Business Background and Investment rationale
SSL International PLC (SSL) is a consumer products company who own the global brands, Durex and Scholl. They also have a diverse portfolio of locally owned brands such as Meltus, Medised and Syndol in the United Kingdom and Sauber and Mister Baby in Southern Europe.
Strong sales and double digit operating profit growth
For year ending March 2008 SSL sales grew 6.9%, driven by the strong growth of Durex, Scholl Footcare and Scholl Footwear. Durex branded condom sales grew by 8.4%, while the 'Play' range grew 15.4% to £32.2 million. Scholl footcare sales were up 10.1%, to £113.6 million with strong performances from the Scholl Cracked Heel Repair Cream and Scholl Pharmacy ranges in both France and Germany. Scholl footwear sales increased by 10.0% to £76.1 million driven by excellent Autumn/Winter '07 range sales and a robust sell-in of the Spring/Summer '08 range. SSL is confident of achieving double digit operating profit growth by March 2009 by increasing investment in innovation (to drive new product developments), expanding distribution into new and developing territories and with a continued focus on cost control.
Improvement in operating margin
SSL will improve it’s operating margins from March 2009 by restructuring the European supply chain and by transferring production to SSL's existing facilities in Thailand and India. This will supplement profit generation from Durex, Scholl and other brands.
Technical outlook
On daily chart SSL is trading a near three year low of 400.0p. The stock average upside move was 27% for the last three times at this level. MACD is negative and 12 day EMA has crossed below 26 day EMA indicating a weak sell signal. 14 day RSI is below 40.0 showing weakness in trend. Stock has strong support near 400.0p and resistance near 453.0p level and if it rises above, resistance can found near 470.0p. A consolidation is expected at 400.0p as MACD, stochastic and RSI would be oversold.
Trading strategy
The stock can be bought at around 410.0p with a profit target 457.23p and stop loss of 389.45p (Hedge position: Short position in spread betting with £3.047 bet per point)
Business Background and Investment rationale
First Group PLC provides passenger transportation services. It operates in four divisions; UK Bus Services, UK Rail Services, North America Yellow School Buses and Greyhound Intercity Coach Transportation (United States and Canada).
Balanced portfolio of business
The group’s balanced portfolio of businesses continues to generate strong operating cash flow and has good opportunities for future growth. Approximately 50% of revenue is secured under medium-term contracts. First Group’s contracts with government agencies and other large organizations in both the UK and North America represent a robust annual revenue stream worth £2.8 billion. After completion of a $3.5 billion acquisition of Laidlaw International Inc First Group America have created a stronger, more robust business. Operating in a vast, highly fragmented marketplace with clear growth opportunities First Group expects to deliver better than anticipated synergies of $150 million per annum from April 2009 on the Laidlaw acquisition.
Strong passenger growth
First Group is Britain's largest bus operator, running one in five of all local bus services. It’s fleet of nearly 9,000 buses carries approximately 3 million passengers a day across 40 major towns and cities. The intoduction of passenger growth initiatives like the ‘Fuel Buster’ ticket (allowing passengers to fix travel costs for six months) and partnerships with local authorities across UK (through targeted investment in new vehicles) have resulted in a like for like passenger revenue increase of 7.5% as soaring fuel prices entice commuters form their cars. The group also operates one quarter of the UK passenger rail network including intercity, commuter and regional services carrying almost 275m passengers per annum.
Technical outlook
On daily chart First Group is consolidating between 500.0p and 611.0p and rebounded the last four times from a low of 500.0p. MACD is negative and the 14 day RSI is near 30 indicating near to oversold. DMI index is above 30 indicating a strong negative trend, but trend is positive for MACD and 14 day RSI making a positive slope. A consolidation with correction is expected between 500.0p and 520.0p before a higher move is expected. Stock has good support at 500.0p and resistance at 569.65p and 613.35p.
Trading strategy
The stock can be bought at around 485.0p with a profit target 540.29p and a stop loss of 460.69p (Hedge position: short position in spread betting with £2.575 bet per point)
