Business

Denis O'Brien is upbeat on stocks for 2014

BY AL EDWARDS

Wednesday, February 05, 2014    

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CHAIRMAN and founder of international mobile telephone company Digicel, Denis O'Brien, is bullish about global stock markets and sees a bright future for equities.

Speaking with Bloomberg on his way to the World Economic Forum in Davos, Switzerland, at the end of last month, he said: "I am positive about 2014, but it will not be like 2013 in terms of S&P 500 index gains. The stock market will be up due to better global earnings and consumers doing better. Consumers are recovering their appetite for goods, as they are only now emerging from their version of the debt crisis."

The telecoms mogul also sees interest rates remaining low allowing for more investments.

The year 2008 saw a global financial crisis that threatened to unhinge global stock markets, and in some quarters was compared with the Great Depression of the 1920s.

On September 29, 2008, The Dow slumped nearly 778 points in the biggest single day point loss ever. The day's loss knocked out approximately US$1.2 trillion in market value.

Yesterday morning (Tuesday) The Dow Jones industrial average was up 36 points, or 0.2 per cent to 15,409. The Standard &Poor's 500 Index rose 7 points, or 0.4 per cent to 1,749. The Nasdaq Composite gained 20 points, or 0.5 per cent to 4,017.

Markets were coming off a drop of more than 320 points for the Dow and the blue-chip index, the worst January performance in five years following disappointing news about US manufacturing.

"After this whole year of being down over 5 per cent, I think the markets are trying to rally," said David Chalupnik, Head of Equities for Nuveen Asset Management."

O'Brien was very positive on telecommunications stocks, saying that if he had US$100 million to invest, he would bet US$40 million on Vodafone, US$20 million on Indian telecoms giant Bharti Airtel, US$20 million in Japan's telecommunications and Internet company SoftBank Corp as well as US$20 million in Bangkok-based Advanced Info Service.

So why Vodafone, and what does O'Brien see there that others do not ?

Vodafone is the world's third largest mobile-operated telecommunications company, with an estimated 252 million customers worldwide.

Vodafone's share price has been falling ahead of the company's third quarter update due on Thursday. This is due in part because of fears that turbulence in emerging markets will hurt revenues and profits.

Vodafone is expected to report a five per cent drop in revenues for the three months to the end of December with steep falls in Europe being offset by solid emerging markets growth.

AT&T has denied an immediate interest in bidding for Vodafone in an effort to gain access into Europe, but continues to study a potential bid down the road.

In Tuesday's trading, Vodaphone share price was down 1.4 per cent at 219.05.

Last week Vodafone shareholders voted unanimously to approve a 51 billion pound cash and shares windfall from the sale of Vodafone's American subsidiary, Verizon Wireless, signaling the largest return of value to investors in corporate history.

Vodafone shareholders worldwide will receive an estimated 15 billion pounds in cash and a further 36 billion pounds in the shares of Verizon Communications.

"This is the largest ever single return of value to shareholders and, in our view, rewards our shareholders for their long-term support of Vodafone's US strategy," the chairman, Gerald Kleisterlee, told gathering investors.

O'Brien has made it clear that he intends to continue to grow Digicel and to extend his business interests elsewhere in the world.

As far as the telecoms sector is concerned he said, " The world order is changing. Europe is not an attractive place to invest and that's why you have falling free cash flow and when you have falling free cash flow, what do you do, you just cut investment."

He added that Digicel increased revenues 8 per cent last year to about US$2.8 billion, with earnings before interest, tax, depreciation and amortisation increasing 11 per cent to about US$1.2 billion.

O'Brien said the biggest hurdle facing the global economy was politicians.

"They are more and more worried about their re-election than growing their economies. Also certain European banks will still have issues particularly in the Benelux region, Spain, Italy, France and Germany. It will take many more years to sort them out, " he told Bloomberg.

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