Market Musings 24/2/2012
It’s been a very hectic few days in terms of newsflow. Let’s recap on what’s been happening:
To kick off with the food sector, Kerry Group issued solid FY11 results, with earnings coming in towards the top end of its guided range. Management sees a healthy 7-10% growth in earnings in 2012, but I wouldn’t be surprised if that forecast is augmented by acquisition activity over the coming months.
(Disclaimer: I am a shareholder in RBS plc) The financial sector also featured heavily in recent days. Bloomberg posted a very bullish piece on the outlook for Dublin’s commercial real estate sector, which has positive read-through for the domestic banks here along with RBS and, let’s not forget, NAMA. Speaking of RBS, the bank issued full-year results yesterday that had a few interesting pointers for Ireland Inc. Total impairments at its Ulster Bank unit fell 4% yoy in 2011, although mortgage impairments were nearly 2x 2010 levels last year (£570m vs £294m). In terms of the operating performance, the NIM declined by 7bps to 1.77%, which is not bad, while operating profits were 10% lower at £360m. While I suspect that impairments for the sector have peaked in Ireland, there will definitely be a big change in the mix of impairments in 2012 as residential mortgage books deteriorate further due to the underlying economic fundamentals here.
(Disclaimer: I am a shareholder in CRH plc) Turning to the construction sector, CRH announced a number of management changes at its US operations. This is an important development, as (i) it shows the management cadre’s experience and strength in depth; which (ii) offsets the effect of departures to rivals e.g. Summit Materials. CRH also announced that Nicky Hartery will take over as its next Chairman in May. Elsewhere, as expected Readymix agreed to a takeover by its biggest shareholder, Cemex.
(Disclaimer: I have an indirect shareholding in Dragon Oil) In the energy space, Dragon Oil issued FY11 results that contained few surprises given the detailed guidance provided by management in the run-up to them. Elsewhere, Shell offered $1.6bn or £1.95/share for Cove Energy, which should mean a nice windfall for a lot of Irish private investors. I’ve written before about how I believe one of the themes in the energy space this year will be cash-rich large caps picking up small caps, and Shell’s move for Cove continues a narrative that also features Dragon Oil’s approach for Bowleven and Premier Oil’s acquisition of EnCore.
(Disclaimer: I am a shareholder in Irish Continental Group plc) I was interested to see that HSBC is forecasting significant growth in Irish trade volumes over the coming 10-15 years. Should this come to pass, a key beneficiary of it will be ICG, which is a major player in both LoLo (containers) and RoRo (trucks) freight here.
(Disclaimer: I am a shareholder in France Telecom plc, Independent News & Media plc and Datong plc) Switching to the TMT sector, I was unsurprised to read that France Telecom has cut its dividend. It’s a stock I really need to do some work on to see if there’s merit in keeping it in my portfolio or not. Elsewhere, Datong issued a statement at its AGM yesterday that revealed good progress on cost takeout and optimism on sales growth for the full-year. On the other side of the world, Independent News & Media’s Australasian associate APN posted in-line underlying profits for FY11. There were some boardroom ructions at UTV Media, which I suspect could put the company into play especially given how concentrated the share register is. The firm’s biggest shareholder, TVC Holdings, posted this response to yesterday’s developments.
In the blogosphere, John Kingham did up an interesting piece on Centaur Media, with a focus on its intangible assets. Speaking of intangibles, Lewis did a good article on Communisis that’s well worth a read. He also wrote a piece on Haynes Publishing that’s worth checking out. Wexboy completed (at least for now!) his impressive Great Irish Share Valuation Project.