Monthly Archives: October 2013

Carl Icahn & Transocean – a quick look at what’s been happening lately

Just revisiting a post I published in January following the news that Carl Icahn was building a stake in Transocean and thought I would update the story. Since I wrote that article Transocean decided in May to pay a 5% dividend (USD 2,24) vs. the USD 4 Carl Icahn was fighting for. That brings his break-even for the position close to CHF 40-42. That also coincides with where the stocks multi year lows were marked. A strong support zone from a technical analysis perspective. The veterans looking at technical indicators at the time of the news flow regarding his position and pointing out that the stock was stretched turned out to be right. The stock was unable to clear the CHF 54 region. Part of the story here is USD related though. In USD the stock is trading at close to 49 vs the CHF 44 here in Switzerland. The top coincided with the USD/CHF at 0.97, now the FX rate is at 0.89, a drop of nearly 10%. So if you invested CHF you’re down, even including the dividend, if you bought following his entry. Note that the stock nearly reached USD 60 in February 2013, the high was USD 59.50.

This headline crossed the wires on Oct 21st and is probably a good sign for liquidity and media coverage:

21-10-2013 23:43 en djnw Transocean to Replace Dell in S&P 500 After Market Close on Oct. 28 -CNBC

Icahns’ activity has been subdued in comparison to his fight with Apple:

14-08-2013 23:46 en djnw *DJ Icahn Reports Higher Stake in Transocean -Filing

Rating activity has been a mixed bag with more analysts cutting than raising with the notable exception of S&P Capital IQ.

16-10-2013 17:24 en djnw *DJ Transocean Cut to Underperform From Mkt Perform by BMO >RIG
20-08-2013 15:54 en djnw *DJ Transocean Cut to Neutral From Buy by UBS >RIG

 

09-08-2013 14:55 en djnw *DJ Transocean Cut to Neutral From Buy by Global Hunter Securities >RIG
08-08-2013 21:19 en djnw *DJ Transocean Raised to Buy From Hold by S&P Capital IQ >RIG
02-07-2013 14:31 en djnw *DJ Transocean Cut to Neutral From Buy by Citigroup >RIG

 

 

Charts:

transocean-3-year-chart-2010-2013-carl-icahn

transocean-2013-carl-icahn

 

 

Meyer Burger moves from IFRS to Swiss GAAP FER

Just two weeks after Burkhalter Holding (see post) another SIX listed company has decided to switch from IFRS to Swiss GAAP FER. Meyer Burger has cited growing complexity, the overly detailed rules (costly) of IFRS as factors behind their decision to switch to Swiss GAAP FER. They are convinced that Swiss GAAP FER is a solid framework permitting a true and fair view. The shares of Meyer Burger (Ticker: MBTN) will remain listed on the domestic standard of the SIX Swiss Exchange.

As was the case at Burkhalter Holding they will use equity capital to offset the goodwill and pension plans will also see adjustments; the amount of liabilities for these will sink. For the last published balance sheet as of June 30th the switch will still result in a equity capital ratio of over 50%.

The detailed numbers and changes will be published on March 14, 2014 in the annual report 2013.

Link to the press release published today

Burkhalter Holding moves from IFRS to Swiss GAAP FER

Today the board of Burkhalter Holding (Ticker: BKRN) announced the switch from IFRS to Swiss GAAP FER. The main reasons given were the treatment of pension plans and of goodwill and in a further remark the steady increase of rules (read: making accounting more tedious and expensive with IFRS).

They can now offset the equity capital, which will sink, with goodwill. As they no longer need to adhere to IAS 19 the employee benefits will also free up equity capital.

The adjusted EPS will be lower: CHF 4.29 instead of CHF 4.53. Same with EBIT: CHF 29.3m instead of CHF 30.9m. The fall is due to the discount rate changing from the market rate (IAS 19) to a higher calculatory rate (as for tax calculations for example) for the employee benefit plans.

Update: also see the post regarding Meyer Burger (Ticker: MBTN) switching from IFRS to Swiss GAAP FER (Oct-18-2013)

Due to the change Burkhalter Holding will have to move from the Main Standard to the Domestic Standard.

Media Release: Burkhalter-Holding_Switch_to_Swiss_GAAP_FER_from_IFRS

Calculating Variance of a Portfolio with 2 Market Returns – CIIA Foundation

Using the data from the following table, evaluate the risk
measured by the standard deviation) in CHF of a portfolio
invested 75% in the Swiss market and 25% in the UK market,
rounded to the nearest integer.
Description Percentage
Standard Deviation in CHF of the Swiss Market return 15%
Standard Deviation in CHF of the UK market return 13%
Covariance between the Swiss market return in CHF
and the UK market in CHF 0.08
Solution
= 0.75^2 * 0.15^2 + 0.25^2 * 0.13^2 + 2 * 0.75 * 0.25 * 0.08 = 0.0437
= SQRT of 0.0437 = 0.209 = 20.9%
variance-two-portfolios.png