Irish market prices see little change

THE ISEQ 100 is set to rise by 20% for the fourth year in a row and still offers significant value to investors, according to a new report.

If the current positive trend is sustained the ISEQ 100 could hit a new all time high of 10,000 by the end of 2007.

Looking back to the 2003 low point, the performance of the ISEQ has remained exceptionally impressive since that time, said Robbie Kelleher, chief economist and head of research at Davy Stockbrokers.

“The index is about 130% off its 2003 low point, and it looks like 2006 will be the fourth year in a row in which the return on the market will be in or around 20%. It is 25% up from the low point reached after the May/June sell-off. European markets are also some 130% above the low point of March 2003 and are up nearly 20% since the May/June sell-off”.

However valuations in both the European and Irish markets have changed very little over the period and remain at the very bottom end of the trading range of the last 15 years.

On that basis, the ISEQ could reach 10,000 sometime in 2007 and still leave the Irish market trading on a P/E that is very low by historic standards, he said.

In the context Mr Kelleher warned that companies, because of the good value they offer, are in danger of being snapped up by either equity houses or other corporates who are fully aware of the exceptional value offered at current prices and ratings, he said.

“If portfolio managers do not recognise such value in the equity market, then there is plenty of liquidity in corporate balance sheets and private equity funds that will happily do so,” he said.

This year already the ISEQ is 25% up from the low point reached after the May/June sell-off.

European markets are also 30% above the low point of March 2003 and are up nearly 20% since the May/June sell-off.

Despite those gains, valuations in both the European and Irish markets have changed very little over the period and remain at the very bottom end of the trading range of the last 15 years, he said.

Davys are currently forecasting earnings growth of 12% for the Irish market in 2007, but given the upward momentum to earnings revisions the eventual outcome could well be between 15% and 20%.

Despite these very impressive price gains, the overall valuation of the Irish market has not changed very much since the trough of the early 2003 market, said Mr Kelleher.