

It’s been a busy few days, with a lot of college assignments to work on. Thankfully there hasn’t been a lot of newsflow to go through. Most of what I’ve seen has had a distinctly Irish feel to it. Let’s take a look:


(Disclaimer: I’m a shareholder in AIB, CRH and Ryanair) In terms of the markets, I was intrigued to read that AIB’s €21bn market cap is more than CRH (€8.3bn), Ryanair (€4.9bn), Kerry (€4.6bn) and Paddy Power (€1.9bn) combined. This anomaly is primarily down to the billions of shares AIB has issued to the State and its very low free-float – every 1c move in AIB’s share price moves the group’s market cap by €5bn. In terms of where Allieds should be trading at, it’s clearly finger in the air stuff. But for reference, its closest peer, Bank of Ireland, trades at a market cap of only €2.3bn, and you can decide for yourselves whether AIB should be trading at such a vast premium to its main rival.


Elsewhere on the ISEQ, I was interested to learn that Irish-Swiss baking group Aryzta’s La Brea line is the 9th best selling fresh bread brand in the United States. Aryzta has a lot of “hidden brands” as well. For example, if you buy a cookie in Subway, it’s made by Arytza’s Otis Spunkmeyer unit. If you buy a McDonalds burger in Australia, it’s made by Aryzta’s Fresh Start Bakeries unit. If you go into a Tim Hortons restaurant in Canada and buy a bagel, it’s made at Aryzta’s Maidstone Bakeries unit. If you go into a Starbucks in the United States and buy a sandwich, the bread is made by Aryzta’s Pennant Foods unit. The list goes on!


(Disclaimer: I’m a shareholder in Total Produce plc) Staying in the Irish food sector, I note that the listeria outbreak in the US is spreading. First it was affecting melons, now it’s hitting lettuce. This may have an impact (albeit a small one) on Ireland’s Total Produce and Fyffes.


Ireland Inc got a very welcome vote of confidence from Google, which announced that it is to invest €75m in a new data centre in Dublin. The city has become a major hub for the internet industry, with the likes of Twitter, LinkedIn and Facebook all having been attracted to the capital. Hopefully the example they set will encourage more Irish entrepreneurs to set up online businesses, to add to previous success stories such as the gifted Collison brothers from Limerick. As an aside, I was amused to read a report that a pub crawl may have contributed to Twitter’s decision to open an office in Dublin!


Bloomberg reports that Ireland is looking for payback for “averting Europe’s Lehman”. While I agree with the gist of the story, I did scratch my head at the mention of how much our bond yields have improved by. Make no mistakes about it, the primary reason for this improvement is gargantuan purchases of our debt by the ECB in the secondary market. The Irish economy has been deteriorating in recent months and the public finances are not materially different to the targets set at the start of the year.


Speaking of Ireland’s public finances, how about this revealing comment from Socialist Workers Party TD Richard Boyd-Barrett – when queried about his €12k annual expenses claims for travelling the 12 kilometres between his constituency and Dáil Éireann (the Irish parliament), he explained:


I do not use that money; it goes into a campaign fund.


You’d wonder how many Irish taxpayers would be willing, if it were optional, to pay taxes to fund politicians’ “campaigns”.


Written by Philip O'Sullivan

October 2, 2011 at 9:28 am

3 Responses

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  1. […] ECB intervention in terms of buying peripheral countries’ debt, which touches on something I mentioned yesterday about the recent sharp move in Irish bond yields – namely, that you shouldn’t read too […]

  2. Regarding the decision around Twitter allegedly being made on a Pub crawl, while were I come from everyone insist that all decisions are made on the golf course. . .


    October 3, 2011 at 6:28 pm

  3. […] Dublin played host to the Global Irish Economic Forum over the weekend, which provided plenty of positive headlines around our economy (for a change!). While I wouldn’t be quite so bullish as Taoiseach Enda Kenny was about our country’s medium term economic prospects, there’s no denying that he communicated a strong enterprise-friendly narrative around Ireland to a global audience. The event brought some seriously heavy hitters from a wide range of industries to the capital, who hopefully got some opportunities to properly network with our indigenous entrepreneurs – recall how a pub crawl reportedly helped swing the recent Twitter investment our way! […]

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