ONE MORE THING:Irish Continental Group's cash-generating ability was highlighted this week in a report by Merrion Stockbrokers.
Analyst Gerard Moore went so far as to describe the listed ferry company as a “cash machine”.
He’s not too wide of the mark. In the current climate, ICG is probably the safest dividend in town, having paid out a tidy €1 a share in recent years. This helped its big block shareholders – chief executive Eamonn Rothwell, the One51/Doyle group consortium and developer Liam Carroll – to meet the financing costs of their share-buying spree when the company was the subject of frenzied takeover moves.
Caroll and the Doyles have since disappeared off the register.
The €1 a share divvy equates to a yield of 7 per cent. With the ferry operator practically debt-free, Moore estimates that the dividend could rise to €1.23 (9 per cent yield) in full-year 2012 and €1.98 (14 per cent yield) in 2013. “Put another way, we estimate that ICG could distribute excess cash (post-dividend) of €140 million over the next seven years, finance a ship replacement in 2019 and still be debt-free thereafter,” Moore said.
ICG hasn’t been immune to the recession. But its low cost base, which was restructured well in advance of the crash, its relatively young fleet and strong management has helped it steer a safe course in the downturn.
There’s also a decent chance that Rothwell will make another tilt at buying the business when financial markets open up again.
Moore has put a price target of €16.20 on the stock. That’s a premium of 13 per cent to the current level and making them a nice stocking filler in Moore’s view.
