GG now spends rainy days trading equities and currencies. He likes to use a combination of technical analysis and news flow to make trading decisions.
Bank of Ireland and Cairn Energy
Bank of Ireland is due to issue a full year pre-close trading update on Monday morning. It last updated the market in mid-February, so it is unlikely that there will be many new surprises; however at the last update the company surprised some analysts by lowering guidance for earnings growth to between 3%-5%.
The bank was caught up in the recent HBOS ’short-selling’ crossfire (I see the Irish financial regulator has been after firms’ dealing records to see if there has been any ’skulduggery’ involved in the recent trading of shares in Irish financial institutions) but has since rebounded strongly.
Analysts will be looking to see that there has been no further deterioration in the Life business, or further provisions required for the SIV investments. The fact that the company has been able to raise money (via a recent €500M 2012 bond) should be seen as a positive development. However, with Irish economic growth moderating and both the UK and Irish property markets dealt another blow by rises in some mortgage rates, it is difficult to see anything but modest progress in earnings in the short term.
Oil exploration & production company Cairn Energy is also due to release delayed results on Monday. The company, which focuses on interests in South Asia, has been wrangling with state and local governments about recovering the cost of a 600km pipeline need to link the Rajasthan field to the refineries. It is hoped that the short delay has enabled the company to successfully conclude negotiations over the potential $800m pipeline cost from oil sales.
The results themselves are of secondary importance, although they are expected to show that the company was profitable despite production output falling slightly. The figures will be complicated by the flotation of Cairn India (some of the Indian oilfield assets), in which Cairn Energy still holds 69%.
Over recent weeks the share price has been highly volatile, affected by all kinds of rumour and speculation. Hopes have waxed and waned on the perceived success (or otherwise) of the pipeline negotiations with the shares falling by over 30% at one stage, only to rebound strongly as rumours of a £40 per share bid and a sharply higher oil price have combined to excite the market.
Not for the faint-hearted, but with a recent intraday trading range of over a pound, plenty of opportunity for a trade!
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March 29th, 2008 at 3:52 pm
In the short term bank of ireland seems fucked because of over bearish sentiment.The fact that it is an extremely conservative bank with only tiny exposure to crappy assets is irrelevant.In medium term massive gains to be had.As it is trading at 6.5 times eps the bargain hunt team will snap it up. it is worth 15 euro a share.
March 31st, 2008 at 4:17 pm
Cheers Conor.
Tend to agree, although I am still of the opinion that the ‘credit crunch’ is due to linger a while longer and that there may well be another high profile ‘victim’ to join Bear Stearns and Northern Rock before we are done. There are plently of decent companies trading on PE’s and yields which are similar-UK banks, housebuilders, retailers and engineering companies to name just a few. Until LIBOR and its ECB equivalent show sustained signs of weakening, things are not going to get any better for consumer facing investments.
Trading update for BOI was as anticipated; eps growth of 3-5% suggesting that little improvement has been seen in either the Life business or on the value of the investments in the SIVs since Feb. Still it also implies that things hadn’t got materially worse, although the weakness of the £ against the euro doesn’t help. I see that mortgage growth in Ireland was also pretty weak, and interestingly BOI was behind the recent refinancing of Woolies-more in today’s blog. Stock little changed on the day.
Cairn has failed to tie-up a deal with the Indian government; at least so far, although it remains confident of a deal ’soon’.
Mixed messages from Cairn, on the one hand it has upped the estimate of reserves in the Rajastahn fields by 150m boe to 3.75bn, of which it hopes it can get over 1bn out; (shame to leave so much behind at $100 per barrel!) a figure 19% higher than its previous best estimate.
On the downside, the cost of developing the fields has increased due to cost inflation in the oil services industry (is it time to load up with shares like HAL, AMEC, WSM etc?). One broker suggest that capex on the field could have increased by $400m.
Stock quietly higher (about 1%) on a dull day for the market.