CSS Partners FTSE350 Market Report

Market Report

23 September 2008

National Express PLC
NEX.L

Sector	Travel & Lesuire
Last closing price (23/09/08) (p)	883
52 week High/Low (p)	1337/818.5
Market Cap (£bn)	1.45
Sector weight age by Market Cap (%)	2.756
Average Volume (mn)	1.15
P/E ratio (TTM)	15.22
Industry P/E ration (TTM)	0.10

TTM: Trailing Twelve Month

Daily chart (NEX.L)

Business background and investment rationale

National Express Group PLC is a public transport company with operations in the United Kingdom, Spain and North America. The company’s divisions include trains, buses and coaches. The network operates to more than 1,000 destinations within the United Kingdom, including all of the major airports.

Strong demand for bus and train services

National Express has focused on providing excellent value fares to drive revenue growth for its bus and train services as soaring fuel prices encourage travelers to switch from cars to public transport. The company will gain more market share after British Airways announced domestic capacity reductions, and as car drivers feel continued fuel pain on the London to Leeds/York/Newcastle/Edinburgh routes.

Fuel hedging and improved operating efficiency

National Express has hedged all its fuel for 2008 and has 56% hedged its total needs for 2009. The group is confident it will recover additional fuel costs through a combination of innovative pricing mechanisms and improved operating efficiency. In the UK, the integration of operations into a single division based in Birmingham will deliver annualised cost savings of £11 million. In Spain, the successful integration of Continental Auto with Alsa will expand the range of products and services in existing businesses, and strengthen National Express’ position in the Spanish transport market.

Technical outlook

On daily chart, NEX is near to its two-year low of 818.0p, where it rebounded three times indicating strong support at this level. MACD is negative and 14-day RSI is below 30.0 showing oversold. 14-day +DMI have cross below 14-day -DMI indicating that a strong negative trend has formed. However volatility is decreasing which indicates consolidation at this level. Stock has first leg of support near 850.0p and if it breaches it has support near 788.0p. Stock has strong resistance near 950.0p level and if it rise above resistance can found near 1042.0p.

Trading strategy

The stock can be bought around 840.0p with a profit target 936.85p and stop loss of 798p (Hedge position: Short position in spread betting with £1.487 bet per point).

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British American Tobacco
BATS.L

Sector	Tobacco
Last closing price (23/09/08) (p)	1795
52 week High/Low (p)	2060/1658
Market Cap (£bn)	35.87
Sector weight age by Market Cap (%)	66.69
Average Volume (mn)	8.2
P/E ratio (TTM)	15.72
Industry P/E ration (TTM)	0.73

TTM: Trailing Twelve Month

Daily chart (BATS.L)

Business background and investment rationale

British American Tobacco PLC is an international tobacco company engaged in the sale of cigarettes, cigars, leaf and other tobacco products. It has over 300 brands in its portfolio which are sold in over 180 markets. There is a particular focus on its four Global Drive Brands (GDB), which are Dunhill, Kent, Lucky Strike and Pall Mall.

Strong growth in emerging markets

In an interim result for the first six months, BATS reported 15% higher revenue at £5,457 million thanks to a combination of favorable exchange rate movements, improved pricing and a better product mix. In Asia-Pacific, profits rose by £68 million to £403 million, mainly attributable to strong performance in Pakistan, Vietnam, Bangladesh, Australia and Malaysia, as well as benefiting from favorable exchange rates. The group’s associate in India, ITC, continued its strong profit growth; its contribution rose by £10 million to £64 million. At constant rates of exchange, the contribution would have been 13% higher than last year. In Europe, profit at £530 million was up £126 million, mainly as a result of excellent performances in Russia and Romania.

Significant acquisition in emerging market

In February 2008, BATS won the public tender for Tekel, the Turkish state owned Tobacco Company, with a bid of US$1,720 million. The acquisition will raise the company’s share in the Turkish market, which is the eighth largest cigarette market in the world, to some 36% from just over 7%. The company also announced an agreement to acquire 100% of Skandinavisk Tobakskompagni’s (ST) cigarette and snus (moist powder tobacco) business. ST accounts for more than 60% of cigarette sales in Scandinavia, allowing BATS to strengthen its market positions in Denmark, Norway, Sweden and Poland and achieve significant synergy benefits after acquisition.

Technical outlook

On daily chart, stock is in consolidation phase between 2040.0p and 1700.0p and once again it is near to its low of 1700.0p. MACD is negative and 14-day RSI is below 50.0 indicating weakness in strength.14 day -DMI has cross above 14-day +DMI indicating strong downside with volatility decreasing which indicates consolidation. Stock has good support near 1700.0p and strong resistance between 2000.0p-2040.0p.

Trading strategy

The stock can be bought around 1740.0p with a profit target 1940.62p and stop loss of 1653p (Hedge position: Short position in spread betting with £0.717 bet per point).

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This report has been issued by CSS Partners LLP (“CSS Partners”). CSS Partners is an appointed representative of Charles Street Securities Europe LLP (“CSS”) which is authorised and regulated by the Financial Services Authority in the UK. It constitutes non-independent “investment research” as contemplated by the FSA Rules and is thus considered a marketing communication. This report was prepared by Kuldeep Bhati who is employed as an analyst at CSS Partners and as such does not conform with the FSA definition of independent investment research and as such is not subject to the rule of not dealing ahead of distribution of the marketing communication and was not prepared in line with the legal requirements for independent communication.

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Risk Factors

There is no certainty that the recommendations will be successful or that they will make money for investors.

There is no certainty that execution prices can be achieved, either in opening or in closing a position.

There is considerable risk operating in equity, futures, options and spread betting markets and investors need to be able to sustain a total loss of capital along with unlimited liability. Potential investors are recommended to consult a financial adviser before entering into such positions.

Regulatory disclosures

In accordance with the Conduct of Business Rules COBS12.4.7R (i) in the preparation of the report the analyst used price and volume charts provided by independent data suppliers and applied technical analysis tools of investment and trading evaluation in arriving at his recommendations, ii) all recommendations made by the analyst are followed up in subsequent reports until the closure of a position, iii) there is no certainty that any recommendation will be successful or that technical analysis should be used exclusively to arrive at investment decisions.

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Distribution of recommendations for the period 1 July to 30 September 2008:

% Distribution of recommendations No of recommendation

Buy 60.8% 17

Hold 0 0

Sell 39.2% 11

The first column displays the % distribution of recommendations made by CSS Partners in this Technical Analysis Trading programme and the second column shows the numbers of such recommendation. Neither CSS nor CSS Partners has any investment banking relationships with any of the companies covered in the Technical Analysis Trading Programme, namely the companies in the FTSE 350 index.

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	% Distribution of recommendations	No of recommendation
Buy	60.8%	17
Hold	0	0
Sell	39.2%	11