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Morning Wrap
Today’s Newsflow
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Economic View Stunning SYRIZA victory to bring things to
a head
Kingspan Confirms advanced talks with Joris Ide Group
over potential bolt-on acquisition
CRH Press speculation that CRH has teamed up with KKR
for Holcim Lafarge bid
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26 Jan 2015
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Goodbody Morning Wrap
Economic View Stunning SYRIZA victory to bring things to a head
Yesterday’s Election in Greece, where the anti-austerity party Syriza won 36% of the vote,
will have implications well beyond that country. While Syriza will fall two seats short of an
overall majority, it is highly likely that Alexis Tsipras will be sworn in as Prime Minister of a
coalition government over the coming days. Laying out his stall in his victory speech last
night, Tsipras stated that the “mandate of the Greek people today cancels, in an indisputable
way, the memorandums”. He added that it makes “the Troika a thing of the past”.
While one would expect these types of comments given the campaign platform of the party,
the gauntlet has been clearly put down to the EU, IMF and ECB. Significantly, Tsipras has a
much stronger hand to play than his predecessor in 2012. This time around, Greece is
running a primary surplus (expected to be 4% of GDP this year), while the majority (80%) of
Greek debt is now held by official creditors.
The coming weeks will thus be about who plays their hand best around the negotiating table.
The new Greek government knows it has the mandate from its people to renegotiate its
bailout programme, including its large debt burden. European leaders do not want a return of
the uncertainty of 2012 and also know that it must be careful not to set a precedent for
other countries who may also seeking some form of debt relief from Europe (Spain and
Ireland most prominently). The ECB has already said that it will not play any part in a Greek
debt restructuring.
The middle ground for both sides appears to be some form of restructuring of the
official loans, by way of extension, interest holidays or interest rate reductions. In
some ways, bringing these issues to a head in Greece could be a positive
development, as Greek debt, at 170% of GDP is clearly unsustainable. It may be a
volatile few weeks though before we get to that position.
Home…
Page 2
26 Jan. 15
Dermot O’Leary
+353-1-641 9167
dermot.c.oleary@goodbody.ie
Goodbody Morning Wrap
Kingspan Confirms advanced talks with Joris Ide Group over potential bolt-on acquisition
Following media speculation over the weekend Kingspan has this morning confirmed that it is
Recommendation: Buy
in negotiations to acquire Joris Ide Group. This is a business headquartered in Belgium and is
Closing Price: €15.40
a leading manufacturer of steel profiles and insulated panels. In addition to a strong position
in its home market of Belgium the business also has significant market positions in France
and Eastern Europe.
Robert Eason
+353-1-641 9271
robert.v.eason@goodbody.ie
Kingspan has given no financial details but according to a Mergermarket's article the
business has EBITDA of €36-37m. While we can't confirm these figures, we estimate that the
proforma net debt to EBITDA based on 2015 forecasts would be circa 2x (including Vicwest
which is to be acquired for circa €110m subject to competition clearance ), which is a
comfortable level of leverage.
Strategically the acquisition would complement Kingspan's existing mainland
European insulated panel business which now has estimated sales of €500m
following the Thyssenkrupp acquisition in 2012. It is this ability to utilise one of
the strongest balance sheets in the building materials sector coupled with
continued increases in penetration rates in end markets that underpins our positive
stance on the stock.
Home…
CRH Press speculation that CRH has teamed up with KKR for Holcim Lafarge bid
Press speculation over the weekend reported that CRH have teamed up with KKR, an
American private equity firm, in its bid for €6bn worth of Holcim Lafarge assets. The report
Recommendation: Buy
Closing Price: €22.35
suggests, CRH has held discussions with KKR about an agreement for the private equity firm
to take control of some divisions to assuage regulator concerns in the event of a successful
bid. It is reported that KKR are particularly interested in the UK assets, which ties in with our
view that these do not appeal to CRH.
Our working assumption is that CRH will not increase leverage above net
debt/EBITDA of 2.5x, with a potential equity placing beyond this level. Based on a
purchase multiple of 8-10x, we calculate that the level of earnings accretion would
be between 10-20% before any synergies.
Home…
Page 3
26 Jan. 15
Robert Eason
+353-1-641 9271
robert.v.eason@goodbody.ie
Goodbody Morning Wrap
Market Data
Top 10 Covered Companies
Company
AIB Group
Price
Mkt Cap
(LC)
(LCM)
1 Day
Absolute
1 Week
Relative to European Sector
1 Mth
P/E
Ytd
1 Day
1 Week
1 Mth
Ytd
2015f
2016f
0.08
42,404
2.5
8.0
1.3
2.5
0.8
2.8
-5.9
-5.2
45.0
54.4
CRH
22.35
16,552
3.8
12.7
12.5
12.3
2.0
7.2
4.5
3.9
22.9
18.6
Ryanair
10.34
14,305
2.2
7.2
6.2
5.5
0.4
2.0
-1.4
-2.5
16.8
13.8
Wolseley
39.99
10,659
1.4
10.1
7.7
8.5
-0.4
4.8
0.1
0.3
17.7
15.2
5.36
9,945
2.1
9.1
13.1
10.3
0.4
3.8
5.1
2.0
n/m
n/a
65.19
11,460
4.3
5.4
10.2
14.2
2.5
0.3
2.4
5.6
21.8
19.6
IAG
Kerry Group
Bank of Ireland
0.29
9,391
-5.2
-4.6
-8.8
-7.3
-6.8
-9.2
-15.3
-14.3
11.6
10.5
easyJet
17.35
6,819
1.5
8.4
4.0
3.8
-0.3
3.2
-3.4
-4.0
12.8
12.1
Mondi
11.50
5,584
1.1
8.2
7.6
9.5
-0.7
2.9
-0.1
1.3
13.9
13.1
Lufthansa
14.90
6,896
-1.7
4.6
7.5
7.7
-3.4
-0.5
-0.1
-0.4
10.8
8.8
ISEQ performance
Indices
Price
1 Day
1 Week
1 Mth
Ytd
5,600
ISEQ
%
5,577.82
2.12
5.56
6.69
6.76
5,400
FTSE 100
6,832.83
0.53
4.31
3.56
4.06
DAX 30
10,649.58
2.05
4.74
7.33
8.61
CAC 40
4,640.69
1.93
5.96
7.55
8.61
FTSE Eurofirst 300
1,479.51
1.80
5.14
7.62
8.11
Nasdaq
4,757.88
0.16
2.66
-0.16
0.46
S&P 500
2,051.82
-0.55
1.60
-1.46
-0.34
4,400
Dow Jones
17,672.60
-0.79
0.92
-1.95
-0.84
Nikkei 225
17,511.75
1.05
3.84
-0.70
0.35
4,200
Jan-14
Px 1 day Px 1 Week
5,200
5,000
4,800
4,600
Apr-14
Jul-14
Oct-14
Jan-15
Oct-14
Jan-15
Oct-14
Jan-15
Exchange Rates
Px Dec14
Avg Ytd
Stg/€
Current
0.749
0.757
0.761
0.776
0.772
US$/€
1.125
1.142
1.150
1.210
1.173
CHF/€
JPY/€
STOXX 600 performance
0.987
0.994
0.981
1.202
1.121
380
132.547
134.623
135.245
145.079
138.961
370
360
Bonds
350
Yield
1 Day
Yld 1 Wk
Yld 1 Mth
Yld 3 Mth
US 2 Yr
0.49
-0.03
0.49
-0.26
0.10
US 10 Yr
1.79
-0.07
-0.05
-0.47
-0.48
UK 2 Yr
0.32
-0.02
-0.07
-0.13
-0.27
UK 10 Yr
1.48
-0.04
-0.06
-0.37
-0.76
BD 2 Yr
340
330
320
310
Jan-14
-0.17
0.01
-0.01
-0.17
-0.12
BD 10 Yr
0.32
-0.07
-0.09
0.32
-0.54
Irish 10 Yr
0.90
-0.07
-0.14
-0.36
-0.93
Current
1 day
5 day
1 Mth
1 Yr
48.79
0.56
-2.75
-20.91
-54.65
Gasoline (NYM $/Gal)
1.35
1.28
-0.80
-14.17
-49.36
Heat Oil (NYM $/Gal)
1.62
0.66
-2.67
-16.94
-45.80
16,000
15,500
Commodities
%
Brent (ICE $/bbl)
Nat.Gas
Gold $/oz
Silver $/ozt
Copper U$/MT
Wheat $/BU
Source : FactSet
Page 4
26 Jan. 15
Apr-14
Jul-14
FTSE 250 performance
2.99
5.33
-4.51
-5.83
-36.87
1,294.75
-0.08
1.35
10.12
2.51
18.23
0.83
7.74
16.04
-9.35
5,581.00
-2.80
-1.40
-12.29
-23.39
5.30
-0.70
-0.52
-16.60
-7.02
17,000
16,500
15,000
14,500
14,000
Jan-14
Apr-14
Jul-14
Goodbody Morning Wrap
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Page 5
26 Jan. 15
Goodbody Morning Wrap
Other disclosures
We would like to inform you that Robert Eason holds shares in Kingspan
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26 Jan. 15