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ISEQ rises on Irish debt hopes

Thursday, February 28 12:41:57

The ISEQ made steady gains this morning on hopes that the next week or so will see Europe help Ireland back in to the bond markets.

By 12:30 the ISEQ was up 28.47 points to 3,750.11.

Following the Ecofin agreement in principle in January to examine ways to smooth the bailout exit for Ireland and Portugal, a number of proposals are likely to be discussed at the meeting of finance ministers next week. A leaked report to Reuters, also cited by the Financial Times earlier in the week, suggests that a backloading of the loan repayments for both countries is one of the proposals under discussion. Under this proposal, the loans would still be fully repaid by a certain date and would not require approval by the German Bundestag. The second option, which would involve an extension of the loan repayment period beyond the current plan, would require approval by the German parliament, something German politicians would like to avoid, according to Goodbody's.

Kerry Group topped the gainers with shares up 53c to E42.63.

Following Tuesdays FY12 results from Kerry Group, we have made small changes to our forecasts, including the adjustment for IAS 19 (Pensions), resulting in FY13 EPS reducing from 259.9c to 255.5c. We made no changes to our lfl continuing volume forecasts (4pc Ingredients, 2pc Consumer Foods) and EPS growth is forecast to grow at an average 10pc p.a. to 2017.

Kerry Ingredients has been transformed from a supplier of ingredients to food manufacturers to a food technology company that incorporates higher levels of R&D (equivalent to over a third of Ingredient's operating profit). New R&D centres planned for Ireland (E100m) and, we expect, the Far East will accelerate this trend.

Kerry is spending E700m between the 1Kerry programme, new R&D facilities and rationalisation over the next five years. The 10pc base case EPS growth that ensues can be further augmented by M&A activity in a few years. We estimate Kerry could spend E3bn on acquisitions or, perhaps, a large scale merger, that could add a further 3pc to annual EPS growth (to 13pc p.a.).

"We remain positive on Kerry Group's longer term prospects and believe it should be a core portfolio holding within consumer staples. We are increasing our share price target to E45 and continue to rate the stock "Hold" but would look for share price weakness to buy for the long term," said Goodbody Stockbrokers.