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ISEQ flat amid Prom Deal uncertainties

Tuesday, February 19 12:45:03

The ISEQ made little progress this morning amid lingering uncertainties over the Anglo promissory notes deal.

By 12:30, the ISEQ was up 3.71 points to 3,669.56.

Uncertainties continue to linger in the wake of the Irish government's decision to liquidate IBRC. Following on from Friday's comments from both Weidmann and Draghi, the ECB President confirmed yesterday that the arrangement, which sees Irish government bonds swapped for the promissory notes at the CBI, will be scrutinised for its legality under Article 123 of the ECB Treaty. Draghi stated that the ECB only noted the transaction two weeks ago, but the ECB's Annual Review will provide the opportunity to examine the deal in more detail. As we noted last Friday, one could argue that the transaction is in breach of Article 123, but this could also be reasonably argued for the previous promissory note arrangement, not to mention both SMP and OMT, according to Goodbody Stockbrokers.

Shares in Smurfit Kappa fell 1c to E11.44. Independent containerboard producer Hamburger (1.6m tonnes of testliner capacity) has announced a E40/tonne price increase to all testliner grades from 1 March. This is in addition to the E30-40/tonne increase which has already been secured in the market in February. The company notes that strong demand has resulted in a very good order book and a quick implementation is expected due to strong demand and a continuing decrease in testliner stocks. "With momentum on pricing gathering pace and strong cash flow generation allowing for further deleveraging of the balance sheet and/or increased cash returns, we favour Smurfit Kappa particularly given its undemanding valuation (5.5x EV/EBITDA versus 6x historical)," said Goodbody's Robert Eason.

The UK government has committed to zero carbon new homes from 2016. As part of this timetable an uplift to the current energy efficiency standards were supposed to be introduced this April (last change was 2010). However, according to press reports these could be delayed until Autumn. The delays are due to disagreements within the coalition on how strong the new efficiency rules should be and there are now some "fears that they may be watered down so far as to render them meaningless". Shares in Kingspan fell 6c to E8.80.