Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 17/4/2012

with 3 comments

Having had a rather productive day in terms of college and making the final edits to my articles for the next issue of B&F I thought I’d “treat myself” to writing a short blog on what has been grabbing my attention in the past 24 hours or so.

 

(Disclaimer: I am a shareholder in Ryanair plc) To start with, I was interested to read in Bloxham’s morning wrap that political wrangling may harm Boeing sales – might this further delay a future Ryanair mega-order of new aircraft and increase the likelihood that Europe’s biggest low-cost carrier will pay a second €500m special dividend in addition to the one widely expected in RYA’s FY13 financial year? My own estimates for Ryanair have the carrier paying €500m out in each of FY13 and FY14, so let’s see how this dispute plays out.

 

(Disclaimer: I am a shareholder in Playtech plc) In the TMT space, UTV Media issued an update in which it revealed a significant contract win for its talkSPORT franchise – under the terms of the deal talkSPORT becomes the Premier League’s global audio partner, meaning that it will broadcast commentary outside of Europe on all 380 Barclays Premier League games in multiple languages. This could well prove to be a very significant win for UTV over time. Elsewhere, Playtech announced that it is to buy even more assets from Teddy Sagi, paying him over  €100m for B2B, B2C and property holdings. Given well-documented concerns about deals of this nature (Sagi is presumably in the Guinness Book of Records for the most related party deals with a single plc in history) it was no surprise to me to see the shares move lower today. I really have only myself to blame though, having previously whined about how the stock has repeatedly left me feeling “legged over” (!) but at the same time holding on to it in the hope that I could sell it higher up. There’s a lesson in that for investors everywhere.

 

In the construction space, it appears that the second largest builders merchant chain in Ireland may be carved up between Saint-Gobain and Grafton. Given that Saint-Gobain is quite a rational competitor for Grafton et al in the UK, I wouldn’t see any negative read-through for Grafton if Saint-Gobain were to materially step up its presence in this market.

 

Greencore bought a convenience food manufacturing business in the US, bolstering its presence in that market. They are paying $36.0m for the business, representing historic EV/Sales, EV/EBITDA and P/B multiples of 0.55x, 6.3x and 1.8x which to me look reasonable enough. Obviously the main focus for Greencore remains its UK operation, but for information on the conference call Greencore said that post the acquisition total USA sales will be pro-forma approximately £160m, which on a back-of-the-envelope calculation represents around 14% of group revenues. Greencore USA’s key clients include Ahold, Delhaize and 7-Eleven – while I don’t want to detract from those impressive customers, I note that these are not (obviously) clients of Greencore in the UK – I wonder if it could better improve its competitive position by emulating fellow Irish food stock Aryzta and ‘following the client’ – Aryzta has become a key supplier to McDonalds across at least two continents, for example. Building a relationship like that would reduce the risk for Greencore of having its margins crushed by its customers, given that it is in their customers’ interest to ensure that their suppliers are in good financial shape.

 

(Disclaimer: I am a shareholder in BP plc) Switching to macro news, regular readers of this blog will know that I’m unmoved by some of the more bullish commentary from certain quarters in this country about the Argentine economy, partly because of my first hand experience of having traveled through the country last year and having spoken to locals about the severe hardship many of them are experiencing, and partly because the Argentine government’s flair for doctoring statistics means that one should take any reports based on government produced data with a pinch of salt. Anyways, the latest development there is that the government has moved to nationalise YPF, a development which presumably serves to inform overseas investors that they would have to be out of their mind to put money into Argentina. Whatever about any short-term gains from YPF, how does driving away FDI help aid Argentina in the longer term? I am a little concerned about BP’s $7bn stake in Pan American Energy, especially given the war of words between Argentina and the UK over the Falkland Islands. Wexboy picks up the baton and beats Argentina’s crazed politicians with it here.

 

Finally, reports that the Irish Central Bank is to buy the half-built shell of what had been intended to be a future headquarters for Anglo Irish Bank are to be welcomed, given that it removes an eyesore on the quays that greets many of the 1.7m ferry passengers that use Dublin Port each year (not to mention those of us who live in that part of town!). Now, if NAMA could have similar results with the rest of its portfolio we’d be having some real progress!

Advertisements

Written by Philip O'Sullivan

April 17, 2012 at 6:14 pm

3 Responses

Subscribe to comments with RSS.

  1. Well, seeing as your blog (like mine) is banned in China, it stands to reason that you’d be a pariah in more than one country 😉

    Philip O'Sullivan

    April 17, 2012 at 6:44 pm

  2. […] of the crazy economic policies being implemented by President Fernández de Kirchner, which I’ve been writing about for some time. One of the main beneficiaries of this is Uruguay – when I traveled to Montevideo last year I […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: