Market Musings 16/4/2012

This blog has sadly become something of a casualty of late as the main body of my exams are now less than three weeks away and I also have two articles for Business & Finance magazine due in the middle of this week!

 

(Disclaimer: I am a shareholder in France Telecom plc) There was quite a bit of news around France Telecom since my last update. First, the operator finalised the terms of its buyout of Egypt’s Mobinil. This was something I already had penciled into my forecasts for the company, so no surprise there. However, what did surprise me was another story I spotted involving France Telecom, which said that the European Commission is investigating whether France’s telecom regulator was too generous in setting the rates it allows new mobile operator Iliad to charge other companies for calls into its network. While we’ll wait and see what comes of that, anything that undermines Iliad’s Ryanair-style entry into the French mobile market would be good news for France Telecom (yes, I am speaking from a  hopelessly conflicted viewpoint!)

 

Seeing as I’ve mentioned Ryanair, I was also interested to read that Qantas has made the world’s first commercial biofuel flight. This is an interesting development which I’ll be keeping tabs on, especially given that the modest ‘carbon footprint’ involved would certainly help offset some of the EU’s carbon taxes if it was to be rolled out in an economical way in this part of the world.

 

In other energy sector related news, Dragon Oil issued an interim management statement this morning, in which it revealed average Q1 production of 70.6kbopd (the 2011 average was 61.5kbopd), and retained its 2012 gross output growth target of 15%. I didn’t see any ‘new news’ within the statement, but with the group having reached its 2012 output growth target of 15% in Q1, I am guessing that the risks on the production front lie to the upside for Dragon Oil.

 

(Disclaimer: I am a shareholder in Independent News & Media plc) In Friday’s Irish Times former INM director Leslie Buckley called for regime change at the publisher (see here and here). Expectations of a showdown at the AGM remain undiminished. But, of course, one would prefer if the dirty linen wasn’t aired in public, regardless of the grievances involved.

 

(Disclaimer: I am a shareholder in Abbey plc and PetroNeft plc) While reading Edinburgh based microcap fund Nettle Capital’s Q1 2012 factsheet I was interested to learn that they hold Irish listed Abbey, CPL Resources and PetroNeft in their European fund. Great minds and all that!

 

Speaking of Abbey, UK housebuilder Telford Homes issued a strong trading update earlier today in which it said profits would beat expectations due to strong demand. Encouragingly, it has acquired sites that add 1,200 properties to the development pipeline over the past year, which is a vote of confidence in the outlook for the industry. Given Telford’s focus on the south-east of England, which is Abbey’s main area of operations, the read-through for Abbey from this is positive.

 

Switching to macro news, the OECD said that Ireland may need a mini-budget to meet its fiscal targets. This comes as no surprise to me, given my bearish view on the state of the public finances. I despair at the lack of a proper national debate about the fiscal crisis – which has left the door wide open for populist politicians and other vested interests to pretend that this mess can be easily solved through levying punitive taxes on some imaginary army of fabulously wealthy individuals.

 

Cormac Lucey, whose views on both politics and economics I rate very highly, makes a powerful case for why Ireland should reject the forthcoming fiscal treaty.

 

On a lighter note, as a current MBA student at Smurfit, I’ve been thrilled to read of the Smurfit rugby team‘s exploits at the MBA Rugby World Cup in North Carolina – having taken a host of scalps along the way (Duke, Columbia, London Business School, Wharton) the icing on the cake came overnight with the Irish team defeating Harvard University to become world champions for a record tenth time. Congratulations in particular to my classmates Justin Thomas, John O’Loughlin, John MacMahon, Donnchadh Casey, Conor Price, David Pierce and Conor Beirne who were all part of the squad.