1. finance
2. investing
3. stocks

Morning Wrap
Today’s Newsflow
Select headline to navigate to article
Equity Research
Upcoming Events
Irish Economic View NTMA to sell 7-year debt at record low
Company Events
interest rate today
07-Jan
Irish Economic View IDA reports another strong year for FDI in
2014
FBD Holdings Setting the scene ahead of FY14 results; Cutting
estimates for FY15 and FY16
07 Jan 2015
08-Jan
12-Jan
13-Jan
14-Jan
Aer Lingus; Traffic stats - Dec 2014
easyJet; Traffic stats - Dec 2014
Air France-KLM; Traffic stats - Dec 2014
Grafton Group; Trading Statement
IAG; Traffic stats - Dec 2015
Lufthansa; Traffic stats - Dec 2014
Greene King; AGM
SIG; Trading Statement
C & C Group; Q3 2015 IMS
Premier Oil; Q4 2014 trading update
UK Builders Merchants Positive trends into Q4 from
Housebuilders, Topps Tiles and Marshalls
Greencore Sainsbury sees strong Q3 convenience sales growth
First Derivatives Launches new product targetting digital marketing
Economic Events
sector
Ireland
07-Jan
08-Jan
European Building Materials French cement volumes remain
weak
Escher Group Trading update notes downgrade to 2014
CPI (M/M)
Unemployment Rate Dec
United Kingdom
08-Jan
BoE rate announcement
09-Jan
Industrial Production Nov
13-Jan
CPI Dec
United States
09-Jan
Manufacturing Payrolls
Europe
Goodbody Capital Markets
Equity Research +353 1 6419221
Equity Sales +353 1 6670222
Bloomberg GDSE<GO>
Goodbody Stockbrokers (trading as Goodbody) is regulated by the Central Bank of Ireland. For the attention of US clients of Goodbody
Securities Inc, this third-party research report has been produced by our affiliate Goodbody Stockbrokers. Please see the end of this
report for analyst certifications and other important disclosures.
Goodbody Morning Wrap
Irish Economic View NTMA to sell 7-year debt at record low interest rate today
With yields at record low levels, the NTMA is to make its first foray into the bond markets of
2015 this morning. It is expected to sell €3bn-€4bn of a new 7-year bond by way of a
syndicated transaction. Based on the current pricing on the Irish yield curve, the yield could
Dermot O’Leary
+353-1-641 9167
[email protected]
come in as low as 0.85%.
Assuming that the NTMA raised €4bn today, this would go a significant way to meeting its
2015 funding target of €12bn-€15bn very early in the year. While the State has cash buffers
of €17bn and bond redemptions this year are just €2.2bn, the monies raised this year will
also go towards financing the expected exchequer deficit of €7bn as well as the €9bn
refinancing of IMF loans.
Given that there are no bonds outstanding in either 2021 or 2022, it does make some sense
to sell debt in this maturity. However, it is still our preference that the NTMA takes
advantage of the low interest rate environment by locking these low costs well into the
future. In November, the NTMA managed to sell a 15-year bond at a yield of 2.49%. That
bond currently has a yield of 1.79%. There is no reason why the NTMA could not have
tapped this bond once again or even took the opportunity to sell a 20-year bond, given
similar sales by other European sovereigns over recent months.
Ireland is moving early to meet part of its funding requirement for 2015. We expect
the sale to be met with strong demand once again. Given that it will go partly
towards repaying expensive IMF loans, the financial benefits will quickly come
through by way of lower interest costs.
Home…
Irish Economic View IDA reports another strong year for FDI in 2014
In its end of year review yesterday, the IDA reported another strong year for attracting FDI.
A net total of 7,131 jobs were created by its client companies in 2014, marginally ahead of
the 7,071 seen in 2013, and its highest level since 2000.
This brings the total employment at IDA companies to 174,488, its highest level on record.
The agency has also continued to broaden the variety of investment it is attracting, with 88
firms setting up in Ireland for the first time in 2014, an increase of 13% on the previous
year. Besides the benefit of providing direct employment the IDA estimates that for every 10
jobs it creates a further 7 jobs in the wider economy are supported. Allowing for these
indirect jobs, total employment is likely to be closer to 300,000, 16% of the workforce. In
addition, it also estimates that its clients are currently responsible for 10,000 construction
jobs. However, the IDA still struggled with attracting investment to the regions with only
37% of investments going outside Dublin or Cork.
The IDA has been consistently successful at attracting direct foreign investment to
Ireland and the combination of a commitment by the government to Ireland’s
12.5% corporation tax and improving economic conditions supported its activities
in 2014. While its pipeline for the start of 2015 remains strong, the agency warns
against complacency particularly in the area of competitiveness. It is also positive
that the media coverage that Ireland has received in relation to its corporation tax
regime has done little to damage flows of FDI into the country to date.
Home…
Page 2
07 Jan. 15
Juliet Tennent
+353-1-641 9469
[email protected]
Goodbody Morning Wrap
FBD Holdings Setting the scene ahead of FY14 results; Cutting estimates for FY15 and FY16
Following the Q3 IMS in November, we downgraded FY14 estimates materially after FBD
Recommendation: Hold
highlighted an uptick in large claims and prior year claims adjustments. Ahead of the FY14
Closing Price: €10.90
results in early March we take the opportunity to update our forecasts for FY15 and FY16.
Eamonn Hughes
Detail on progress addressing frequency shows that by end October, volumes were down by
4.7%, though average premiums were up 6.9%, showing a 2% rise in premiums in that
+353-1-641 9442
[email protected]
period vs 5% in H1. On revisiting likely momentum in our models, we have cut our H2
premium numbers from +3% to +1% (lower volumes, rates unchanged), but leave our FY14
operating EPS estimate unchanged at -7c. But continuing similar premium momentum into
FY15, delivering a flatter premium profile rather than our previous expectation of 4% growth
lowers operating EPS by 15c to 88c for FY15 (-14%), whilst FY16 drops to 118c (down from
141c, -16%).
Putting these adjustments through our model, in combination with higher negative
short term investment returns given lower returns for longer, pares end 2016 NAV
by 10% to €7.74. However, it also pushes our year of normalisation of earnings out
by 12 months to 2017. For valuation purposes, we are moving to an FY16 NAV from
FY15, though this is balanced by moving our long term growth rate from 2% to 0%
given the uncertain outlook. Reflecting the lower NAV and building the extra year
of discounting drives our PT down from €15 to €12.00. We retain our Hold.
Home…
UK Builders Merchants Positive trends into Q4 from Housebuilders, Topps Tiles and Marshalls
Topps Tiles has today reported Q115 lfl sales growth of 6% for the 13 weeks ending 27th of
December, representing a continuation of the 6.7% lfl growth seen in the first 8 weeks of
FY15. Management has reiterated it’s confidences in delivering further progress in FY15
towards its target of taking one third of the market.
Marshalls has issued a trading update for the full year with revenue up 17%, implying growth
of 12% in November/December. Expectations for the full year are unchanged despite an
additional £2m restructuring charge in H214. Order books have also remaind strong at 11.9
weeks, unchanged from the end of October.
UK housebuilders Persimmon and Galliford Try have issued end of year and Q215 trading
updates both citing continued growth in housing completions. Persimmon has reported that
the value of year end forward sales is up 7%, representing a slowdown from the +12% at
the end of Q3 (+22% end of Q2). Galliford Try has stated that H115 performance is in line
with expectations and that it expects continued improvements in operating margin
performance in the Housebuilding division.
Overall, these results point to continued momentum in the UK market into the final
quarter of 2014 and underpin our thesis that 2015 will be a year of further growth
in UK construction markets, albeit at a more normalised pace. This provides a
continued positive backdrop for the merchants.
Home…
Page 3
07 Jan. 15
Robert Eason
+353-1-641 9271
[email protected]
David O’Brien
+353-1-641 9230
david.a.o’[email protected]
Sarah Reilly
+353-1-641 6080
[email protected]
Goodbody Morning Wrap
Greencore Sainsbury sees strong Q3 convenience sales growth
Sainsbury reported Q3 lfl sales growth of -1.7% this morning. Price deflation was a
contributory factor in the decline and this looks set to continue. The company’s convenience
foods business, by contrast, saw very strong growth of 16%, similar to the last quarter, due
to more frequent local shopping trips by consumers in its high street stores.
Greencore is a key supplier of convenience foods to Sainsbury and accounts for
Recommendation: Buy
Closing Price: £2.85
Liam Igoe
+353-1-641 9450
[email protected]
circa 10% of UK sales. Greencore’s Q1 IMS will be released on the day of its AGM
on 27 January in which we expect lfl sales to continue to grow at a high single digit
rate.
Home…
First Derivatives Launches new product targetting digital marketing sector
First Derivatives has announced this morning that it has launched a new product, Delta
Marketing Cloud, on its Delta software platform. The product is targetting the digital and
mobile marketing industry across all verticals. The product will assist with combining speed
and scale to allow clients to target the right prospects at the right time and will use data
from website traffic, real-time advertising data, social media and other customer data. The
statement notes that the company has signed a number of key pilot customers.
Overall, another positive announcement from First Derivatives. While small in
revenue terms at present, it highlights its entry into another vertical which is large
and growing rapidly. We continue to highlight the significant opportunity that is
available to the group’s software business. We reiterate BUY.
Home…
Page 4
07 Jan. 15
Recommendation: Buy
Closing Price: £12.55
Rachael Cairns
+353-1-641 9162
[email protected]
Goodbody Morning Wrap
European Building Materials French cement volumes remain weak
Data released by the French Cement Association shows that the underlying construction
market remains weak with volumes down 12.6% yoy in December (adjusting for trading
days), which is the ninth consecutive month of decline. While such cement trends will be
closely watched in the coming months to see whether a recovery in Europe is taking hold, we
note that Q115 performance will be set against very difficult comparatives.
Of our covered stocks, SIG has the biggest exposure to the French construction
sector at just over 20% of group sales. However, it should be noted that this
Robert Eason
+353-1-641 9271
[email protected]
David O’Brien
+353-1-641 9230
david.a.o’[email protected]
Sarah Reilly
+353-1-641 6080
[email protected]
business has a track record of outperforming its underlying markets, a reflection of
its specialisation (insulation and roofing) and a strong management team.
Home…
Escher Group Trading update notes downgrade to 2014
Escher Group has released a trading statement this morning noting that a sizeable licence
agreement did not conclude before the year end 2014 and that negotiations are continuing
into 2015. It notes that group revenues are expected to be down 15% yoy in 2014 (implying
c. $21m) and that Group EBITDA will be materially below market expectations. Management
notes that it remains in a strong position in terms of its product portfolio and its international
pipeline of opportunities.
Overall, while this comes as unwelcome news, timing appears to be the major
issue. Incorporating this update along with the update in December concerning the
USPS rollout will see us reduce our 2014 Group revenue number from $26.7m to
c.$21m and reduce our FY14 EBITDA estimate from $7.2m to c.$2m ($2.6m from
the USPS rollout delay and a further c.$2.6m reflecting today’s announcement).
Home…
Page 5
07 Jan. 15
Recommendation: Buy
Closing Price: £2.43
Rachael Cairns
+353-1-641 9162
[email protected]
Goodbody Morning Wrap
Market Data
Top 10 Covered Companies
Company
AIB Group
CRH
Ryanair
Wolseley
IAG
Kerry Group
Bank of Ireland
Price
Mkt Cap
Absolute
Relative to European Sector
P/E
(LC)
(LCM)
1 Day
1 Week
1 Mth
Ytd
1 Day
1 Week
1 Mth
Ytd
2015f
2016f
0.08
42,927
-2.4
5.1
-12.8
3.8
-1.7
8.1
-7.7
7.2
45.6
55.1
18.73
13,871
-2.4
-4.1
-6.5
-5.9
-1.7
-1.4
-1.1
-2.8
19.2
15.6
9.67
13,376
-2.4
-1.6
-0.2
-1.4
-1.7
1.2
5.7
1.9
15.9
13.6
35.79
9,540
-1.6
-2.2
-3.0
-2.9
-1.2
0.1
3.0
-0.9
15.8
13.6
4.81
8,921
-2.6
-0.2
-1.2
-1.1
-1.9
2.6
4.6
2.2
n/m
n/a
56.50
9,933
-1.1
-2.6
-4.8
-1.0
-0.3
0.2
0.7
2.3
18.9
17.0
0.30
9,845
-1.3
-2.9
-11.9
-2.9
-0.6
-0.1
-6.7
0.3
12.1
11.1
easyJet
16.82
6,647
-1.2
1.1
-4.5
0.7
-0.8
3.4
1.5
2.7
n/m
n/m
Lufthansa
14.03
6,424
0.3
1.4
-5.7
1.4
1.0
4.3
-0.2
4.8
n/m
n/a
Mondi
10.18
4,943
-0.3
-3.2
-7.6
-3.0
0.4
-0.5
-2.2
0.1
11.7
11.0
ISEQ performance
Indices
Price
1 Day
1 Week
1 Mth
Ytd
5,400
ISEQ
%
5,086.19
-1.53
-2.43
-4.49
-2.65
5,300
FTSE 100
6,366.51
-0.79
-2.76
-5.58
-3.04
5,100
DAX 30
9,469.66
-0.04
-3.43
-6.12
-3.43
CAC 40
4,083.50
-0.68
-3.82
-7.60
-4.43
FTSE Eurofirst 300
1,323.47
-0.68
-2.89
-5.81
-3.29
4,700
Nasdaq
4,592.73
-1.29
-3.87
-3.93
-3.03
4,600
S&P 500
2,002.61
-0.89
-3.74
-3.51
-2.73
Dow Jones
17,371.64
-0.74
-3.40
-3.27
-2.53
Nikkei 225
16,883.19
-3.02
-3.25
-5.79
-3.25
Px 1 day Px 1 Week
5,200
5,000
4,900
4,800
4,500
4,400
4,300
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Oct-14
Jan-15
Oct-14
Jan-15
Exchange Rates
Px Dec14
Avg Ytd
Stg/€
Current
0.786
0.783
0.782
0.776
0.782
US$/€
1.192
1.194
1.216
1.210
1.200
CHF/€
JPY/€
STOXX 600 performance
1.201
1.201
1.203
1.202
1.202
355
141.502
142.761
145.214
145.079
143.489
350
345
Bonds
340
335
Yield
1 Day
Yld 1 Wk
Yld 1 Mth
Yld 3 Mth
330
US 2 Yr
0.63
-0.03
-0.06
-0.01
0.11
325
US 10 Yr
1.94
-0.09
-0.25
-0.36
-0.48
320
UK 2 Yr
0.37
0.01
-0.05
-0.14
-0.26
UK 10 Yr
1.56
-0.11
-0.23
-0.46
-0.79
BD 2 Yr
315
-0.11
0.00
0.00
-0.08
-0.04
BD 10 Yr
0.44
-0.08
-0.09
-0.30
-0.42
Irish 10 Yr
1.18
-0.01
-0.06
-0.19
-0.48
Commodities
%
310
Jan-14
1 day
5 day
1 Mth
1 Yr
51.10
-3.78
-10.87
-26.02
-52.12
Gasoline (NYM $/Gal)
1.35
-1.96
-8.00
-23.63
-48.82
16,500
Heat Oil (NYM $/Gal)
1.73
-1.31
-5.86
-18.10
-41.26
16,000
Nat.Gas
2.94
1.94
1.70
-22.72
-31.77
1,210.25
0.85
0.35
1.36
-2.89
16.29
2.58
2.00
-0.24
-18.71
6,191.00
-0.40
-2.64
-5.28
-15.35
5.92
0.47
0.34
-0.38
-2.31
Gold $/oz
Silver $/ozt
Copper U$/MT
Wheat $/BU
Source : FactSet
Page 6
07 Jan. 15
Jul-14
FTSE 250 performance
Current
Brent (ICE $/bbl)
Apr-14
17,000
15,500
15,000
14,500
14,000
Jan-14
Apr-14
Jul-14
Goodbody Morning Wrap
Issuer & Analyst Disclosures
Analyst Certification
The named Research Analyst certifies that: (1) All of the views expressed in this research report accurately reflect my personal views about
any and all of the subject securities and issuers. (2) No part of my remuneration was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by me in this report.
Regulatory Information
Goodbody Stockbrokers, trading as Goodbody, is regulated by the Central Bank of Ireland. Goodbody is a member of the Irish Stock
Exchange and the London Stock Exchange. Goodbody is a member of the FEXCO group of companies. This publication has been approved by
Goodbody Stockbrokers. The information has been taken from sources we believe to be reliable, we do not guarantee their accuracy or
completeness and any such information may be incomplete or condensed. All opinions and estimates constitute best judgement at the time
of publication and are subject to change without notice. The information, tools and material presented in this document are provided to you
for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for
securities.
Conflicts of Interest
Goodbody Stockbrokers has procedures and policies in place to identify and manage any potential conflicts of interest that arise in
connection with its research business. Goodbody Stockbrokers’ analysts and other staff who are involved in the preparation and
dissemination of research operate and have a management reporting line that is independent to its Corporate Finance business. Information
barriers are in place between the Corporate Finance arm and the Research arm to ensure that any confidential and or price sensitive
information is handled in an appropriate manner.
Our Investment Research Conflicts of Interest Policy is available at Conflicts of Interest
Investors should be aware, that, where appropriate, research may be disclosed to the issuer(s) in advance of publication in order to correct
factual inaccuracies only and not to materially amend the research in any way. Goodbody Stockbrokers is satisfied that it has operational
procedures in place, which ensure that such disclosures will not compromise the report’s objectivity.
Goodbody Stockbrokers and its associated companies may from time to time perform investment banking or corporate finance services,
including underwriting, managing or advising on a public offering for, or solicit business from any company recommended in this report.
Goodbody Stockbrokers may have acted, in the past 12 months, as lead manager / co-lead manager in the securities of any company
named in this report.
Goodbody was the co-lead manager for Hibernia REIT Plc for a public fund raising in the past 12 months.
Goodbody Stockbrokers acts as corporate broker to AIB Group, Datalex, FBD Holdings, First Derivatives, Grafton Group, Greencore, Hibernia
REIT, ICG, Kingspan, Origin Enterprises, Paddy Power, UDG Healthcare, and UTV Media
Goodbody Stockbrokers is a registered market maker in the majority of companies listed on the Irish Stock Exchange and their equivalent
on the London Stock Exchange and may hold positions in any of the companies mentioned in this report from time to time. A complete list of
the companies that Goodbody Stockbrokers makes a market in is available at Regulatory Disclosures
Page 7
07 Jan. 15
Goodbody Morning Wrap
Other disclosures
We would like to inform you that Robert Eason holds shares in Kingspan
We would like to inform you that Robert Eason holds shares in SIG
A description of this company is available at Company Descriptions
All prices used in this report are as at close of business of the previous working day unless otherwise indicated.
A summary of our standard valuation methods are available at Valuation Methodologies
A summary of share price recommendations and whether material investment banking services have been provided to these companies is
available at Regulatory Disclosures
Other important disclosures are available at Regulatory Disclosures
Goodbody Stockbrokers updates its recommendations on a regular basis. A breakdown of all recommendations provided by Goodbody
Stockbrokers is available at Regulatory Disclosures Where Goodbody Stockbrokers has provided investment banking services to an issuer,
details of the proportion of buys, holds and sells attributed to that issuer will also be included. This is updated on a quarterly basis.
The date on which stock recommendations were first released for all stocks mentioned in this report are available at
http://www.goodbody.ie/research_disclosures/regulatorydisclosures/index.html. If a different recommendation has been made in the
previous twelve months, this will also be disclosed here.
Recommendation Definitions
Goodbody Stockbrokers uses the terms “Buy”, “Sell” and “Hold. The term “Buy” means that the analyst expects the security to appreciate in
excess of 10% over a twelve month period. The term “Sell” means that the security is expected to decline in excess of 10% over the next
twelve months. The term “Hold” means that the analyst expects the security to neither appreciate more than 10%, or depreciate more than
10% over the next twelve months.
On 26th November, 2012, the terms “Add” and “Reduce” were removed from the Recommendation Definitions and both were replaced with
the “Hold” recommendation. Any Previous Recommendation that refers to either an “Add” means that the analyst expected the security to
appreciate by up to 15% over a twelve month period. Any Previous Recommendation to “Reduce” means that the analyst expected the
security to decline by up to 15% over the next twelve months.
In the event that a stock is delisted the firm will automatically cease coverage. If however the firm ceases to cover a stock for any other
reason the firm will disclose this fact.
Distribution of research to clients of Goodbody Securities Inc (GSI) in the US
GSI distributes third-party research produced by its affiliate, Goodbody Stockbrokers
GSI is a member of FINRA and SIPC
GSI does not act as a market-maker.
This information was current as of the last business day of the month preceding the date of the report.
An affiliate of GSI may have acted, in the past 12 months, as lead manager/co-lead manager of a publicly disclosed offer of the securities in
this company. Investors should be aware that an affiliate of GSI may have provided investment banking or non-investment-banking services
to, and received compensation from this company in the past 12 months or may provide such services in the next three months. The term
investment banking services includes acting as broker as well as the provision of corporate finance services, such as underwriting and
managing or advising on a public offer. All transactions by US persons involving securities of companies discussed in this report are to be
effected through GSI.
Disclaimer
While all reasonable care has been taken in the production and dissemination of this report it is not to be relied upon in
substitution for the exercise of independent judgement. Nothing in this report constitutes investment, legal, accounting or tax
advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or
otherwise constitutes a personal recommendation to you.
Private customers having access, should not act upon it in anyway but should consult with their independent professional
advisors. The price, value and income of certain investments may rise or may be subject to sudden and large falls in value.
You may not recover the total amount originally invested. Past performance should not be taken as an indication or guarantee
of future performance; neither should simulated performance. The value of securities may be subject to exchange rate
fluctuation that may have a positive or adverse effect on the price or income of such securities.
All material presented in this report, unless specifically indicated otherwise is copyright to Goodbody Stockbrokers. None of the material, nor
its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express
written permission of Goodbody Stockbrokers.
Goodbody, Ballsbridge Park, Ballsbridge, Dublin 4, Ireland
T
(+353 1) 6670400
W
www.goodbody.ie
E
[email protected]
Page 8
07 Jan. 15