Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 24/1/2012

with 3 comments

Since my last blog it’s been mostly all about trading updates and some good blogs from my UK and Irish peers. Let’s take a look at what has been going on.

 

Dragon Oil issued a solid trading update. Management had already guided the market on production levels, but there was a positive surprise in the shape of an upward revision to reserves. As Goodbody’s Gerry Hennigan points out, Dragon recorded gross reserves of 658 mmboe at the end of 2005, the same figure outlined for 2011, despite production over the past six years. His total risked NAV on the stock is £8.17, which compares favourably with yesterday’s £5.13 closing price. Given that Dragon is effectively a play on the oil price, this could be one to trade should tensions with Iran worsen.

 

Speaking of the oil sector, you might recall that some months ago I criticised Chancellor of the Exchequer George Osborne for raising taxes on North Sea oil producers. Well, last year only 14 exploration wells were drilled offshore UK, the lowest rate of activity since 1965. Cause, meet effect.

 

(Disclaimer: I am a shareholder in PetroNeft plc) Elsewhere, I note that there has been an oil IPO in London today – RusPetro – its operations are in the same geographical area as PetroNeft’s, so it’s one I’ll be keeping an eye on.

 

(Disclaimer: I am a shareholder in Glanbia plc) Switching to food stocks, PZ Cussons issued a trading statement earlier today in which it reported “strong revenue growth” in its Nigerian nutrition business – which is a 50:50 joint venture with Glanbia. This is a further positive sign for Glanbia, although I think its share price is high enough at current levels, for reasons I recently outlined.

 

(Disclaimer: I am a shareholder in Playtech Ltd) It was a busy day for Playtech, which announced Q4 KPIs, 2 new joint ventures and an acquisition. I take encouragement from the solid trading stats and decent enough start to 2012 for the group. On the joint ventures, these bolster its position in Germany and South Africa, two large markets that are reportedly going down the route of further liberalisation. While my concerns around corporate governance issues have not gone away, I’m happy to let this one run a little longer in the hope that it can get back to my break-even point in the near future. To me Playtech is like a paratroop on a C-130 plane – it’s waiting for the green light before jumping out of my portfolio!

 

In the blogosphere, Mark Carter wrote a great blog on Premier Foods that’s worth checking out here. Lewis at Expecting Value does a good write-up of his experiences as a shareholder in RSM Tenon, which reminds me of some of the horror stories in my own portfolio over the years!

 

Finally, I did some digging on the National Newspapers of Ireland website yesterday and was interested to read through how circulation figures have evolved for the national titles here over the past few years. Comparing the most recent data to five years ago reveals that over that period circulations have performed as follows: Irish Times -14%, Irish Independent -17%, Irish Examiner -24%, Irish Star -23%, Irish Mirror -16%, Irish Sun -27%. You can download the data set from my blog by clicking this link.

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Written by Philip O'Sullivan

January 24, 2012 at 5:18 pm

3 Responses

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  1. So, PFD – up nearly 30% in the few days that I mentioned it. It does have an interesting corporate restructuring story, but I can’t for the life of me work out whether it will pay off. It’s one big advantage is that it does have loads of brands. It’s big problem is its enormous debt. It beats me which one will win out in the end. Answers on a postcard, please.

    Mark Carter

    January 28, 2012 at 10:51 pm

    • I view binary plays like PFD as being more of an ‘option’ than a ‘share’. Given the macro backdrop, my instinct is that the winner (in relative terms) will be the banks, so it’s not one for me. I have enough highly leveraged plays in the portfolio as it stands!

      Philip O'Sullivan

      January 29, 2012 at 12:03 pm

  2. […] the British government’s reversal of its previous anti-investment stance, which I had been critical of. I hope to do some work on the firms focused on the UK continental shelf (Xcite Energy in […]


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