Wednesday, 28 October 2015

European earnings numbers today: Statoil, Heineken, Lloyds

Another day...more European earnings numbers.  With the VW conference call later, what has caught my eye from today's selection?

Continuing the oil sector theme after yesterday's BP disclosures (link here), the Norwegian company Statoil came out with their Q3 thoughts.  Again the key is the balance sheet...and with the help of divestments Statoil did manage to pay their 5.5%+ dividend yield although of course cost cuts are continuing.  

As as investment I am not that excited about Statoil given I perceive it is recumbent to its key Norwegian government shareholder but what the numbers are telling me is that at least so far mega cap energy stocks are still hitting their dividend yields...and this is why I still think the space offers opportunities.  

Meanwhile Heineken shares reached another new high (doubling in the last five years)...'s sales only Q3/9m numbers continued to impress the market and the continuing good organic growth level is impressive although due to mix issues they did not up their margin guidance (although the commentary sounded suitably cautiously optimistic).  

There is much to like about Heineken (see my write-up here) but I am cautious at a x20+ P/E.  

Finally Lloyds.  Looking through my UK RNS notes this morning I observed:

Lloyds Bank – underlying results better but headline flat / weaker due to impairments, slight deterioration in guidance

Guidance for 2015 updated
Net interest margin for the full year now expected to be in line with year-to-date performance (2.63 per cent)
Asset quality ratio now expected to be lower than 15 basis points for the full year
Other income expected to recover in the fourth quarter but full year now expected to be slightly below 2014
Remaining guidance unchanged

So at a 55p tangible NAV and a 15%+ return on equity it implies a mid 80s pence share price.  The trouble is the headline return on equity is just 4%+ due to impairments and related.  As they continue to pay out impairments (albeit it surely towards the end of this process as shown by the 64% fall in impairments yoy) and have other write-downs there will continue to be a gap...albeit this gap between these return on equity measures should start to narrow.  So today's 10% discount to the above derived theoretical valuation feels...about right.  

With the UK government set to offload its remaining shares a discount is appropriate but the current share price level in the lower 70s pence area is starting to look opportunistic. 

1 comment:

  1. Just one comment on Lloyds: The stated ROEs are "Returns on required equity",not Returns on Equity.