Smurfit Kappa Share Discussion Threads

[lbo] 17/1/2010 14:33

High rollers' losses a fresh hell for banks



Davy's 2008 financial statements reveal that the value of client assets had been written down by €3.5bn to €6.5bn.

If the Davy numbers are representative, then the HNWIs could be nursing losses of billions, possibly tens of billions, of euro. If this was ready cash then it's only an issue for the investors. However, it is far more likely that a significant proportion of the money invested was in fact borrowed. That makes it a problem, a very big problem, for the banks also.



First a feast, and then a famine as crisis hits

Buoyed by the €7bn Jefferson Smurfit Kappa merger, Michael Smurfit bought the K Club with Gerry Gannon for €115m. It allowed him to build a €10m mansion at the Ryder Cup venue

[lbo] 14/1/2010 16:36

OH DEAR OH DEAR!

keelingr - 21 Dec'09 - 10:37 - 120 of 154


Should we believe a) the global investor's favourite journal "The Irish Independent" as quoted by LBO, the Merchant of Doom or b) Goldman Sachs!!!

December 3rd 2009


Goldman Sachs raises Smurfit Kappa price target to 8.80 EUR from 6.93








Goldman's Admits To Front Running Clients
For years, Wall Street whispered that Goldman Sachs (GS) profited handsomely by trading ahead of, or even against, its own clients. Yesterday a Goldman executive made an unusual admission that, in some cases, the rumors were true. In an e-mail message to select clients, Thomas C. Mazarakis, the head of Goldman's fundamental strategies group, acknowledged that his unit often provided investment ideas that the firm had already traded on. Sometimes Goldman has even taken the opposite approach, betting against particular instruments that the group has recommended. "We may trade, and may have existing positions, based on trading ideas before we have discussed those trading ideas with you," he wrote. The statement comes as the firm faces growing criticism over its role in the financial crisis, and is a rare acknowledgment of Goldman's conflicts with certain of its clients

[keelingr] 12/1/2010 09:30

Positive pricing cycle continues; upside risk to earnings forecasts in H2

Price 663c Rating: Outperform Issued: 30/06/09

SKG management presented at the Davy equity market conference in New York on
January 8th. A number of its observations are worth noting. Containerboard (test and kraft) prices will have increased by €90-100 per tonne by the end of January; this is the basis for current box price negotiations. SKG is confident of achieving a similar increase in box prices in 2010. Our current forecasts assume a €60 per tonne box price increase which could prove conservative. Every 1% (c.€8-10 per tonne) increase in the box price adds over €30m to group EBITDA. If management succeeds in getting the full increase in box prices, this could result in further forecast upgrades in H2. In addition, OCC prices have started to rise recently as Chinese demand increases. This may support efforts to implement another containerboard price increase, helping to further drive the pricing cycle.

Management estimates that the c.€400m permanent cost take-out over the 2007-
2010 period will add 150bps to operating margin longer-term. This makes our
€1,250m estimate of EBITDA at the next peak in 2013 very achievable.
Growing revenues and the impact of cost-cutting will drive strong cash generation which will help reduce debt levels. The recent bond issue priced under 8% is well below the company's 'through-the-cycle' returns, implying a positive impact for equity-holders. Consolidation is still required to secure better industry discipline.

SKG's improving balance sheet will not be a barrier to its involvement in this
process. Overall, this was a confident presentation from a company that has
entered a positive pricing cycle. With earnings upside potential for a stock that is already very cheap, we strongly reiterate its position as one of our top picks for 2010.

[lbo] 04/1/2010 13:25

McGann's double whammy

[keelingr] 31/12/2009 10:47

"Packaging group Smurfit Kappa emerged as the star performer of the Iseq's larger-cap stocks, adding almost 255 per cent over the year."

[smicker] 27/12/2009 10:33

More positive news

[smicker] 24/12/2009 12:12

2 million sold and the share price goes up. Somebody wants them

[lbo] 22/12/2009 23:45

Smurfit sold €500m of eight-year bonds, which carried a coupon, or annual interest payment, of 7.5pc. A further €500m of bonds, due for repayment in 10 years, were priced at 7.87pc.

A debt market source said: "The issues were very competitively priced -- taking advantage of a 'sweet spot' in the market, with a lot of cash going into high-yield bonds at the moment."

Deutsche Bank, Citigroup, Davy, JP Morgan and Credit Suisse were the main brokers in charge of managing the transaction

[lbo] 22/12/2009 23:40

Bonds trading at less than 50 cents on the dollar now account for only 1.1 per cent of the high-yield market, or $8.9bn in securities, down from 27.5 per cent, or $202bn in bonds, a year ago, according to JPMorgan data.

This isn't a bubble, either, where bonds rise in secondary-market price but where there's still no primary market for new issuance. To the contrary, private-equity shops and others have been quite successful of late in refinancing their leveraged loans in the high-yield market.

I'm not sure where all this demand for risky debt is coming from, given that everybody still expects a significant wave of defaults over the next couple of years: there can't be that many fixed-income investors who are happy converting their debt to equity and taking control of a distressed company. Maybe junk bonds are the new equity: somewhere you can make a lot of money by spotting a compelling story, even if the rest of the market is moving in an unpredictable manner. Just don't come crying to me when it all ends in tears.

[lbo] 22/12/2009 23:40

Bonds trading at less than 50 cents on the dollar now account for only 1.1 per cent of the high-yield market, or $8.9bn in securities, down from 27.5 per cent, or $202bn in bonds, a year ago, according to JPMorgan data.

This isn't a bubble, either, where bonds rise in secondary-market price but where there's still no primary market for new issuance. To the contrary, private-equity shops and others have been quite successful of late in refinancing their leveraged loans in the high-yield market.

I'm not sure where all this demand for risky debt is coming from, given that everybody still expects a significant wave of defaults over the next couple of years: there can't be that many fixed-income investors who are happy converting their debt to equity and taking control of a distressed company. Maybe junk bonds are the new equity: somewhere you can make a lot of money by spotting a compelling story, even if the rest of the market is moving in an unpredictable manner. Just don't come crying to me when it all ends in tears.

[lbo] 22/12/2009 23:29

Banks' willingness to underwrite has been helped by the revival in the high yield bond market, which has allowed borrowers such as Smurfit Kappa to refinance bank debt, returning cash for lenders to recycle. A more vibrant bond market also makes banks more willing to take on risk, believing they can sell it down later.

Bidders can also take advantage of existing lenders' unease with their current loans. A lender to an overleveraged company may be willing to provide funding to a prospective bidder offering a less debt-heavy capital structure.

Still, a return to the go-go days isn't on the horizon. Bidders will struggle to raise debt for much more than 4.5 times the target company's Ebitda - a far cry from the seven times achieved during the boom years. Banks are insisting that equity compose at least 50 per cent of total capital.

[keelingr] 22/12/2009 19:37

Your first post on this thread was in OCT08 when SKG was trading at 1.87. Since then you've consistenly predicted the downfall of SKG. The reality is that Smurfit is up c. 350% - I would say that's pretty wrong from my point of view!! Will you still be here in 2-3 years time if SKG is trading at €15 plus predicting the end is nigh??? Of course you will!!!

Why don't you take a big short position if you're so confident? LOL

[lbo] 22/12/2009 19:07

If Davy has provided certain material investment banking services to any company under coverage in the past 12 months, this too is indicated. 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

[lbo] 22/12/2009 18:46

Price 1475c Target: 2350.0c Issued: 25/04/07

[lbo] 22/12/2009 18:15

€18 to €6 in 2 years! Wrong indeed! LOL

The extend and pretend continues



Davy is an accredited primary dealer for government bonds. This year the NTMA issued a record amount of bonds to domestic and overseas institutions. Davy has also taken in large underwriting fees for rights issues by the likes of CRH, the country's most valuable company.



Corporate Ireland tries to escape wall of debt

[keelingr] 22/12/2009 16:26

Just face it LBO, you called this one wrong. The company is generating significant operating profits with EBITDA in the region of EUR800-1000mln per annum. Demand is improving across the markets where it operates and pricing continues to improve. Yes they have significant debt, but this is not a problem as evidenced by the strong take up for 8-10 year bonds at very reasonably priced yields. We all make mistakes LBO, and it seems that you just got this one wrong.

[lbo] 22/12/2009 16:01

I wonder what kind of Buy note Davys showed clients on The McNamara Rindsend site! LOL

Pumpty Dumpty sat on a wall....Pumpty Dympty had a great fall!

[keelingr] 22/12/2009 09:15

US box prices on the rise; upgrades in the sector; positive outlook for European industry in 2010

News that a number of US box producers have announced price increases of 8-
12%, effective from January, has resulted in upgrades in the sector. This is despite the fact that volumes are still down year-on-year, but sequential trends are encouraging.

In Europe, increases of a similar magnitude, i.e.10-12% (circa €100/tonne), have been announced for January. This is a big driver of SKG's profits – every 1% increase in price adds circa €30m to EBITDA. In our current forecasts, we are assuming an increase of €60/tonne (7-8%). If the industry is successful therefore and OCC prices remain roughly where they are, then there is upside to our forecasts. This does not include the potential for a further containerboard price increase, which in turn would drive box prices higher.
In both Europe and the US, producers appear to have been emboldened by the
success of the recent increases. It will be interesting to see how this confidence converts into fresh moves for another price rise. The pricing cycle has turned and appears to be gaining momentum.

The outlook for earnings is positive, which we believe is not reflected in current valuation levels of just over 5 times. Out 1000c price target for SKG is looking more realistic in this environment.

[keelingr] 21/12/2009 14:54

Interesting read - I like to hear both sides of the argument. Probably certain elements of truth but the article pretty much reads like this "Economic Armageddon is coming.....if you don't buy MoneyWeek you will lose all your money!!"

[lbo] 21/12/2009 14:24

Makes my views look optimistic! LOL

[lbo] 21/12/2009 12:12

Reality is sent packing as debt keeps piling up



Unfortunately, memories are short. The crisis was caused in part by excessive debt: mortgages that could not be repaid; credit-card balances that consumers could not cover; property loans based on inflated values. And the solution being proposed is more debt: huge government borrowing. The economy is floating on a sea of credit, with government deficits topping $1 trillion, more than 80% of the mortgage market supported by the government, and the Federal Reserve Board printing so many dollars that fears of deflation have been replaced with a gnawing worry that inflation will prove the enemy - although not a worry of investors who are stocking up on gold and gold-related assets. Wholesale prices rose last month by an unexpectedly large 1.8% (0.5% if we exclude food and energy, of relevance to those who neither eat nor drive nor heat their homes). Worse still, the president is urging banks to lend more freely to businesses that the bankers deem unlikely to be able to repay, and government agencies are financing mortgages at 97% of the value of the homes being bought. Those loans aren't exactly of the highest quality.

[lbo] 21/12/2009 12:03

Looking at the bare statistics, it's easy to see why more firms in Ireland are looking to recruit fixed income professionals. To October 2009, the Irish government had raised €23bn in syndicated bond issuance – more than double that in 2008. Corporate bond issuance in Europe as also surged this year.

"The volumes of both government and corporate bond issuance has created a huge amount of tradable debt," says Liam Clarke, director of institutional bonds at Dolmen Securities in Dublin. "Stockbrokers have therefore been adding to their fixed income desks."

As well as Dolmen, Bloxham, Davy, Merrion Capital and NCB Stockbrokers have all added to their ranks in this area, and REIT Capital is also looking to recruit a fixed income specialist.

[keelingr] 21/12/2009 12:03

Thanks for that LBO. If Goldman are right, as they regularly are, 2010/11 should be even better than expected for SKG!