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January 4, 2011
Davy on 2011
Highlighted content 2011 - bumpy recovery set to
Irish equity market – evidence of operating
continue; another year for stock
leverage should emerge in 2011 as volumes pickers
recover
Construction and building materials – residential Three big themes will help drive markets higher in 2011
recovery may gain momentum; emerging markets • 2010 was a volatile year in markets as well as sectors.
will continue to outperform
2011 is also likely to be a good year for stock pickers.
Paper and packaging – 2011 is likely to be another • Continuing growth in emerging markets, a slow and
positive year for Smurfit Kappa Group lumpy recovery in developed markets and the impact
of operating leverage as volumes recover are likely to
Food and beverage – Kerry Group has strong be three main themes impacting earnings.
financial flexibility entering 2011; C&C and Britvic
remain our top picks
• Markets, however, are not expensive in an historic
context and should generate reasonable returns.
Pharmaceuticals and healthcare – top-line growth Risks still abound – buyers beware
to remain elusive • While the scene is set for continuing recovery in
earnings, a number of shocks could result in a sell-off
Airlines – LCCs remain our preferred plays in markets.
Gaming – our top picks in the sector are Paddy
• These include pressure on the euro in the shadow of
Power and Ladbrokes sovereign bond concerns, the impact of austerity
measures in Europe and slowing growth in China
Financials – funding remains the key challenge and/or other emerging markets.
Stocks with powerful market positions, strong balance
Media and technology – cost-cutting complete; sheets and cash flow and high or recovering returns will
focus now on top-line growth
outperform
Contents
Outlook for equity markets in 2011 4
2010 was another year for stock pickers 4
What are the factors likely to drive markets in 2011? 6
Risks still abound; shocks could derail recent rally 7
Key themes will help to filter attractive stock choices 8
Davy's top picks for 2011 10
Market summary 13
Gaming 43
Sector performance in 2010 43
Key themes for 2011 46
How key stocks are positioned for 2011 47
Sector valuation 48
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Research Report: Davy on 2011 January 4, 2011
Financials 49
Sector performance in 2010 49
Key themes for 2011 50
How key stocks are positioned for 2011 51
Banks sector valuation 55
Insurance sector valuation 58
Support services 62
Sector performance in 2010 and outlook for 2011 62
DCC – Performance in 2010 62
DCC – Key themes for 2011 62
CPL – Performance in 2010 63
CPL – Key themes for 2011 63
Sector valuation 65
Resources 67
Sector performance in 2010 67
Key themes for 2011 67
How key stocks are positioned for 2011 69
Sector valuation 71
Stock ratings 74
Important disclosures 76
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Research Report: Davy on 2011 January 4, 2011
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Research Report: Davy on 2011 January 4, 2011
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Research Report: Davy on 2011 January 4, 2011
Overall, the picture is therefore broadly similar to this time last year.
· Top-line growth rates are likely to
remain pedestrian in the developed Top-line growth rates are likely to remain pedestrian in the developed
economies with much more economies with much more attractive growth rates in emerging markets.
attractive growth rates in emerging
markets
On this basis, we would still retain a cyclical bias within portfolios with
more focus on those names with exposure to the more attractive
emerging economies.
Evidence of operating leverage should emerge in 2011 as volumes
recover
While much has been written about the positive impact of cost-cutting
and operating leverage on profits, it is important to note that operating
leverage does not materialise until volumes actually start to recover.
· We are assuming that volumes will We are assuming that volumes will improve in 2011, which should
improve in 2011, which should result in a reasonable pick-up in earnings. The market is forecasting circa
result in a reasonable pick-up in
earnings
13% earnings growth in the US in 2011 with 15% growth expected in
European markets. This is based on circa 5% growth in sales in both
locations. We would not disagree with this assessment.
Market is trading at an undemanding multiple; equity markets
could rise in line with earnings growth
In the US, the S&P is trading at 13.1 times 2011 consensus earnings
forecasts. This is well below the long-term average of 15 times and
certainly considerably below the multiple that one would expect in the
early stages of an economic recovery.
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Research Report: Davy on 2011 January 4, 2011
Figure 1: S&P 5600 P/E chart with LT average Figure 2: E300 P/E chart with LT average
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S&P 500 forward P/E Average FTSE E300 forward P/E Average
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Research Report: Davy on 2011 January 4, 2011
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Research Report: Davy on 2011 January 4, 2011
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The challenge for many corporates in 2011 will be how to recover higher
input costs in order to maintain/improve margins in an environment
where demand recovery is slow.
Cost recovery is easier in certain circumstances:
· The company has a strong market position, controlling supply at a
local or regional level and with little competition or substitutable
products. In this environment, customers have little choice but to pay
higher prices.
· Companies in sectors where supply/demand dynamics have improved
through industry consolidations and/or recovering demand.
· Where companies have developed/innovated a product which is
unique or provides the customer with sufficient value add that he/she
is willing to pay a higher price to access this innovation.
We therefore need to look for companies that have one or more of these
characteristics.
Strong balance sheets and robust cash flow, providing
opportunities for M&A growth potential or other returns-enhancing
measures
Strong balance sheets and cash generation will be a key differentiator in
2011. In an environment where growth in developed markets is likely to
be slow, growth in revenue and profits could be driven through mergers
and/or acquisitions.
There was a significant pick-up in M&A activity levels in 2010, and this
is likely to continue in 2011 as companies with strong balance sheets and
cash flows take advantage of attractively-priced acquisition targets.
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Research Report: Davy on 2011 January 4, 2011
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Research Report: Davy on 2011 January 4, 2011
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Research Report: Davy on 2011 January 4, 2011
SUMMARY
Price Change % No. (m) Mkt Wght 10 Yr End 2010 Debt/(Cash)/EBITDA EBITDA €m*
Company
(c) Wk YTD Shrs Cap €m % Pr/Bk 10 11F 10 11F 12F
CRH 1550 -0.5 -18.5 709 10991 27.3 Dec2010 E 1.12 2.2 1.7 1609.7 1695.3 1768.8
Ryanair Holdings 377 0.8 14.4 1487 5604 13.3 Mar 2011 E 2.05 0.8 0.2 781.6 947.4 1125.2
Kerry Group 2497 -2.5 21.4 175 4379 8.3 Dec2010 E 2.82 1.9 1.4 564.5 601.9 620.3
Dragon Oil (USc) 838 3.4 43.6 511 3202 3.9 Dec2010 E 2.06 -1.8 -1.9 716.3 770.7 868.7
ARYZTA 3499 0.8 36.2 83 2898 7.1 Jul 2010 P 1.71 3.6 2.3 339.9 456.1 482.2
Elan Corp (USc) 573 -7.1 -6.0 585 2504 5.1 Dec2010 E 14.17 6.6 4.4 127.6 179.2 212.1
Bank of Ireland 38 8.1 -55.5 5299 1987 3.2 Dec2010 E 0.42 764.0 656.0 1128.0
DCC 2360 2.6 21.0 83 1965 4.9 Mar 2011 E 2.15 0.3 0.0 268.3 279.3 285.8
Smurfit Kappa Group 730 0.6 17.7 219 1597 2.1 Dec2010 E 0.94 3.4 2.3 908.1 1169.1 1190.9
Paddy Power 3070 0.0 24.0 48 1482 3.2 Dec2010 E 6.68 -0.9 -1.1 129.7 131.6 146.4
Top Ten Companies 1521.2 -0.1 -4.3 36608 78.3 1.46
Tullow Oil (USc) 1967 -2.1 -0.3 888 13046 Dec2010 E 4.75 1.2 1.3 615.3 1201.1 1830.3
Kingspan Group 749 2.0 24.8 166 1245 2.3 Dec2010 E 2.05 1.1 0.8 106.0 110.3 130.7
C&C 338 1.0 12.4 336 1136 2.7 Feb 2011 E 1.86 -0.1 -0.7 126.1 135.2 143.0
Glanbia 368 6.7 27.4 294 1081 1.2 Dec2010 E 3.36 2.3 1.8 177.9 185.1 185.4
ICON (USc) 2190 -1.8 7.8 59 965 2.3 Dec2010 E 1.97 -2.0 -2.3 125.8 135.2 157.6
Kenmare (USc) 48 14.3 86.1 2404 865 2.1 Dec2010 E 2.43 5.6 1.7 20.5 101.5 184.0
Grafton Group 345 3.3 17.4 231 798 1.8 Dec2010 E 0.84 2.6 2.1 96.9 108.7 132.7
Amarin Corp (USc) 820 2.0 513.6 99 605 Dec2009 P 13.88 N/A N/A -29.9 -30.0 -30.0
Aer Lingus 108 -1.7 68.8 534 577 0.4 Dec2010 E 0.78 -2.0 -2.0 125.3 145.2 197.5
United Drug 210 0.0 -1.4 240 504 1.2 Sep 2010 P 1.36 1.3 0.9 87.1 91.1 93.6
Origin Enterprises 320 1.9 50.2 133 426 0.3 Jul 2010 P 2.34 1.5 1.3 72.4 58.6 58.1
Irish Continental Grp 1552 0.0 7.0 25 388 0.6 Dec2010 E 2.45 0.1 -0.3 55.2 60.0 64.0
Petroneft (USc) 110 4.5 268.5 412 338 0.7 Dec2010 E 4.75 N/A -0.6 -2.0 60.6 115.5
Allied Irish Banks 30 -4.5 -75.0 1081 324 0.7 Dec2010 0.52 533.6 539.5 939.0
Irish Life & Permanent 108 8.0 -67.3 277 299 0.7 Dec2010 E 0.13
Independent News & Media 50 1.8 -44.7 550 277 0.5 Dec2010 E 16.09 3.5 2.9 264.9 294.6 300.1
Greencore Group 127 -2.6 -8.6 207 262 0.7 Sep 2010 P 1.47 2.4 2.4 79.1 79.1 79.8
FBD Holdings 620 -4.6 -10.1 33 206 0.3 Dec2010 E 1.00
IFG Group 130 4.0 -6.5 124 162 0.3 Dec2010 E 1.42 0.5 -0.1 26.1 30.0 37.3
UTV Media (Stg) 137 -1.0 44.0 96 153 0.2 Dec2010 E 0.93 2.7 2.2 26.6 27.5 29.2
Norkom 150 6.4 2.7 90 135 0.2 Mar 2011 E 2.10 -10.8 -7.8 3.2 4.9 6.2
Trinity Biotech (USc) 881 -2.4 132.7 21 135 Dec2010 E 1.44 -3.2 -4.6 17.5 17.3 18.1
Abbey 510 2.0 8.5 25 126 0.2 Apr 2011 E 0.74 -6.5 -4.2 14.2 20.1 24.1
Total Produce 38 -0.8 10.3 330 124 0.3 Dec2010 E 0.82 1.4 1.3 52.9 54.3 56.5
Fyffes 37 5.7 -19.6 329 122 0.3 Dec2010 E 0.83 -1.0 -1.1 18.2 19.6 20.5
CPL Resources 253 0.0 24.0 37 94 0.1 Jun 2011 E 1.39 -6.0 -6.0 7.7 8.6 10.7
TVC Holdings plc 65 0.0 4.8 101 66 0.1 Mar 2011 E 0.76 N/A N/A -8.5 -2.1 -2.1
Donegal Creameries 400 -4.1 86.1 10 41 0.1 Dec2010 E 0.64 2.6 2.4 7.5 7.9 8.0
Readymix 21 0.0 18.0 110 23 0.0 Dec2010
Datalex (USc) 27 -4.6 37.9 72 14 0.0 Dec2010 E 0.54 -3.9 -2.9 3.1 4.6 6.9
Balmoral Intl. Land 2 -25.0 -66.7 583 9 0.0 Dec2010 E 0.16 21.6 21.1 8.7 8.9 8.9
Siteserv plc 5 0.0 -23.1 124 6 0.0 Apr 2011 E 0.97 9.0 7.5 16.3 19.1 20.7
AGI Therapeutics (USc) 3 -13.3 -65.3 67 2 0.0 Dec2010 E 0.29 N/A N/A -4.3 -5.4 -5.4
Total Market (ISEQ) 2885.1 0.3 -3.0 48092 100.0 1.37
13 Davy Research
Research Report: Davy on 2011 January 4, 2011
SUMMARY (CONTINUED)
Yield (%) Ent Value / EBITDA Dil. Adj. EPS (c) EPS Growth (%) P/E Ratio
Company
10 11F 12F 10 11F 12F 10 11F 12F 10 11F 12F 10 11F 12F
CRH 4.0 4.0 3.9 8.4 7.7 7.1 75.8 82.7 96.4 -21.0 9.2 16.5 20.5 18.7 16.1
Ryanair Holdings 0.0 0.0 0.0 8.0 6.1 4.4 26.8 35.6 45.6 24.7 32.8 27.8 14.1 10.6 8.3
Kerry Group 1.1 1.2 1.3 9.5 8.5 7.9 191.1 207.0 218.1 14.8 8.3 5.4 13.1 12.1 11.4
Dragon Oil (USc) 0.0 0.0 0.0 4.2 3.7 2.9 76.1 81.9 92.4 51.5 7.7 12.8 11.0 10.2 9.1
ARYZTA 1.1 0.9 0.9 11.4 9.2 8.3 244.0 300.5 314.3 4.0 23.1 4.6 14.3 11.6 11.1
Elan Corp (USc) 0.0 0.0 0.0 31.1 21.8 18.0 -11.4 -13.9 1.8 N/A N/A N/A N/A N/A 322.3
Bank of Ireland 0.0 0.0 0.0 -48.9 -10.6 4.3 N/A N/A N/A N/A N/A 8.7
DCC 3.0 3.2 3.3 7.7 7.1 6.6 191.7 201.0 207.2 8.2 4.9 3.1 12.3 11.7 11.4
Smurfit Kappa Group 0.0 1.1 2.3 5.3 3.8 3.4 60.3 167.9 190.0 N/A 178.5 13.2 12.1 4.3 3.8
Paddy Power 2.8 2.9 3.4 10.5 10.1 9.2 174.7 174.6 204.0 44.7 -0.1 16.8 17.6 17.6 15.0
Top Ten Companies 1.7 1.8 1.8 N/A N/A N/A N/A 18.0 11.2
Tullow Oil (USc) 0.5 0.6 0.6 29.6 15.9 10.6 12.5 54.2 91.1 300.4 334.2 68.1 157.6 36.3 21.6
Kingspan Group 1.3 1.7 2.2 12.8 12.0 10.0 28.5 32.5 42.5 1.2 13.9 30.8 26.3 23.1 17.6
C&C 2.4 2.8 3.0 8.7 7.5 6.5 25.9 30.6 33.3 14.4 18.0 8.8 13.0 11.1 10.2
Glanbia 1.9 2.0 2.1 8.0 7.2 6.7 37.1 39.3 40.9 20.9 6.0 4.2 9.9 9.4 9.0
ICON (USc) 0.0 0.0 0.0 8.3 7.3 5.8 144.6 133.4 158.4 -5.4 -7.7 18.7 15.1 16.4 13.8
Kenmare (USc) 0.0 0.0 0.0 62.1 13.1 6.5 -0.4 2.2 6.1 N/A N/A 170.4 N/A 21.4 7.9
Grafton Group 1.7 2.2 2.9 10.8 9.4 7.4 16.5 20.0 29.8 208.7 21.5 48.7 20.9 17.2 11.6
Amarin Corp (USc) 0.0 0.0 0.0 N/A N/A N/A -28.2 -28.7 -28.7 N/A N/A N/A N/A N/A N/A
Aer Lingus 0.0 0.0 0.0 1.8 1.3 0.2 6.8 10.8 16.8 N/A 58.6 54.8 15.8 10.0 6.4
United Drug 4.0 4.2 4.4 6.8 6.2 5.7 22.8 23.1 24.5 -2.6 1.2 6.0 9.2 9.1 8.6
Origin Enterprises 2.6 2.7 2.8 6.0 6.8 6.6 37.3 36.5 37.1 3.1 -2.1 1.6 8.6 8.8 8.6
Irish Continental Grp 6.4 6.4 6.4 7.1 6.2 5.4 122.0 147.8 165.9 14.3 21.1 12.3 12.7 10.5 9.4
Petroneft (USc) 0.0 0.0 0.0 N/A 6.9 3.3 -2.3 6.6 15.6 N/A N/A 134.5 N/A 16.6 7.1
Allied Irish Banks 0.0 0.0 0.0 -55.1 -4.6 0.0 N/A N/A N/A N/A N/A 1898.7
Irish Life & Permanent 0.0 0.0 0.0 -34.3 -20.2 40.4 N/A N/A N/A N/A N/A 2.7
Independent News & Media 0.0 0.0 0.0 6.6 5.6 5.2 9.0 12.1 14.7 -62.7 35.3 21.4 5.6 4.1 3.4
Greencore Group 5.9 5.9 6.2 5.8 5.8 5.6 16.7 16.7 17.4 -3.8 -0.1 4.0 7.6 7.6 7.3
FBD Holdings 5.3 5.3 6.5 88.3 136.3 137.6 31.3 54.3 1.0 7.0 4.5 4.5
IFG Group 3.1 3.8 4.6 6.7 5.3 3.6 16.3 17.7 21.9 17.8 8.6 23.7 8.0 7.3 5.9
UTV Media (Stg) 0.0 0.0 0.0 7.7 7.0 6.0 15.6 16.6 17.9 34.4 6.1 8.3 8.8 8.3 7.6
Norkom 0.0 0.0 0.0 30.7 19.1 14.9 2.3 2.9 4.1 -75.7 27.8 39.8 65.4 51.1 36.6
Trinity Biotech (USc) 0.0 0.0 0.0 7.1 5.9 4.3 61.8 64.4 70.3 9.5 4.2 9.2 14.2 13.7 12.5
Abbey 1.7 1.8 1.9 2.0 1.8 1.9 42.0 59.2 71.1 -14.0 41.0 20.1 12.1 8.6 7.2
Total Produce 4.5 4.5 4.7 4.2 4.0 3.7 6.4 7.1 7.5 -1.3 10.5 5.7 5.9 5.3 5.0
Fyffes 4.5 4.5 4.5 2.7 2.3 2.0 4.1 4.7 4.9 -20.5 13.0 4.8 9.0 7.9 7.6
CPL Resources 1.6 1.7 2.3 6.3 4.9 3.4 19.2 21.4 26.3 39.9 11.3 23.0 13.2 11.8 9.6
TVC Holdings plc 0.0 0.0 0.0 N/A N/A N/A -7.0 -1.5 -1.6 N/A N/A N/A N/A N/A N/A
Donegal Creameries 4.0 4.0 4.0 6.3 5.9 5.6 66.2 69.2 70.0 125.1 4.4 1.2 6.0 5.8 5.7
Readymix
Datalex (USc) 0.0 0.0 0.0 2.3 1.3 0.2 3.8 5.8 8.7 N/A 55.4 49.7 7.1 4.6 3.1
Balmoral Intl. Land 0.0 0.0 0.0 21.9 21.4 21.1 -1.0 0.2 0.2 N/A N/A N/A N/A 6.8 6.8
Siteserv plc 0.0 0.0 0.0 9.4 7.8 7.0 0.5 2.3 3.6 -65.7 330.6 54.6 9.4 2.2 1.4
AGI Therapeutics (USc) 0.0 0.0 0.0 1.4 0.2 N/A -7.1 -8.2 -8.2 N/A N/A N/A N/A N/A N/A
Total Market (ISEQ) 1.7 1.8 1.9 N/A N/A N/A N/A 16.8 10.5
14 Davy Research
Research Report: Davy on 2011 January 4, 2011
maturity schedules. We estimate the sector will end 2010 with net
debt/EBITDA of circa 2.3x, which could fall to under 2x by the end of
this year.
16 Davy Research
Research Report: Davy on 2011 January 4, 2011
balance sheet, the strength of the group's aggregates positions and its
inexpensive valuation relative to its peers. Holcim's emerging markets
exposure and the strength of its balance sheet are reflected in our
'outperform' rating on the stock. Its markets in Asia-Pacific and Latin
America contribute 75% of group EBIT. Holcim provides exposure to
high-growth markets we favour in 2011 such as India and Brazil.
· Travis Perkins (TPK) ended 2010 strongly, but we think the stock has
· Travis Perkins (TPK) ended 2010 further to go. Back on 2011 estimates, TPK remains the least
strongly, but we think the stock expensive of our lightside coverage list, which is very harsh given the
has further to go
quality of the business. While the UK economic backdrop is likely to
prove challenging in 2010, we believe TPK can continue to
outperform its peers operationally and that synergies from the BSS deal
can surprise on the upside.
· We also continue to see Grafton as a geared recovery play backed by a
· We continue to see Grafton as a
geared recovery play backed by a
proven management team. Decisive action in lowering its operating
proven management team cost base has left Grafton in an excellent position to disproportionately
gain from any recovery in volumes.
· The other lightside stock that offers decent upside in our view in 2011
is SGO. Operationally, the group did well in 2010 and is capable of
· The other lightside stock that offers
decent upside in 2011 is SGO building on this. The above-mentioned IPO of the packaging division
will generate cash that is likely to be deployed in emerging markets and
in consolidating the European distribution market. With a diversified
revenue base and decent exposure to both emerging markets and
growth areas of construction (energy efficiency), SGO is well
positioned.
· Elsewhere, many other building materials stocks look fairly valued
entering 2011 and, in the absence of upgrades, may struggle to
outperform. Examples include Geberit, Kingspan and Wolseley.
· The UK housebuilders had a tough year in 2010, dealing with a
general election, an emergency budget and, more recently, the
government spending review. The combination of these events and the
prospect of rising unemployment undermined consumer confidence.
Revenues slipped as a result, particularly in the second half of 2010.
The availability of mortgage finance has also restricted activity and
· Among the UK housebuilders, weighed on the sector. We believe the new build industry has largely
Persimmon, Bellway and Abbey
stand out as potential relative adjusted to this trading environment and that there is value in the UK
outperformers in 2011 housebuilders. A number of stocks trade at significant discounts to
their net asset values. Persimmon, Bellway and Abbey stand out as
potential relative outperformers in 2011.
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Research Report: Davy on 2011 January 4, 2011
BUILDING MERCHANTS
Grafton Group (GN5 ID) 345 365 233 798 3.3 18.6 17.4 4.0 8.3 18.8 0.84 2.6 2.1
Hornbach Holding (HBH3 GY) 9950 10050 6252 796 1.5 12.1 44.6 2.2 2.3 46.3 1.04 1.7 1.6
Travis Perkins plc (TPK LN) 1058 1058 665 2980 4.5 27.3 28.2 5.2 16.3 29.7 1.16 2.6 1.6
Wolseley plc (WOS LN) 2046 2051 1223 6783 -0.7 15.9 69.4 0.0 5.9 71.4 1.89 0.6 0.3
Builders merchants (4) 1018 1021 651 11356 1.1 18.3 54.6 1.7 8.0 56.4 1.44 1.4 1.0
Home Depot (HD US) 3506 3649 2707 42917 -2.1 12.6 29.7 -1.5 2.8 31.2 3.05 1.1 1.1
Home Retail Group (HOME LN) 189 295 189 1798 -3.6 -9.1 -31.1 -3.0 -17.0 -30.3 0.55 -0.7 -0.7
Lowe's (LOW US) 2508 2822 1959 25852 -3.7 7.2 14.7 -3.1 -2.1 16.1 1.88 0.8 1.0
Kingfisher plc (KGF LN) 263 267 199 7249 -2.4 9.0 18.7 -1.7 -0.5 20.2 1.17 0.0 -0.1
BUILDING COMPONENTS
Kingspan Group (KSP ID) 749 749 500 1245 2.0 23.8 24.8 2.7 13.1 26.4 2.05 1.1 0.8
Geberit (GEBN VX) 21620 21990 16040 7127 -0.2 11.2 39.6 0.5 1.5 41.3 5.13 -0.8 -1.1
Rockwool (ROCKA DC) 71600 73800 45800 2111 -2.4 5.3 17.2 -1.8 -3.9 18.6 1.89 0.1 -0.1
SIG plc (SHI LN) 129 138 91 886 5.3 12.6 18.5 6.0 2.9 20.0 0.91 2.0 1.6
Wavin NV (WAVIN NA) 1140 1440 863 579 1.6 12.1 -18.6 2.2 2.3 -17.6 1.02 2.3 1.7
Building components (5) 1815 1833 1297 11947 0.1 11.4 27.6 0.8 1.7 29.1 2.57 0.3 -0.0
OTHER BUILDING
Hill & Smith (HILS LN) 278 377 235 249 4.8 14.8 -16.7 5.5 4.9 -15.7 1.62 1.2 1.0
Saint-Gobain Group (SGO FP) 3850 4018 2849 20436 -1.1 11.6 1.1 -0.4 1.9 2.4 0.94 1.7 1.5
Uralita (URA SM) 350 434 350 691 0.0 -2.0 -14.2 0.7 -10.5 -13.2 2.04 2.5 1.8
Wienerberger (WIE AV) 1429 1587 970 1679 1.5 17.3 11.8 2.2 7.1 13.2 0.52 2.1 1.5
IRISH HOUSEBUILDING
Abbey (ABBY ID) 510 520 405 126 2.0 12.6 8.5 2.7 2.8 9.8 0.74 -6.5 -4.2
UK HOUSEBUILDING
Barratt Developments plc (BDEV LN) 89 142 70 997 0.6 23.1 -26.2 1.3 12.4 -25.3 0.29 2.8 2.0
Bellway plc (BWY LN) 670 826 511 943 3.1 26.8 -15.5 3.7 15.7 -14.4 0.78 -0.9 0.5
Berkeley Group (BKG LN) 890 933 742 1361 -2.1 7.2 12.0 -1.4 -2.1 13.4 1.31 -3.2 -2.4
Bovis Homes plc (BVS LN) 414 454 327 642 2.8 20.9 -1.7 3.5 10.4 -0.5 0.78 -2.0 -0.1
Persimmon plc (PSN LN) 417 508 337 1463 0.6 19.7 -8.4 1.3 9.3 -7.3 0.74 0.4 -0.3
Redrow plc (RDW LN) 136 152 98 488 0.9 26.3 5.2 1.6 15.3 6.5 0.94 4.3 2.7
Taylor Wimpey plc (TW/ LN) 32 44 22 1174 2.3 28.7 -16.4 3.0 17.5 -15.4 0.69 4.6 3.1
Construction and Housebuilding (8) 1003 1211 814 7194 0.9 20.1 -9.3 1.6 9.7 -8.2 0.66 1.1 0.9
US HOUSEBUILDING
Beazer Homes (BZH US) 539 688 321 305 -0.9 25.7 19.1 -0.3 14.8 20.6 0.92 N/A N/A
D R Horton (DHI US) 1193 1497 971 2842 -1.9 15.3 17.4 -1.2 5.2 18.9 1.45 2.7 3.0
KB Home (KBH US) 1349 1933 980 887 -2.9 15.8 5.5 -2.3 5.7 6.8 1.73 N/A 8.7
Lennar (LEN US) 1875 2071 1272 2590 1.1 19.7 57.1 1.8 9.3 59.0 1.38 15.8 8.5
NVR (NVR US) 69102 75300 60416 2911 -2.2 8.1 4.0 -1.5 -1.3 5.3 2.39 -2.6 -1.6
Pulte Homes (PHM US) 752 1339 621 2147 -0.2 16.5 -19.6 0.5 6.4 -18.6 1.25 N/A 7.0
Ryland Group (RYL US) 1703 2568 1437 561 -3.8 13.3 -7.5 -3.2 3.5 -6.4 1.37 N/A 2.4
Toll Brothers (TOL US) 1900 2315 1602 2354 -4.1 2.7 8.1 -3.4 -6.3 9.4 1.23 N/A 5.8
FTSE E300 Constr. & Mats. (E3CONS) 1490 1587 1199 -0.7 9.5 -1.2
19 Davy Research
Research Report: Davy on 2011 January 4, 2011
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
BUILDING MATERIALS
CRH (CRH ID) 76 83 96 27.2 4.0 4.0 1.2 8.4 7.7 7.1 20.5 18.7 16.1
Readymix (RYX ID)
Buzzi Unicem (BZU IM) 32 54 85 169.1 2.1 2.2 1.8 6.8 5.7 4.7 27.1 15.9 10.1
Cimpor (CPR PL) 37 41 44 18.2 3.9 3.9 1.9 8.0 7.1 6.4 13.6 12.4 11.5
HeidelbergCement AG (HEI GY) 296 362 457 54.4 2.1 2.7 3.0 7.2 6.3 5.4 15.9 13.0 10.3
Holcim (HOLN VX) 330 416 536 62.2 2.5 2.8 1.9 8.0 7.3 6.5 21.4 17.0 13.2
Italcementi (IT IM) 10 30 45 359.3 1.9 2.0 0.8 5.5 5.0 4.4 64.1 21.2 14.0
Lafarge (LG FP) 330 379 445 34.7 4.3 4.3 1.7 7.7 7.1 6.4 14.2 12.4 10.5
European building materials (8) 3.2 3.4 1.7 7.5 6.7 5.9 18.2 15.1 12.3
Eagle Materials (EXP US) 59 61 101 70.3 1.4 1.4 1.5 15.1 14.0 9.4 47.9 46.7 28.1
Martin Marietta (MLM US) 197 264 370 88.3 1.7 1.7 1.2 13.8 12.3 9.9 46.9 34.9 24.9
Owens Corning (OC US) 154 210 270 75.0 0.0 0.0 N/A 7.9 6.6 5.5 20.2 14.8 11.6
Vulcan Materials (VMC US) -53 -16 76 N/A 2.3 2.3 N/A 20.5 16.3 11.9 N/A N/A 58.4
Cemex (CX US) -71 -12 34 N/A 0.0 0.0 N/A 11.3 9.6 7.9 N/A N/A 31.3
US building materials (4) 2.0 2.0 1.4 13.0 11.0 8.7 30.3 22.8 23.2
Global building materials (12) 3.1 3.2 1.7 8.2 7.3 6.3 18.6 15.5 13.2
BUILDING MERCHANTS
Grafton Group (GN5 ID) 16 20 30 80.7 1.7 2.2 2.7 10.8 9.4 7.4 20.9 17.2 11.6
Hornbach Holding (HBH3 GY) 905 987 1039 14.8 1.3 1.3 6.8 5.1 4.8 4.6 11.0 10.1 9.6
Travis Perkins plc (TPK LN) 75 92 104 38.4 1.1 1.7 6.3 10.9 7.5 6.5 14.0 11.5 10.1
Wolseley plc (WOS LN) 74 120 158 113.4 0.0 1.2 N/A 9.8 8.2 7.0 27.6 17.1 12.9
Builders merchants (4) 0.5 1.4 9.7 9.5 7.6 6.6 20.0 14.5 11.7
Home Depot (HD US) 198 223 261 31.8 2.7 2.9 2.1 8.9 8.4 7.8 17.7 15.8 13.4
Home Retail Group (HOME LN) 21 21 23 7.5 7.8 7.8 1.4 3.3 3.2 3.0 9.0 8.9 8.3
Lowe's (LOW US) 140 164 191 36.1 1.7 1.9 3.3 7.5 7.3 7.2 17.9 15.3 13.2
Kingfisher plc (KGF LN) 20 22 24 23.9 2.5 2.9 3.0 6.5 5.7 5.1 13.4 11.9 10.8
BUILDING COMPONENTS
Kingspan Group (KSP ID) 29 32 42 48.9 1.3 1.7 2.9 12.8 12.0 10.0 26.3 23.1 17.6
Geberit (GEBN VX) 1060 1140 1237 16.7 2.5 2.5 2.0 14.6 13.4 12.2 20.4 19.0 17.5
Rockwool (ROCKA DC) 2254 3023 4264 89.2 1.3 1.5 2.3 8.6 6.9 5.8 31.8 23.7 16.8
SIG plc (SHI LN) 7 9 11 57.8 0.0 2.3 N/A 8.9 7.7 6.8 18.5 14.3 11.7
Wavin NV (WAVIN NA) 25 69 101 305.6 0.0 0.0 N/A 7.9 6.5 5.2 45.6 16.5 11.2
Building components (5) 2.0 2.2 2.3 11.7 10.2 8.9 22.8 19.4 16.3
OTHER BUILDING
Hill & Smith (HILS LN) 37 34 38 1.9 4.5 4.8 2.9 4.8 4.6 4.0 7.5 8.2 7.3
Saint-Gobain Group (SGO FP) 273 315 315 15.2 3.2 3.5 2.2 6.3 5.8 5.8 14.1 12.2 12.2
Uralita (URA SM) 7 11 15 102.9 0.7 1.3 2.8 9.8 8.5 7.4 48.3 32.3 23.8
Wienerberger (WIE AV) -20 11 63 N/A 0.0 0.0 N/A 12.2 10.3 8.0 N/A N/A 22.8
IRISH HOUSEBUILDING
Abbey (ABBY ID) 42 59 71 69.3 1.7 1.8 4.9 2.0 1.8 1.9 12.1 8.6 7.2
UK HOUSEBUILDING
Barratt Developments plc (BDEV LN) 3 10 14 439.6 0.0 0.0 N/A 8.2 5.4 4.6 34.9 8.6 6.5
Bellway plc (BWY LN) 30 34 45 53.4 1.5 1.6 3.0 14.3 12.9 10.0 22.7 20.0 14.8
Berkeley Group (BKG LN) 62 73 83 33.7 1.8 2.0 3.9 6.9 6.3 5.9 14.3 12.2 10.7
Bovis Homes plc (BVS LN) 8 18 24 209.7 0.0 1.9 N/A 25.3 15.5 12.0 52.4 22.8 16.9
Persimmon plc (PSN LN) 21 32 43 111.1 1.8 2.2 2.7 9.7 7.8 6.0 20.2 12.9 9.6
Redrow plc (RDW LN) 3 7 9 242.1 0.0 0.0 N/A 23.1 14.0 10.8 50.2 20.5 14.7
Taylor Wimpey plc (TW/ LN) 1 3 4 328.3 0.0 0.0 N/A 11.1 7.7 5.5 31.1 12.2 7.3
Construction and Housebuilding (8) 0.9 1.2 4.6 10.6 7.9 6.3 23.4 13.1 9.6
US HOUSEBUILDING
Beazer Homes (BZH US) -57 -138 -35 N/A 0.0 0.0 N/A N/A N/A 47.9 N/A N/A N/A
D R Horton (DHI US) 77 23 70 -9.1 1.3 1.3 5.1 16.8 18.1 10.0 15.5 51.9 17.0
KB Home (KBH US) -125 -36 86 N/A 1.9 1.9 N/A N/A 21.0 16.9 N/A N/A 15.8
Lennar (LEN US) 36 65 125 252.1 0.9 0.9 2.2 30.7 21.5 12.2 52.8 28.9 15.0
NVR (NVR US) 3050 3857 6391 109.5 0.0 0.0 N/A 9.7 9.8 5.8 22.7 17.9 10.8
Pulte Homes (PHM US) -252 5 51 N/A 0.0 0.0 N/A N/A 18.8 17.3 N/A N/A 14.9
Ryland Group (RYL US) -183 -36 60 N/A 0.7 0.7 N/A N/A 20.3 13.9 N/A N/A 28.3
Toll Brothers (TOL US) -2 -2 48 N/A 0.0 0.0 N/A N/A N/A 31.0 N/A N/A 40.0
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20 Davy Research
Research Report: Davy on 2011 January 4, 2011
· The global paper and packaging · The global paper and packaging sector enjoyed a strong performance
sector enjoyed a strong in 2010 with the European index increasing by almost 40% and the
performance in 2010
US sector rising by over 13%.
· In Europe, Smurfit Kappa Group (SKG) underperformed the sector,
rising by 17.7%, having significantly outperformed in 2009 (+240%).
It also underperformed its main peers, Mondi (+58.2%), SCA
(+26.4%) and DS Smith (+64.9%).
· This performance was driven by rising forecasts – our 2010 and 2011
EBITDA forecasts increased by over 8% during 2010.
· We are now forecasting EBITDA · 2009 has proved to be the trough year for earnings in this cycle with
growth for SKG of 23% in 2010 and SKG's EBITDA bottoming out at €741m. We are now forecasting
a further 29% in 2011
EBITDA growth of 23% in 2010 and a further 29% in 2011.
FTSE E300 Forestry & Paper (E3PAPR) 994 1008 560 0.7 15.6 58.9
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
European Sector
Smurfit Kappa Group (SKG ID) 60 168 190 215.2 0.0 1.1 N/A 5.3 3.8 3.4 12.1 4.3 3.8
Mondi (MNDI LN) 36 51 61 70.2 2.2 2.8 3.2 5.3 4.4 3.7 14.3 10.1 8.4
SCA (SCAB SS) 887 1031 1099 24.0 3.8 4.0 2.2 7.1 6.1 5.6 11.9 10.2 9.6
Smith (David S.) (SMDS LN) 16 21 22 40.7 3.0 3.5 2.6 6.1 5.1 4.6 12.8 9.8 9.1
Stora Enso (STERV FH) 74 77 79 7.0 2.5 3.1 3.7 6.8 6.2 5.6 10.7 10.3 10.0
UPM-Kymmene (UPM1V FH) 94 101 107 13.1 3.4 3.8 2.1 7.1 6.1 5.6 14.0 13.1 12.4
European paper & packaging (6) 3.0 3.4 2.7 6.5 5.5 4.9 12.3 10.0 9.2
US Sector
International Paper (IP US) 202 275 325 60.6 1.5 1.8 5.1 5.7 4.8 4.2 13.5 9.9 8.4
Pkg.Corp.America (PKG US) 163 215 263 61.0 2.3 2.3 2.7 7.0 5.5 4.8 15.9 12.0 9.8
Temple Inland (TIN US) 90 180 255 183.3 2.1 2.1 2.0 7.1 4.5 4.0 23.6 11.8 8.3
Weyerhaeuser (WY US) 40 50 107 166.3 1.1 3.2 2.0 13.7 11.5 8.4 47.3 37.9 17.8
US paper & packaging (4) 1.4 2.4 3.5 7.5 6.1 5.2 19.8 14.3 10.6
Paper & packaging (10) 2.3 3.0 2.9 6.9 5.7 5.0 14.7 11.5 9.8
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Pernod – M&A unlikely in the short term but would like to grow by
acquisition when debt falls
· While Pernod is unlikely to be involved in M&A in the short term
given its high level of debt, it will look to grow by acquisition once
debt falls to 3-4x EBITDA.
· Pernod would like to acquire a premium US whiskey or a premium
Tequila brand. If it does look for exposure to premium whiskey, it
strikes us that a takeover/merger of Brown Forman (BF) would be
compelling. Pernod would bolster its US position with Jack Daniels
and BF would get the benefit of Pernod’s global distribution network.
Remy Cointreau – interested in a range of categories
· Remy Cointreau has announced that it intends to dispose of its
champagne division and will re-invest the proceeds in its spirits
division.
· It is interested in all categories with the exception of other cognac
brands and the ultra-competitive vodka category.
Scope for increased consolidation activity in beer sector
· While the beer sector is already highly consolidated, we believe there is
scope for increased activity in 2011. Carlsberg has stated that it will
focus acquisition spend on its fast-growing Asian division, while the
Foster beer business is likely to be on the block following the demerger
from the underperforming wine business. Carlsberg rapidly de-
leveraged over the past two years, and we forecast net debt/EBITDA of
circa 2x by end-2010. This gives it significant firepower, although we
expect acquisitions in Asia to be smaller bolt-on transactions.
· We believe Heineken is likely to remain focused on the integration of
· Given the growth in craft beers in FEMSA in the early part of 2011. Given the growth in craft beers in
developed markets, it is possible developed markets, it is possible that we will see consolidation among
that we will see consolidation
among these smaller players or these smaller players or among the global players looking to pick up
among the global players looking niche but high-value brands.
to pick up niche but high-value
brands
· The most fanciful story we have heard recently is that ABI could
attempt a merger with SABMiller. However, this is unlikely. Despite
being the one and two players globally, there is no significant overlap
in their geographic footprint with the exception of the US market. It
has been suggested that Molson Coors would buy SABMiller's stake in
the US joint venture Miller Coors and thus alleviate this problem.
Cider an appealing category; C&C likely to remain a take-out target
· Finally, cider remains a very attractive category with its strong growth
· Cider remains a very attractive
category with its strong growth rates, high operating margins and broad appeal to both male and
rates, high operating margins and female consumers.
broad appeal to both male and
female consumers · As the category continues to grow internationally, we believe C&C is
likely to remain an attractive take-out target given its established
profitable brands, production capacity, high cash generation and debt-
free balance sheet.
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Food
SHARE PRICE AND PERFORMANCE
Price 12 Month Mkt. Cap Change % (€) Rel to E300 sector % Pr/Bk Debt/EBITDA
Local High Low €m Wk 1 Mth YTD Wk 1 Mth YTD 2010 2010 2011
INGREDIENTS
Kerry Group (KYG ID) 2497 2703 2050 4379 -2.5 0.9 21.4 -0.2 -4.1 1.4 2.82 1.9 1.4
Danisco (DCO DC) 51000 51750 34250 3263 0.3 16.3 46.1 2.7 10.5 22.1 1.85 1.2 1.0
Givaudan (GIVN VX) 100900 104700 82650 7453 0.0 4.6 44.6 2.4 -0.7 20.9 2.50 1.4 1.0
IFF (IFF US) 5559 5577 3977 3320 -1.7 2.7 44.6 0.6 -2.5 20.8 5.25 1.6 1.2
McCormick (MKC US) 4653 4771 3556 4621 -2.8 2.6 37.8 -0.5 -2.6 15.2 4.64 1.3 1.0
Sensient Tech (SXT US) 3673 3747 2498 1363 -3.3 4.9 49.4 -1.0 -0.3 24.9 2.07 1.7 1.3
Ingredients (7) 1832 1862 1343 26817 -1.0 4.7 38.8 1.3 -0.5 16.0 2.87 1.5 1.2
DAIRY PROCESSING
Donegal Creameries (DCP ID) 400 470 190 41 -4.1 0.0 86.1 -1.8 -5.0 55.5 0.64 2.6 2.4
Glanbia (GLB ID) 368 368 243 1081 6.7 13.6 27.4 9.2 8.0 6.5 3.36 2.3 1.8
Dairy Crest (DCG LN) 423 425 329 658 2.7 14.2 20.5 5.2 8.5 0.7 1.79 2.3 2.1
Danone (BN FP) 4702 4824 3996 30465 -2.4 4.2 9.8 -0.1 -1.0 -8.3 2.07 1.9 1.7
Dean Foods (DF US) 884 1853 726 1203 4.5 17.9 -47.6 6.9 12.1 -56.2 1.12 5.4 4.9
Koninklijke DSM (DSM NA) 4261 4284 3043 9606 0.3 13.2 23.6 2.6 7.6 3.3 1.34 0.2 0.0
Nestle SA (NESN VX) 5475 5660 4835 151746 -2.4 4.6 29.2 -0.1 -0.6 8.0 2.99 0.0 0.2
Parmalat SpA (PLT IM) 205 213 173 3552 -1.4 6.5 5.0 0.9 1.2 -12.3 1.09 -3.8 -4.0
Robert Wiseman (RWD LN) 343 527 313 282 -3.5 3.2 -31.0 -1.2 -2.0 -42.4 1.53 0.3 0.2
Saputo (SAP CN) 3958 3985 2749 6114 -0.2 5.5 45.2 2.2 0.2 21.3 3.72 0.3 -0.2
Dairy processing (15) 1907 1957 1488 209336 -2.0 5.1 23.9 0.3 -0.1 3.6 2.54 0.5 0.5
FRUIT DISTRIBUTION
Fyffes (FFY ID) 37 47 30 122 5.7 12.1 -19.6 8.2 6.5 -32.8 0.83 -1.0 -1.1
Total Produce (TOT ID) 38 40 32 124 -0.8 -3.9 10.3 1.6 -8.6 -7.8 0.82 1.4 1.3
Chiquita (CQB US) 1402 1830 1118 473 -1.1 21.6 -16.9 1.3 15.6 -30.5 0.89 3.1 2.4
FDP (FDP US) 2495 2508 1925 1113 -1.2 10.2 20.8 1.1 4.7 0.9 0.92 0.9 0.5
Fruit distribution (4) 4457 4531 3724 1831 -0.7 11.9 5.0 1.6 6.4 -12.3 0.90 1.6 1.2
SPECIALITY BAKING
ARYZTA (YZA ID) 3499 3500 2582 2898 0.8 7.0 36.2 3.2 1.7 13.8 1.71 3.6 2.3
Canada Bread (CBY CN) 4576 5625 4200 871 -0.4 7.3 -1.2 1.9 2.0 -17.5 N/A N/A N/A
CSM NV (CSM NA) 2619 2627 1855 1728 1.7 12.2 42.5 4.1 6.6 19.1 1.64 2.6 2.2
Panera Bread (PNRA US) 10121 10642 6565 2294 -4.8 -2.1 61.8 -2.5 -6.9 35.2 5.18 -0.9 -0.8
Ralcorp Holdings (RAH US) 6501 6929 5435 2667 -2.3 1.8 16.5 0.0 -3.2 -2.7 1.28 3.6 2.7
Speciality baking (6) 5750 5852 4342 10810 -1.4 4.6 33.9 0.9 -0.6 11.9 1.82 2.5 1.8
FOOD MANUFACTURERS
Greencore Group (GNC ID) 127 147 104 262 -2.6 -10.6 -8.6 -0.3 -15.0 -23.6 1.47 2.4 2.4
Associated British Foods (ABF LN) 1181 1182 820 10894 -0.9 8.2 48.3 1.4 2.9 23.9 1.76 0.7 0.7
Cranswick (CWK LN) 860 908 726 476 -0.2 -0.7 13.1 2.2 -5.6 -5.5 1.88 0.7 0.4
Northern Foods (NFDS LN) 63 72 42 343 1.4 1.7 -3.0 3.8 -3.4 -19.0 N/A 2.3 2.0
Premier Foods (PFD LN) 19 37 16 539 -1.1 15.5 -44.3 1.2 9.8 -53.4 0.42 3.6 3.2
UK food manufacturers (5) 1007 1016 740 12262 -0.8 8.0 34.3 1.5 2.6 12.2 1.55 1.3 1.2
ADM (ADM US) 3008 3371 2451 14355 -2.5 0.6 2.8 -0.2 -4.4 -14.1 1.32 1.5 1.1
Conagra Foods (CAG US) 2258 2628 2114 7416 -1.3 2.0 4.8 1.1 -3.1 -12.4 1.97 1.3 1.1
General Mills (GIS US) 3559 3893 3357 16902 -2.5 -2.3 7.5 -0.1 -7.2 -10.1 4.27 1.8 1.6
PZ Cussons (PZC LN) 401 409 235 2002 0.3 1.9 53.2 2.7 -3.2 28.0 2.82 -0.9 -1.1
Tyson Foods (TSN US) 1722 2040 1247 4852 -3.4 5.5 50.1 -1.2 0.3 25.5 1.26 0.8 0.7
Unilever NV (UNIA NA) 2330 2402 2094 79906 -1.7 7.2 2.4 0.7 1.9 -14.4 4.69 0.8 0.6
Food manufacturers (12) 1286 1326 1162 137958 -1.8 4.9 7.1 0.5 -0.4 -10.5 2.86 1.1 1.1
SWEETENERS
Associated British Foods (ABF LN) 1181 1182 820 10894 -0.9 8.2 48.3 1.4 2.9 23.9 1.76 0.7 0.7
ADM (ADM US) 3008 3371 2451 14355 -2.5 0.6 2.8 -0.2 -4.4 -14.1 1.32 1.5 1.1
Agrana Beteiligungs (AGR AV) 7809 7850 5688 1109 1.1 9.0 23.9 3.5 3.6 3.6 1.21 1.6 1.3
Corn Products (CPO US) 4600 4727 2661 2598 -4.1 3.5 68.4 -1.8 -1.7 40.7 1.88 2.9 1.7
Illovo Sugar (ILV SJ) 2760 3371 2435 1434 -2.2 11.5 3.0 0.1 6.0 -13.9 2.28 0.6 0.6
Südzucker (SZU GY) 1993 2039 1394 3773 -1.4 21.0 37.0 0.9 15.0 14.5 1.24 1.2 1.1
Tate & Lyle (TATE LN) 518 545 389 2813 0.3 -1.2 23.6 2.7 -6.2 3.3 2.76 1.6 1.0
Tongaat Hulett (TON SJ) 10850 10950 9500 1286 0.2 6.7 30.4 2.6 1.4 9.0 2.07 1.3 0.8
Sweeteners (8) 1966 2007 1578 38262 -1.6 5.4 22.8 0.7 0.1 2.6 1.55 1.3 1.0
FTSE E300 Food Producers (E3FOOD) 1652 1696 1325 -2.3 5.2 19.7
31 Davy Research
Research Report: Davy on 2011 January 4, 2011
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
INGREDIENTS
Kerry Group (KYG ID) 191 207 218 14.2 1.1 1.2 6.9 9.5 8.5 7.9 13.1 12.1 11.4
Danisco (DCO DC) 2925 3174 3559 21.7 1.8 2.0 3.2 9.4 8.7 7.7 17.4 16.1 14.3
Givaudan (GIVN VX) 5919 6541 7152 20.8 2.2 2.7 2.6 11.0 10.3 9.4 17.0 15.4 14.1
IFF (IFF US) 343 384 412 20.1 1.9 2.1 3.3 10.2 9.2 8.2 16.2 14.5 13.5
McCormick (MKC US) 261 280 305 17.1 2.2 2.4 2.5 11.5 10.7 10.0 17.9 16.6 15.3
Sensient Tech (SXT US) 215 235 259 20.2 2.2 2.3 2.7 10.1 9.1 8.5 17.1 15.6 14.2
Ingredients (7) 2.0 2.3 3.1 10.2 9.4 8.6 16.2 14.7 13.6
DAIRY PROCESSING
Donegal Creameries (DCP ID) 66 69 70 5.7 4.0 4.0 4.1 6.3 5.9 5.6 6.0 5.8 5.7
Glanbia (GLB ID) 37 39 41 10.4 1.9 2.0 5.3 8.0 7.2 6.7 9.9 9.4 9.0
Dairy Crest (DCG LN) 46 48 50 8.8 4.6 4.8 2.3 6.2 5.9 5.8 9.3 8.8 8.5
Danone (BN FP) 273 307 339 24.1 2.7 3.0 2.2 11.6 10.5 9.4 17.2 15.3 13.9
Dean Foods (DF US) 80 84 96 20.0 0.0 0.0 N/A 7.6 7.0 6.7 11.1 10.5 9.2
Koninklijke DSM (DSM NA) 328 340 377 14.9 3.1 3.3 2.5 7.9 7.7 7.0 13.0 12.5 11.3
Nestle SA (NESN VX) 324 349 392 21.0 3.2 3.5 1.9 10.8 10.5 9.8 16.9 15.7 14.0
Parmalat SpA (PLT IM) 11 11 12 14.3 2.4 2.4 2.1 5.7 5.3 4.8 19.5 19.5 17.1
Robert Wiseman (RWD LN) 37 30 34 -7.1 5.3 5.3 2.0 4.1 4.5 4.1 9.4 11.5 10.1
Saputo (SAP CN) 225 241 285 26.9 1.6 0.0 3.5 10.6 9.6 9.3 17.6 16.5 13.9
Dairy processing (15) 3.0 3.4 2.0 10.4 9.9 9.2 16.5 15.3 13.7
FRUIT DISTRIBUTION
Fyffes (FFY ID) 4 5 5 18.4 4.5 4.5 2.5 2.7 2.3 2.0 9.0 7.9 7.6
Total Produce (TOT ID) 6 7 7 16.8 4.5 4.5 3.8 4.2 4.0 3.7 5.9 5.3 5.0
Chiquita (CQB US) 107 173 175 64.3 0.0 0.0 N/A 7.1 5.6 5.1 13.2 8.1 8.0
FDP (FDP US) 178 215 250 40.4 0.0 0.0 N/A 8.0 6.7 5.3 14.0 11.6 10.0
Fruit distribution (4) 4.5 4.5 13.6 6.8 5.7 4.9 12.2 9.5 8.7
SPECIALITY BAKING
ARYZTA (YZA ID) 244 301 314 28.8 1.1 0.9 6.6 11.4 9.2 8.3 14.3 11.6 11.1
Canada Bread (CBY CN) 315 335 366 16.2 0.5 0.0 13.1 6.9 6.3 5.8 14.5 13.7 12.5
CSM NV (CSM NA) 182 190 206 12.8 3.4 3.5 2.1 9.2 8.3 7.6 14.4 13.8 12.7
Panera Bread (PNRA US) 358 435 500 39.7 0.0 0.0 N/A 11.4 9.9 8.5 28.3 23.3 20.2
Ralcorp Holdings (RAH US) 468 543 587 25.4 0.0 0.0 N/A 8.9 6.9 6.5 13.9 12.0 11.1
Speciality baking (6) 1.7 1.9 7.1 10.0 8.0 7.2 16.3 14.0 12.9
FOOD MANUFACTURERS
Greencore Group (GNC ID) 17 17 17 4.0 5.9 5.9 2.2 5.8 5.8 5.6 7.6 7.6 7.3
Associated British Foods (ABF LN) 72 77 82 12.9 2.0 2.2 3.0 8.5 8.2 7.7 16.4 15.4 14.5
Cranswick (CWK LN) 73 79 85 16.0 3.2 3.5 2.6 7.2 6.6 5.9 11.8 10.9 10.2
Northern Foods (NFDS LN) 6 7 8 30.9 7.2 7.2 1.3 5.6 5.1 4.8 10.5 9.0 8.0
Premier Foods (PFD LN) 5 5 6 27.5 0.0 0.0 N/A 4.9 4.4 4.1 4.2 3.7 3.3
UK food manufacturers (5) 2.2 2.4 3.4 7.3 7.0 6.6 14.1 13.0 12.1
ADM (ADM US) 300 293 323 7.5 2.0 2.0 5.0 7.2 6.5 6.1 10.0 10.3 9.3
Conagra Foods (CAG US) 175 192 213 21.2 3.8 4.3 2.0 7.3 6.8 6.3 12.9 11.8 10.6
General Mills (GIS US) 248 269 291 17.3 3.1 3.4 2.2 9.0 8.3 7.6 14.4 13.3 12.2
PZ Cussons (PZC LN) 17 20 19 9.1 1.6 1.8 2.6 11.9 10.2 9.1 23.6 20.5 21.6
Tyson Foods (TSN US) 219 184 205 -6.4 0.9 0.9 13.7 3.9 4.2 3.8 7.9 9.4 8.4
Unilever NV (UNIA NA) 151 161 176 16.9 3.5 3.7 1.8 11.5 10.5 9.5 15.5 14.4 13.2
Food manufacturers (12) 3.1 3.1 2.3 9.1 9.1 8.4 13.9 13.9 13.2
SWEETENERS
Associated British Foods (ABF LN) 72 77 82 12.9 2.0 2.2 3.0 8.5 8.2 7.7 16.4 15.4 14.5
ADM (ADM US) 300 293 323 7.5 2.0 2.0 5.0 7.2 6.5 6.1 10.0 10.3 9.3
Agrana Beteiligungs (AGR AV) 476 576 658 38.2 2.5 2.5 2.4 7.4 6.9 6.1 16.4 13.5 11.9
Corn Products (CPO US) 291 369 389 33.5 1.2 1.3 5.2 9.7 6.4 5.6 15.8 12.5 11.8
Illovo Sugar (ILV SJ) 101 157 205 103.5 2.4 3.1 1.5 8.8 7.1 6.2 27.4 17.6 13.5
Südzucker (SZU GY) 121 125 132 9.2 2.4 2.6 2.5 7.8 7.7 7.5 16.5 16.0 15.1
Tate & Lyle (TATE LN) 42 46 50 16.7 4.5 4.5 1.8 7.4 6.7 6.3 12.2 11.2 10.4
Tongaat Hulett (TON SJ) 647 771 982 51.9 3.0 3.6 2.0 7.4 6.5 5.4 16.8 14.1 11.0
Sweeteners (8) 2.2 2.4 3.4 7.5 6.8 6.3 13.1 12.5 11.4
32 Davy Research
Research Report: Davy on 2011 January 4, 2011
Beverage
SHARE PRICE AND PERFORMANCE
Price 12 Month Mkt. Cap Change % (€) Rel to E300 sector % Pr/Bk Debt/EBITDA
Local High Low €m Wk 1 Mth YTD Wk 1 Mth YTD 2010 2010 2011
C&C (GCC ID) 338 360 266 1136 1.0 8.6 12.4 3.7 4.0 -5.7 1.86 -0.1 -0.7
Global Sector
Anheuser-Busch InBev (ABI BB) 4280 4585 3399 68686 -2.2 2.1 17.6 0.4 -2.2 -1.3 2.63 3.0 2.3
Carlsberg (CARLB DC) 55850 60750 36700 11429 -1.7 3.0 45.2 0.9 -1.3 21.9 1.41 2.2 1.7
Constellation Brands (STZ US) 2215 2234 1483 8213 -2.7 4.3 48.8 -0.2 -0.1 24.8 1.79 4.0 3.5
Davide Campari (CPR IM) 487 499 352 2828 -1.3 5.8 33.5 1.3 1.4 12.1 2.44 2.3 1.6
Diageo (DGE LN) 1185 1215 1000 34552 -3.5 0.7 12.8 -0.9 -3.5 -5.3 5.85 2.1 1.8
Heineken (HEIA NA) 3669 3855 3290 21134 -1.5 2.8 10.3 1.1 -1.5 -7.4 1.86 2.4 2.0
Molson Coors Brewing (TAP US) 5019 5093 3890 6767 -3.5 2.2 18.9 -0.9 -2.1 -0.2 1.28 0.5 0.1
Pernod Ricard (RI FP) 7036 7207 5533 18593 -2.1 12.1 17.4 0.5 7.4 -1.4 2.02 4.7 4.0
Remy Cointreau (RCO FP) 5295 5390 3396 2569 -1.0 4.9 48.7 1.7 0.5 24.8 2.44 2.5 2.1
SABMiller (SAB LN) 2257 2306 1650 41688 -2.7 7.9 27.6 -0.1 3.4 7.1 2.61 1.6 1.2
Beverage (10) 5349 5482 4199 215025 -2.4 4.0 20.3 0.2 -0.3 0.9 2.43 2.6 2.1
Britvic plc (BVIC LN) 473 518 398 1323 -3.0 -5.9 19.7 -0.5 -9.8 0.5 N/A 2.5 2.1
FTSE E300 Beverages (E3BEVG) 1996 2048 1580 -2.6 4.4 19.2
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
C&C (GCC ID) 26 31 33 28.4 2.4 2.8 3.2 8.7 7.5 6.5 13.0 11.1 10.2
Global Sector
Anheuser-Busch InBev (ABI BB) 241 286 324 34.5 1.1 1.4 5.3 9.6 8.3 7.5 17.8 15.0 13.2
Carlsberg (CARLB DC) 3623 4193 4705 29.9 1.0 1.1 6.7 8.6 7.7 6.9 15.4 13.3 11.9
Constellation Brands (STZ US) 175 192 213 21.8 0.0 0.0 N/A 16.4 15.1 14.1 12.7 11.5 10.4
Davide Campari (CPR IM) 27 31 34 24.6 1.3 1.4 4.4 11.9 10.4 9.4 17.9 15.7 14.3
Diageo (DGE LN) 79 86 95 19.2 3.4 3.6 2.0 10.6 9.9 9.1 14.9 13.7 12.5
Heineken (HEIA NA) 239 272 303 26.5 2.0 2.3 3.3 7.8 7.1 6.3 15.3 13.5 12.1
Molson Coors Brewing (TAP US) 360 387 417 16.0 2.2 2.4 3.3 9.1 7.8 7.2 14.0 13.0 12.0
Pernod Ricard (RI FP) 423 471 534 26.1 2.1 2.3 2.8 13.7 12.5 11.2 16.6 14.9 13.2
Remy Cointreau (RCO FP) 229 263 297 29.7 2.5 2.6 1.7 16.2 14.1 12.6 23.1 20.1 17.8
SABMiller (SAB LN) 119 136 152 27.6 2.2 2.5 2.4 13.5 11.9 10.8 18.9 16.6 14.8
Beverage (10) 1.9 2.2 3.3 10.6 9.4 8.5 16.5 14.5 13.0
Britvic plc (BVIC LN) 35 40 46 31.5 3.7 4.2 2.0 8.8 7.5 6.5 13.6 11.8 10.3
31
33 Davy Research
Research Report: Davy on 2011 January 4, 2011
Jack Gorman
Pharmaceuticals and healthcare
jack.gorman@davy.ie Sector performance in 2010
Aiden O'Donnell · It was a lacklustre year for broader pharma and healthcare indices.
aiden.odonnell@davy.ie
Absolute performance was flat to moderately positive; relative
outperformance, in the case of European and US healthcare, was
modest.
· In the US, the biotech sector outperformed its pharma counterpart.
· The performance of the larger Irish companies in 2010 broadly
mirrored that of the main US and European sectors. Smaller caps were
driven by specific product or earnings performance.
Table 10: 2010 performance
Stock/Sector Price 12-month high 12-month low % chg 2010
Elan ($) 5.73 8.24 4.25 -6.0
United Drug (c) 210 285 195 -1.4
ICON ($) 21.90 30..31 18.93 7.8
Trinity Biotech ($) 8.81 8.93 3.76 132.7
Amarin Corporation ($) 8.20 8.49 0.93 513.6
AGI (c) 3 9 3 -65.3
E300 Healthcare 1317.4 1348.2 1172.5 6.3
SPX Healthcare 364.8 382.5 324.1 0.7
Source: Davy
34 Davy Research
Research Report: Davy on 2011 January 4, 2011
· United Drug should build on the · United Drug should build on the robust financial performance it
robust financial performance it demonstrated in 2010. We expect its less directly regulated activities
demonstrated in 2010
ex-Ireland to grow solidly, and market leadership will allow it to
endure regulatory and economic pressures in Irish wholesaling.
· Supplemented by M&A, the prospect of mid- to high-single-digit
earnings growth is possible in 2011/2012. This is also supported by
consistently strong returns on capital.
35
35 Davy Research
Research Report: Davy on 2011 January 4, 2011
US LARGE CAP
Bristol Myers Squibb (BMY US) 2648 2793 2244 33855 -1.4 1.8 12.2 1.3 1.1 5.5 N/A N/A N/A
Lilly (Eli) (LLY US) 3504 3806 3225 30181 -2.6 1.0 5.0 0.1 0.3 -1.3 3.27 0.0 -0.3
Johnson & Johnson (JNJ US) 6185 6603 5702 126872 -2.7 -2.5 2.7 0.0 -3.2 -3.4 3.22 -0.5 -1.0
Merck & Co. (MRK US) 3604 4103 3182 82936 -2.7 1.4 5.5 0.0 0.7 -0.8 1.95 0.3 0.0
Pfizer (PFE US) 1751 2000 1414 104761 -2.6 4.3 3.0 0.1 3.6 -3.1 1.55 0.6 0.2
US large cap (6) 553 584 533 433924 -2.5 0.7 3.0 0.2 0.0 -3.1 2.35 0.3 -0.1
EUROPEAN PHARMA
AstraZeneca (AZN LN) 2922 3385 2732 48022 -3.2 -5.2 3.6 -0.5 -5.8 -2.5 2.76 -0.1 -0.3
GlaxoSmithKline (GSK LN) 1240 1319 1095 75058 -3.9 -0.5 -3.0 -1.2 -1.2 -8.8 6.03 0.9 0.6
Merck KGAA (MRK GF) 6026 7231 5730 13100 -0.2 -0.1 -6.9 2.5 -0.8 -12.4 1.32 2.3 1.6
Novartis (NOVN VX) 5495 6025 5055 115934 -1.8 7.6 15.2 0.9 6.9 8.4 2.05 1.2 0.7
Roche (Sws) (ROG VX) 13700 18600 13020 112800 -0.5 3.6 -7.7 2.2 2.9 -13.2 10.22 1.1 0.7
Sanofi-Aventis (SAN FP) 4785 5769 4457 62730 -2.5 2.7 -13.1 0.2 2.0 -18.3 1.21 0.1 -0.2
Shire Pharma (SHP LN) 1543 1567 1220 10107 -0.4 -0.2 31.6 2.4 -0.8 23.8 6.17 0.4 -0.3
European pharma (13) 917 937 813 543040 -2.0 2.8 3.9 0.7 2.2 -2.2 2.87 0.8 0.4
CRO
ICON (USc) (ICLR US) 2190 2999 1922 965 -1.8 5.7 7.8 0.9 5.0 1.4 1.97 -2.0 -2.3
Charles River Labs (CRL US) 3554 4156 2825 1532 -2.5 5.6 12.9 0.2 4.9 6.2 1.70 2.3 2.3
Covance (CVD US) 5141 6325 3793 2490 -2.5 11.0 0.8 0.2 10.3 -5.2 2.28 -1.1 -1.1
Kendle (KNDL US) 1089 2153 783 121 -3.2 17.2 -36.4 -0.5 16.5 -40.2 0.70 3.2 2.4
Parexel (PRXL US) 2123 2516 1485 922 -5.8 17.0 61.1 -3.2 16.2 51.5 2.84 0.7 0.3
PPD (PPDI US) 2714 2782 2091 2409 -3.9 5.6 23.9 -1.3 4.9 16.5 2.57 -2.1 -2.2
CRO (6) 1913 2234 1661 8441 -3.2 8.5 13.5 -0.5 7.8 6.7 2.15 -0.3 -0.5
DIAGNOSTICS
Trinity Biotech (USc) (TRIB US) 881 890 384 135 -2.4 6.3 132.7 0.3 5.6 118.9 1.44 -3.2 -4.6
Orasure (OSUR US) 575 677 325 199 -3.9 6.2 21.1 -1.2 5.5 13.9 2.60 N/A N/A
Small cap diagnostics (10) 1936 1990 1532 8419 -2.6 17.4 7.9 0.1 16.6 1.5 2.91 0.7 0.4
S&P 500 Pharma & Biotech (S5PHRM) 338 357 302 -2.7 0.7 6.3
VALUATION
EPS (c) EPS Gth % EV/Sales EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2012 2010 2011 2012 2010 2011 2012
US BIOTECH
Elan Corp (USc) (ELN US) -11 -14 2 N/A 3.4 3.0 2.7 31.1 21.8 18.0 N/A N/A N/A
Amgen (AMGN US) 511 530 574 12.3 3.2 3.4 3.0 6.9 7.3 6.4 10.7 10.4 9.6
Biogen Idec (BIIB US) 496 565 593 19.5 3.5 3.4 3.2 7.9 7.5 7.9 13.5 11.9 11.3
Genzyme (GENZ US) 187 410 516 176.7 4.1 3.3 2.6 14.8 12.7 7.9 38.2 17.4 13.8
Gilead Sciences (GILD US) 367 406 450 22.6 3.6 3.3 3.1 6.3 6.0 5.8 9.9 8.9 8.1
US biotech (5) 3.5 3.4 3.0 7.7 7.6 6.8 12.7 11.2 10.1
US LARGE CAP
Bristol Myers Squibb (BMY US) 215 225 200 -6.9 2.3 2.2 2.3 6.5 6.1 7.3 12.3 11.7 13.2
Lilly (Eli) (LLY US) 485 454 417 -13.9 1.8 1.7 1.7 5.1 5.2 5.6 7.2 7.7 8.4
Johnson & Johnson (JNJ US) 493 526 569 15.4 2.6 2.3 2.1 8.0 7.0 6.2 12.5 11.8 10.9
Merck & Co. (MRK US) 343 389 402 17.4 2.6 2.5 2.4 5.9 6.1 5.8 10.5 9.3 9.0
Pfizer (PFE US) 221 231 229 3.6 2.4 2.2 2.2 4.9 4.5 4.6 7.9 7.6 7.6
US large cap (6) 2.4 2.2 2.1 6.2 5.8 5.6 10.1 9.5 9.3
EUROPEAN PHARMA
AstraZeneca (AZN LN) 425 419 395 -7.1 1.9 1.8 1.8 4.6 4.1 4.2 6.9 7.0 7.4
GlaxoSmithKline (GSK LN) 95 120 128 35.3 2.6 2.5 2.3 7.9 6.6 5.9 13.1 10.3 9.7
Merck KGAA (MRK GF) 635 704 734 15.6 2.0 1.7 1.5 8.0 6.5 5.9 9.5 8.6 8.2
Novartis (NOVN VX) 499 524 539 8.0 3.4 2.9 2.7 10.5 9.3 8.9 11.0 10.5 10.2
Roche (Sws) (ROG VX) 1303 1435 1575 20.9 3.3 3.2 2.9 8.6 7.8 7.0 10.5 9.5 8.7
Sanofi-Aventis (SAN FP) 689 665 608 -11.7 2.1 2.0 1.9 5.2 5.0 5.0 6.9 7.2 7.9
Shire Pharma (SHP LN) 90 102 117 29.0 4.0 3.4 3.0 11.8 9.6 8.2 17.1 15.1 13.2
European pharma (13) 2.7 2.5 2.3 8.0 7.2 6.7 10.7 10.0 9.7
CRO
ICON (USc) (ICLR US) 145 133 158 9.6 1.2 1.0 0.9 8.3 7.3 5.8 15.1 16.4 13.8
Charles River Labs (CRL US) 188 231 265 41.0 2.3 2.3 2.2 10.5 10.0 9.2 18.9 15.4 13.4
Covance (CVD US) 212 281 332 56.6 1.6 1.5 1.3 10.6 8.9 7.4 24.3 18.3 15.5
Kendle (KNDL US) 42 65 59 40.5 0.8 0.7 0.7 8.4 6.8 6.0 25.9 16.8 18.5
Parexel (PRXL US) 108 127 156 44.0 1.2 1.0 0.8 8.3 6.9 5.4 19.7 16.7 13.7
PPD (PPDI US) 104 148 170 63.0 2.0 1.7 1.4 10.9 7.8 6.5 26.1 18.3 16.0
CRO (6) 1.7 1.5 1.3 10.0 8.3 7.0 21.6 17.3 14.8
DIAGNOSTICS
Trinity Biotech (USc) (TRIB US) 62 64 70 13.7 1.4 1.3 1.0 7.1 5.9 4.3 14.2 13.7 12.5
Orasure (OSUR US) -5 -4 9 N/A 3.6 3.3 2.9 N/A N/A N/A N/A N/A 63.9
Small cap diagnostics (10) 2.0 1.8 1.7 8.9 8.0 7.2 19.0 17.2 15.6
38
38 Davy Research
Research Report: Davy on 2011 January 4, 2011
Stephen Furlong
stephen.furlong@davy.ie
Airlines and other transport
Joshua Goldman
Sector performance in 2010
joshua.goldman@davy.ie
· Airline stocks, largely regarded as early cyclical recovery plays,
outperformed in 2010. All airlines under our coverage universe
· All airline stocks outperformed performed above the FTSE E300 benchmark index. Indeed, the FTSE
the overall market in 2010 300 travel and leisure index was one of the best-performing sectors
with airlines outperforming within this sub-sector.
· The Davy global index of low-cost carriers (LCCs) was up 20.4%, and
the Davy index of European network airlines was up 31.5%. This
compared with a 7.3% rise in the FTSE E300 index.
· The network airlines are now trading at their book value against the
LCC index at 1.7x book.
39 Davy Research
Research Report: Davy on 2011 January 4, 2011
OTHER AIRLINES
AMR (AMR US) 779 1016 596 1939 -1.9 -11.7 7.8 0.2 -14.8 -18.5 N/A 4.9 3.6
Cathay Pacific (293 HK) 2145 2410 1280 8109 -2.4 -8.2 58.1 -0.3 -11.4 19.5 1.60 0.9 0.8
Delta Airlines (DAL US) 1260 1493 997 7425 0.9 -10.7 18.5 3.1 -13.8 -10.5 N/A 2.7 1.8
Qantas (QAN AU) 254 298 217 4395 0.1 -0.3 3.4 2.3 -3.8 -21.8 0.97 1.2 1.1
Singapore Airlines (SIA SP) 1530 1650 1350 10665 0.1 -0.9 19.7 2.2 -4.4 -9.5 1.27 -1.3 -1.3
United Continental Holdings (UAL US) 2382 2953 1223 5641 -0.3 -16.5 97.4 1.8 -19.5 49.2 N/A 1.5 0.9
US Airways (LCC US) 1001 1207 486 1208 -1.1 -13.0 121.3 1.1 -16.1 67.3 N/A 2.6 2.1
AIRPORTS
Aeroports de Paris (ADP FP) 5907 6478 5159 5846 -1.5 0.2 4.9 0.6 -3.4 -20.7 1.72 2.6 2.6
Copenhagen Airp. (KBHL DC) 177500 177500 118000 1869 8.7 14.9 44.7 11.0 10.8 9.4 3.92 2.2 2.3
Fraport (FRA GY) 4716 4878 3440 4335 -2.3 4.2 30.0 -0.2 0.6 -1.7 1.66 3.9 4.2
Uniq. Zurich Airport (FHZN SW) 38200 38400 29250 1876 0.4 9.5 45.4 2.5 5.7 9.9 1.39 2.5 2.2
Flughafen Wien (FLU AV) 5123 5123 3311 1076 2.3 8.4 47.2 4.4 4.6 11.3 1.30 4.1 4.7
TOUR OPERATORS
Kuoni Reisen (KUNN SW) 45425 45925 29400 1107 1.5 11.5 54.2 3.7 7.6 16.6 2.26 -2.1 -1.8
Thomas Cook (TCG LN) 190 272 172 1897 -0.6 -1.0 -14.9 1.6 -4.5 -35.7 0.94 1.5 1.4
TUI Travel (TT/ LN) 246 308 190 3207 -2.2 13.5 -0.3 -0.1 9.5 -24.7 1.38 0.4 0.4
TRANSPORT LOGISTICS
Deutsche Post (DPW GR) 1270 1446 1118 15355 -0.4 2.9 -5.8 1.7 -0.8 -28.8 1.57 0.7 0.5
DSV A/S (DSV DC) 12330 12330 8350 25788 1.7 9.0 31.2 3.8 5.2 -0.8 3.88 2.2 1.5
FedEx (FDX US) 9301 9562 7011 21885 -2.0 -1.0 19.2 0.0 -4.5 -9.9 1.94 -0.0 -0.1
Kuehne & Nagle (KNIN VX) 13000 13550 9305 12478 -0.8 5.3 53.3 1.3 1.6 15.9 5.97 -1.0 -1.2
Oesterreichische Post (POST AV) 2473 2473 1820 1670 2.3 9.3 30.0 4.4 5.5 -1.7 2.47 -1.0 -1.0
Panalpina Welttransport (PWTN SW) 12050 12850 6875 2410 -1.0 8.9 117.0 1.1 5.1 64.0 3.45 -2.2 -2.0
TNT NV (TNT NA) 1975 2349 1762 7433 4.7 7.4 -8.1 6.9 3.6 -30.6 3.12 1.0 0.8
United Parcel Service (UPS US) 7258 7376 5615 53613 -2.2 0.4 35.4 -0.2 -3.2 2.3 8.44 1.0 0.8
FTSE E300 Travel & Leisure (E3LEIS) 1316 1348 972 -2.1 3.7 32.3
41 Davy Research
Research Report: Davy on 2011 January 4, 2011
VALUATION
EPS (c) EPS Gth % EV/Sales EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2012 2010 2011 2012 2010 2011 2012
LOW COST AIRLINES
Ryanair Holdings (RYA ID) 27 36 46 69.8 1.7 1.4 1.1 8.0 6.1 4.4 14.1 10.6 8.3
Air Arabia (AIRARABI UH) 5 8 8 60.0 1.0 1.0 1.0 13.0 8.1 6.5 16.4 10.2 10.2
AirAsia (AIRA MK) 28 30 35 24.8 3.7 3.2 2.9 9.2 7.8 7.2 9.2 8.4 7.3
Airtran Hldgs. (AAI US) 37 53 73 98.0 0.6 0.5 0.6 6.8 5.7 6.5 20.0 13.9 10.1
Air Berlin (AB1 GY) -42 7 45 N/A 0.2 0.2 0.2 5.5 4.7 3.6 N/A 50.2 8.2
easyJet (EZJ LN) 30 43 55 84.2 0.6 0.5 0.4 7.4 4.8 3.6 14.8 10.2 8.1
GOL Linhas (GOL US) 49 103 133 174.1 1.3 1.1 1.1 9.0 6.9 6.5 31.6 14.9 11.5
JetBlue (JBLU US) 40 55 64 60.0 1.0 0.9 0.8 5.9 5.0 5.9 16.5 12.0 10.3
Norwegian Air (NAS NO) 257 953 1392 442.2 0.6 0.8 0.8 13.2 9.1 7.3 45.8 12.3 8.4
Southwest Airlines (LUV US) 74 90 101 36.5 0.8 0.7 0.6 5.4 4.1 3.6 17.5 14.4 12.9
Tiger Airways (TGR SP) 11 14 19 75.9 1.9 1.6 1.4 14.5 9.9 9.3 17.2 13.3 9.8
Virgin Blue (VBA AU) 1 4 5 420.0 0.6 0.5 0.5 6.6 4.5 3.2 43.0 12.0 8.3
Vueling (VLG SM) 146 138 169 15.5 0.1 0.0 N/A 1.2 0.2 N/A 6.7 7.1 5.8
Westjet Airlines (WJA CN) 80 110 149 86.3 0.8 1.0 0.9 4.3 5.2 4.5 17.6 12.8 9.4
Low cost airlines (14) 0.9 0.8 0.8 6.5 5.3 4.6 16.5 12.0 9.7
OTHER AIRLINES
AMR (AMR US) -129 22 118 N/A 0.4 0.4 0.4 6.6 4.9 3.8 N/A 36.2 6.6
Cathay Pacific (293 HK) 300 266 247 -17.6 1.2 1.1 0.9 5.3 5.3 5.0 7.1 8.1 8.7
Delta Airlines (DAL US) 180 226 240 33.1 0.7 0.6 0.5 5.0 3.9 3.5 7.0 5.6 5.3
Qantas (QAN AU) 11 26 33 189.1 0.6 0.5 0.5 4.8 3.7 3.2 22.1 9.9 7.6
Singapore Airlines (SIA SP) 119 147 161 35.5 0.9 0.8 0.7 4.1 3.5 2.9 12.8 10.4 9.5
United Continental Holdings (UAL US) 430 481 551 28.0 0.4 0.3 0.3 3.4 2.5 2.3 5.5 5.0 4.3
US Airways (LCC US) 225 250 290 29.2 0.4 0.3 0.3 4.2 3.6 3.0 4.5 4.0 3.4
AIRPORTS
Aeroports de Paris (ADP FP) 298 316 339 13.8 3.0 2.9 2.8 9.0 8.6 8.1 19.8 18.7 17.4
Copenhagen Airp. (KBHL DC) 9458 9958 10430 10.3 5.4 5.3 5.1 10.4 10.0 9.6 18.8 17.8 17.0
Fraport (FRA GY) 181 213 233 28.7 3.2 3.3 3.1 10.1 9.8 8.8 26.0 22.2 20.2
Uniq. Zurich Airport (FHZN SW) 2119 2422 2730 28.8 4.0 3.7 3.5 7.9 7.3 6.8 18.0 15.8 14.0
Flughafen Wien (FLU AV) 346 347 334 -3.3 3.4 3.6 3.4 10.0 10.3 9.8 14.8 14.8 15.3
TOUR OPERATORS
Kuoni Reisen (KUNN SW) 2760 3548 4250 54.0 0.3 0.2 0.2 6.6 5.5 5.0 16.5 12.8 10.7
Thomas Cook (TCG LN) 23 26 28 22.0 0.3 0.3 0.2 4.5 4.1 3.7 8.3 7.4 6.8
TUI Travel (TT/ LN) 22 24 27 23.3 0.2 0.2 0.2 4.6 4.3 3.9 11.2 10.4 9.1
TRANSPORT LOGISTICS
Deutsche Post (DPW GR) 113 122 130 15.0 0.4 0.3 0.3 5.0 4.5 3.9 11.2 10.4 9.8
DSV A/S (DSV DC) 603 785 933 54.9 0.8 0.7 0.6 11.5 9.6 8.3 20.5 15.7 13.2
FedEx (FDX US) 517 628 715 38.3 0.7 0.7 0.7 6.2 5.3 4.7 18.0 14.8 13.0
Kuehne & Nagle (KNIN VX) 525 627 704 34.1 0.7 0.7 0.6 14.1 11.9 10.3 24.8 20.7 18.5
Oesterreichische Post (POST AV) 163 166 168 3.1 0.6 0.6 0.6 5.6 5.5 5.3 15.2 14.9 14.7
Panalpina Welttransport (PWTN SW) -77 660 790 N/A 0.4 0.3 0.3 12.6 9.1 7.5 N/A 18.3 15.3
TNT NV (TNT NA) 139 161 183 32.3 0.8 0.7 0.7 7.0 6.4 5.7 14.2 12.3 10.8
United Parcel Service (UPS US) 353 417 481 36.3 1.6 1.5 1.4 10.4 9.2 8.1 20.6 17.4 15.1
David Jennings
david.jennings@davy.ie
Gaming
Sector performance in 2010
Simon McGrotty
simon.mcgrotty@davy.ie
After a very strong year in 2009 when the sector was up 47%, gaming
stocks underperformed in 2010, down 10.4%. All of the stocks in the
universe posted negative returns with the exception of Paddy Power
which was up 24%.
44 Davy Research
Research Report: Davy on 2011 January 4, 2011
45
44 Davy Research
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44
46 Davy Research
Research Report: Davy on 2011 January 4, 2011
We retain a 'neutral' stance on William Hill on the basis that we like the
prospects for retail recovery but remain concerned about regulatory risk
in its online business.
47
44 Davy Research
Research Report: Davy on 2011 January 4, 2011
FTSE E300 Travel & Leisure (E3LEIS) 1316 1348 972 -2.1 3.7 32.3
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
Paddy Power (PWL ID) 175 175 204 16.8 2.8 2.9 2.0 10.5 10.1 9.2 17.6 17.6 15.0
PartyGaming (PRTY LN) 17 18 19 11.5 0.0 0.0 N/A 8.5 7.6 6.6 13.9 13.2 12.5
Ladbrokes plc (LAD LN) 14 14 16 20.6 4.5 4.5 2.5 6.5 6.1 5.2 9.1 9.0 7.5
William Hill plc (WMH LN) 20 19 21 7.0 3.2 3.7 3.7 5.7 5.7 5.0 8.6 9.1 8.0
888 Holdings Plc (888 LN) 3 3 3 11.6 1.2 2.4 4.8 9.0 9.1 7.6 17.7 18.0 15.8
bwin (BWIN AV) 104 189 213 104.3 1.5 2.7 2.3 11.9 7.1 6.1 28.3 15.6 13.9
New Unibet Group (UNIB SS) 1119 1109 1315 17.5 5.8 5.9 1.4 8.1 8.0 6.8 12.6 12.7 10.7
Sportingbet (SBT LN) 6 7 7 14.0 2.4 2.8 4.1 5.9 5.2 4.5 10.0 9.4 8.7
Online operators (5) 1.8 2.3 3.6 8.9 7.2 6.2 16.0 13.5 12.2
Overall gaming (8) 2.7 3.1 3.0 7.4 6.8 5.9 12.4 11.9 10.4
48 Davy Research
Research Report: Davy on 2011 January 4, 2011
Emer Lang
emer.lang@davy.ie
Financials
Stephen Lyons
Sector performance in 2010
stephen.lyons@davy.ie
· 2010 proved to be another rollercoaster year for Irish financials. The
first quarter was relatively calm with results announcements broadly as
· 2010 proved to be another
rollercoaster year for Irish financials
expected, predictably highlighting the funding/impairment challenges
facing the sector.
· At the end of March, extensive statements from the Regulator and
government outlined the capital requirements produced by the new
Prudential Capital Assessment Review (PCAR) process. Bank of
Ireland (BKIR) would need €2.7bn and Allied Irish Banks (ALBK)
€7.4bn to hit a core equity ratio of 7% allowing for future losses (both
NAMA and non-NAMA). Anglo Irish Bank, requiring at least €22bn,
proved the biggest shock. Higher-than-expected NAMA discounts
were a key factor: tranche 1 loans transferring to the agency attracted a
weighted average haircut of 47% compared with initial government
estimates of 30% (September 2009).
· Yet April was a strong month for the Irish banks. Investor sentiment
improved following the initial NAMA transfer and apparent
clarification of the banks' capital needs. On April 26th, BKIR
announced its plan to raise a gross €3.4bn (net €2.9bn) to meet its
PCAR requirement. The ISE financials index (ISEF) rose 8.2% in
April, bringing the year-to-date return to 13.5% at that point.
· BKIR successfully completed its fundraising and secured EU approval
for its restructuring plan in July, but any relief proved short-lived. As
term funding markets grew increasingly difficult, investors began to
focus on the banks’ ‘funding cliff’ at end-September when close to
€30bn term funding matured. Banks appeared to have comfortable
collateral positions to meet this, allowing for an element of pre-
funding in January-April, but rating agency downgrades (S&P
sovereign and individual bank downgrades in September hit
particularly hard) added to the pressure as banks lost rating-sensitive
corporate deposits.
· Persistent speculation that NAMA discounts might be even higher
culminated in an end-September announcement that ALBK needed
€10.4bn instead of €7.4bn due to an anticipated 60% discount on
remaining NAMA loans. BKIR's capital was deemed sufficient at that
juncture. Since then the acuteness of the funding situation has become
increasingly evident, leading to a more than doubling in reliance on
monetary authorities by end-November.
· The EU/IMF package brought new
conditions: banks would be
· The EU/IMF package, announced in late November, brought new
required to ‘overcapitalise’ to a conditions: banks would be required to ‘overcapitalise’ to a core Tier 1
core Tier 1 ratio of at least 12%, ratio of at least 12%, while the sector would undergo a 'fundamental
while the sector would undergo a
'fundamental downsizing and downsizing and reorganisation'. The Credit Institutions (Stabilisation)
reorganisation' Act introduced the requisite legislation to enable the Minister for
Finance to restructure the industry, including imposing losses on
subordinated debt. The ISEF ended the year down 61%.
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42%). The group had hoped to raise up to €4.9bn of this from self-
help measures, primarily asset disposals, leaving a residual of €3.5bn,
which could have been satisfied through conversion of its government
preference shares. The haircut increased to 48.5% in tranche 2,
creating some uncertainty over the capital requirement, but it was not
until end-September when the Regulator revealed that the remaining
NAMA assets would transfer at a discount of 60% that the enormity of
the capital shortfall emerged.
· ALBK's capital requirement was increased by €3bn to €10.4bn to meet
the target core equity ratio of 7%. The group planned to raise €5.0bn
of this internally, with the remaining €5.4bn to be raised by a
government underwritten rights issue in November 2010. The
successful disposal of its Polish businesses (€2.5bn) and its stake in
M&T (€0.9bn) created €3.4bn of equity, but in the absence of a sale
of the UK operation, the underwritten rights issue was increased to
€6.6bn.
· ALBK's new core Tier 1 target of 14% increased the residual equity
capital requirement to €9.8bn. In December, the government injected
€3.7bn, leaving a residual €6.1bn to be raised by end-February. Unless
a UK sale (put on hold recently) can be expedited with state credit
enhancement, it is likely that much of this will have to come from
government, leaving its stake in ALBK in the high-90% region.
· Subordinated debt of over €4bn may contribute something: although
the EC is determined to protect holders of senior debt, holders of
subordinated debt are expected to share the pain where state aid is
substantial.
· Uncertainty over the fate of ALBK is understandably keeping investors
on the sidelines.
Bank of Ireland
· BKIR successfully completed its initial capital-raising in 2010; secured
EC approval for its restructuring plan; incorporated an authorised UK
bank; and sold BIAM, its asset management subsidiary – the first of a
number of assets it is required to sell under its plan – to State Street.
· Notwithstanding its undoubted progress, funding conditions remained
far from normal, with concerns over the Irish sovereign compounding
the challenge. BKIR revealed in its mid-November IMS that it lost
€10bn of rating-sensitive deposits in Q3 in the aftermath of
sovereign/bank ratings downgrades, forcing it to raise reliance on the
ECB from a net €8bn at the halfway stage to a net €20bn at that time.
· Under the ‘overcapitalisation’ · Under the government/Regulator ‘overcapitalisation’ strategy, the
strategy, the bank’s immediate
challenge is to raise €2.2bn more bank’s immediate challenge is to raise €2.2bn more equity by the end-
equity by the end-February February deadline. It intends to seek to generate this through a
deadline
combination of ‘internal capital management initiatives, support from
existing shareholders and other capital markets sources’.
· It raised €700m swapping guaranteed senior debt for LT2
subordinated debt in December. The source of the residual €1.5bn
52 Davy Research
Research Report: Davy on 2011 January 4, 2011
FBD
· FBD's mid-November IMS confirmed that anticipated rate hardening,
particularly for home and business insurance, is beginning to have a
positive impact, albeit a modest one. Policy volumes in the second half
of 2010 were running broadly in line with the previous year, reversing
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Banks
SHARE PRICE AND PERFORMANCE
Price 12 Month Mkt. Cap Change % (€) Rel to E300 sector % ROE %
Local High Low €m Wk 1 Mth YTD Wk 1 Mth YTD 2010 2011 2012
Allied Irish Banks (ALBK ID) 30 179 27 324 -4.5 -13.0 -75.0 -1.5 -16.1 -72.3 N/A N/A 0.0
Bank of Ireland (BKIR ID) 38 121 26 1987 8.1 19.4 -55.5 11.4 15.3 -50.7 N/A N/A 4.7
Banks (2) 212 754 156 2312 5.7 12.2 -61.2 9.0 8.4 -57.0
UK Banks
Barclays (BARC LN) 262 383 255 37135 -3.0 -0.7 -2.2 0.0 -4.1 8.3 6.6 8.3 9.8
Lloyds Banking Group (LLOY LN) 66 78 47 52173 -5.5 5.8 33.8 -2.6 2.1 48.1 2.9 8.9 12.4
RBoS (RBS LN) 39 58 31 49606 -4.9 1.1 38.1 -2.0 -2.4 52.9 1.4 5.1 7.0
UK banks index (3) 131 169 108 138914 -4.6 2.3 19.1 -1.7 -1.2 31.8
Austrian Banks
Erste Bank (EBS AV) 3514 3559 2510 13289 0.4 16.6 34.8 3.5 12.6 49.3 7.3 9.6 10.7
Raiffeisen Bank (RBI AV) 4100 4275 2901 8016 0.3 8.3 3.8 3.5 4.5 14.9 11.7 12.2 13.8
Austrian banks index (2) 2353 2387 1704 21305 0.4 13.3 22.7 3.5 9.4 35.8
Benelux Banks
KBC (KBC BB) 2550 3800 2547 9127 -3.1 -5.6 -16.1 -0.1 -8.9 -7.1 16.4 15.0 17.0
Dexia (DEXB BB) 260 498 258 4801 -4.2 -7.9 -41.7 -1.3 -11.1 -35.5 8.4 6.9 7.7
Benelux banks index (2) 634 1008 633 13928 -3.5 -6.4 -26.7 -0.5 -9.7 -18.9
French Banks
Credit Agricole (ACA FP) 950 1368 802 22825 -2.8 0.7 -23.1 0.2 -2.8 -14.9 5.4 8.6 10.1
BNP Paribas (BNP FP) 4761 5960 4148 57056 -4.0 4.4 -14.8 -1.0 0.8 -5.7 11.6 11.8 12.3
Societe Generale (GLE FP) 4022 5220 3033 30021 -4.5 12.7 -17.8 -1.6 8.8 -9.1 9.5 10.6 12.0
Natixis (KN FP) 350 482 314 10178 -2.5 3.2 -1.3 0.5 -0.4 9.2 7.9 8.4 9.2
French banks index (4) 776 996 657 120081 -3.8 5.5 -16.3 -0.8 1.8 -7.3
Greek Banks
Alpha Bank (ALPHA GA) 380 884 380 2030 -5.7 -11.0 -53.7 -2.8 -14.1 -48.7 0.9 3.8 7.2
EFG Eurobank (EUROB GA) 375 871 362 2020 -2.6 -2.3 -52.4 0.4 -5.7 -47.3 N/A 2.5 6.8
Emporiki (TEMP GA) 165 463 120 845 -0.6 36.4 -62.3 2.5 31.7 -58.3 N/A N/A 18.1
Natl. Bank of Greece (ETE GA) 605 1874 605 5784 -3.4 -6.8 -64.1 -0.4 -10.0 -60.3 4.8 8.1 9.8
Greek banks index (4) 207 590 207 10679 -3.5 -4.4 -61.6 -0.5 -7.7 -57.5
German Banks
Commerzbank (CBK GY) 555 735 545 6561 -2.4 -1.0 -5.6 0.7 -4.4 4.5 12.3 5.0 11.8
Deutsche Bank (DBK GY) 3910 6038 3660 36343 -1.1 6.9 -20.9 2.0 3.2 -12.4 7.2 10.4 10.4
Deutsche Postbank (DPB GY) 2080 2727 1994 4551 0.5 -4.4 -9.1 3.6 -7.7 0.6 4.2 7.2 9.0
German banks index (3) 456 646 436 47456 -1.1 4.5 -16.2 2.0 0.9 -7.3
Italian Banks
Intesa Sanpaolo Spa (ISP IM) 203 320 197 25947 -5.0 1.1 -35.6 -2.1 -2.4 -28.7 4.7 6.0 7.0
Unicredit SpA (UCG IM) 155 231 149 29835 -6.0 3.6 -30.8 -3.1 0.0 -23.4 2.7 5.4 7.1
Banca Monte Dei P. (BMPS IM) 85 133 83 5699 -4.0 3.1 -30.7 -1.0 -0.4 -23.3 2.1 4.3 5.6
UBI Banca (UBI IM) 655 1051 641 4186 -4.8 2.2 -34.8 -1.9 -1.3 -27.8 2.1 3.7 5.0
Mediobanca (MB IM) 666 883 577 5735 -2.8 5.0 -19.9 0.2 1.3 -11.3 6.2 8.8 9.5
Italian banks index (5) 2330 3533 2269 71402 -5.2 2.7 -32.2 -2.2 -0.9 -24.9
Nordic Banks
Danske Bank (DANSKE DC) 14300 15460 11490 13404 -1.1 0.4 21.0 1.9 -3.1 33.9 4.8 9.8 11.2
Nordea (NDA SS) 7315 7600 6030 32981 -0.6 6.3 14.6 2.5 2.6 26.9 10.6 11.4 11.6
SE Banken (SEBA SS) 5610 5650 3884 13729 -0.2 11.9 44.5 2.9 8.1 60.0 6.8 9.7 9.9
DNB NOR ASA (DNBNOR NO) 8190 8315 6095 17127 -0.1 11.6 39.0 3.0 7.7 53.9 11.1 11.6 12.0
Svenska Handelsbanken (SHBA SS) 21490 22650 18280 14943 -1.4 4.1 20.2 1.7 0.5 33.1 12.3 12.5 12.8
Swedbank (SWEDA SS) 9380 9855 6270 9963 -0.7 7.4 50.9 2.3 3.7 67.1 7.4 9.6 10.1
Nordic banks index (6) 1179 1190 866 102146 -0.7 6.8 26.4 2.4 3.1 39.9
Portuguese Banks
Banco Comercial P. (BCP PL) 58 92 58 2732 -4.3 -1.0 -31.1 -1.3 -4.4 -23.8 4.8 5.7 6.6
Banco Espirito Santo (BES PL) 288 499 279 3360 -3.3 3.2 -37.0 -0.3 -0.3 -30.3 7.5 6.8 6.5
Banco BPI (BPIN PL) 139 230 139 1247 -4.5 -0.3 -34.7 -1.5 -3.7 -27.7 10.1 11.1 11.9
Portuguese banks index (3) 219 364 217 7339 -3.9 1.0 -34.5 -0.9 -2.5 -27.5
Spanish Banks
Banco Popular Espanol (POP SM) 384 600 381 5281 -3.2 -2.3 -25.2 -0.2 -5.7 -17.2 7.0 7.2 8.3
BBVA (BBVA SM) 756 1315 708 33951 -3.2 6.8 -40.6 -0.2 3.1 -34.3 14.6 13.4 15.3
Banco Sabadell (SAB SM) 295 453 295 3728 -3.1 -1.4 -23.9 -0.1 -4.8 -15.7 7.2 5.6 7.5
Banco Espanol Credito (BTO SM) 620 919 593 4262 -3.5 1.4 -27.6 -0.5 -2.1 -19.8 9.8 9.7 10.9
Banco Santander (SAN SM) 793 1198 730 66033 -2.5 8.6 -31.4 0.6 4.9 -24.0 11.7 13.1 13.9
Spanish banks index (5) 662 1037 619 113255 -2.8 6.9 -33.6 0.2 3.2 -26.5
Swiss Banks
Credit Suisse (CSGN VX) 3767 5640 3704 35740 -1.7 6.0 -12.8 1.4 2.4 -3.5 15.2 15.6 15.7
UBS AG (UBSN VX) 1535 1848 1340 47036 -1.7 6.5 13.3 1.4 2.8 25.4 14.6 12.9 13.1
EFG International (EFGN SW) 1280 2025 1070 1502 -0.6 16.0 6.1 2.5 12.0 17.4 10.3 11.3 18.7
Julius Baer Group (BAER VX) 4380 4445 3075 7239 0.5 19.8 42.6 3.6 15.7 57.9 11.2 12.3 12.5
Swiss banks index (4) 552 633 467 91517 -1.5 7.4 2.8 1.6 3.7 13.8
European banks index (43) 442 552 414 740334 -2.9 4.9 -13.5 0.1 1.3 -4.2
FTSE E300 Banks (E3BANK) 530 624 489 -3.0 3.6 -9.7
55 Davy Research
Research Report: Davy on 2011 January 4, 2011
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover Price/Book P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
Allied Irish Banks (ALBK ID) -55 -5 0 N/A 0.0 0.0 N/A 0.52 0.54 0.53 N/A N/A N/A
Bank of Ireland (BKIR ID) -49 -11 4 N/A 0.0 0.0 N/A 0.42 0.43 0.39 N/A N/A 8.7
Banks (2) N/A N/A N/A 0.43 0.45 0.40 N/A N/A 10.1
UK Banks
Barclays (BARC LN) 27 36 47 71.2 1.9 2.7 5.4 0.63 0.60 0.54 9.6 7.2 5.6
Lloyds Banking Group (LLOY LN) 2 7 11 463.0 0.0 0.0 N/A 0.97 0.90 0.79 34.8 10.1 6.2
RBoS (RBS LN) 1 4 5 342.5 0.0 0.0 N/A 0.60 0.58 0.55 32.6 10.9 7.4
UK banks index (3) 1.9 2.7 9.7 0.71 0.68 0.62 20.2 9.3 6.4
Austrian Banks
Erste Bank (EBS AV) 227 322 408 79.7 1.8 2.0 3.5 1.10 1.02 0.91 15.5 10.9 8.6
Raiffeisen Bank (RBI AV) 412 438 579 40.5 1.0 1.8 10.3 1.20 1.09 0.96 9.9 9.4 7.1
Austrian banks index (2) 1.5 1.9 5.1 1.14 1.05 0.93 12.8 10.3 8.0
Benelux Banks
KBC (KBC BB) 559 549 595 6.6 3.8 3.9 5.8 0.85 0.79 0.74 4.6 4.6 4.3
Dexia (DEXB BB) 43 41 51 20.0 0.0 2.5 N/A 0.51 0.44 0.39 6.1 6.4 5.1
Benelux banks index (2) 3.8 3.4 8.1 0.69 0.62 0.56 5.0 5.1 4.5
French Banks
Credit Agricole (ACA FP) 104 175 225 116.8 4.7 6.8 2.3 0.48 0.46 0.43 9.2 5.4 4.2
BNP Paribas (BNP FP) 659 731 829 25.7 4.4 5.0 3.1 0.84 0.77 0.70 7.2 6.5 5.7
Societe Generale (GLE FP) 500 610 739 47.7 4.2 5.2 2.9 0.75 0.70 0.65 8.0 6.6 5.4
Natixis (KN FP) 44 50 55 26.4 6.9 7.1 1.8 0.62 0.59 0.57 8.0 7.0 6.4
French banks index (4) 4.6 5.6 2.8 0.70 0.65 0.61 7.8 6.3 5.4
Greek Banks
Alpha Bank (ALPHA GA) 5 25 60 N/A 0.0 0.0 N/A 0.47 0.45 0.42 73.8 15.2 6.3
EFG Eurobank (EUROB GA) -5 18 57 N/A 0.0 0.0 N/A 0.50 0.49 0.45 N/A 20.6 6.6
Emporiki (TEMP GA) -220 -37 15 N/A 0.0 0.0 N/A 1.28 1.49 1.99 N/A N/A 11.0
Natl. Bank of Greece (ETE GA) 49 81 116 134.5 0.0 1.8 N/A 0.58 0.55 0.51 12.3 7.4 5.2
Greek banks index (4) N/A 1.8 N/A 0.56 0.54 0.51 15.7 9.7 5.9
German Banks
Commerzbank (CBK GY) 106 39 120 13.4 0.0 0.0 N/A 0.66 0.61 0.54 5.2 14.2 4.6
Deutsche Bank (DBK GY) 370 576 629 69.9 1.9 2.6 4.9 0.76 0.71 0.64 10.6 6.8 6.2
Deutsche Postbank (DPB GY) 109 200 274 151.7 0.0 0.0 N/A 0.82 0.76 0.70 19.1 10.4 7.6
German banks index (3) 1.9 2.6 7.1 0.75 0.69 0.63 9.6 7.6 6.0
Italian Banks
Intesa Sanpaolo Spa (ISP IM) 20 26 33 67.3 4.2 4.9 2.3 0.48 0.47 0.45 10.3 7.7 6.2
Unicredit SpA (UCG IM) 9 19 25 177.8 1.9 4.5 3.0 0.46 0.44 0.43 17.2 8.1 6.2
Banca Monte Dei P. (BMPS IM) 5 10 13 165.2 2.4 2.8 2.5 0.36 0.36 0.34 17.0 8.5 6.4
UBI Banca (UBI IM) 33 68 90 171.5 3.8 4.4 1.3 0.38 0.37 0.36 19.8 9.6 7.3
Mediobanca (MB IM) 47 66 83 77.0 2.6 3.8 2.8 0.87 0.85 0.76 14.2 10.1 8.0
Italian banks index (5) 3.0 4.5 2.5 0.47 0.46 0.44 13.7 8.2 6.4
Nordic Banks
Danske Bank (DANSKE DC) 717 1600 2016 181.2 0.5 2.6 9.7 0.94 0.86 0.78 20.0 8.9 7.1
Nordea (NDA SS) 566 654 729 28.9 3.4 3.7 2.3 1.37 1.28 1.18 12.9 11.2 10.0
SE Banken (SEBA SS) 321 472 507 57.8 2.1 3.6 2.7 1.23 1.15 1.10 17.5 11.9 11.1
DNB NOR ASA (DNBNOR NO) 734 804 908 23.7 4.3 4.6 2.1 1.24 1.16 1.09 11.2 10.2 9.0
Svenska Handelsbanken (SHBA SS) 1724 1887 2064 19.7 4.0 4.4 2.0 1.53 1.42 1.33 12.5 11.4 10.4
Swedbank (SWEDA SS) 605 844 960 58.8 2.0 3.7 3.2 1.15 1.07 1.01 15.5 11.1 9.8
Nordic banks index (6) 3.0 3.8 2.4 1.25 1.16 1.08 13.8 10.8 9.5
Portuguese Banks
Banco Comercial P. (BCP PL) 5 6 8 56.6 3.4 4.8 2.5 0.55 0.53 0.50 11.6 9.3 7.4
Banco Espirito Santo (BES PL) 41 40 42 1.6 4.2 4.9 3.4 0.52 0.49 0.44 7.0 7.2 6.9
Banco BPI (BPIN PL) 22 22 23 6.2 5.6 5.8 2.8 0.73 0.77 0.72 6.4 6.4 6.0
Portuguese banks index (3) 4.1 5.0 3.0 0.56 0.54 0.50 8.1 7.7 6.9
Spanish Banks
Banco Popular Espanol (POP SM) 43 45 53 24.6 5.7 5.2 1.9 0.63 0.63 0.59 9.0 8.6 7.2
BBVA (BBVA SM) 118 118 142 20.4 5.6 5.9 2.8 0.95 0.89 0.82 6.4 6.4 5.3
Banco Sabadell (SAB SM) 27 24 35 28.4 5.1 3.8 1.8 0.72 0.70 0.67 11.0 12.1 8.6
Banco Espanol Credito (BTO SM) 82 88 101 24.1 6.1 6.6 2.1 0.76 0.72 0.68 7.6 7.0 6.1
Banco Santander (SAN SM) 100 117 131 31.0 7.6 7.6 1.7 0.94 0.89 0.83 7.9 6.8 6.1
Spanish banks index (5) 6.7 6.8 2.0 0.91 0.86 0.80 7.5 6.8 5.9
Swiss Banks
Credit Suisse (CSGN VX) 452 513 558 23.5 4.6 4.8 2.6 1.27 1.14 1.02 8.3 7.3 6.7
UBS AG (UBSN VX) 189 192 218 15.1 0.0 0.0 N/A 1.19 1.05 0.93 8.1 8.0 7.1
EFG International (EFGN SW) 36 110 151 317.1 0.8 1.6 3.6 1.54 1.18 1.44 35.3 11.6 8.5
Julius Baer Group (BAER VX) 247 294 324 31.3 0.9 1.1 6.1 2.00 1.82 1.65 17.8 14.9 13.5
Swiss banks index (4) 3.9 4.1 6.1 1.27 1.13 1.00 8.7 8.1 7.2
European banks index (43) 4.0 4.6 3.0 0.79 0.74 0.69 10.8 8.0 6.5
FTSE E300 Banks (E3BANK) 530 624 489 -3.0 3.6 -9.7
VALUATION CONTINUED
EPS (c) EPS Gth % Div Yield % Div Cover Price/Book P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
Eastern European Banks
Bank Pekao (PEO PW) 980 1205 1395 42.3 4.0 4.7 1.4 2.34 2.23 2.13 18.3 14.9 12.8
BPH (BPH PW) -204 364 651 N/A 0.0 0.0 N/A 1.31 1.24 1.11 N/A 19.5 10.9
BZWBK (BZW PW) 1268 1559 1827 44.1 1.9 3.0 3.1 2.39 2.13 1.93 16.9 13.8 11.8
BRE Bank (BRE PW) 1440 1990 2520 75.0 0.0 1.1 N/A 1.91 1.69 1.55 21.1 15.3 12.1
PKO Bank Polski (PKO PW) 255 340 410 61.1 2.6 3.4 2.3 2.54 2.25 2.00 17.0 12.8 10.6
ING Bank Slaski (BSK PW) 5742 6772 7999 39.3 0.6 2.3 10.3 2.06 1.83 1.64 15.6 13.2 11.2
Komercni Bank (KOMB CP) 33223 36584 39552 19.0 4.5 5.0 1.7 2.20 2.11 1.91 13.4 12.1 11.2
OTP Bank (OTP HB) 45015 66895 87494 94.4 0.4 3.5 22.5 1.02 0.90 0.80 11.2 7.5 5.7
Eastern Eur. banks index (8) 2.5 3.5 2.7 2.02 1.83 1.66 15.8 12.6 10.5
Retail banks index (14) 3.3 4.4 3.0 0.70 0.66 0.62 14.7 8.4 6.3
Wholesale banks index (6) 3.8 4.4 4.3 0.91 0.83 0.76 8.1 7.1 6.1
US Banks
Citigroup (C US) 40 45 56 41.8 0.0 0.0 N/A 0.83 0.77 0.70 12.0 10.5 8.4
Bank of America (BAC US) 108 150 190 75.5 0.3 0.3 27.0 0.62 0.58 0.53 12.4 8.9 7.0
BB&T Corp (BBT US) 281 264 350 24.8 2.3 2.6 4.7 1.08 1.04 0.98 9.4 10.0 7.5
Fifth Third Bancorp (FITB US) 53 110 143 170.6 0.3 0.3 13.2 1.12 1.04 0.94 27.9 13.3 10.3
Goldman Sachs Group (GS US) 1339 1776 1974 47.4 0.8 0.8 9.6 1.30 1.15 1.04 12.6 9.5 8.5
JPMorgan Chase (JPM US) 385 470 548 42.2 0.5 1.4 19.3 0.98 0.90 0.84 11.0 9.0 7.7
KeyCorp (KEY US) 23 51 68 195.7 0.5 0.5 5.8 0.92 0.89 0.84 38.5 17.4 13.0
Morgan Stanley (MS US) 237 297 310 31.1 0.7 0.7 11.8 0.86 0.81 0.73 11.5 9.2 8.8
M&T Bank Corp (MTB US) 554 612 705 27.3 3.2 3.2 2.0 1.37 1.30 1.22 15.7 14.2 12.3
PNC (PNC US) 548 575 640 16.8 0.7 0.7 13.7 1.06 0.98 0.89 11.1 10.6 9.5
Suntrust (STI US) -34 95 225 N/A 0.1 0.1 N/A 0.80 0.80 0.75 N/A 31.1 13.1
US Bancorp (USB US) 168 215 263 56.3 0.7 1.2 8.4 1.85 1.64 1.48 16.1 12.5 10.3
Wells Fargo (WFC US) 221 285 351 59.2 0.6 1.4 11.0 1.38 1.25 1.13 14.1 10.9 8.8
US banks index (13) 0.6 1.1 14.6 0.97 0.90 0.82 12.5 10.1 8.4
Global aggregate (64) 2.3 2.9 4.5 0.89 0.83 0.76 11.7 9.0 7.3
57
56 Davy Research
Research Report: Davy on 2011 January 4, 2011
Insurance
SHARE PRICE AND PERFORMANCE
Price 12 Month Mkt. Cap Change % (€) Rel to E300 sector % ROE %
Local High Low €m Wk 1 Mth YTD Wk 1 Mth YTD 2010 2011 2012
FBD Holdings (FBD ID) 620 780 557 206 -4.6 6.9 -10.1 -2.9 -1.7 -9.6 14.8 20.4 18.1
Irish Life & Permanent (IPM ID) 108 394 51 299 8.0 8.0 -67.3 10.0 -0.7 -67.1 N/A N/A 4.7
General Insurance
Admiral Group (ADM LN) 1515 1693 1114 4741 -2.9 -3.6 31.5 -1.2 -11.3 32.4 54.9 56.2 54.9
Allianz (ALV GR) 8896 9560 7679 40432 -1.5 4.4 1.5 0.2 -4.0 2.2 11.3 11.3 11.5
Amlin (AML LN) 409 433 363 2364 0.5 5.9 17.7 2.3 -2.6 18.5 14.7 14.0 13.7
AXA (CS FP) 1245 1758 1106 28885 -3.0 12.6 -24.7 -1.2 3.6 -24.2 8.0 9.1 9.1
Brit Insurance (BRE LN) 1042 1045 728 961 -1.0 -1.8 36.4 0.8 -9.7 37.3 11.4 8.7 8.7
Catlin Group (CGL LN) 370 393 320 1548 -0.8 8.5 12.3 1.0 -0.2 13.1 10.2 9.5 9.1
Mapfre (MAP SM) 208 309 196 6259 -3.3 6.2 -29.0 -1.6 -2.3 -28.5 13.4 13.5 12.6
Generali (G IM) 1421 1919 1353 22123 -3.6 5.0 -24.5 -1.9 -3.4 -24.0 10.0 11.6 11.9
RSA Insurance (RSA LN) 125 137 115 5091 -3.0 1.4 7.2 -1.3 -6.8 7.9 13.8 14.1 13.9
General insurance (10) 550 653 507 112611 -2.5 6.1 -12.7 -0.7 -2.4 -12.1
Life Insurance
Aegon (AGN NA) 458 541 404 7944 -0.7 8.1 0.8 1.1 -0.6 1.5 8.8 7.4 7.7
Aviva (AV/ LN) 393 424 294 12912 -2.5 7.8 2.0 -0.8 -0.9 2.6 14.9 13.4 13.8
ING Groep (INGA NA) 728 816 552 27894 -0.1 7.0 5.5 1.7 -1.5 6.2 9.1 11.2 11.3
Legal & General (LGEN LN) 97 106 70 6613 -3.9 2.9 23.9 -2.1 -5.3 24.7 17.0 14.8 13.8
Old Mutual (OML LN) 123 145 97 7825 -2.6 1.0 16.4 -0.9 -7.1 17.1 8.9 8.5 9.1
Prudential (PRU LN) 668 681 488 19813 -2.8 14.4 7.7 -1.0 5.2 8.5 16.2 16.7 18.4
Life insurance (7) 748 789 606 83301 -1.7 8.0 6.3 0.1 -0.7 7.0
European insurance (17) 460 508 402 195911 -2.1 6.9 -5.5 -0.4 -1.7 -4.9
FTSE E300 Life Insurance (E3LIFE) 271 289 232 -1.8 8.7 -0.7
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover Price/Book P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
FBD Holdings (FBD ID) 88 136 138 55.8 5.3 5.3 2.7 1.00 0.87 0.77 7.0 4.5 4.5
Irish Life & Permanent (IPM ID) -34 -20 40 N/A 0.0 0.0 N/A 0.13 0.13 0.12 N/A N/A 2.7
General Insurance
Admiral Group (ADM LN) 67 78 87 28.4 4.3 4.9 1.0 11.98 10.46 8.89 22.5 19.5 17.5
Allianz (ALV GR) 1118 1200 1285 15.0 5.1 5.6 2.5 0.90 0.84 0.79 8.0 7.4 6.9
Amlin (AML LN) 51 55 55 8.8 5.4 5.7 2.3 1.23 1.10 1.02 8.1 7.4 7.4
AXA (CS FP) 174 203 222 27.4 5.6 6.3 2.5 0.59 0.56 0.52 7.1 6.1 5.6
Brit Insurance (BRE LN) 128 105 122 -4.7 5.8 6.0 2.1 0.88 0.78 0.74 8.2 9.9 8.6
Catlin Group (CGL LN) 49 46 50 3.4 7.3 7.6 1.8 0.78 0.67 0.63 7.6 8.0 7.4
Mapfre (MAP SM) 31 32 33 7.1 7.2 7.7 2.1 0.92 0.88 0.80 6.7 6.4 6.3
Generali (G IM) 124 154 173 39.6 3.5 4.2 2.5 1.18 1.10 1.02 11.5 9.3 8.2
RSA Insurance (RSA LN) 13 15 16 21.7 7.0 7.4 1.5 1.28 1.22 1.15 9.6 8.5 7.9
General insurance (10) 5.1 5.7 2.3 0.87 0.82 0.76 8.4 7.5 6.9
Life Insurance
Aegon (AGN NA) 84 72 80 -4.3 N/A 1.7 N/A 0.48 0.48 0.44 5.4 6.4 5.7
Aviva (AV/ LN) 64 70 76 19.1 6.5 6.9 2.5 0.98 0.88 0.84 6.2 5.6 5.2
ING Groep (INGA NA) 96 135 147 53.1 N/A N/A N/A 0.67 0.61 0.56 7.6 5.4 5.0
Legal & General (LGEN LN) 14 13 14 5.0 4.6 4.9 3.1 1.21 1.09 0.94 7.2 7.3 6.8
Old Mutual (OML LN) 16 18 18 14.9 2.7 3.2 4.8 0.72 0.66 0.62 7.7 6.8 6.7
Prudential (PRU LN) 51 94 101 97.1 3.1 3.3 2.5 2.30 2.07 1.84 13.1 7.1 6.6
Life insurance (7) 4.1 4.1 5.4 0.85 0.78 0.72 7.9 6.2 5.6
European insurance (17) 4.8 5.2 3.1 0.86 0.80 0.74 8.2 6.9 6.3
Simon McGrotty
Media and technology
simon.mcgrotty@davy.ie
Sector performance in 2010
· On the back of a strong · On the back of a strong performance in 2009, media stocks found
performance in 2009, media stocks progress more challenging during 2010. The E300 media index
found progress more challenging
during 2010
performed well during the first four months of the year amid optimism
regarding a global economic recovery. However, May was a difficult
month with the sector losing almost 15%. Having rallied since, the
sector finished up 12.3% in 2010, offsetting May's decline and
returning to March 2010 levels. Overall, the sector marginally
outperformed the broader E300 index in 2010.
· With the exception of companies · With the exception of companies that had exposure to the FIFA
that had exposure to the FIFA World Cup, top-line growth has been relatively benign with earnings
World Cup, top-line growth has
been relatively benign with growth driven by aggressive cost-cutting strategies.
earnings growth driven by · At the start of the year, we identified Independent News & Media
aggressive cost-cutting strategies
(INM) as our top pick within the sector. Supported by a group
restructuring completed at end-2009, we felt that the stock would
outperform with the focus returning to its strong fundamentals.
· This theme played out during the first half as INM outperformed the
sector, rising by 10.8% in the first four months. During May, the
stock sold off along with the sector but has failed to recover since then.
We attribute this underperformance directly to the source of the
market's concerns relating to the national sovereignty of peripheral
eurozone countries, one of which is Ireland (INM's key market).
· INM remains our top pick within the sector for 2011. While we
· INM remains our top pick within
the sector for 2011 acknowledge that the valuation is overly cheap, a catalyst may be
required for value to be recognised.
59 Davy Research
Research Report: Davy on 2011 January 4, 2011
60
60 Davy Research
Research Report: Davy on 2011 January 4, 2011
TELEVISION
UTV Media (Stg) (UTV LN) 137 151 91 153 -1.0 0.2 44.0 1.3 -5.1 29.3 0.93 2.7 2.2
ITV (ITV LN) 70 74 48 3174 -3.8 2.2 38.1 -1.6 -3.2 24.0 5.53 0.7 0.3
Media (4) 379 391 265 18414 -2.6 -0.1 35.9 -0.4 -5.4 22.0 13.41 1.1 0.7
FTSE E300 Media & Ent. (E3MEDA) 663 678 556 -2.2 5.6 11.4
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
Independent News & Media (INM ID) 9 12 15 64.3 0.0 0.0 N/A 6.6 5.6 5.2 5.6 4.1 3.4
UK Sector
Daily Mail (DMGT LN) 46 52 56 20.9 2.8 3.0 2.9 8.3 7.5 6.6 12.4 11.0 10.3
Johnston Press (JPR LN) 4 5 6 48.6 0.0 0.0 N/A 4.8 4.4 3.9 2.9 2.2 1.9
Trinity Mirror (TNI LN) 26 27 26 0.3 0.0 0.0 N/A 2.9 2.5 2.1 2.6 2.6 2.6
UK newspapers (5) 3.6 3.8 2.4 7.6 7.1 6.3 12.2 11.4 10.6
European Sector
Schibsted (SCH NO) 974 1131 1329 36.5 2.0 2.4 2.8 9.2 7.7 6.5 17.7 15.2 12.9
Springer (Axel) AG (SPR GY) 926 974 1022 10.4 3.7 3.8 2.1 7.6 6.6 6.0 13.2 12.6 12.0
European newspapers (11) 2.9 3.2 2.4 8.2 7.3 6.4 14.6 13.3 12.2
Global Sector
APN News & Media (APN AU) 18 20 22 22.2 5.5 7.0 1.7 7.3 6.5 5.9 10.9 9.6 8.9
Gannett Company (GCI US) 242 227 255 5.4 1.1 1.1 15.1 4.4 4.1 3.3 6.2 6.7 5.9
Naspers (NPN SJ) 1804 2304 2864 58.8 0.8 1.0 6.0 20.3 16.5 13.8 21.3 16.7 13.4
West Australian Newspapers (WAN AU) 45 50 55 21.8 7.0 7.3 1.0 9.9 8.9 8.0 14.3 12.9 11.7
Global newspapers (23) 2.2 2.5 3.4 8.3 7.7 7.0 14.9 13.5 11.9
TELEVISION
UTV Media (Stg) (UTV LN) 16 17 18 14.9 0.0 0.0 N/A 7.7 7.0 6.0 8.8 8.3 7.6
ITV (ITV LN) 5 6 7 24.3 0.0 1.5 N/A 7.1 6.2 5.5 13.1 11.4 10.5
Media (4) 2.6 2.6 2.3 10.6 9.0 7.8 20.4 16.6 14.1
61 Davy Research
Research Report: Davy on 2011 January 4, 2011
Caren Crowley
caren.crowley@davy.ie
Support services
Sector performance in 2010 and outlook for 2011
Joshua Goldman
joshua.goldman@davy.ie
· Support services' companies exposed to under-pressure government
budgets (for example Serco and Capita) were hit by the outlook for
subdued public spending. We expect this theme will continue to carry
weight in 2011.
· While government spending is a significant theme for the support
services' group, it should be contextualised when looking at the year
ahead for DCC. Support services activities account for only 14% of
group profits. Furthermore, while DCC has some exposure to
government budgets, its crucial markets are commercial and industrial
users. As such, business confidence surveys and Purchasing Managers
Indices are important indicators of demand for DCC's services and
products.
· A key theme in 2011 will be how much industry takes up the baton
from government in spurring economic growth.
64
63 Davy Research
Research Report: Davy on 2011 January 4, 2011
SECURITY
Securitas (SECUB SS) 7865 7940 6735 3202 1.5 7.2 28.3 3.4 0.4 8.0 2.94 1.8 1.5
Group 4 Securicor (GFS LN) 255 284 238 4184 -1.9 4.1 0.8 0.0 -2.5 -15.1 2.34 2.1 1.7
Security (2) 933 968 845 7387 -0.4 5.4 11.0 1.4 -1.3 -6.6 2.56 2.0 1.6
Unite Group (UTG LN) 194 308 163 362 -1.5 0.8 -33.1 0.3 -5.6 -43.7 0.66 14.8 16.3
RECRUITMENT
CPL Resources (CPL ID) 253 278 210 94 0.0 5.4 24.0 1.9 -1.3 4.4 1.39 -6.0 -6.0
Adecco (ADEN VX) 6125 6615 4622 9273 -2.5 11.7 27.2 -0.7 4.7 7.1 2.77 1.0 0.4
Brunel Int. (BRNL NA) 2949 2963 1946 684 2.4 19.4 25.8 4.3 11.8 5.9 3.54 -1.9 -1.5
Harvey Nash (HVN LN) 56 56 32 47 -1.9 0.9 66.1 -0.1 -5.5 39.8 1.08 -0.1 -0.6
Hays (HAS LN) 129 132 88 2079 -1.6 15.8 27.8 0.2 8.5 7.6 13.40 0.8 1.0
Kelly Services (KELYA US) 1880 1998 1032 515 -6.0 2.1 68.6 -4.3 -4.4 41.9 1.23 N/A N/A
Manpower (MAN US) 6276 6514 4058 3824 -4.3 8.1 23.0 -2.5 1.3 3.5 1.92 0.1 -0.1
Michael Page (MPI LN) 555 566 346 1982 -0.5 13.2 51.2 1.4 6.1 27.3 10.43 -0.9 -1.0
Randstad (RAND NA) 3950 4141 2801 6717 2.3 12.0 13.2 4.3 4.9 -4.7 2.48 1.5 0.9
Robert Half (RHI US) 3060 3216 2157 3363 -3.0 7.1 22.5 -1.2 0.3 3.1 5.18 -2.0 -2.0
Recruitment (10) 707 723 513 28578 -1.5 11.1 24.4 0.4 4.0 4.7 2.92 0.6 0.2
PLANT/EQUIPMENT HIRE
Siteserv plc (SSV ID) 5 10 4 6 0.0 -16.7 -23.1 1.9 -21.9 -35.3 0.97 9.0 7.5
Ashtead (AHT LN) 173 177 77 1014 1.7 28.4 119.8 3.6 20.3 85.0 1.76 2.9 2.7
Cape (CIU LN) 415 415 191 564 2.5 12.5 88.5 4.4 5.4 58.6 1.58 0.7 0.3
H&E Equip. Services (HEES US) 1157 1251 678 303 -4.8 12.8 17.9 -3.0 5.7 -0.8 1.65 3.1 1.7
Lavendon Group (LVD LN) 116 120 44 222 -1.7 42.5 70.7 0.2 33.5 43.7 1.07 2.0 1.4
Ramirent (RMR1V FH) 985 996 624 1071 1.7 12.4 44.0 3.6 5.3 21.2 3.49 1.4 0.9
Speedy Hire (SDY LN) 28 36 19 170 -2.7 -2.8 7.0 -0.9 -8.9 -9.9 0.61 1.9 1.6
Plant/equipment hire (7) 1361 1374 812 3350 0.7 17.6 63.0 2.6 10.1 37.2 1.75 2.3 1.9
FTSE E300 Support Services (E3SUPP) 485 494 393 -1.9 6.8 18.8
65 Davy Research
Research Report: Davy on 2011 January 4, 2011
VALUATION
EPS (c) EPS Gth % Div Yield % Div Cover EV/EBITDA P/E
2010 2011 2012 10-12 2010 2011 2010 2010 2011 2012 2010 2011 2012
DCC (DCC ID) 192 201 207 8.1 3.0 3.2 2.7 7.7 7.1 6.6 12.3 11.7 11.4
Energy
Brenntag AG (BNR GY) 408 540 597 46.3 2.0 2.6 2.7 9.1 8.1 7.5 18.7 14.1 12.8
Buckeye Partners (BPL US) 339 362 400 17.9 5.8 6.1 0.9 13.3 10.8 9.9 19.7 18.5 16.7
Rubis (RUI FP) 479 556 629 31.1 3.5 3.7 1.6 10.9 8.6 7.4 18.2 15.7 13.9
Healthcare
United Drug (UDG ID) 23 23 24 7.3 0.3 0.3 0.3 6.8 6.2 5.7 9.2 9.1 8.6
Invacare (IVC US) 181 200 212 16.9 0.2 0.0 36.2 N/A N/A N/A 16.7 15.1 14.3
Euromedis (EMG FP) 47 55 63 34.0 1.1 1.4 9.2 6.1 5.6 5.3 9.5 8.1 7.1
Computer Distribution
Ingram Micro Inc. (IM US) 198 233 291 47.0 0.0 0.0 N/A 4.9 4.7 4.0 9.6 8.2 6.6
Northamber (NAR LN) N/A N/A N/A N/A 0.0 0.0 N/A N/A N/A N/A N/A N/A N/A
Tech Data Inc (TECD US) 416 469 530 27.4 0.0 0.0 N/A 4.5 3.7 2.8 10.6 9.4 8.3
Support Services
Bunzl (BNZL LN) 59 63 68 15.4 3.2 3.4 2.6 9.2 8.5 7.6 12.2 11.4 10.6
SECURITY
Securitas (SECUB SS) 610 649 707 15.8 3.9 4.2 2.0 8.0 7.4 6.8 12.9 12.1 11.1
Group 4 Securicor (GFS LN) 21 23 25 18.4 3.0 3.2 2.8 7.5 6.9 6.4 12.1 11.2 10.2
Security (2) 3.4 3.6 2.4 7.7 7.1 6.5 12.4 11.6 10.6
Unite Group (UTG LN) -2 1 3 N/A 0.0 0.0 N/A 25.5 26.3 31.0 N/A N/A 55.9
RECRUITMENT
CPL Resources (CPL ID) 19 21 26 36.8 1.6 1.7 4.8 6.3 4.9 3.4 13.2 11.8 9.6
Adecco (ADEN VX) 286 371 465 62.6 1.4 2.0 3.4 12.4 9.4 7.2 21.4 16.5 13.2
Brunel Int. (BRNL NA) 111 161 231 107.7 2.6 2.9 1.5 14.6 10.3 7.6 26.6 18.3 12.8
Harvey Nash (HVN LN) 5 7 8 59.1 4.4 4.9 2.1 5.7 3.7 N/A 10.9 7.6 6.9
Hays (HAS LN) 3 5 7 126.2 4.5 4.5 0.6 19.6 14.4 10.4 40.2 26.7 17.8
Kelly Services (KELYA US) 73 128 187 157.9 0.0 0.0 N/A 8.1 6.1 N/A 25.9 14.7 10.1
Manpower (MAN US) 167 275 396 137.7 1.2 1.2 2.3 11.8 8.9 7.3 37.7 22.8 15.8
Michael Page (MPI LN) 15 23 33 120.7 1.4 1.5 1.9 19.1 12.8 8.9 37.0 24.3 16.8
Randstad (RAND NA) 195 259 323 65.3 3.0 3.2 1.7 12.7 9.5 7.4 20.2 15.3 12.2
Robert Half (RHI US) 44 44 44 246.6 1.7 1.7 0.8 24.4 24.4 24.4 69.5 69.5 69.5
Recruitment (10) 2.0 2.3 1.9 13.6 10.0 7.7 26.5 18.8 14.2
PLANT/EQUIPMENT HIRE
Siteserv plc (SSV ID) 1 2 4 N/A 0.0 0.0 N/A 9.4 7.8 7.0 9.4 2.2 1.4
Ashtead (AHT LN) 3 5 10 252.7 1.7 1.8 0.9 6.0 5.5 4.9 62.9 33.1 17.8
Cape (CIU LN) 40 44 47 16.4 2.9 3.2 3.4 5.8 5.2 4.9 10.2 9.5 8.8
H&E Equip. Services (HEES US) -83 7 76 N/A 0.0 0.0 N/A 8.6 4.8 3.9 N/A N/A 15.3
Lavendon Group (LVD LN) 6 9 11 89.8 0.9 1.0 5.9 4.7 4.0 3.6 19.6 12.7 10.3
Ramirent (RMR1V FH) 13 37 58 351.4 2.0 2.5 0.6 9.9 7.6 6.3 76.3 26.5 16.9
Speedy Hire (SDY LN) 0 1 3 N/A 1.4 1.4 0.5 4.0 3.5 3.1 N/A 21.4 9.2
Plant/equipment hire (7) 2.0 2.2 1.6 6.5 5.5 4.8 31.0 20.9 13.5
66
66 Davy Research
Research Report: Davy on 2011 January 4, 2011
Job Langbroek
job.langbroek@davy.ie
Resources
Caren Crowley
Sector performance in 2010
caren.crowley@davy.ie
· One of the key themes of the past year has been the strength of prices
for most hard commodities. This robustness is surprising given the
challenging macroeconomic climate. Some of this strength relates to
inflows from investment funds and currency movements, but demand
· One of the key themes of the past from emerging economies and supply-side problems also helped to
year has been the strength of
prices for most hard commodities underpin prices.
· Against the broad strength of commodity prices, there were
contrasting performances among related indices. The FTSE E300 Oil
and Gas Producers Index underperformed the market and was down
7.9% by end-November. The FTSE E300 Mining Index, on the other
hand, outperformed and was up 21% over the same period.
· Clean-up costs from BP's Macondo well in the Gulf of Mexico were
· Clean-up costs from BP's Macondo
well in the Gulf of Mexico were
probably the key drag on the performance of oil and gas indices, of
probably the key drag on the which BP is a key constituent. However, it could also be that the
performance of oil and gas indices market has decided that the long-term repercussions of this incident
are negative for the sector. Long-term implications include higher
insurance costs, stronger regulation, slower and perhaps curtailed
permitting, etc.
· In the mining sector, an interesting development is the increased
concern regarding the availability of rare earth metals and other
strategic industrial metals. This reflects the 'politicisation' of some
sources of supply by dominant suppliers such as China, which is
following a policy of restricting output in order to preserve scarce
resources.
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COMPANY PERFORMANCES
Price 52 Week No of Market Avg Daily Price performance % (local) Quote Sector
High Low Shares(m) Cap (€m)Volume(m) 1 wk 1 mth 3 mth YTD 12 mth
Tullow Oil (USc) (TLW LN) 1967.0 2239 1453 888.0 13046.1 1.890 -0.1 9.5 -2.4 -6.8 -6.8 ISE/LSE Oil and Gas
Cairn Energy (CNE LN) 420.0 493 318 1399.5 6848.2 5.323 0.2 8.7 -7.4 26.3 26.3 London SE Oil and gas
Dragon Oil (USc) (DGO ID) 838.1 838 553 511.5 3201.5 0.607 5.5 23.1 20.5 34.2 34.2 ISE/LSE Oil and Gas
Premier Oil (PMO LN) 1950.0 1980 1017 116.4 2644.4 0.313 0.1 6.2 17.9 76.5 76.5 London SE Oil and Gas
Heritage Oil (HOIL LN) 448.7 455 288 284.9 1489.2 0.967 -1.3 20.9 51.2 32.3 32.3 London SE Oil and Gas
Soco Int'l (SIA LN) 369.6 484 292 340.3 1465.4 0.918 3.4 10.8 -14.1 10.3 10.3 London SE Oil and Gas
Bowleven (BLVN LN) 379.0 390 90 215.5 951.4 2.232 1.1 17.1 111.1 319.9 319.9 AIM Oil and Gas
Kenmare (USc) (KMR ID) 48.2 51 14 2403.6 865.3 5.157 16.7 27.7 49.3 74.0 74.0 ISE/LSE Mining
Cove Energy (COV LN) 96.5 110 22 490.8 551.8 2.171 -1.5 -4.5 35.0 348.8 348.8 IEX/AIM Mining
Petroneft (USc) (PTR LN) 110.0 112 31 411.6 338.0 1.915 6.6 7.8 53.6 244.4 244.4 IEX/AIM Oil and Gas
Petroceltic (PCI LN) 13.0 17 8 2001.7 303.2 5.740 6.1 2.0 18.2 -13.3 -13.3 IEX/AIM Oil and Gas
Circle Oil (COP LN) 34.8 40 30 563.4 228.1 1.469 -0.7 0.0 -2.1 16.8 16.8 AIM Oil and Gas
Providence Resources (PRP ID) 300.0 470 180 33.7 101.1 0.046 5.3 7.1 50.0 -28.6 -28.6 IEX/AIM Oil and Gas
Regal Petroleum (RPT LN) 25.8 92 12 318.4 95.5 8.081 -1.9 63.5 39.2 -67.8 -67.8 AIM Oil and Gas
Mwana Africa (MWA LN) 10.5 15 7 532.5 65.1 1.199 2.4 14.8 -23.6 -16.0 -16.0 AIM Mining
Titanium Resources Group (TXR LN) 10.3 14 6 385.9 46.1 0.797 6.5 -8.9 36.7 18.8 18.8 AIM Mining
Aminex (AEX ID) 10.0 19 8 454.0 45.4 2.245 0.0 -4.8 11.1 -4.8 -4.8 ISE/LSE Oil and Gas
Ovoca Gold (OVG ID) 45.0 48 16 88.5 39.8 0.175 -2.2 9.8 60.7 125.0 125.0 IEX/AIM Mining
Ormonde Mining (ORM ID) 11.0 11 4 294.8 32.4 0.862 57.1 57.1 56.5 83.3 83.3 IEX/AIM Mining
Petrel (PET LN) 28.0 34 18 76.7 25.0 0.114 24.4 41.8 16.7 3.7 3.7 AIM Oil and Gas
Minco (MIO LN) 6.3 6 2 315.4 23.0 1.436 35.1 35.1 72.4 163.2 163.2 AIM Mining
Conroy Diamonds & Gold Plc (CDG LN) 6.0 12 4 230.5 16.1 0.764 2.1 -5.9 -41.5 41.2 41.2 IEX/AIM Mining
Seaenergy (SEA LN) 23.5 71 17 53.0 14.5 0.497 9.3 -3.1 4.4 -55.2 -55.2 AIM Oil and Gas
Lansdowne Oil & Gas (LOGP LN) 13.8 15 4 53.7 8.6 0.098 0.0 44.7 66.7 168.3 168.3 AIM Oil and Gas
Karelian Diamond Resources (KDR LN) 4.3 4 1 60.5 3.0 0.196 0.0 6.3 79.0 30.8 30.8 IEX/AIM Mining
Aluminum $/mt 2460.8 2461 1835 2.4 9.1 6.0 26.1 12.0 12.0 63.2 4.4 -16.7 -36.1 45.7
Copper USc/lb 444.7 445 277 4.4 16.3 21.8 50.7 32.9 32.9 215.4 45.7 13.2 -53.8 137.3
Gold $/t oz 1418.8 1424 1053 2.5 2.4 8.4 14.3 29.1 29.1 61.3 70.1 31.0 5.5 24.9
Nickel $/mt 24708.0 27227 16976 2.6 7.4 5.6 25.6 33.9 33.9 112.8 -5.0 -23.6 -55.4 59.0
Cheddar Cheese Barrel $/lb 1.3 2 1 -1.1 -9.2 -22.8 -4.1 -6.3 -6.3 18.6 -32.3 53.5 -42.9 26.6
Coffee "C" USc/lb 240.5 241 129 2.0 19.5 31.4 45.0 76.9 76.9 114.6 63.7 N/A -23.8 21.3
Corn $/bu 629.0 629 336 2.4 15.6 26.9 68.4 51.8 51.8 54.6 32.8 31.4 -14.0 1.8
Soybean USc/bu 1403.0 1403 895 3.2 12.9 26.8 55.5 33.8 33.8 43.2 24.4 N/A -13.1 7.0
Wheat USc/bu 794.3 815 428 1.4 15.0 17.8 65.4 46.7 46.7 30.1 0.8 59.5 -22.5 -11.3
EU ETS €/mt 13.9 16 12 0.0 -6.1 -10.4 -10.4 3.3 3.3 -12.3 -37.9 23.2 -29.2 -15.1
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Research Report: Davy on 2011 January 4, 2011
Caren Crowley
caren.crowley@davy.ie
Energy and environment
Sector performance in 2010
Aiden O'Donnell
aiden.odonnell@davy.ie
· It was a very tough year for companies operating in the renewable
energy space. This is best demonstrated by the poor reception given to
· 2010 was a very tough year for the initial public offering (IPO) of Enel Green Power, the renewable
companies operating in the energy subsidiary of Italian utility Enel. A lack of investor appetite for
renewable energy space
the sector is further reflected in the performance of the Wilderhill New
Energy Global Innovation Index, or NEX, which fell 14.6% in 2010.
The NEX tracks the performance of 87 clean energy stocks worldwide.
· A tough market for project finance; · Reasons behind the sector's poor performance include a tough market
low prices for competing sources of for project finance; low prices for competing sources of energy,
energy; and unstable or slow
particularly gas; and unstable or slow regulation, specifically in Spain
regulation contributed to the
sector's poor performance and the US.
· Within the waste management sector, a recovery in recyclate prices
provided some relief but critically decent volume growth remained
difficult to come by.
· There was M&A around the edges of the waste management sector in
2010. Private equity was the biggest spender and valuations were
roughly 8x current year EBITDA. Transactions tended to be for
companies that have long-term contracts with municipalities or local
authorities. These contracts provide a high degree of revenue
protection.
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Important disclosures
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his or her personal views about any or all of the subject securities or issuers referred to in this report and (2) no part of his or her compensation was, is or will be,
directly or indirectly related to the specific recommendations or views expressed in this report.
This is a summary of Davy ratings for all companies under research coverage, including those companies under coverage to which Davy has provided material
investment banking services in the previous 12 months. This summary is updated on a quarterly basis. The term 'material investment banking services' includes
Davy acting as broker as well as the provision of corporate finance services, such as underwriting and managing or advising on a public offer.
76 Davy Research
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Davy acts as stockbroker to Abbey; AGI Therapeutics; Aminex; ARYZTA; Bank of Ireland; Blackrock International Land; Boundary Capital; C&C; China Real Estate
Opportunities; PL; CRH; DCC; Dragon Oil; Elan Corporation; Fyffes; Glanbia; ICON; IFG Group; Independent News & Media; Irish Life & Permanent; Kenmare
Resources; Kerry Group; Minco; Norish; NTR; Ormonde Mining; Ovoca Resources; Petroceltic; Petroneft; Prime Active Capital; Providence; Readymix; Ryanair;
Siteserv; Smurfit Kappa Group; Total Produce; Tullow Oil; TVC Holdings and United Drug.
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77 Davy Research