Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 22/6/2012

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Since my last update Aer Lingus has responded to Ryanair’s takeover approach, saying that the indicated bid price from Europe’s largest LCC undervalues the company, while also noting the regulatory hurdles that Ryanair would have to overcome before being able to gain clearance for any tie-up between the two companies. Echoing the ‘undervalued’ line was Irish Transport Minister Leo Varadkar, who has clearly forgotten that several months ago he said he’d be open to offers of at least €1 a share, which is significantly below the €1.30 Ryanair has stated. Businessman Denis O’Brien offered a few thoughts of his own on the proposed deal in an interview with Bloomberg yesterday.


(Disclaimer: I am a shareholder in Irish Continental Group plc) Following on from the recent secondary placing in ICG, I’ve taken the opportunity to increase my stake in the company. My rationale is that: (i) the exiting of One51 from the share register removes an overhang from the stock; (ii) the recent slide in the oil price – Brent futures yesterday fell below $90 for the first time since December 2010 – is good news for ICG, which doesn’t hedge its fuel requirements; and (iii) at these levels the stock offers a very attractive dividend yield of 6.75%.


(Disclaimer: I am a shareholder in Independent News & Media plc) INM’s Australasian associate, APN, made a AUD$66m online acquisition, which represents attractive multiples of 0.9x EV/Sales and 8x EV/EBITDA, clearly undemanding for digital assets, although it doesn’t appear to have done a lot to lift the share price.


In the blogosphere, the excellent Value and Opportunity blog offered a much needed sense of perspective for these troubled times, while also outlining the bull case for investing in Europe.


Written by Philip O'Sullivan

June 22, 2012 at 8:00 am

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