Finance Hacks

Kerry Group has modest beginnings, since starting operations in Listowel back in 1972, the company has grown from a small dairy business in Kerry to a major player within the global food industry. Millions of people now consume their products on a daily basis! They employ 23,000 people worldwide, reporting an annual revenue of €6.4 billion and €691.4 million net profit for 2017! Kerry Group went public in 1986, trading on both the LSE and ISEQ with a market cap of €15 billion.

Similarly to Glanbia shares, shareholders have suffered a tough time recently with the stock price dropping from an all-time high of €94.92 in December 2017 to today’s price of €83. Long-term shareholders can’t complain as the Group has a remarkable track record for delivering positive earnings growth over the last five years. Despite the pull back, the consensus among analysts is positive. 7 out the 15 financial analysts polled by the Financial Times believe they will outperform the market, the remaining 8 rate the company as a hold. The overall sentiment is slightly less positive in comparison to last year. The price targets set by investment analysts range from €78 to €96, with the median price being €89, representing an 8% increase from the current price of €82.10. It expects to pay out a dividend of €0.67 for this year.

Reasons to Buy

• Resilient business model that has posted a positive growth in earnings in each of the last five years. Over the last 40 years, Kerry Group has outperformed the vast majority of indexes and competitors.
• Generate strong cash flows that can be used to make more strategic acquisitions. Acquisitions are an important part of their strategy to aid growth in emerging markets. Since 2000, the Group have spent over €4 billion on acquisitions.
• Strong management team with decades of experience.
• Not overly reliant on one product or market.

Reasons to Sell

• Brexit will directly impact all Irish businesses operating in the UK. 30% of Kerry Groups annual exports are sold to the UK. Their share price has witnessed sharp declines based on news surrounding the uncertainty of Brexit. If customs regulations are enforced, it will negatively impact their competitiveness abroad due to increased costs and delays.
• Currency risks – the United States contributes approx 20% of their revenue, the dollar has performed terribly against the euro since early 2017, losing about 15% in value.
• Operate in competitive markets where it’s difficult to develop sustainable competitive advantages. Also their dairy business relies on massive volumes to combat low margins.
• Regulatory risks could negatively impact stock price performance.

I would avoid buying shares in the short term due to the uncertainty involving Brexit. Kerry Group could be a great long-term investment, a company with a long history of growth appeals to every shrewd investor. Investors will need significant patience to hold through volatile market conditions.

Headquarted in Kilkenny, Glanbia PLC is a global nutrition company with operations in 32 countries, employing 6,600 people. The group was originally formed in 1997, after a merger between Avonmore Foods and Waterford Foods, Ireland’s two biggest dairy co-ops. Since the merger, Glanbia has drastically moved away from its core dairy business and expanded into international markets.

Share Price Performance

Over the last 12 months Glanbia’s share price has experienced a sharp decline, dropping by over 25%. They reached a peak of €19.59 in April 2017 but now trade at €13.90. The primary reason for the sell off was the disappointing performance of the JV’s due to weak dairy prices. In the years previous, Glanbia has been a huge success story, with eight years of double-digit earnings growth driving their stock price to new highs.

Recent Acquisitions

• In 2014, they acquired Nutramino, a Scandinavian sports nutrition company operating mainly in Sweden, Denmark and Norway.  Nutramino expanded into the UK and Ireland, with big retailers such as Holland and Barrett stocking their products.
• Isopure was another acquisition in 2014, they sell a range of protein powders and drinks.
• Glanbia took over thinkThin in 2015 for $217 million. thinkThin sell a range of healthy protein snacks in the form of bars, powders, cakes and smoothies etc. Products are stocked in well-known US retailers such as Trader Joe’s, CVS, Whole Foods and Target.
• Last year, Glanbia bought Amazing Grass, a US company that primarily sell plant-based nutrition, a massive health trend in America.
• In February 2017, they acquired Body & Fit, an online nutrition business with a big presence in Germany and the Benelux region.

Reasons to Buy

• Continue to make strategic acquisitions to grow and maintain their market share in various product categories. Mergers and acquisitions are a key competent of their growth strategy, they intend to spend another €300 to €400 million on further acquisitions.
• Have sold off 60% of Glanbia Ireland, their undesirable low-margin liquid milk business. The company can focus more attention on products with higher margins.
• Potential takeover target, there is speculation shareholders would be bought out at €20 per share. Diversifying away from the liquid milk businesses increases the chances of an international food group buying out the company. Analysts at BNP Paribas suggested the Irish company as a perfect takeover target for Japanese food company, Ajinomoto.
• Future Dividend plans – to entice investors they plan a dividend payout between 25% to 35% of adjusted earnings per share.

Reason to Sell

• They released a profit warning in February 2018, stating earnings growth will slow down in the coming year due a combination of weak dairy prices and increased investments.
• The specialist nutrition market is highly competitive with thousands of companies saturating the market. Glanbia has no sustainable competitive advantages in the performance nutrition sector. The barriers to entry are so low, almost anyone can setup a nutrition business with a few thousand euro.
• Currency exchange risk – the United States makes up 80% of their revenue. The dollar has weakened significantly against the euro from early January 2017, falling from 0.96 to 0.81. They need to start hedging their currency risk.
• They report some of their earnings on a constant currency basis, companies use this reporting method to hide underlying problems on their balance sheet.

Their stock price has fallen significantly over the past year. The stock could be bottoming out but I think its price still has potential to fall further in 2018 and 2019. Would be interested in buying shares if they fall closer to €10.

Since launching in 2015 Mintos has developed into one of the top peer-to-peer marketplaces in Europe, but is it worth the hype? The Latvian based business went from a start-up to a Fintech Award nominee in just one year. With over 15,000 investors from over 50 countries, Mintos is certainly a bustling marketplace with a thousands new users signing up.

It might seem strange that a Latvian based lender would be a go-to choice for people in Ireland but one of the most appealing things about Mintos is its popularity with international investors. Mintos states that their “mission is to facilitate free and efficient movement of capital” and they have already seen huge growth since launching.

Signing up

The signing up process is simple, all you have to do is fill out the registration, it should not take longer than five minutes.

Depositing Money

Whether you’re with AIB or Bank of Ireland, all transfers must be made via SEPA bank transfer. On average transfers take 1-2days to show up into your Mintos account. Don’y forget to add your investor number as the reference. This number can be found on the deposit page.

How Does Mintos Work?

One of the main pros of Mintos is its simplicity; they act as a matchmaker for lenders looking to raise capital and investors looking to make money. The marketplace is where all the action takes place, investors browse through the website in search of lucrative loans and invest in loans that will offer a safe return.

Lenders, on the other hand, can list their loan on the marketplace to attract investors to them, rather than looking for a loan from a bank they can simply use the platform to raise money at affordable rates. The marketplace makes it easy for lenders to sell their loans on to investors and it can all be set-up in minutes.

There are six different loans you can invest in on Mintos including mortgages, car loans, business loans, short-term loans, agriculture loans and that’s just a sample of them. The secondary market is also worth mentioning, this is separate to the main marketplace and can be leveraged to sell any current investments you have to other users.

The risk involved could be minimal or high depending on exactly what type of loan you invest in and navigating the platform can be tricky unless you have some experience. Still the process of investing is very simple and Mintos offers a lot of variety. In comparison to Irish P2P lenders such as Linked Finance and Flender, Mintos are a lot bigger with more opportunities to make money; this is the main reason they are becoming popular in Ireland.

The Pros and Cons

So, now you have an idea of how the platform works let’s take a closer look at the pros and cons.

Pros

• Minimum investment of only €10.
• Great alternative to Irish P2P lenders.
• High potential interest returns – it’s not unrealistic to receive an annual return of 12%.
• Buyback guarantee available on certain loans. In the event that a loan is overdue or defaulted on, the loan originator will repurchase the loan.
• A wide range of loan options.
• Free currency exchange is available.
• The secondary market allows investors to cash out early with no selling fees.
• Auto-invest management tool can be programmed to suit you’re level of risk.

Cons

• The lender is not FCA regulated.
• Higher risk on certain kinds of loans.
• No provision fund service is available.
• Currency exchange risk when investing in loans with a different currency.
• Mobile app needs to improve so customers can conveniently check investments.
• You need to act quickly because the best loans got bought fast. Lenders can overcome this by learning how to use the Auto invest feature.
• Irish residents have to pay tax on any profits.

Mintos vs Twino

Twino is another leading P2P lending platform based in Latvia that is growing at a phenomenal rate in Europe. Both companies are safe and offer buyback guarantees but Twino is less popular because they have lower loan volumes and offer lower interest rates. Despite Twino having low loan volumes its easy to liquidate investments on the secondary market.

Promo Codes?

No promo codes are currently available but Mintos does offer a 1% cashback on investments made within the first 90 days.

Closing Thoughts

Mintos might not be perfect, but it is definitely worth exploring in 2018 before it becomes too popular. Once supply and demand levels out overtime the interest rates on loans will drop below 10%, this has happened to well-known peer-to-peer lenders in the US and UK.

Bank of Ireland shareholders endured a torrid time over the last few years. 2017 proved to be an uneventful year as the banks performance was underwhelming with some investors switching to AIB in the hope of better returns. BOI posted profits of €852 million last year, down 18% on 2016 figures.

As of March 2018, the consensus among analysts is neutral. Out of the 18 analysts polled by the Financial Times, 7 of them rated Bank of Ireland as a hold with the rest of the votes split evenly between the buy and sell option. The previous forecast was a lot more positive as the majority of analysts predicted the bank would outperform the market. Not surprisingly they were wrong! The price targets predicted ranged from €4.80 to a high of €9.30, with €7.95 as the median price. The median represents a 14.95% increase on the current share price of €6.92 on the ISEQ.

Reasons to Invest

• Overall public opinion on BOI has improved since Francesca McDonagh was appointed as CEO, taking over from the unlikable Richie Boucher.
• They are investing close to a billion euro in IT infrastructure to help cut costs, making the bank more cost efficient in the long run. This investment is badly needed as most of their technology is outdated.
• Bank of Ireland will start paying a dividend of 11.5 cent per share for the first time since the financial collapse. They were expected to start dividend payments in early 2017 but had to delay plans because of volatility in the size of its pension deficit. The dividend could represent a key catalyst in their turnaround and more funds will be looking to invest. BlackRock recently increased their holdings to take advantage of the fall in share prices.
• The bank has barely performed any asset write backs which is crazy once you consider the increase in the value of properties here.
• Ireland is one of the fastest growing economies in Europe with a 4% increase in GDP. An improving economy will positively impact the overall banking sector.
• Investec are promoting Bank of Ireland as of their top stocks picks for 2018. Investec are basically paid cheerleaders for the company and claim BOI will recover strongly.

Reasons Not to Invest

• Approximately 14,500 customers were impacted by the tracker mortgage scandal. BOI are working out a plan to compensate everyone affected. If the bank receives any more negative press in 2018 regarding more payouts to customers it will suppress share prices. The mis-selling of mortgages has done severe damage to their brand.
• BOI are heavily exposed to Brexit with the UK making up 40% of their loan book. AIB has less exposure to the UK and now own a bigger share of the mortgage market in Ireland. Traditionally AIB and BOI were neck and neck in terms of market share but AIB have recently gained some ground.
• Their investment in IT infrastructure could take 5-10 years before it has a noticeable impact. Investors will need a significant patience to buy and hold the company.
• The fintech revolution means BOI will have more competition and could lose customer deposits. N26, a mobile bank, is becoming extremely popular with Irish residents as they’re a great low-cost alternative.

How to Buy Bank of Ireland Shares

If you’re interested in purchasing shares I highly recommend using an online broker such as Degiro. They charge the cheapest commissions out of all the brokers in Ireland. E.g. if you buy €10,000 worth of BOI shares it cost only €6 in fees. On the other hand, it would cost €50 with Davys and €100 using Goodbody Stockbrokers.

Degiro is a low-cost dutch broker established by a group of former bankers aiming to disrupt the brokerage industry in Europe. Offering cheap commissions and a solid trading platform they have experienced rapid growth with 250,000 customers, managing close to €30 billion in transaction every year. Since launching in Ireland in 2015, they have made waves within the Irish market, charging lower fees than well-known brokers such as Davys, Goodbody Stockbrokers and Cantor Fitzgerald. They provide access to a range of assets classes including bonds, mutual funds, stocks, trackers, futures and options. Degiro currently operate in 18 countries across the EU and are regulated by the Dutch Central bank. Luckily they are not regulated by the Irish Central Bank, everyone knows how incompetent they are.

Opening an Account

The whole account setup process is relatively straightforward which is rare for an online stock broker. There is no need to fill out any paperwork as they use a “derived bank identification” to verify accounts, your account should be approved within two to five business days. In total it takes ten minutes to fill in the required registration information. When signing up there are five different account types to choose from:

• Basic – not allowed to borrow money or trade with margin.
• Custody – no margin but you can trade some leveraged products.
• Active – Up to 50% margin available.
• Trader – 100% margin available.
• Day Trader – 100% margin with additional margin offered during trading hours.

If you’re new to the stock market go with the basic or custody account, I’ve seen so many inexperienced traders blow up accounts with margin. Using margin basically means you’re borrowing money from your broker, it’s used when short selling an asset class to profit from a drop in price. I’ve seen online some people have concerns about giving their PPS number but like all stock brokerages Degiro need this information. When joining, provide your IBAN number for your bank account, transfers generally take 2-3 business days to clear. If you bank with AIB or Permanent TSB, Trustly can be used to make an instant deposit at a cost of €1. There are two options for funding an account, via bank transfer and SOFORT. You can only make withdrawals via bank transfer, SOFORT is not allowed.

Commissions

Degiro offer the lowest fees on nearly all of their investment products. Unlike other brokerages, they don’t charge inactivity or stupid maintenance fees. Buying Irish shares on the ISEQ is really cheap! Example, purchasing €1,000 worth of Bank of Ireland shares will cost €2.40, in comparison with Goodbody stockbrokers it would cost €25 in commissions. That’s a staggering €22.60 difference in fees!

List of Extra Fees:

Real Time Stock Quotes – Degiro charge extra for real time prices which is annoying. Prices displayed on the platform are delayed by 15 minutes. The fee depends on the exchange, it ranges from €1.50 to €21 per month.

Currency Conversion Cost – If you are buying a financial asset in a different currency, the conversion cost will be the daily exchange rate and a 0.10% foreign exchange fee.

Exchange Connection Fee – This a new cost introduced and does not apply to the ISEQ. It’s cost €2.50 per year for each exchange traded on regardless of how many trades you make. Example if you trade on the Nasdaq, London Stock Exchange and Hong Kong Stock Exchange it will cost €7.50 every year. This fee is charged on a monthly basis, 20 cent for each exchange.

Dividend Processing Fee – Assets such as ETF’s and stock may give dividends, the fee charged on dividends will depend on your account type. With a basic or active account, there is no fee for processing dividends, with a custody account the charge is €1 plus a 3% dividend.

Trading Platform

Degiro has both a desktop (webtrader) and mobile trading platform for customers. They have a solid platform that has all the features you would expect such as stock market news, charts, transaction history and portfolio management. Out of 10 I would rate their platform a seven, not amazing but considering how cheap the commissions are I don’t care too much. In addition, the user interface is easy to navigate, so it doesn’t take long to learn how to place trades.

Pro’s

• Great low-cost alternative to Davy and Goodbody Stockbrokers.
• There is no account minimum required, perfect for beginners who want to start out with under €1,000 to gain some experience.
• They offer access to a wide range of financial products.
• Perfect for long-term investors just looking to buy shares without being charged expensive inactivity fees.
• Allows investors buy shares on all major exchanges.
• Safe and reliable – all customers deposits are held in a separate custodian account so if they go bust, client deposits will not be recoverable assets to creditors.

Con’s

• Customer service needs to improve, don’t have enough staff to support all customers and it can take days to receive a response.
• Not suitable for active day traders.
• No demo account available for beginners.
• No education or research options available.
• €20,000 is the maximum amount that is protected in case of bankruptcy.
• Exchange connection fee is a small but sneaky charge not many customers know about.

Final Thoughts

Degiro is a great broker for those new to investing and have €1,000 to €20,000 worth of capital to invest. Interactive Brokers is a better option for experienced day traders looking for faster executions. While no broker is perfect, Degiro does receive negative reviews from clients. Customers complain about the company not offering tax efficient accounts, slow executions and poor customer service. It’s simple, if you want a better service sign up with a more expensive broker such as Interactive Brokers.