Ryanair will continue to climb - but it's not looking good for AIB
Published 27/12/2015 | 02:30
We surveyed an array of experts at Ireland's leading stockbroking houses on an anonymous basis to get their frankest opinions on the winners and losers of the last 12 months and what is in store for 2016. The results don't bode well for Aryzta or AIB.
Q: What do you predict will be the best performing Irish stock in 2016?
Shareholders in Michael O'Leary's airline saw the value of their investment climb by just over 50pc in 2015, but Ireland's top analysts expect Ryanair's share price will continue to soar next year.
"They should see continued growth in the underlying business as they open new routes and put circa 40 new aircraft to work on their network," said one. 2016 could also be the year when Ryanair starts code-sharing for the first time, funnelling transatlantic passengers onto its European routes.
Eamonn Rothwell's ICG was analysts' second choice. ICG's value surged past €1bn for the first time ever in December on the back of economic growth and sterling strength.
Q: What do you predict will be the worst performing Irish stock in 2016?
Analysts don't feel good about the prospects for AIB shareholders in 2016. With a market capitalisation of €21bn, it remains massively overvalued.
We still do not know if the Government will reduce its stake in the country's second-biggest lender in 2016. If it does, new investors will want to buy in at more realistic levels. Rather than boost the existing shares privatisation, therefore, is set to push the lender's stock lower.
That won't be a reflection on the bank itself. Chief executive Bernard Byrne said at an EGM in December that market sentiment towards Ireland was "very friendly" at present but warned that sentiment can turn quickly.
Others tipped as likely to be the worst performing Irish stock of 2016 included Kerry Group, Glanbia, Ormonde Mining and Bank of Ireland.
Q: Who was the best-performing CEO of an Irish listed company in 2015?
A: Michael O'Leary
Mullingar man O'Leary took the prize for best chief executive for a second consecutive year. As one analyst said recently: "For Ryanair, it's like Christmas every month."
Paddy Power's still relatively new CEO Andy McCue, who is just 41, ranked second after securing a £6bn (€8bn) merger with Betfair "which could prove transformational for the industry and the company", one analyst noted.
McCue will take the COO role when the deal is completed and Breon Corcoran will be CEO.
Q: Who was the worst-performing CEO of an Irish listed company in 2015?
A: Owen Killian
Every analyst surveyed said Aryzta's Owen Killian. The Swiss-Irish baked-goods company's share price has plummeted this year, while Roscommon native Killian and other senior executives were lambasted by some shareholders for their compensation packages.
Q: What do you predict for the price of oil in 2016?
A: Average $45 a barrel in 2016
Responses ranged from between $40 to $50 a barrel. Nobody opted for anything close to the $20 a barrel that Goldman Sachs has warned about.
"It is going to be volatile," said one Irish analyst. "Either way, it will probably be higher than current levels."
This has implications for the global economy. "There is a fear that it could rebound faster than expected as the economy lifts and that could have implications for inflation, putting pressure on central banks to raise interest rates," said another.
Q: What are the prospects for the Irish economy in 2016?
A: Average 5pc GDP growth
All reported strong growth but again responses varied. Some selected a GDP growth rate of as low as 4pc, while one expert predicted the Irish economy will expand by as much as 6.8pc next year.
The average of the analysts' responses, 5pc, is lower than the ESRI's prediction of 6pc.
There are lots of variables that could spur growth higher, one person pointed out.
"Provided there is still reasonable export demand and the exchange rate acts a boon to the tourist sector, we should see tax receipts remain good. And with an election, who knows what 'goodies' could be splashed about?"
Q: What are the prospects for the global economy in 2016?
A: Average 3pc growth
Most responses here were around the 3pc mark, peaking at 3.6pc - though one pessimistic analyst said they predicted 0pc growth from the global economy next year.
"We should see some improvement from a tough year for emerging markets," said another. "The US will likely trundle on and provided there are no significant political headaches in Europe, there should be some growth there as well."
Q: What are the prospects for the euro-dollar exchange rate in 2016?
A: Average $1.10
The euro-dollar exchange rate should stay within 2015's ranges of $1.05-$1.15, Irish analysts predict. Which means no real reprieve for Irish shoppers who have had to give up annual shopping trips to New York with the surge of the dollar.
Q: What are the sectors to watch in 2016?
A: REITs, banks, energy, technology
"Energy and materials/mining could be massive performers if there is a rebound in commodity prices. In the absence of that, we are likely to see good returns from the technology sector and maybe the industrials," said one analyst.
"Energy companies are very undervalued at the moment", said another, who also highlighted the health balance sheets of technology companies. "Companies with a lot of debt around them will struggle as interest rates rise."
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