Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 20/5/2012

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After the huge volume of company updates we saw on Friday I’m hoping that this week will be a little quieter on the newsflow front. In this update I’m focusing on what to expect from this week’s main scheduled updates from across the universe of stocks I follow, along with one or two other nuggets of information that I found interesting.


(Disclaimer: I am a shareholder in Ryanair plc) Given that I have about 17% of my portfolio invested in Ryanair, tomorrow’s FY12 results from Europe’s biggest low cost carrier will be of particular interest to me. RYA guided in late January that it now expects to deliver net income of €480m, having previously upped its guidance by 10% to €440m back in November. With consensus standing at €494m (in my own model, for what it’s worth, I have €491.9m), it seems that the market expects an earnings beat from Ryanair. Of course, nobody trades the history, so all eyes will be on guidance for how RYA has performed since the start of its FY13 financial year, particularly on the yield side, along with any clues on special dividends (unlike most followers of the company I currently forecast two €500m payouts – in both FY13 and FY14 – but given the €106m it has spent on buying back its own shares recently, I’m starting to wonder if I should revise that to one special dividend and further share buybacks). I wouldn’t expect too much ‘new news’ on the cost side given that RYA has hedged 82% of its fuel needs for FY13 already.


(Disclaimer: I am a shareholder in Irish Life & Permanent plc) Another company updating the market this week is Irish Life & Permanent, which holds its AGM on Tuesday. I’m assuming that it will repeat the practice of previous years and release an interim management statement at 7am that morning. Following the announced sale of its insurance unit to the State, and news that the State is positively disposed to its restructuring plans, I assume that interest will be centred on: (i) the provision of more information on how the post-restructuring ptsb banking unit will operate; (ii) arrears and impairment trends in the loanbooks; and (iii) any hint of a possible re-start of the sale process around the UK buy-to-let mortgage book.


Food manufacturing group Greencore will release its H1 results on Tuesday. The main attention here will be on the integration of Uniq, current trends in the UK convenience food space and how well its (still relatively small) US business is performing. Trading on a PE of circa 6x and yielding around 6%, Greencore looks cheap but I dislike its chunky net debt.


(Disclaimer: I am a shareholder in Marston’s plc). With all the market noise on Friday, I didn’t get a chance to properly review the presentations that accompanied some of the results statements that came out that day until yesterday. One that really stood out for me was pub group Marston’s – happily, for all the right reasons. In the group’s interim results presentation management outlined a number of key positives, including: (i) slide 8 illustrates the positive trends in operating margins, which have risen 90bps in 4 years despite the economic headwinds, which underlines the successful execution of the firm’s growth strategy; (ii) slide 37 shows that the firm is comfortably within all of its debt covenants; (iii) slide 19 illustrates just how well the firm’s investment policy is paying off, with targeted ROI from new-builds of 16.5%; (iv) slide 25 shows how the learning effects from this strategy is paying off, with returns on more recently completed establishments standing at 18.5%; and (v) slide 38 shows that the firm has no significant near-term debt maturities, which gives it welcome breathing space. In all, I found Marston’s presentation to be very comforting and remain a happy holder.


The government announced that the keel has been laid for the first of the Irish Naval Service’s two new offshore patrol vessels. At 90m long these will be the largest ever vessels operated by the INS, and they are due to be delivered in 2014 and 2015 to replace two of the three Emer class vessels (commissioned in 1978, 1979 and 1980 respectively). In Department of Defence briefing notes prepared for the Minister after he took up his post early last year these were the only significant planned procurement items alluded to, which reflects the present financial constraints. However, by 2015, after the delivery of the OPVs, of the INS’ eight strong flotilla three will have been in service for over 30 years, so this is an area that will have to be revisited by the Minister before long.


Written by Philip O'Sullivan

May 20, 2012 at 12:40 pm

One Response

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  1. […] From an Irish perspective the main news today has been FY12 results from LCC gorilla Ryanair. In the preview I wrote yesterday I noted that the market (as reflected by consensus of €494m) was expecting net income to come in […]

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