Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 26/4/2012

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The next couple of weeks are likely to be very quiet on the blog as I face into the main body of exams on the MBA. Sadly, the volume of newsflow is proving to be anything but quiet!


(Disclaimer: I am a shareholder in Irish Life & Permanent plc) It was confirmed today that IL&P’s permanent tsb unit will have an independent future,  following months of uncertainty. The bank will submit a restructuring plan to the European Commission before the end of June, with the group splitting into three – CHL (UK loans), which has a loan book of €7.1bn, permanent tsb (the ‘good bank’, with the healthier loans), which has a loan book of €14.2bn, and AMU (Asset Management Unit, the ‘bad bank’), which has a loan book of €12.5bn. I suspect that the sale process for the UK loan book will be re-started once the Commission approves the restructuring, while for the rest of the loan book there are some significant questions outstanding on both capital and funding. In all, I think it’s too early to take a view on whether or not IL&P is worth buying at these levels.


(Disclaimer: I am a shareholder in Abbey plc) Switching to the construction sector, I’ve recently noted improving newsflow from the UK housebuilders, which bodes well for Irish listed (but chiefly south-east England focused) Abbey plc. One of its peers, Redrow, announced that it is launching a placing and open offer to raise £80m to help fund an expansion of its housebuilding operations. ‘So what?’, you might well ask. Well, what makes this noteworthy is that the placing is being done at an 11% premium to where the shares closed at the day before the announcement was made, with the placing fully underwritten by the Chairman. If he wasn’t bulled up on the prospects for the UK housing market, he wouldn’t be comfortable to underwrite a placing at a premium to the market price.  Another UK housebuilder, Taylor Wimpey, earlier today said: “UK housing market conditions remain stable and the Group is trading at the upper end of our expectations“. In all, the newsflow from this sector continues to get better.


(Disclaimer: I am a shareholder in CRH plc) Elsewhere, I was pleased to read confirmation that Semapa will pay CRH €574m for its 49% stake in Secil. This will cut the group’s net debt / EBITDA ratio to 1.5x or so by end-2012, which underlines CRH’s capacity for a step-up in M&A activity.


(Disclaimer: I am a shareholder in Independent News & Media plc and Trinity Mirror plc) In the TMT sector, regional newspaper group Johnston Press published its 2011 results yesterday. These revealed continued difficult conditions in Ireland, with advertising revenues dropping 19.1% in 2011, which was the same rate of decline as in 2010. In terms of the read-through for INM, this comes as little surprise (INM referred to “very challenging trading conditions” in Ireland in its 2011 results on March 22), but I do suspect (emphasis) that the parts of the country where Johnston Press’ portfolio of Irish assets are located are doing worse (from an economic perspective) than where INM’s portfolio of Irish regional assets is located. From the perspective of Trinity Mirror, I note comments from Johnston Press that it is moving a number of daily publications to weekly editions, which fits with my narrative of the UK newspaper sector becoming right-sized. Elsewhere, I was pleased to see share purchases in Independent News & Media by both the new chairman and the new CEO.


Elsewhere, regular blog readers will know that Playtech has been a constant thorn in my side in the 18 months or so since I bought into it. I was delighted to take the opportunity to sell out of it on Tuesday afternoon at 381p/share, clearing all of 1p/share profit (in constant currency terms) relative to my entry level. I’m mulling over what to do with the proceeds and some other cash reserves – I have 20 live positions in the portfolio which is just about as many as I can safely manage given the other pressures on my time. What I would like to buy is more exposure to sterling denominated assets (given the near-term political uncertainty in Euroland) so I’m considering raising my existing shareholding in one or more of Trinity Mirror, RBS and BP.


Pharma group Elan posted “solid” Q1 results earlier today, with management saying that it’s on track to achieve its full-year financial guidance.


The Cove Energy takeover story took another twist as Royal Dutch Shell made a recommended cash offer for the company. As noted before, the sale of Cove will mean a nice windfall for a lot of Irish private investors.


Written by Philip O'Sullivan

April 26, 2012 at 4:34 pm

2 Responses

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  1. […] I am a shareholder in BP plc) Speaking of oil stocks, I followed through on my recent commitment to add to my sterling denominated assets and I doubled my position in BP at 420p yesterday. While I […]

  2. […] net proceeds of €564.5m from the sale of its stake in Portuguese cement firm  Secil. As mentioned before, these funds will provide the group with considerably enhanced financial flexibility to expand […]

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