Markets Live: Monday, 18th February, 2013 This is the transcript of the Markets Live session ending at 12:03 on 18 Feb 2013. Obvious portrait for today Actually I have another portait for today It's not a person, but its about a mystery person Sorry, don't know why that is upside down! That's from Ian Gordon at Investec Regular readers will remember his note from last week, when he booked a few Barc profits Prematurely in our view Each Saturday, when I take my daughters to their ballet classes, I marvel at the sign at reception which simply reads "Thank you.....for introducing us to Barclays." What other bank is held in such high esteem by the British public? The shares have returned 119% since July 2012 lows. On 0.4x tNAV, one did not need to believe that RotE would reach 13% by 2015 to own them, but we now see the risk/reward as more balanced. Barclays remains (by far) our preferred UK domestic bank, but we take a breather. Downgrade to Hold. So where's the ballet class. KNew you were going to ask taht Lanterns School of The Performing Arts in East London What's the market doing Bryce? Volume's about 60% of what it should be, even for a Monday. FTSE off 12 points at 6315 We should also keep an eye on credit Italian elections coming up And there's a sense that the Spanish jitters are back ES 10 yr widened to 5.33 this mornign probably worth keeping an eye on this Lots more Spanish paper coming this week. 2yr, 6yr and 10yr paper Nobby you are right on Cyprus - we ahve looked at it, but not for a little while Vix is at its lowest in a yonk. It won't take much to upset this. Man mentioned on the right. Man Group PLC (EMG:LSE): Last: 111.00, up 3.4 (+3.16%), High: 112.00, Low: 108.00, Volume: 3.14mBlock And via Sam Jones, we have an update on GLG's reverse takeover of Man. A glacially slow-motion reverse takeover by Manny Roman. Executed at a premium of about minus 50 per cent to when he first joined. Yes, Tony Tassell just dropped by suggesting we should rename it Manny Group Because what a quant box needs is more people to manage it. As for who's coming in and/or getting promoted .... There's Luke Ellis, from GLG Sanday Rattray, from GLG Mark Jones, from GLG Simon White, from GLG hehehe i get the picture Oh, and Merrill's stepped up to try and explain the recent rally in Man shares. Up something like 30% in a couple of weeks. And up again this morning Had heard Manny has been out seeing anyone and everyone, selling his vision of a glorious GLG-driven future So here's what Merrill make of it. Man has bounced very sharply of late. We think there are three potential explanations for this. Normalisation. Our view is that Man's "normalised" earnings power is well ahead of its current run rate, and that if it shows any signs of returning to this sort of level, it is extremely cheap. If current financial conditions represent normalisation elsewhere (as we think they do), then this happy day could be approaching. Historically, Man has responded as AHL has approached performance fee territory. We show a chart of AHL later in this note, but in summary, the strategy has performed strongly this year (up around 3.7% judged by the daily fund the company reports), and is around 9% below performance fee territory. Restructuring. There is also, apparently, a theory that the company's new CEO, Manny Roman, will "do something" at the company's FY 12 results. Broadly, we believe the first two arguments. The first is what lies behind our buy case on Man. We don't really believe the third, as it is in our view hard to see what exactly the company could do that it is not already doing. Which is a fair point on the restructuring. Rejigging the board all seems rather small beer. AHL is bound to rebound now that Peter Clarke has gone. Dead cert. Just how things happen 9% to performance fee territory... You toss a coin a hundred times, you'll win 50% of the time. AHL's averaging less than a 50% win rate. Mean reversion is a powerful argument. Perhaps the only argument, actually. We should mark the rise in ITV Unspecified bid chatter Top of the leader board tho - up 3% at 120.7 Maybe come true one day Yeah, it might, and it's cashed up and under leveraged and all that stuff. Plus it still has a bit of faded glamour to attract a suit, like EMI when that was bought. ITV PLC (ITV:LSE): Last: 120.60, up 3.6 (+3.08%), High: 120.76, Low: 117.30, Volume: 7.46mBlock Big deal in this market though. I know we've seen big deals lately, but ...... Frankly, I'd be keener to pin the rally on media buyer feedback. With the bid speculation strictly -grade. Here's Merrill (again) in its results preview. Latest media-buyer forecasts suggest that ITV family net advertising revenues (NAR) will be up 10% in January, 6% in February and 8-14% in March. The strong growth in January February has been widely reported and partly reflects the (recently resolved) dispute between Channel 4 and Group M, with some temporary reallocation to ITV1. We believe March is much stronger than previously expected, partly reflecting the timing of Easter and a pull-forward of spend from April (expected to be down 1%). As well as timing Channel 4 benefits, we believe the underlying market is also stronger than expected, given Retail resilience, increased Government spend, and Telco / Pay TV competition. These estimates would suggest ITV family NAR of c6-7% for the first four months of the year, and we raise our FY forecast from -1% to +1%, assuming June will be down double digits without Euro 2012, and the remainder of the year slightly positive. Higher ad growth results in a 7% upgrade to 2013 FD EPS (to 9.9p, 5% above consensus). ITV will report FY results on February 27th and we expect group revenues of £2208m (+3%), based on flat ITV family NAR and 11% growth in ITV Studios (which was boosted by the inclusion of Daybreak). We forecast EBITA of £512m (23% margin) and FD EPS of 8.68p. ITV could also announce a buy-back, given its strong balance sheet; however, we would expect this to limited by ITV's pension deficit / contributions and desire to maintain flexibility to pursue further content acquisitions. ITV trades on 11.8x 2013 EPS, or 12.4x adjusting for the pension deficit. We maintain our Neutral rating and raise our PO to 125p (vs. 117p). Right - where are we? Can you turn the volume down on that conversation going on between James Mac and Robin Wirigglesworth? I can't hear myself think If either of them had an off switch, I'd have triggered it months ago, And ive got a bloody headache Ditto. Didn't earlier. to be fair it's not James, its Robin Anyway, that's enough of our issues. Bumi? Bumi PLC (BUMI:LSE): Last: 388.70, up 11.4 (+3.02%), High: 398.92, Low: 376.86, Volume: 321.93kBlock Ive just completely lot track of the story was trying to help me earlier @taxloss: normalised earnings, poppet. e Panel Executive does not consider the Purchasers to be acting in concert with any of the Recapital Group, the Bakrie Group or Borneo nor with persons acting in concert with Recapital Group, the Bakrie Group or Borneo; Yes, I think that's the best strategy. Read the Bumi stuff yourself. We're not paid enough to make sense of it. Quicker this comes to a head the better Investegate broken for me earlier Which caused me to go to RNS at the LSE. How do you navigate that? Got crap like this on also, cluttering the place up Hon Hai Precision Industry Co Ld Subject: Explain media reporting Contents: 1.Name of the reporting media: CNYES 2.Date of the report:2013/02/18 3.Content of the report: 3.1 Hon Hai aims for 15% YoY revenue growth this year. 3.2 Hon Hai's 2013 revenue is expected to see more than 4.5 trillion. 4.Company's explanation of the reportage or provided information: The company has not been forecast any Consolidated revenue, which has to follow the regulation and all the official financial report should be released at M.O.P.S. Google points me in the direction of various cleaning services Oh, this is Foxconn! Hon Hai is the listed Taiwanese parent Can i just mention this quickly also Nomura - Alternative beta I havent had a chance to read this But its a detailed discussion on how fund management might change As all the active benchmark tracking managers die Quick trip to Europe Restructuring and special divi Natixis. They phone up and complain if we spell it wrong. Stock is up 27% on news Nitaxis. What's the story? PARIS, Feb 17 (Reuters) - French bank Natixis said on Sunday it would simplify its finances by shedding a 20 percent stake in BPCE, a network of cooperative lenders which controls it, paving the way for higher dividends in the future. Natixis said it would sell 12 billion euros ($16.02 billion) in investment certificates through which it owned a fifth of parent company BPCE to BPCE and its cooperative shareholders. BPCE and Natixis plan to unveil a new three-year strategic business plan in the second half of the year, Natixis executives said. The move to restructure its ties with BPCE group, one of France's largest cooperative lenders, will allow Natixis to pay out a 2 billion euro one-time special dividend to shareholders, worth 0.65 euro a share, the bank said in a statement. So this bank was almost bust back in 2008 French gov rescured rescued even - involving a merger of the co-ops that owned it Top of the european leader board this morning - by a long way Results From Cogane™ in Parkinson's Disease Clinical Trial Phytopharm plc (PYM: London Stock Exchange) ("Phytopharm," the "Group" or the "Company") today announces the results of the Phase II, randomised, double blind, placebo controlled, dose-ranging trial of Cogane™ in unmedicated patients with early-stage Parkinson's disease ("CONFIDENT-PD"). Analysis of the headline results indicated that Cogane™ had no beneficial effects on patients" symptoms measured by the primary or secondary endpoints in the study. A Phytopharm herbal remedy that doesn't really work when you test it. Another biotech whose drug doesn't work. Got 5.5m in the bank - considering what to do yet Reuters saying market cap is 35m but that's clearly out of date The stock is down 80% Phytopharm operates as a virtual Group ensuring the majority of our financial resources are focussed on the development our pharmaceutical pipeline. We utilise a network of external scientific and clinical experts to help guide our development programmes with our experienced pharmaceutical managers overseeing operations. So one option for Phytopharm is just to log off Switch off the machine. This joke of a company spans my entire market reporting career Watched it float - by Panmure i think Can understand why people punt on these things Several binary events before the drug finally, inevitably, fails. If they can get it through Stage II you can make some money. So name somewhere where they've been successful over the past two decades Was going to say Shire, but that was an OTC pill maker that bought in the ADHD stuff, wasn't it? In terms of the blue sky ones ........... I can remember none. Though it's not really in the same area. I mean specifically Phytopharm - turning herbal remedies into proper drugs, which have been tested Ah - right - well obviously that's been a bust. Correction - NOT turning herbal remedies into proper drugs, which have been tested Not saying other biotechs have all failed Peel Hunt are shop, I think. Trial failure: Cogane has comprehensively failed its Phase 2 trial for the treatment of early stage Parkinson's disease patients. Disappointingly not one of the three doses demonstrated an effect on the primary or secondary endpoints over placebo. Residual assets: The company had £5.5m (1.6p) in the bank as of 31st Jan 2013 (which includes a recent R&D tax credit), a monthly burn of c£150k and a 2-year lease liability. A strategic review has been initiated and all R&D spend halted. An AGM is expected late next month. Phytopharm has over £58m in retained tax losses, 1.6p in cash and we attribute no value to the remaining pipeline/IP. We expect the shares to fall over 80% today to below 2p. Good call, Doctor. Management team: The result is particularly disappointing for CEO Tim Sharpington who joined after the funds had been raised, and the trial had been initiated. The company had attempted to diversify the pipeline applications of Cogane on a tight budget and had undertaken all pre-emptive business development activities in the hope of a successful outcome. Strategic options: Over the coming weeks we expect the board to review the potential for Cogane and Myogane for other neurodegenerative diseases including motor neuron disease and glaucoma. We see limited value in these indications, nor in any other drugs in the pipeline. In similar situations (Renovo, Minster and Antisoma) the companies have ultimately become cash shells awaiting a reversal. A significant loss: The comprehensive nature of the failure raises questions over the relevance of the pre-clinical models used, and the size/expense of the trial that was required to prove that Cogane was futile. Ultimately this outcome should have been reached at a lesser loss for shareholders. Wider implications: Reaching this point sooner remains a key challenge for the pharmaceutical industry. Until companies are better able to select for specific genetically defined patients for targeted drugs, UK Pre-revenue drug development companies will remain a lottery. Well, it's not really a lottery. Someone usually wins the lottery. Head up the market for a bit? Sage has sold a bunch of stuff. The Sage Group PLC (SGE:LSE): Last: 335.70, down 2.2 (-0.65%), High: 338.60, Low: 332.50, Volume: 672.50kBlock SalesLogix and the Nonprofit Solutions in the US C&I, ATL, Automotive and Aytos in Europe All flagged as non-core last year. Ticket price of £93.4m Which will be coming back to shareholders, though we don't know how. Basically, it's a clean-up exercise Fixing previous management's empire building, getting a cleaner structure. It does, however, take a bite out of earnings. Let me cut to Credit Suisse for the detail Who push through some forex adjustments at the same time to avoid making the downgrade. Non-core disposals: Sage has announced that it has sold seven non-core products for an aggregate consideration of £93.4m, £81.9m of which is payable in cash on completion. This announcement comes as no real surprise after management highlighted a series of non-core products at its capital markets day back in July 2012. Management has indicated the intention to return the cash proceeds to shareholders, but there is no clarity on the timing or mechanism for doing so; we assume it's done via a share buy-back. While this creates a more-focused group, management indicates that this disposal has no material impact on the remaining group organic growth or margin prospects. Forecast implications: In isolation and on a full year basis, this transaction is c5% EPS dilutive. However, in addition to the disposal, we also update our forecasts for currencies and we assume a more aggressive buy-back in 2H13 (over and above the return of capital from the disposals). This means that overall forecasts remain broadly unchanged. Valuation: Recent news from Sage has been fairly muted, with an in line 1Q13 IMS and now an EPS dilutive acquisition. Meanwhile, the shares have rallied c15% year-to-date. This leaves the shares on a Dec 13 PE of 15.2x, which is a 5-year high. We see nothing in the group's organic growth profile that warrants this re-rating, meanwhile we remained concerned about the long term risks from cloud competition/ business model threats. Hence, we retain our Underperform rating. As Sage continues to report modest organic growth, we see scope for the valuation to trend back to the 5-yr average PE multiple of 12.8x. This justifies a 284p target price (higher than our previous 278p target due to a slight increase in the 5yr average PE valuation). The risk to our target price is a possible take-over, following speculation in the press. However, we view this as unlikely for the time being. (@taxloss: stop thinking like a dismal pedantic wonk, dearie. I mean a long-run normalisation of historic profitability.) half term and President's day in the US Nothing in the weekend press either. I guess we haven't. Top-read story on the Muppet Detector this morning. A term of endearment used to describe BB share promoters on FT Alphaville. Excalibur ordered ot pay 8m into court to cover potential costs. We also learn that the judge wants at least three months to consider the case - when it finishes, maybe in a couple of weeks time. has Excalibur got the money? Or will someone else supply it? They're being funded by a specialist litigation group. And I'm not going to be surprised if they're doing it via a special purpose vehicle. Which, in the wrong outcome, could be shut down. Okay, I see, so this is the probable reason for the court wanting a payment upfront I'm suggesting that's what's happening. I'm merely speculating. Not indicative of the judge's mood And this is why GKP's price has only advnaced 4% this morning It's up 8p at 209p this mornign Which is nothing, given the exciting prospects here @taxloss: I've never found you more bewitching than I do right now. pack it in, both of you Oh, GKP price is indicative of nothing at all. Retail driven nutso stock. (@Niala: no. There isn't.) Why can't I find this M&P story on the Telegraph website? Pertamina, the Indonesian oil company, has submitted an indicative bid for listed French counterpart Maurel & Prom, The Sunday Telegraph reported. The newspaper cited City sources, who added that Pertamina is in discussions to acquire Maurel & Prom. Was it in the paper edition only? Has it been pulled? Their search function is even worse than ours. What can we say here? We can say, I guess, that Maurel & Prom is followed by some rather questionable types. And if the number of reported bids had actually resulted in bids, it would've changed hands 20 times in the past two years. One day maybe. Market cap is 1.7bn euros Well, it's France. You don't expect statements even when a story's true. Anyway, Ben Harrington story - lets see what happends And closed session. yes, thanks for keeping us company Back tomorrow same time/place