Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 22/1/2012

with 2 comments

Gambling, alcohol, weapons and fossil fuels all feature prominently in this blog, which tells me that ethical investment funds are probably not for me!

 

(Disclaimer: I am a shareholder in PetroNeft plc) In terms of the oil sector, I felt quite ill on Thursday as I watched PetroNeft’s share price implode on significant volumes. The damage was done by one of its larger shareholders, investment fund Bluegold, dumping its shareholding. I don’t believe that this trade is any specific reflection on PetroNeft as Bluegold has also in recent days sold down positions in Petroceltic, Deo Petroleum and Mediterranean Oil & Gas. I also note this Reuters report from late last year. Unfortunately, the problem for small-cap oilies in general is that there is a view doing the rounds that they are unable to tap funding in these challenging times, so there seems to be a paucity of buyers to step into the breach. However, I can’t help but wonder if small-cap E&P names will resemble coiled springs whose share prices are ready to explode higher until either (i) sentiment and/or the funding environment changes or (ii) large-cap oil stocks start bidding for them as a way of bolstering their reserves at relatively inexpensive prices. Time will tell if my hunch is correct.

 

Staying with the broader energy sector, Kentz, which I previously was a shareholder in, released a solid trading update. Management see sales and profits marginally ahead of consensus, while net cash at the end of 2011 was an impressive $223m. One that I still have on my watchlist.

 

(Disclaimer: I am a shareholder in Playtech plc) In the betting space William Hill issued a trading update which contained two things that caught my attention. Firstly, the company said that it is to write down its telephone betting business’ book value (£47m) to zero. Internet displacement strikes again! This leads me on to the second thing that I was interested to learn – in 2011 net revenue in its online unit, which Playtech is a minority shareholder in, grew at over 20% for the second year running. While this was broadly in line with what the brokers I follow were expecting, it is nonetheless reassuring. However, my stance remains that I will look to exit Playtech at a suitable opportunity.

 

Moving from the bookies to the pub, Richard Beddard did up a good post on Greene King. Regular readers will know that I recently bought shares in one of its competitors, Marston’s. I quite like MARS, well, obviously – I wouldn’t have bought shares in it otherwise! – but I note that Richard also did up a relatively cautious piece on it two years ago which serves as a useful Devil’s Advocate view for when I get around to doing a proper write-up on why I pulled the trigger on it. For now, here is a summary on why I bought Marston’s.

 

(Disclaimer: I am a shareholder in Irish Life & Permanent plc) The Troika gave Ireland another pat on the back during the week. This has been extensively covered elsewhere, so I don’t propose to go through it in detail here. What did catch my attention from an equity investor’s perspective was the Department of Finance’s comments about Irish Life & Permanent in its press release following the visit. The government will make a decision on IL&P’s “future direction” by the end of April, which tells me that a relaunch of the previously aborted sale process around Irish Life will likely go ahead in the near future, possibly as early as when contracts are agreed with AIB to finalise Irish Life as the latter’s new insurance jv partner. The recap of Irish Life & Permanent is due to be completed by the end of June, so whether the money comes from private sources (through a sale of Irish Life) or the State will be known by then. We’ll also know for once and for all if PTSB has a future as a standalone entity. I’ve a piece covering all of these issues in more detail here.

 

HMV, which I’ve written extensively about before, announced a debt deal and improved supplier terms. While the announcement was greeted with euphoria, I don’t see it changing my view (terminal) on the outlook for its business model.

 

As noted before, my old friend Wexboy has launched an ambitious, and very worthy, undertaking – The Great Irish Share Valuation Project. While I prefer to plod through the Irish and UK markets (with the occasional overseas name thrown in) on a case study-by-case study basis, I like his use of an excel file to plot his recommendations. Here’s a downloadable summary of my views on the stocks I’ve covered in detail on this blog.

 

There has been a lot of media coverage of the upcoming referendum on independence for Scotland. The debate seems to be heavily based around economic matters, which is no surprise given the large transfers Scotland receives from England. I note a report in last weekend’s Financial Times which said that including its geographical share of oil revenues Scotland would have run a 10.6% fiscal deficit in 2010. It’s worth noting that Greece’s deficit in the same year was -10.5%. For years Alex Salmond said Ireland was a key part of his economic model for an independent Scotland. Looking at Scotland’s fiscal position he may get his wish.

 

This is an interesting statistic – US online advertising spending will surpass print ad spending for the first time in 2012.

 

Did you hear about the $300bn of 1934 US gov bonds that were “found” in a crashed plane in a Philippines jungle?

 

Speaking of finds, did you hear about the cannon with a range of 14.5km that was discovered in Northern Ireland?

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2 Responses

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  1. […] 99%+ stake in the two businesses, I’m not sure that the decision is AIB’s to make! As I recently noted, the State is mulling over its options for IL&P, so we should have a better idea of […]

  2. […] guidance that the IL&P recap question would be resolved by the end of April, which is something I’ve written about previously. In terms of IL&P as an investment proposition, well, we’ll have a better handle on […]


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