Delaney plumps for consistent market scorers
John Delaney Boss of the FAI
Published 25/12/2011 | 05:00
John chooses utilities giant DCC to kick off with as it has "a very strong balance sheet and is always on the hunt for acquisitions. It is one of Ireland's most consistent performers for nearly 20 years with strong exposure to the UK economy.
"A first break in annual earnings growth since the company went public in 1994 should not detract from a business model which has proven its merits over previous cycles and which is expected to return to double digit earnings growth in 2013, while also continuing its uninterrupted record of dividend growth.
"FBD continues its strong performance in a tough economic environment, picking up insurance market share in the urban areas, with a strong backbone in the agricultural community.
"The group has successfully navigated a challenging domestic economic backdrop with its market share enhanced, while at the same time safeguarding its capital base and solvency. The group's conservative approach to its underwriting assets allocation is evident from 89 per cent of its investment portfolio comprising German bunds (61 per cent) and deposits and cash (28 per cent). The group's growing presence in urban markets, success in developing a strong online presence and recent changes to the competitive landscape in the Irish general insurance market are all supportive of further market share advances in 2012 and beyond.
"Kerry Group is a landmark member of the Irish corporate community, expanding its global presence in ingredients, and driven by innovation and acquisition. With a strong balance sheet (net debt to EBITDA of 1.6), low exposure to Ireland (10 per cent), and a share price 6 per cent below its all-time high, Kerry is positioned to continue growth in 2012."
Green building materials supplier Kingspan is another favourite with John. "With its central focus on insulation products the group is among the best positioned companies to capitalise on the ongoing structural shift towards a low-energy building materials solution that is evident in global construction markets.
"The acquisition of CRH's European insulation business in 2010 ranks among the largest deals to date for the company, yet the balance sheet remains in rude good health post the transaction with forecast net debt to EBITDA of 1.6 at December 2011. Its management retains its appetite for further acquisitions with insulation businesses in the US and Europe the most likely focus."
John thinks there are ripe opportunities for Ryanair in 2012. "With the industry's lowest costs they can exploit the unfolding recession across Europe by taking market share from higher priced competitors. As its existing aircraft contract expires in 2013 the low-cost airline is set for a period of growing cashflows that may be recycled to shareholders via special dividends."
His final choice is Paddy Power, "A superb company which continues to innovate in one of the most competitive markets. Growth in online gaming and betting continues to be key to Paddy Power's earnings growth with the coming of age of mobile internet acting as a significant new driver in the online market.
"Paddy Power has consistently maintained a strong net cash position which has facilitated both organic expansion and acquisitions, notably in Australia. The group is particularly well positioned to take advantage of opportunities in new online markets, given its established track record of only operating in regulated markets."