Morning Wrap

Today ’s Newsflow Equity Research 19 Jul 2016 Upcoming Events Select headline to navigate to article

Economic View Large-scale social housing target a key Company Events part of today’s Action Plan 21-Jul Breedon Aggregates; H1 results Britvic; Q3 2016 Trading Update Cairn Homes Conversion of Founder Shares Danske Bank; Q2 2016 results easyJet; Q3 2016 IMS US Building Materials Another weak month of highway Howden Joinery; Q2 2016 Results contract awards but H2 comps are easier Premier Foods; Q1 2017 Trading Update SABMiller; Q1 2017 Trading Update Kingspan Peer results points to strong first half of the year Unilever PLC; Q2 2016 results

CPL Resources Irish expansion by Sigmar in response to FDI demand

Economic Events Ireland

United Kingdom

United States

Europe

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Economic View Large-scale social housing target a key part of today’s Action Plan

Grand plans for a massive social house-building programme are set to be the cornerstone of Dermot O’Leary +353-1-641 9167 the Government’s Action Plan for Housing to be published later today. According to this [email protected] morning’s Irish Times, the Government’s target for social housing output is to be increased from 35,000 by 2021 to between 45,000 and 50,000.

All State-owned lands will be assessed for their potential for house building, with the government likely to push for mixed-tenure developments. As part of the plans, an additional €2bn will be allocated to the provision of social housing, on top of the €3.8bn already earmarked by the previous government. There is a preference to fund this spending to be off balance-sheet, but this will require some clarity from Eurostat first.

Under the previous social housing plan, it was expected that 22,000 units would be built, 11,000 would be leased and about 2,000 refurbished. These were already lofty ambitions. The new targets are even more so. To get to this level of output, working with the private sector will be a prerequisite. We may find out more about the plans on that score when the full report is published later today.

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Cairn Homes Conversion of Founder Shares

Following the announcement that the Performance Condition in relation to the first Test Recommendation: Buy Period of the Founder Share Scheme was satisfied on 21 March 2016, Cairn Homes has Closing Price: €0.98 confirmed this morning that a conversion of Founder Shares into 15,021,937 Ordinary Eamonn Hughes Shares will take place. Application will now be made to the FCA and the LSE for the new +353-1-641 9442 shares to be admitted to the Official List, with dealing set to commence on or around the 16th [email protected] August 2016. All of the new Ordinary Shares will be subject to a 1-year lock-up period, with a further 50% subject to an additional 1-year lock-up period.

The announcement this morning is in line with our expectations, with our valuation methodology including the dilution from the Founder Shares. Taking an average of our peer-based and ROCE valuation methodology, our fair value on Cairn Homes currently stands at €1.31, 33% upside to the current share price.

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US Building Materials Another weak month of highway contract awards but H2 comps are easier

The latest data release from ARTBA (American Road Transportation Builders Association) Robert Eason +353-1-641 9271 shows another weak month for highway contract awards with the June figure down 28% yoy. [email protected] This leaves the second quarter down 19% and also follows a weak first quarter at -22%. Contract awards for bridges also show a weak trend with Q1 -39% and Q2 -31%. David O’Brien +353-1-641 9230 david.a.o’[email protected] ARTBA notes that the weak first half to the year follows the record growth in 2015 (+7%). Jason Molins However, it is in line with the 2011-14 average for the month and the ytd. +353-1-641 9141 [email protected]

The weakness in the contract awards ytd can be attributed to difficult comparatives Sarah Dunne (Q1 and Q2 in 2015 +42% and +27%). However, with the yoy comparisons easing +353-1-641 0482 [email protected] into the second half of the year (-14% in H215) we are expecting contract awards to improve. This is underpinned by a multi-year federal highways programme as well as improving state budgets.

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Kingspan Peer results points to strong first half of the year

Lindab has reported Q2 operating profits of SEK138m, which is in line with Bloomberg Recommendation: Buy expectations and up strongly from last year’s outturn of SEK110m. This was on the back of Closing Price: €21.42 strong organic sales growth of 8% (5% Q1) with management noting the Nordics developing Robert Eason well and Western Europe experiencing good growth. On the UK (Lindab’s third largest market +353-1-641 9271 representing 9% of sales) “it is too early to say what the consequences of Brexit will have for [email protected] Lindab”. Management also notes the need to pass on higher steel costs with price increase announcements set for H2.

This statement follows yesterday’s upgrade of guidance from NCI Building Systems, reflecting better top-line and commercial discipline in a rising steel price environment. Third quarter sales is now expected to be $458-469m, which compares to previous guidance of $435-455m and consensus of $446m. EBITDA is expected to be in the range of $53-63m, significantly ahead of Bloomberg consensus of $43m.

Both the results from Lindab and the upgraded Q3 guidance from NCI Building Systems underpins what we believe has been a very strong first half of the year for Kingspan. Indeed, we are expecting profits have grown by in excess of 30%.

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CPL Resources Irish expansion by Sigmar in response to FDI demand

Sigmar Recruitment announced yesterday the creation of 150 new positions in Ireland over Recommendation: Buy the three year period 2016 – 2018 in response to an uplift in demand from US companies Closing Price: €5.15 that are expanding internationally from Ireland. The positions, both at experienced and Gerry Hennigan graduate level, involve recruitment, sales and digital marketing. +353-1-641 9274

[email protected] Cpl previously announced a target to add c.200 recruiters peaking at c.550 by June 2018. As of December 2015 that base stood at 475 with the payback from that investment starting to materialise in H1’16 when the average fee per recruiter stood at €143.2k, having been static for the year to June 2015 at c.€124k.

With 74% of Cpl’s NFI contribution emanating from Ireland, the announcement from Sigmar yesterday would suggest limited evidence of a downturn in the Irish recruitment market post the EU Referendum in the UK.

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Market Data Top 10 Covered Companies

Company Price Mkt Cap Absolute Relative to European Sector P/E (LC) (LCM) 1 Day 1 Week 1 Mth Ytd 1 Day 1 Week 1 Mth Ytd 2016f 2017f CRH 26.40 21,529 0.6 1.8 4.0 -1.1 0.3 -0.0 -0.0 6.8 16.6 13.1 AIB Group 6.42 17,536 0.3 11.7 1.9 -3.6 0.1 9.7 -2.0 4.1 14.1 19.5 11.70 15,086 0.9 3.3 -8.7 -22.1 0.7 1.4 -12.2 -15.8 14.2 11.3 HeidelbergCement 71.67 14,220 0.4 1.1 0.8 -5.2 0.1 -0.7 -3.0 2.4 13.8 12.6 80.50 14,152 -0.3 1.2 5.0 5.5 -0.5 -0.6 1.0 13.9 24.4 21.5 Wolseley 40.86 10,626 -0.5 0.3 10.9 10.7 -0.4 0.5 0.7 5.8 16.2 14.2 IAG 4.30 8,747 1.9 10.3 -10.0 -29.5 1.7 8.3 -13.5 -23.9 5.5 5.5 Paddy Power Betfair 85.95 7,194 0.4 1.6 -0.4 -5.4 0.5 1.9 -9.5 -9.6 27.9 22.9 Mondi 14.33 6,958 0.6 1.9 11.2 7.4 0.3 0.1 6.9 16.0 12.3 11.7 DCC 67.80 5,982 1.3 0.5 9.2 19.8 1.5 0.8 -0.8 14.5 21.0 24.2

Indices ISEQ performance

% Price 1 Day 1 Week 1 Mth Ytd ISEQ 5,817.57 0.46 2.26 -2.90 -14.34 6,800 FTSE 100 6,695.42 0.39 0.19 11.20 7.26 6,600 6,400 DAX 30 10,063.13 -0.04 2.34 4.48 -6.33 6,200 CAC 40 4,357.74 -0.34 2.19 3.91 -6.02 6,000

FTSE Eurofirst 300 1,338.06 0.18 1.72 4.53 -6.92 5,800

Nasdaq 5,055.78 0.52 1.35 5.32 0.97 5,600 S&P 500 2,166.89 0.24 1.39 4.62 6.02 5,400 Dow Jones 18,533.05 0.09 1.68 4.85 6.36 5,200 Jul-15 Oct-15 Jan-16 Apr-16 Nikkei 225 16,497.85 - 5.02 5.76 -13.32

Exchange Rates

Current Px 1 day Px 1 Week Px Dec15 Avg Ytd

Stg/€ 0.833 0.837 0.850 0.737 0.784 STOXX 600 performance US$/€ 1.107 1.107 1.105 1.086 1.115 CHF/€ 1.089 1.088 1.086 1.087 1.095 420

JPY/€ 117.145 117.131 113.349 130.676 123.582 400

Bonds 380

Yield 1 Day Yld 1 Wk Yld 1 Mth Yld 3 Mth 360

US 2 Yr 0.69 0.02 0.69 -0.00 -0.04 340 US 10 Yr 1.58 0.04 0.15 -0.03 -0.19 320

UK 2 Yr 0.17 0.01 0.02 -0.21 -0.30 300 Jul-15 Oct-15 Jan-16 Apr-16 UK 10 Yr 0.82 -0.01 0.07 -0.32 -0.65

BD 2 Yr -0.65 0.01 0.05 -0.65 -0.15

BD 10 Yr -0.02 -0.02 0.15 -0.02 -0.18

Irish 10 Yr 0.48 -0.01 0.04 -0.37 -0.37

Commodities FTSE 250 performance

% Current 1 day 5 day 1 Mth 1 Yr 18,000 Brent (ICE $/bbl) 46.96 -1.37 1.51 -4.49 -17.76 17,500 Gasoline (NYM $/Gal) 1.42 - 3.16 -5.53 -26.27 17,000 Heat Oil (NYM $/Gal) 1.40 - 1.19 -5.69 -16.03 16,500 Nat.Gas 2.72 -1.23 -0.55 3.77 -5.16 Gold $/oz 1,334.70 0.58 -0.60 3.41 17.82 16,000 Silver $/ozt 19.72 -2.09 -2.81 13.53 31.38 15,500

Copper U$/MT 4,839.00 -2.15 -1.62 7.02 -11.45 15,000

Wheat $/BU 4.25 - -3.41 -11.74 -23.33 14,500 Jul-15 Oct-15 Jan-16 Apr-16

Source : FactSet

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