Contrarian Investor UK moves to SpreadBetMagazine.com

I will no longer be posting on this site from May 1st 2012. See my new contributions from May 1st at www.spreadbetmagazine.com/blog

I have updated the profit to date and portfolio pages see above with my closing portfolio valuation of £101,185, compared with the £50,000 starting valuation in December 2009, not too bad considering the collapse in AIM commodity stocks during the Summer-Autumn of 2011. I look forward to seeing your continued readership on SpreadBet Magazine. Many thanks for your comments and contributions. If you have any questions or comments please email me at contrarianinvestoruk@gmail.com. All the best readers!

 

 

Astra Zeneca's Brennan rewarded for failure?

Astra Zeneca's departing Chief Executive illustrates some of the excesses of capitalism we normally associate with the banks. Despite delivering a drop in earnings last year of over a third and presiding over a stagnated share price over his tenure, David Brennan received £9.3m last year, including a £5.9m payout from a long-term bonus plan.

His retirement will be eased by his nearly £1 million a year pension, equivalent to a pension pot of £18 million. On top of this he is likely to get his £1m salary in full when he leaves at age 58, plus £1.2m in bonuses.

Brennan also holds around £8 million in Astra Zeneca shares plus a further £10 million in stock options and long term incentive plan shares.

Are we really rewarding Chief executives for performance? In the case of Astra Zeneca shareholders clearly no. A disgrace. Perhaps Brennan and ex-RBS Chief Fred Goodwin can have some nice rounds of golf together!

Could next week be the week for Ithaca Energy?

From the independent "Traders reported clients nibbling a few takeover candidates. Explorer Ithaca Energy ticked up 4p to 187p as long-standing chatter over a 250p a share approach from Kuwait did the rounds again." http://www.independent.co.uk/news/business/sharewatch/market-report-london-tech-stocks-bathe-in-samsungs-korean-sun-7685201.html

In addition, first oil from the Athena field cannot be far away. With the field in full production from late June, Ithaca's production doubles from 5000 to 10,000 barrels per day. 

This is one of my favourities at the moment. The current share price is underpinned by the production increase, forward price/earnings is less than 5. Then there is the takeover interest, thought to be Kuwaiti national oil company and many others. The shares are trading at 187p after a 2.2% increase on AIM, they rose 3.5 percent to $C2.99 on the Toronto Exchange. Plenty of tree shakes this week, to take the shares off the impatient or weak holder. 

The rumours are for a bid of at least $C4 or £2.53. So 35% upside on a bid, probably 20 percent short term downside if the bid doesn't materalise. Long term this is going well over £2 anyway as production ramps up in its North Sea fields. 

Sorrell blasts lack of UK growth strategy

I completely agree with Martin Sorrell. What is Britain's growth strategy? Austerity Britain, needs to be growth Britain otherwise we'll never pay back the £1 trillion of national debt!

From the Telegraph

http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/media/9232636/David-Cameron-has-no-plan-to-return-Britain-to-growth-claims-WPP-chief-Sir-Martin-Sorrell.html

David Cameron has no plan to return Britain to growth, claims WPP chief Sir Martin Sorrell

David Cameron has yet to come up with a credible strategy to return Britain to growth, and risks being "blown off course" by news events, Sir Martin Sorrell has claimed.

Sir Martin Sorrell, the WPP chief executive, expects the UEFA Football Championships, the Summer Olympics and Paralympics, and the US Presidential Elections to underpin industry growth this year. Photo: Reuters

By Katherine Rushton7:08PM BST 27 Apr 2012138 Comments

Sir Martin, chief executive of the world's biggest advertising agency, WPP, expressed relief that Britain's double dip has so far been "marginal" but warned that the Prime Minister does not yet have a clear strategy for saving the UK from a deepening recession.

"The Coalition Government has done well on attempting to reduce the deficit. What is needed now is a comprehensive plan," he said. "We don't seem to have a plan in place as yet. Oddly, I find myself in agreement with Vince Cable [the Liberal Democrat Business Secretary]."

Sir Martin's comments came as WPP reported a 7.6pc increase in its first-quarter revenues to £2.39bn and revised its full-year growth expectations slightly upwards to more than 4pc.

The increase was fuelled by strong growth in Asia and Latin America and demand for digital products. Revenues in Britain also rose ahead of expectations, at 2.5pc, as companies battled to grow their share of the market.

"Crudely, we are benefiting from a positive double-whammy," Sir Martin said.

WPP's strong performance may go some way to help to avoid a repeat of last year's protest over Sir Martin's remuneration. On Friday, he said it was "out of line" to say his £4.5m compensation package amounted to a "substantial pay packet" because most of his earnings are via shares, which he bought with his own funds.

"I don't have a substantial pay packet, I have a substantial amount of money which I invest in [WPP] and which I have paid tax on. If that's morally repugnant or wrong to you, that's fine. It is not a pay packet," he said.

"Find me a FTSE 100 chief executive who has invested the amount of money I have in the company. I am not apologetic about the performance of the company, and this is pay for performance for goodness sake."

He said he was "irritated" by the focus on any increase in his earnings compared with the lack of attention they receive when they fall, as in 2009.

Last year 40pc of WPP shareholders failed to to back the company's remuneration report, which showed Sir Martin received a base salary of just over £1m, a £1.9m bonus, £400,000 of pension contributions and £374,000 in benefit payments.

He also received £950,000 in share awards.

Update earnings news from US overwhelm negativity from eurozone

The FTSE 100 ended the week at 5,777, broadly flat versus 7 days ago, but still 4.8 percent down compared with a year ago. The powerhouse of index growth this week was the Nasdaq composite which finished at 3,069, 2.3 percent up for the week helped by exceptionally good earnings from Amazon and Apple. The Dow Jones Industrial Average closed on Friday at 13,228, up 1.5 percent for the week, with Procter and Gamble being the stand out faller on Friday. The S&P 500 finished at 1,403, up 1.8 percent for the week.

Of the 275 companies in the S&P 500 that have reported earnings in the first quarter, 72% have reported earnings above analyst expectations.

Amazon.com smashed analyst estimates for first quarter 2012 earnings despite a 35% drop in earnings . The shares finished up 16 percent to $227.

For the quarter Amazon reported net income of $130 million, or 28 cents a share, compared to net income of $201 million, or 44 cents a share, for the same period last year. Revenue rose 34% to $13.18 billion and operating income fell 40% to $192 million. Analysts were expecting earnings of 6 cents a share on revenue of $12.9 billion.

Sales of media products grew by 19% to $4.7 billion. Electronics and other general merchandise sales were up 43% to nearly $8 million. Amazon’s “other” category, including cloud-based Web services business,  grew by 61% to $500 million for the period.

Procter and Gamble shares fell 3.6% to $64 yesterday after disappointing earnings results. For the quarter ended March 31, P&G reported a profit of $2.41 billion, or 82 cents a share, compared with a year-earlier profit of $2.87 billion, or 96 cents a share. Stripping out items like restructuring costs, P&G reported core earnings of 94 cents a share. Gross margins fell to 49.3% from 50.8%, though revenue was up 1.5% to $20.19 billion. P&G is reversing price cuts in the U.S. and Canada on toothpaste, shaving razors, laundry detergents and dish washing liquids to try and offset the impact of rising commodity prices which are hitting margins. It was surprising to see UK listed household products companies, Unilever and Reckitt Benckiser in relatively robust form given Procter's earnings.

US Q1 2012 GDP growth came in at 2.2 percent, versus expectations of 2.6 percent and below the 3 percent seen in Q4 2011. The disappointing GDP number mostly reflected a slowdown in business investments and a smaller buildup of inventories. But it also was caused by a rise in imports and a sizable and unexpected cutback in defence spending. Consumer activity was robust.

Spain released data  showing 367,000 people lost their jobs in the first three months of 2012. 5.6m  or 25 per cent of the Spanish workforce are now unemployed, close to a record high set in 1994. Half of young people under 25 have no work and in more than 1.7m households no one has a job. Foreign Minister José Manuel García-Margallo, foreign minister, told state radio that “Spain is undergoing a crisis of enormous proportions”. S&P lowered the country’s long and short-term rating to triple B plus/A2 from A/A-1, near the lower end of investment-grade quality. It is going to be a long haul for Spain to beat this cycle of decline. The UK may have its problems but compared with Greece, Ireland, Spain and Portugal they look relatively manageable.

Plenty more US earnings to come next week after a good week on the corporate front. Things are looking encouraging as long as the eurozone problems can be contained and that if a big question mark. German unemployment has fallen to its lowest level since the unification of Germany in 1990. There is very much a two speed Europe with Germany leading the way, and everyone else following in its wake. German's high technology engineering and export focus is giving it significant competitive advantage unlike Britain's predominantly service based economy which relies on growth in the financial services sector as well as consumer spending. 

Richard Smith, Xcite Energy CEO posts new interview

http://www.youtube.com/watch?v=FgYPXXXmL-A

I see the shares have retraced back to 107p after a promising start this morning after the release of the funding strategy for phase 1b and 2 of the Bentley development. One day this sleeping giant will wake up!!! Fundamentals are unbelievably positive, but fundamentals are not always a feature of AIM stocks. This is a traders share, but one day the share price will reflect Net Asset Value (£280 million share price versus £1 billion asset value for core area). Patience of a saint needed with Xcite!

Xcite Energy RNS Reserves and Funding strategy

Latest RNS confirms no equity fund raising, so no further dilution. Reserves based lending agreement is key and negotiations are in progress. I would guess the current extended well test will give lenders the comfort to proceed with the investment for phase 1b of the Bentley development. Gives good information for investors and hopefully starts lifting the share price out of silly territory.

Key Points

Ø 2P oil reserves for the Core Area of approximately 116 MMstb, with NPV10 (after tax) value of approximately $1.46 billion.

Ø Funding resources for Phase 1A work programme available to the Company.

Ø Funding for Phase 1B work programme planned to be secured from external sources and oil revenue.

Ø Advanced discussions being held with group of commercial lending banks to secure reserves based lending ("RBL") facility.

Ø Company considering a range of options (including farm-out partner, industry participation, convertible debt instruments and equity) to finance the balance of funds required for Phase 1B; Jefferies and Rothschild appointed to assist.

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11187932

Enquest ups Kraken North Sea stake valuing reserves at $6 a barrel

North Sea focused oil producer, Enquest ,today said it was increasing its stake in the Kraken field to 60 percent.

Under the agreement with First Oil, Enquest will acquire a further 15 per cent interest in two blocks in the East Shetland basin for between $90 million and $144m, depending on the level of reserves. First Oil will retain a 15 per cent stake with 25 per cent held by Nautical Petroleum.

EnQuest will pay an initial consideration of US$45 million dollars in cash and a further US$45 million in cash, contingent upon approval of the Kraken Field Development Plan by the Department of Energy and Climate Change (DECC). EnQuest will acquire a 20% interest in blocks 9/2b and 9/2c, including the Kraken discovery. Gross contingent resources of 160 million barrels (2C) are estimated for block 9/2b and 9/2c.  EnQuest also acquires further potential exploration upside in blocks 3/22a and 3/26 (40% EnQuest interest) and in blocks 9/6a and 9/7b (35% EnQuest interest).

Kraken is a large heavy oil field, located in the East Shetland basin, to the west of the North Viking Graben. It is being progressed to development following successful appraisal and well test results. Kraken FDP approval is anticipated in H2 2012. 

The cost per barrel to EnQuest is $6 per barrel before tax effects and approximately $2.40 per barrel post tax effects.

Interesting that Xcite has a market cap at £253 million, so with 116 million barrels it is valued at £2.18 a barrel or $3.5 a barrel. It is expected that the current EWT should allow a further upgrade of reserves. The company has £800 million in tax credits. Frustrating to see it at £1.05, the effect of the reserves upgrade from 28 mm barrels to 116 mm barrels has now been discounted by the markets. News is due any day now on the current Bentley drill.

Big cap oil reports from Exxon and Shell produce mixed results

Exxon Mobil first-quarter earnings fell 11% on a 5% cut in production and increased operating expenses at its exploration and production business. It made a profit of $9.45 billion, or $2 a share, down from $10.65 billion, or $2.14 a share, a year earlier. Revenue increased 8.8% to $124.05 billion. Expectations were for earnings of $2.09 on revenue of $124.76 billion. The company spent $5.7 billion on share buy backs during the quarter.

The shares are down 1% to $86 .

Shell shares rose 3% today to 2195p on news that first quarter earnings rose to $7.3 billion from $6.3 billion compared with thethe same period in 2011, ahead of expectations of around $6.5 billion.

Earnings from Upstream activities  rose to $6.25 billion from $4.64 billion the year before.

Total production of oil and gas rose to 3.5 million barrels of oil equivalent per day (BOEPD) from 3.5m in the prior year. The average price of oil during the period was $118.45 per barrel, against $105.52 in the same period of 2011.

Contrarian Investor UK is moving to Spread Bet Magazine

As of May 1st, I will no longer be posting on the Contrarian Investor UK blog but will be instead be collaborating with Spread Bet Magazine with a new and even better blog. So this will be my last few days using this site. Check out further news in coming days where I'll be moving to with the same content.

As you can see from their latest edition, Spread Bet Magazine has been launched to bring quality information to investors who trade using CFD's and spread bets. As ever, I will continue to champion the interests of small investors, expose the evils of insider trading and give access to informaton critical in making sensible investment decisions. In other words, business as usual.

The May edition of SBM is at  http://issuu.com/spreadbetmagazine/docs/spreadbet-magazine-v4_generic