Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 16/12/11

with 6 comments

So much for my prediction that newsflow would die down before Christmas! We’ve seen a lot of companies issue trading updates, while there has also been some positive indications on the prospects for further asset disposals by the Irish banks, which should help reduce the financial burden the banking system has placed on taxpayers.

 

(Disclaimer: I am a shareholder in Irish Life & Permanent plc) I was pleased to read that IL&P expects to receive more than 10 bids for its UK loan book, which bodes well for the haircut (25% assumed in PLAR) it’ll have to take on the sale. This also has positive read-through for IBRC’s upcoming disposal of the old Anglo Irish Bank UK loanbook. So, hopefully some money saved for the Irish taxpayer.

 

Prime Active Capital issued a downbeat update yesterday, in which management said it was writing off its investment in Media Square plc and also revealed tough trading conditions for its operating business, which retails mobile phones in the United States.

 

Another Irish microcap, Siteserv, issued H1 results this morning. Management has done well to grow revenues and operating profits in such difficult conditions, but the company remains saddled with borrowings – net debt of €150.3m is nearly 10x its trailing twelve month EBITDA (€15.5m).

 

(Disclaimer: I am a shareholder in Playtech plc) I was pleased to see Playtech acquire Ash Gaming today. Ash will fit well within Playtech’s portfolio and it makes a nice change to see the company doing some M&A that doesn’t involve a related party!

 

Dragon Oil issued a solid drilling update this morning, in which the company announced that it has achieved its previously stated goal of hitting a production level of 70kbopd by the end of 2011.

 

I was interested to read that Telefonica has cut its dividend. My interest in the Europe’s former telecom monopolies starts and ends with their dividends (given the extremely muted growth outlook for the sector as a whole), so this does nothing to improve my sentiment towards the industry.

 

Following on from my recent blog, I was interested to hear that Boyne Valley has prevailed in the battle to buy Premier Foods’ Irish business. It’s good to see more consolidation in the food and beverage sector – which is absolutely necessary to counter the margin crushing that arises from big multiples’ playing suppliers off against each other. Speaking of which, I was pleased to learn of the sale of Cooley Distillery for €71m. It was founded by Smurfit MBA graduate John Teeling and this current Smurfit MBA student salutes him!

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6 Responses

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  1. I’m not sure what to make of the whole Playtech thing. What’s the deal with the resignation of their brokers? Something seems a little odd.

    Mark Carter

    December 26, 2011 at 4:23 pm

    • Hi Mark, great to see you posting on the blog. Apologies for the delay in replying, I was down the country for the holidays with limited internet access. I find that Alistair Osborne in the Telegraph is particularly clued in to what’s happening at PTEC. His piece here on the broker resignation is worth a read: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/8895067/Playtech-stock-market-move-put-in-doubt-as-Deutsche-Bank-resigns.html

      I’ve nearly run out of patience with PTEC to be honest – the poor information flow and repeated cosy deals with companies linked to the founder, who has taken £500m in cash out of the company since the IPO has left me underwhelmed. My average in price is 350p and at the moment I’d be happy to exit the register once it gets back up to that level.

      Philip O'Sullivan

      December 30, 2011 at 2:47 pm

      • Thanks for the response, and a happy new year to you!

        I hold PTEC, and the whole thing has been rattling around my brain the last few days. I am likely to sell sometime next year.

        Like you say, the whole thing has a distinct whiff of fish about it. The board members seem to be Teddy Sagi’s puppets. The loss of an independent non-exec doesn’t help.

        I’m unknowledgeable about brokers, so I asked around about the likely upshot of Deutsche’s resignation. I was told “I have never seen a good outcome when a Broker resigns”. Chilling words.

        The shares are having a run-up on the back of America opening itself up. I might ride it up for awhile and then head for the exit. Something just doesn’t seem right. Hmmm.

        Mark Carter

        December 30, 2011 at 3:35 pm

  2. Hey Mark, having spent 7 years working in stockbroking, I can’t recall seeing a broker quit over anything that didn’t involve bad news. I would share your views on the merits of holding it, but caution that we’ve heard so many stories over the years about an imminent opening up of the US market – seeing is believing!

    Philip O'Sullivan

    December 30, 2011 at 11:53 pm

  3. […] soon be delisted. Siteserv responded to media reports that it was putting itself up for sale, and given the mountain of debt attached to it I expect that shareholders will be left more or less empty-handed. Like Siteserv, Readymix has been […]

  4. […] Deutsche Telekom and Telefonica over the past year or so. Following Telefonica’s decision to cut its dividend before Christmas, it was no surprise to see France Telecom follow suit recently as dividends have […]


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