Thursday 27 October 2016

INM, UTV among top stocks as economic recovery continues

Published 08/04/2015 | 02:30

Traders work on the floor of the New York Stock Exchange. Reuters
Traders work on the floor of the New York Stock Exchange. Reuters

Improving domestic demand will be a key driver of Ireland's economic recovery this year, a new report by Merrion Stockbrokers has predicted.

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The quarterly report from the firm said that a weaker euro and strong growth performances from the US and UK will also aid Ireland during 2015.

"But the most encouraging aspect is the pick-up seen in domestic demand last year, which augurs well for 2015, especially as the recent Budget delivered some income-tax relief (albeit modest) for hard-pressed workers," noted the Merrion report.

The report was co-authored by Merrion's head of research, David Holohan, and its chief economist, Alan McQuaid.

"With consumer confidence near a nine-year high, we expect personal spending to be even stronger this year, helped by the ongoing improvement in the labour market," they said.

"Assuming the economy continues to grow strongly in 2015, as we expect, an average jobless rate of 9.7pc is now envisaged for this year, with the figure likely to be running around the 9pc level come December," they added.

The report also forecast that global stock markets will struggle to maintain new highs and face the risk of declining in the second quarter of this year.

However, it also selected media firms Independent News & Media (INM) and UTV among its top stock picks for the current quarter.

The Merrion report said that INM has undergone a significant period of restructuring in recent years, "which has left the company in a materially stronger position for shareholders". The report added: "As a result of the sale of INM's South African assets in addition to the restructuring of its debts, the company emerged as a profitable company with manageable debt for the first time in a decade."

UTV, which earlier this year launched its new UTV Ireland TV channel, also owns a number of radio stations in Ireland and the UK.

"The company is an attractively priced media company exposed to recovering economies with market leading positions which should give rise to increased advertising revenue," noted Merrion. "UTV is also coming to the end of a capital expenditure cycle that will see free cash flow increase more meaningfully in future years."

Other medium-risk stocks Merrion favours during the current quarter include Yahoo and US semiconductor manufacturer Micron, as well as Homebase and Argos owner Home Retail Group.

Merrion also called for a "determined" public approach to encourage Britain to remain in the European Union.

British Prime Minister David Cameron has pledged to hold a referendum in 2017 on whether or not the UK should remain part of the trading bloc, should the Conservatives be re-elected to government.

"The United Kingdom is Ireland's biggest trading partner and nearly 200,000 Irish jobs - representing around 10pc of Ireland's workforce - depend on that close economic relationship," the Merrion report authors pointed out.

"Trading costs could become prohibitive if an EU-free Britain reintroduced tariffs."

Irish Independent

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