Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 27/10/11

with 2 comments

The main news since my last blog, clearly, has been the developments in the euro-area. Markets have spiked upwards in a move that to me suggests that there is a lot of short covering going on, not least given that there had already been quite a good bit of buying on optimism of a resolution to the crisis ahead of the latest round of talks.


Citigroup has a good summary on the implications for the euro which you can read here. I am particularly struck by this paragraph:


We doubt that this package can bring long-term support to the euro, even as we note that there are a lot of committed USD sellers out there. There is a risk of running stops to the upside, as positions still seem somewhat short EUR, but we don’t think this package can sustain major gains unless outside money is more enthusiastic about backing euro zone debt than either the ECB or euro zone governments seem to be, and we are not sure why this should be the case.


(Disclaimer: I am a shareholder in PetroNeft plc) Speaking of things that are going up, I am pleased to see PetroNeft’s share price motoring ahead. At the time of writing the shares are 30% above their recent lows. While violent moves in share prices are not unusual in a smallcap, I wonder if there is some buying going on in optimism of a positive result (due in December) from its hydraulic fracturing programme at the Lineynoye oil fieldI recently doubled my shareholding in the company, and while clearly my timing could have been better, I’m glad that I persevered with the stock!


Greencore received a preliminary takeover approach on Tuesday, which is an unusual development given that the group has only just concluded the €125m takeover of Uniq. While some people suggested that the interest could be coming from Kerry Group, I would dismiss that out of hand – Kerry’s M&A strategy in consumer foods is centred on buying brands, not the own-label products that Greencore and Uniq produce. My guess is that the approach is from a private equity fund with existing interests in the UK consumer food space that is keen to cherry pick certain business units across Greencore and Uniq that overlap with its owned businesses and flip the rest out to other firms/funds in the space. As an aside, I note that there has been some talk about the P/E multiple that a successful bidder would have to pay for Greencore. You can disregard that, because in reality it is the EV/EBITDA multiple that is of relevance in a takeover situation.


(Disclaimer: I am a shareholder in CRH plc) I was pleased to see CRH appoint a top-drawer business person as a non-executive director. Ernst Bärtschi is CEO of Sika Group and the former CFO of Schindler. This is the sort of best practice approach to non-executive director appointments that all large plcs should be looking to emulate.


Just when I thought the social media bubble was at an end, up popped this – Groupon seeks valuation of 5 times 2012 sales.


My MBA class had a Halloween themed party last night. Which reminds me of this – Halloween by the Numbers.


If you’ve a spare hour, why not spend it with the magnificent Hugh Hendry?


And finally, I was amused by this tweet by Lorcan Roche Kelly, who is one of the most astute financial commentators in Ireland:


When trying to sell retail sovereign debt, is a cliff the best thing to put on the brochure cover?


Written by Philip O'Sullivan

October 27, 2011 at 10:22 pm

2 Responses

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  1. […] significant gains recorded after the EU summit last week. This comes as no surprise to me, given what I said about the movements having suggested that a lot of the move was due to […]

  2. […] to this morning’s price!). However, near term performance from the Siberian oil producer, as I’ve noted before, will hinge on the results from its hydraulic fracturing programme at the Lineynoye oil […]

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