Morning Wrap

Today ’s Newsflow Equity Research 10 Jun 2016 Upcoming Events Select headline to navigate to article

Banks/Property Some potential government measures for Company Events housing market 14-Jun Givaudan; Q4'15 results 15-Jun Berkeley; Q4 2016 results FBD Holdings Motor insurance rates up 35% yoy Pubs Fuller, Smith & Turner FY16 results and current trading update NACS’ International Convenience Retailer of the Year Economic View CB mortgage rules review process begins next week DCC Expansion aspirations

Economic Events Ireland

United Kingdom 14-Jun CPI May 2016 16-Jun Retail Sales May 2016

United States

Europe

Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE

Goodbody Stockbrokers (trading as Goodbody) is regulated by the Central . For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate Goodbody Stockbrokers. Please see the end of this report for analyst certifications and other important disclosures. Goodbody Morning Wrap

Banks/Property Some potential government measures for housing market

The newly created Housing Minister has already committed to publish his housing strategy Eamonn Hughes +353-1-641 9442 within 100 days of office, but some measures that are likely to be included are picked up in [email protected] the Irish Independent this morning after a Dail housing debate yesterday.

The new Minister is considering measures that allow bigger projects to fast-track to An Bord Pleanala, bypassing local councils, in a bid to speed up decisions and minimise delays. The housing strategy will include a special emphasis on increasing the supply of starter homes for first time buyers in , across a range of measures. It will also see the creation of a new Special Delivery Unit in his department with project managers to drive specific building projects from start to finish. The Minister also indicated he will make no attempt to interfere in the Central Bank’s review of its macro-prudential rules.

Housing remains a key issue for the government and the new ministry can only ensure more joined-up thinking on housing delivery in time. We would advocate a key focus on the supply side rather than the demand side and any measures to fast-track planning on larger schemes is likely to be welcomed by housebuilders.

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FBD Holdings Motor insurance rates up 35% yoy

CSO data out yesterday for May shows that motor insurance rates were up 1% in May Recommendation: Hold compared with April, which brings the yoy change to 35.5%. The CSO data comes as Closing Price: €6.50 opposition TDs in parliament last night pushed through a motion to bring greater Eamonn Hughes transparency to pricing. Fianna Fail’s motion sought the re-establishment of the Motor +353-1-641 9442 Insurance Advisory Board on a time-limited basis, greater disclosure around policy renewal [email protected] notifications, action on the settlement of cases, and measures to deal with false and exaggerated claims. However, the Irish Independent reports that the proposed new taskforce is unlikely to be set up as the government is indicating that the Department of Finance is already undertaking a review of the industry, a point also noted by the Minister for Finance in recent weeks.

The rise in motor premiums over the past number of quarters reflects rising claims costs for the industry. However, this improving rates backdrop will still only see FBD return to profitability in Q4 this year, and unlikely to make its target ROEs until 2018/19, with peers facing similar trends. As such, premiums look set to continue to rise for the foreseeable future.

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Pubs Fuller, Smith & Turner FY16 results and current trading update

Fuller, Smith & Turner reported results for the year ending March 26th this morning with lfl Gavin Kelleher +353-1-641 0423 sales +4.8% yoy in Managed Pubs and Hotels and profits in Tenanted Inns +2% yoy. The [email protected] estate comprises 191 Managed Pubs and Hotels and 200 Tenanted Inns. The current trading update for the first ten weeks of the year shows Managed Pubs and Hotels lfl sales +2.7% Kevin McDermott +353-1-641 9162 against strong comparatives and Tenanted Inns profits down 2% yoy. [email protected]

Brian Devitt The strong performance in the Managed Pubs division in the first ten weeks to June +353-1-641 9415 3rd is a positive read through for our covered stocks in the sector. However, the [email protected] underperformance in its Tenanted and Leased pubs would indicate a negative read Rachel Fox through for Greene King and Marstons, where Tenanted and Leased pubs make up +353-1-641 0442 [email protected] c.9% and c.6% of their sales respectively.

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Applegreen NACS’ International Convenience Retailer of the Year

Last night, Applegreen won the NACS Insights 2016 International Convenience Retailer of Recommendation: Buy the Year Award for its new M1 motorway service area in Lisburn, Northern Ireland. The site Closing Price: €4.25 won out of a shortlist of six sites (2 in Ireland, 2 in the UK, 1 in Norway and 1 in Sweden). Patrick Higgins The 16,000 square foot site, which opened in March, has two levels with seating for 300 +353-1-641 0403 people, six different foodservice options and a Lavazza coffee bar. The site also includes an [email protected] executive lounge for business meetings which provides free Wi-Fi and mobile charging.

This award underpins the rationale and strength of Applegreen’s food-to-go focused business model. With the two large forecourt operators (Oil Majors and traditional retailers) retrenching their forecourt footprint due to issues in their core businesses, the underlying forecourt market dynamics in the UK remain favourable for specialist operators like Applegreen.

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Economic View CB mortgage rules review process begins next week

Having earlier flagged a review, the Central Bank announced yesterday that it would invite Dermot O’Leary +353-1-641 9167 submissions on the macro-prudential rules from next week, with the submissions being open [email protected] for eight weeks. This will be followed by a review of the submissions, with a final assessment being made available in November.

In the speech that announced the details of the review, Central Bank Deputy Governor Sharon Donnery reiterated some of the points that have been made previously by representatives of the Central Bank. These included the benefits of the macro-prudential approach, the lessons learned from both a historical and international perspective and the Bank’s intention to maintain macro prudential rules as a key part of its toolkit to manage financial risks.

However, in addition, the Deputy Governor will also take a broader look at the implications of the macro prudential mortgage rules. Whereas most of the focus up to now has been placed on the impact on household indebtedness and banking stability, the review will also look at the impact on “the rental market, housing supply and unsecured lending”. In other words, the Bank will look at the potential unintended consequences of the rules.

We have said previously that we agree with the rules in principle, but some minor tweaks could be made to the implementation of the LTV component of the rules to take account of regional and cyclical elements. Time will tell whether the Central Bank agrees.

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DCC Expansion aspirations

A full page interview with CEO Tommy Breen in the Irish Times this morning rightfully marks Recommendation: Hold the achievements of a company that has now been existence for 40 years. Over that period Closing Price: £63.65 just two CEOs have existed, an anomaly in today’s business environment, but a testament to Gerry Hennigan the consistent performance. +353-1-641 9274

[email protected] While incremental detail in the article is limited, there is a clear reiteration of DCC’s aspirations to expand outside Europe. “Breen thinks it is inevitable that DCC will eventually buy a non-European fuels business from one of the oil majors, although he won’t put a timeframe on it. He hints that it may also buy a healthcare business outside Europe”.

For the year to March 2016, DCC derived 53% of operating profit from the UK with the bulk of the remainder from Continental Europe (40%) and just 7% from Ireland. Energy, at 68% of operating profit, has been the driver of growth over the recent past, with healthcare contributing 15% to Group profit in FY16.

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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 26.82 21,875 -1.9 -0.2 5.9 0.4 -1.0 0.7 3.4 7.7 16.9 13.4 13.77 18,851 0.5 -1.6 7.2 -8.3 1.5 -0.7 4.7 -1.7 14.2 12.1 AIB Group 6.80 18,571 -6.8 -4.2 -16.2 2.1 -5.9 -3.4 -18.2 9.5 14.9 20.7 HeidelbergCement 74.80 14,842 -1.2 -1.1 -3.7 -1.1 -0.3 -0.2 -5.9 6.0 14.3 13.0 79.81 14,031 -0.3 -1.7 -0.2 4.6 0.7 -0.8 -2.6 12.1 24.2 21.3 IAG 5.11 10,388 -0.5 -3.9 -0.5 -16.3 0.5 -3.1 -2.8 -10.3 5.6 4.4 Wolseley 36.96 9,612 -0.0 -2.4 -5.7 0.1 0.9 -2.8 -6.9 1.1 14.7 12.9 Paddy Power Betfair 93.00 7,785 -0.8 1.0 2.4 2.4 0.2 0.6 1.1 3.4 30.2 24.8 Mondi 13.52 6,565 -0.7 1.8 3.9 1.3 0.3 2.7 1.5 8.6 12.3 11.8 Bank of Ireland 0.25 8,064 -3.1 -5.0 6.9 -26.3 -2.2 -4.1 4.4 -21.0 10.8 9.8

Indices ISEQ performance

% Price 1 Day 1 Week 1 Mth Ytd 7,000

ISEQ 6,358.14 -0.86 -1.20 4.25 -6.38 6,800 FTSE 100 6,231.89 -1.10 0.75 1.91 -0.17 6,600 DAX 30 10,088.87 -1.25 -1.17 1.09 -6.09 6,400 CAC 40 4,405.61 -0.97 -1.35 1.92 -4.99 6,200 FTSE Eurofirst 300 1,340.20 -0.94 -0.80 2.38 -6.77 6,000 Nasdaq 4,958.62 -0.32 -0.26 4.39 -0.97 S&P 500 2,115.48 -0.17 0.49 2.76 3.50 5,800 Dow Jones 17,985.19 -0.11 0.82 1.58 3.21 5,600 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Nikkei 225 16,668.41 -0.97 0.64 2.79 -12.43

Exchange Rates

Current Px 1 day Px 1 Week Px Dec15 Avg Ytd

Stg/€ 0.783 0.783 0.773 0.737 0.777 STOXX 600 performance US$/€ 1.133 1.139 1.116 1.086 1.115 CHF/€ 1.092 1.093 1.105 1.087 1.097 420

JPY/€ 120.577 121.523 121.159 130.676 125.429 400

Bonds 380

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

US 2 Yr 0.77 -0.01 0.77 0.06 -0.12 340 US 10 Yr 1.69 -0.02 -0.11 -0.06 -0.19 320

UK 2 Yr 0.37 -0.00 0.00 -0.03 -0.09 300 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 UK 10 Yr 1.24 -0.01 -0.10 -0.17 -0.23

BD 2 Yr -0.54 -0.00 -0.03 -0.54 -0.00

BD 10 Yr 0.03 -0.02 -0.08 0.03 -0.21

Irish 10 Yr 0.73 -0.03 -0.05 -0.16 -0.16

Commodities FTSE 250 performance

% Current 1 day 5 day 1 Mth 1 Yr Brent (ICE $/bbl) 51.95 -1.07 4.65 19.07 -19.93 18,000 Gasoline (NYM $/Gal) 1.62 -0.07 0.69 12.19 -22.07 17,500 Heat Oil (NYM $/Gal) 1.55 -1.23 4.24 20.59 -19.12 17,000 Nat.Gas 2.62 6.04 9.13 24.74 -8.05 Gold $/oz 1,263.90 0.07 1.89 -0.11 7.35 16,500 Silver $/ozt 17.05 1.79 5.90 -1.62 5.70 16,000

Copper U$/MT 4,546.00 -0.97 -3.03 -4.08 -24.09 15,500

Wheat $/BU 5.10 -1.78 2.61 11.77 -4.13 15,000 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16

Source : FactSet

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