Financial Times 2009 Sainsbury Reports Best Quarterly

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					                                                                                                                          Tuesday 16th June 2009

CONTENTS                                   Market View                                                               Analyst : Stephen Taylor

     Market View :                         European equity markets are broadly lower this morning adding to yesterday’s falls pressured by commod-
                                           ity and financial stocks. These have been two of the strongest sectors since the March rally and if there is
     Irish Banks: S&P downgrades           a pull back in markets, financials and commodity stocks may show some signs of weakness. While we
     Anglo                                 may see a pull back from current levels, we do not anticipate markets to re-visit their March lows. We rec-
                                           ommend buying on weakness, particularly commodity stocks such as BHP Billiton, We have also recently
     Tesco : Solid Q1 trading update       added Cisco and Home Depot to our preferred US recovery stocks list and recommend buying both stocks
     Paddy Power : Continued ex-           on any weakness. We believe that given their balance sheet strength and leadership in their respective
                                           sectors both companies are well positioned to take part in an economic recovery. As for today, the main
     pansion into the UK                   focus will be on German business confidence data due out this morning, while housing data in the form of
     Petroceltic : Well INE-2 suc-         building permits and housing starts from the US will be closely watched. On the corporate side, quarterly
     cessfully drilled to target depth     earnings from electronics retailer Best Buy will also be in focus for a read across on the consumer in the
     Tullow Oil : Uganda well en-
     counters oil in 2 zones
     Market Movers                         Irish Banks : S&P downgrades Anglo                                        Analyst : Oliver Gilvarry

                                           Standard & Poor (S&P) downgraded Anglo Irish Bank’s (Anglo) long term credit rating from A- to BBB+.
IRISH PAPERS TODAY                         The bank’s short term rating was also downgraded from A-1 to A-2, adding another hurdle in the way of
                                           Anglo’s aim of restoring its deposit base. The outlook for the credit rating is negative, the downside risk to
                                           its credit rating arises from the uncertainty surrounding future capital needs, possible state aid implications
  Mainstream acquires three wind           and the risk to the implementation of the new business plan. S&P considers the bank of systemic impor-
  farm projects in Illinois                tance to the Irish banking system and the credit rating reflects this fact. On the proposed business plan the
  (The Irish Times)                        credit rating agency considers the aim to develop a broader business banking operation as “a highly de-
                                           manding plan.” The report also states the stand alone financial position of the bank is “weak and reliant on
  Anglo’s credit rating lowered by         funding support from the Irish Central Bank.” The role of the Irish Government is key in the future of Anglo
  S&P                                      and this support has been highlighted by the proposed injection of €4bn in capital with more to be provided
  (The Irish Times)                        if required. The report highlights the issues facing the bank and the difficulties it faces converting into a
                                           business bank. The S&P report also underlines the point that the Irish State will have to continue support-
  Risks to European banks rise as          ing the bank with funding and capital for the foreseeable future. The level of this support still remains un-
  more losses loom                         known.
  (Irish Independent)                      In a separate development, Moody’s Investor Service cut the long-term credit ratings of 25 Spanish banks
                                           on concerns over higher loan losses due to falls in the property market and the resulting economic slow-
                                           down. The third largest bank, Banco Popular, had its long term debt rating cut to Aa3 from Aa2 with a
INTERNATIONAL PAPERS TODAY                 negative outlook. Moody’s stated the downgrades were driven by “the speed and depth of the deterioration
                                           of the Spanish economy.” The credit ratings of the two largest Spanish Banks, Santander SA and Banco
                                           Bilbao Vizcaya Argentaria SA remain at Aa1 and are under review for a downgrade. Following the down-
                                           grade the Spanish Government stated it may take voting stakes in banks that encounter problems. The
  ECB says banks face further losses
                                           Government is also working on creating a fund of circa €9bn for future bank rescues and the fund will have
  of $283bn
                                           the ability to take on ten times that amount in debt. Comments from the Government also indicate the fund
     (Financial Times)                     could be used to ensure the viability of banks that aren’t in serious difficulties and where early action could
                                           prevent issues later. This report will add to the concerns over the European banking sector and will likely
                                           lead to euro weakness.
  Gunfire disrupts Iran protests
  (The Wall Street Journal)
                                           Tesco : Buy          Current Price (362p) Price target (400p) Analyst : Stephen Taylor

                                           Tesco reported a solid first quarter trading statement for the 13-week period ending 30/05/09. Total group
Company              1-day %      YTD %    reported sales increased by 12.6% excluding petrol. The strong performance was boosted by its interna-
                                           tional division that saw sales increase by 20.1%, just ahead of market expectations for a 20% increase.
Aryzta                -0.2%       -2.2%    Tesco’s UK division also put in a robust performance with sales increasing by 4.3%, broadly in line with
BP                    -2.1%       -3.9%    expectations. The company also pointed out that its personal finance division, Tesco Personal Finance, is
                                           continuing to see steady growth in customer accounts. We believe that with many UK banks reputations
CRH                   -0.1%        9.4%    having been tarnished over the last number of years, Tesco personal finance could be a key area of
DCC                   1.6%        47.4%    growth for the company going forward. Tesco pointed out while the year will undoubtedly be difficult it had
                                           made a solid start to the year and its outlook for the year remains unchanged. Tesco remains our top pick
E.ON                  -3.1%       -13.2%
                                           in the European retail space given its low-cost diversified product offering in addition to its international
HPQ                   -1.8%       2.2%     exposure. Tesco is still regarded as a growth stock trading at 12x forward earnings and providing a divi-
IL&P                 -13.9%      121.0%    dend yield of 3.3%. We reiterate our buy rating and price target of 400p.
INM                  12.1%        -17.6%
J&J                   -2.3%       -8.5%
JPMorgan              -3.2%        7.8%
Microsoft             0.4%        20.5%
Vodafone              -1.6%       -18.0%
Paddy Power: Buy Current Price (€17.52) Price target (€21.50) Analyst : Edward Keeling

Paddy Power has opened its first shop in Manchester, in the Levenshulme area of the city. Although the
UK market remains extremely challenging, the current environment does present new entrants with a very
attractive long term growth opportunity. The average cost of setting up a new Paddy Power shop has de-
clined by half to €250k, while the average annual EBITDA per shop is €140k. As a result Paddy Power will
focus a significant proportion of its expansion plans in the UK. It is planning to bring its total estate there to
180 shops by 2011 (up from 78) and a potential €9m could be added to the groups profit in three years.
With an average turnover per shop that is c.2x that of its competitors, the UK will provide an opportunistic
long term growth prospect.

Petroceltic : Buy        Current Price (11.75c) Price target (13c) Analyst : David Dunk

Petroceltic has announced the drilling results from the INE-2 well in Algeria. INE-2 is the first drilling well of
the current Algerian exploration campaign. The well is located on the Isarene Block in the Illizi basin, in
Algeria. The well has been drilled to the target depth of 1,020 metres , and has encountered the targeted
Devonian F2 sands. While the presence of gas has been confirmed, testing will be performed at a later
date. The drilling rig will now move to Ain Tsila ridge, to begin the drilling of AT-1, due to commence
around the 20th of June. Following this drilling result, AT-1 will be tested, before testing commences on
INE-2. Petroceltic has a 75% interest in the license, with the Algerian state oil & gas company holding the
remaining stake. The drilling of INE-2 was completed on budget, and close to schedule. The presence of
gas at INE-2 was expected, but the testing results will be critical to determining the commercial viability of
the well.

Tullow Oil : Buy            Current Price (916p) Price target (1050p) Analyst : David Dunk

Tullow has announced drilling results this morning, from the Kigogole-3 exploration well. The well is lo-
cated in the Butiaba region of Ugandan Block 2 exploration license. The well encountered over 20 meters
of net oil pay over two separate zones. The well was drilled to a total depth of 575 meters, encountering a
5 meter reservoir of thin bedded oil bearing sands, and a 15 meter zone of good quality reservoir sands.
Kigogole-3 is located southwest of the Kigogole-1 well, which located oil in 2008. The positive drilling result
further extends the potential for the region, and de-risks neighbouring prospects. Although positive, the
resulting change to our NAV is likely to be relatively small, due to the size of the discovery, and the extent
of de-risking of the prospect from nearby successful exploratory wells. The next major catalyst is likely to
be the results of the much larger Ngassa prospect, also located in Uganda, due in the coming weeks.
  Market Movers
                   International Equity Markets                                                  Sector Performances
Index                          Value           1-Day             YTD      Sector                          Index            1-Day              YTD
ISEQ                          2,881          -3.0%             23.0%      Construction                      218          -2.1%                6.5%
FTSE                          4,326          -2.6%             -2.1%      Technology                        171          -2.5%            12.1%
Dow Jones                     8,612            -2.1%           -1.9%      Oil & Gas                         298          -2.6%            12.1%
S&P                             924          -2.4%              2.3%      Financials                        183          -3.3%            20.2%
Nikkei                        9,753          -2.9%             10.1%      Retail                            209          -1.9%            14.7%
Stoxx 50                      2,431            -3.1%           -0.7%      Food & Drink                      232          -1.0%                -0.3%

                       Commodity Prices                                                        Currency Exchange Rates
Commodity                     Index            1-Day             YTD      Commodity                       Index            1-Day              YTD
Crude Oil                       70.6           -2.0%           30.2%      €/$                             1.380          -1.5%                -0.7%
Copper                        229.7          -3.6%             60.0%      €/£                             0.846          -0.8%           -12.5%
Gold                          928.3          -1.2%              6.0%      £/$                             1.632          -0.8%            10.5%
Silver                          14.0         -5.7%             26.6%      $/JPY                           97.82          -0.6%                6.2%
Wheat                         575.3          -1.6%             -8.5%      €/JPY                          135.01          -2.1%                5.5%
Cattle                          80.8         -0.9%             -5.7%      €/SFR                           1.507          -0.4%                1.0%

                       5Yr Credit Spreads                                                        Money Market Rates
Commodity                     Index            1-Day             YTD      Rate                             EUR                UK                US
Invest Grade                  126.2          -6.3%             -26.5%     Overnight                       0.8%             0.4%               0.3%
High Yield                    790.6            2.0%            -21.2%     3-Month                         1.3%             1.3%               0.6%
Financials                    110.0            3.0%            -5.4%      1-Year                          1.5%             1.5%               1.0%
BoI                           355.7            4.3%            40.6%      2-Year                          2.0%             2.4%               1.6%
AIB                           354.4            0.3%            73.1%      5-Year                          3.0%             3.7%               3.1%
RBS                           172.4            3.0%            30.2%      10-Year                         3.7%             4.2%               3.9%

      Date           Company            Re gion        Event              Date                   Event               Region    E stimate

 11/06/2009    Inde pendent News & Me     IE       S/HOLDE RS           16/06/2009     BOJ Target Rate                JN            0.10%
 15/06/2009    Volvo AB                   SE       TRAFFIC              16/06/2009     CPI (MoM)                      UK            0.30%
 16/06/2009    Aeroports de P aris SA     FR       TRAFFIC              16/06/2009     RPI (MoM)                      UK            0.20%
 16/06/2009    Halma PLC                  GB       PRELIM               16/06/2009     ZEW Survey (Econ. Sentime      GE               35
 16/06/2009    Ted Baker P LC             GB       TRADE                16/06/2009     Euro-Zone CPI (MoM)            EC            0.00%
 16/06/2009    Whitbre ad PLC             GB       TRADE                16/06/2009     ZEW Survey (Econ. Sentime      EC               30
 16/06/2009    Best Buy Co ., Inc.        US       Q1                   16/06/2009     Producer Price Index (MoM)     US            0.60%
 16/06/2009    Adobe Systems              US       Q2                   16/06/2009     Housing Starts                 US             480K
 17/06/2009    J Sainsbury PLC            GB       TRADE                16/06/2009     Building Permi ts              US             500K
 17/06/2009    Assura Group Ltd           GB       PRELIM               16/06/2009     Industrial Production          US            -0.90%
 17/06/2009    WS Atkins PLC              GB       PRELIM               16/06/2009     ABC Consumer Confidence        US               --
 17/06/2009    FedE x                     US       Q4                   17/06/2009     Bank of Englan d Minutes       UK               --
 17/06/2009    ArcelorMittal SA           LU       INVESTOR             17/06/2009     Jobless Claims Change          UK             60.5K
 18/06/2009    Arcandor AG                DE       Q2                   17/06/2009     ILO Un employment Rate (3m     UK            7.30%
 18/06/2009    Cadbury PLC                GB       TRADE                17/06/2009     Euro-Zone Trade Balan ce       EC             -1 .5B
 18/06/2009    Go-Ahead Group P LC        GB       TRADE                17/06/2009     Constru ction Output SA MoM    EC               --
 19/06/2009    Ashtead Group Plc          GB       Q4                   17/06/2009     MBA Mortgage Applications      US               --
 19/06/2009    France Telecom SA          FR       S/HOLDE RS           17/06/2009     Consumer Price Index (MoM      US            0.30%
 19/06/2009    Koenig & Ba uer AG         DE       MEETING              17/06/2009     Current A ccount Balance       US           -$8 5.0B
 19/06/2009    Porsche Automobil Hold     DE       RESULTS              18/06/2009     Retail Sales(Vol ume) (MoM)    IE               --
 19/06/2009    Taylor Wimpey P lc         GB       AGM                  18/06/2009     Retail Sales (MoM)             UK            0.40%
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Description: Financial Times 2009 Sainsbury Reports Best Quarterly document sample