Good morning,

markets are called to open higher this morning. This is what's happening today:

  • Cyprus reached an accord with creditors on an international bailout;
  • Japan’s Topix Index of shares climbed 1.1%, rebounding after the first five-day drop in five weeks;
  • Fed’s Bernanke, BOE’s King, IMF’s Blanchard speak in London;
  • Companies reporting results to day in Europe include Aegis Group, Daily Mail and Kentz


Cyprus agreed to the outlines of an aid package, paving the way for 10 billion euros of emergency loans to stave off the threat of default. The accord between Cyprus and the so-called troika of international lenders was reached in overnight talks in Brussels and ratified by finance ministers from the 17-nation euro area.

The revised accord spares bank accounts below the insured limit of 100,000 euros. It imposes losses that two EU officials said would be no more than 40% on uninsured depositors at Bank of Cyprus Plc, the island’s largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second largest.

The seizure of larger deposits may spark tensions with Russia, the source of an estimated $31 billion in holdings in Cypriot banks, according to Moody’s Investors Service. A Cypriot mission to Moscow last week failed to yield an alternative to the European-sponsored bailout.


Money managers from Ares Management LLC to Onex Corp. are borrowing at the fastest pace in six years to buy the type of speculative-grade loans that federal bank

regulators warned last week is becoming riskier. Ares, which oversees $59 billion, and Onex’s credit unit are among firms that have raised $22.9 billion of collateralized-loan obligations this quarter, approaching the all-time high of $26.4 billion in the three months ended June 30, 2007, according to Royal Bank of Scotland Group Plc. Leveraged-loan mutual funds have received their two biggest weekly inflows since January. At the same time the Federal Reserve’s zero interest-rate policy is encouraging investors to seek ever-riskier debt assets to generate returns, some members of the central bank are also saying the market may be overheating. The Fed is now seeking to curb risk by updating guidance on best-underwriting practices for loans.

Stock to watch: Euroasia Drilling (Price $36.01, Price Target $40)

With 29% share, EDC is a clear leader in the domestic drilling market, which we consider attractive thanks to above-average growth and relatively low competition. Volume-wise, the market has been growing at an average annual rate of 10% over the last five years and should see a similar pace throughout 2015. It is characterized by: a) high entry barriers, b) high share of in-house providers (normally operate as captive cost-centres rather than market-oriented businesses); c) high share of long-term contracts, priced on a turnkey basis; d) static and aging fleet. That said, the environment is favourable for those willing to invest in operational excellence and adhere to global industry standards. We forecast EDC to post solid financials, with a 3-year revenue CAGR of 12%, EBITDA CAGR of 13% and net income CAGR of 15%. We expect its growth to outpace that of the market. Our forecasts are net of potential acquisitions, though the strong balance sheet provides for flexibility to engage in value-accretive M&A. We rate EDCL a Buy on what we see as an attractive combination of strong fundamentals and undemanding valuation.

For further information on Euroasia Drilling or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli