Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 6/3/2012

with one comment

It’s pretty much been all about results since my last update. Let’s run through what’s been happening on a sector-by-sector basis.


To start with the financial sector, insurer FBD posted very good 2011 numbers, with operating EPS coming in at 170c versus guidance of 155-165c. The firm saw a 15% uplift in NAV to 630c last year, while it also hiked the dividend by 9.5%. A lot of credit has to go to John McElligott, who correctly identified the opportunity in FBD quite some time ago.


Elsewhere, in the leisure space, Paddy Power, as usual (!), posted outstanding 2011 numbers yesterday. EPS came in at 212.3c (+26%) versus consensus of 202.5c. Management raised the FY dividend by 33%, while net cash of €136m illustrates perfectly the group’s strength and flexibility to respond to new opportunities.


(Disclaimer: I am a shareholder in Total Produce plc) In the food sector, Total Produce released solid 2011 results this morning, with EPS and DPS both up 6% last year. The group did an excellent job in managing pressures such as the German E. coli scare and fragile economic conditions, with total group adjusted EBITA margins only declining 6bps to 1.78% on revenues that were 2.8% lower. Net debt rose to €75.5m from €48.5m at end-2010 mainly due to acquisition spend (including deferred consideration) of €22m, although I was disappointed to see a working capital outflow of €7.8m, which more or less unwound the €7.0m inflow in the previous year. Having updated my model, I was surprised to see a valuation of 59c / share produced by my blended method (P/B, SOTP and DCF) – this is unchanged on my previous valuation of the company, despite the progress made over the past year, and the main reason for this was a €7m deterioration in the reported net pension deficit (while I note management’s comments that this position has improved of late, I prefer to use reported figures in my calculations for consistency). However, as a valuation of 59c/share offers 27% upside from last night’s close, I still think Total Produce is excellent value here.


There was a good bit of news out of UTV Media. The company extended its network affiliate agreement with ITV out to 2024, which won’t really come as a surprise to anyone, while it also acquired social media marketing specialist Simply Zesty to help bulk up its New Media division. While these are incremental positives, the main market interest in the group at this time is centered on its recent boardroom bust-up.


(Disclaimer: I am a shareholder in Ryanair plc) In the airline sector, we had traffic stats from both listed Irish carriers. Ryanair’s February traffic was -2% yoy (4.5m passengers), versus -6% in January, -5% in December and -8% in November. Elsewhere, Aer Lingus continued its run of strong traffic stats, revealing a 7.5% rise in passengers carried, while loads were +1ppt at 67.3%, in February.


In terms of macro news, China downgraded its annual growth target from the long-standing 8% to 7.5%. This came as no surprise to me given my previous comments about the more muted outlook for the Chinese economy. I’m travelling there with my MBA classmates on Saturday, and look forward to sharing my insights upon my return to Ireland.


Written by Philip O'Sullivan

March 6, 2012 at 10:36 am

One Response

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  1. […] Produce issed preliminary annual fugures (thanks for the link to best_choice). Wexboy and Philipp O’Sullivan already commented on the […]

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