After the Monday blog went out, activist investment guru Carl Icahn warned that earnings at many companies are the result of low borrowing costs rather than better operations. He thinks there will be a big drop in share prices. Remember Mr. Icahn was talking about the USA; we invest abroad.
Our stocks in the news:
*Ireland’s Paddy Power plc reported on its results from July 1 to Nov. 17; it reports the way James Joyce might have. It now expects to achieve mid-single digit operating profit growth thisyear and moreover to suffer an estimated 3% headwind from currency translation into euros.
PDYPF is suffering from mounting competition in the UK and Australia for sports betting, plus the threat of a new British point of consumption tax to be applied at the end of 2014. The lowered growth only partly offset by higher online betting and eGaming. While the amounts bet continue to rise 5-6% from prior year at UK and Irish bookie shops, Paddy’s core business, the amount of money it makes per bet is off 3-4%. However, Paddy continues to open new bookie shops in the UK (37 YTD) and Ireland (9).
Moreover, non-Australian on-line betting produced 15% more sports bets but the net revenue gained fell by 11% and the overall net was flat from last year. Oz is a bright spot with sales up 26% overal and online up 30%.
In Italy (where we garnered two new readers) Paddy was one of the first past the post under the Palinsesto Supplementare when the regulator allowed addition events and markets to be bet on in mid-Oct. Paddy’s average monthly sportbook stakes rose by 84% (Forca Italia!) in the month to mid-Nov. compared to the average during the summer months. It has about 8-9% of the Italian sports betting market. (This does not include betting on the Palio, which is a local monopoly.)
As a pink-sheet traded ADR, Paddy doesn’t have to produce quarterly reports under US SEC rules but it would help if they used a normal calendar.
*Drug firm Mallinckrodt plc, also Irish, is up sharply today. but I don’t know why. MNK was spun out early this year by Covidien, maker of medical instruments, COV, also Irish.
*The Financial Times expects that Vale will accept a compromise over the attempt by Brasilia to hit it with a $14-17 bn claim for unpaid taxes on assets sold outside Brazil by the iron-ore giant between 1996 and 2008. While VALE started out a decade ago fighting the imposition in courts, the government now is offering a deal called Refix, which would lower the tax bill to $8.5 bn and allow it to be paid without interest over the next 15 years. The Vale share has suffered because the tax Brazil is trying to collect is roughly 3x annual net profit.
