CSS Partners FTSE350 Market Report

Market Report

20 October 2008

Aveva Group PLC
AVV.L

Sector	Software & computer services
Last closing price (20/10/2008) (p)	774.5
52 week High/Low (p)	1640/702.5
Market Cap (£mn)	492.97
Sector weight age by Market Cap (%)	4.08
Average Volume (k)	805.66
P/E ratio (TTM)	14.45
Industry P/E ration (TTM)	2.6

TTM: Trailing Twelve Month

Daily chart (AVV.L)

Business background and investment rationale

Aveva Group PLC is engaged in the marketing and development of computer software and services for engineering and related solutions. The company provides engineering information technology (IT) software to the plant, power and marine industries.

Strong trading statement

In last week’s recent trading statement Aveva said it expected strong demand in each of its principal end-user markets of oil and gas, power and marine. Geographically, Asia-Pacific and Central Eastern & Southern Europe will remain particularly strong with good customer wins across all main markets. Aveva expect its full-year results to be towards the top end of forecasts following strong growth in the first half, and there is no indication that the global financial turbulence has affected demand for its products.

Contract wins in the emerging markets

Recently Korean shipbuilder, SPP Shipbuilding, has signed a multi-million US dollar agreement with AVEVA for the supply of AVEVA Marine design solutions to the company's three shipyards. In China, AVEVA has gained recognition as one of the strongest players in the engineering software market, both in the marine and process plant industries, with further penetration into the nuclear power sector, as well as signing strategic alliances with national oil operator China Offshore Oil Engineering Company (COOEC). In Brazil, Aveva won a long-term contract from Petrobras and it secured a significant order in the Middle East from Abu Dhabi Ship Building, which will use AVEVA Marine for both commercial and military new build programmes, as well as refit work.

Technical outlook

On daily chart, Aveva has recently made a 52-week low of 702.5p and rebounding with low volatility, indicating formation of bottom. On technical, MACD and 14-day RSI are oversold with MACD negative and historic low, RSI below 30.0. Stochastic also shows oversold with DMI showing strong negative trend. Stock has support at 700p and resistance at 800.0p and 900.0p level.

Trading strategy

The stock can be bought around 730.0p with a profit target 814.16p and stop loss of 693.4p (Hedge position: short position in spread betting with £1.709 bet per point).

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GlaxoSmithKline PLC
GSK.L

Sector	Biotechnology
Last closing price (20/10/2008) (p)	1147.5
52 week High/Low (p)	1403/986.0
Market Cap (£bn)	54.95
Sector weight age by Market Cap (%)	56.76
Average Volume (mn)	29.15
P/E ratio (TTM)	11.50
Industry P/E ration (TTM)	5.69

TTM: Trailing Twelve Month

Daily chart (GSK.L)

Business background and investment rationale

GlaxoSmithKline plc (GSK) is a global healthcare group engaged in the creation, discovery, development, manufacture and marketing of pharmaceutical and consumer health-related products. It has operations in some 114 countries, with products sold in over 140 countries.

Improvement in operational efficiency

In October 2007 GSK announced significant new £1.5 billion Operational Excellence program to improve the effectiveness and productivity of its operations. This new program is expected to deliver annual pre-tax savings of £700 million by 2010. GSK expects to realise the majority of annual savings within the first two years of the program, with approximately £350 million expected by 2008 and £550 million by 2009. These savings will partly mitigate the expected impact to 2008 earnings from generic competition and lower Avandia sales, and the associated adverse impact on GSK’s gross margin. GSK also announced a £6.5 billion share buy back program that will be completed by July 2009 and expects to purchase £1bn in last five months of this year.

Good progress in R&D pipeline and acquisition

To July 2008 GSK received 12 regulatory approvals for a broad range of products that include Entereg, Kinrix, Rotarix, Trexime, Prepandrix and European approval of Tyverb, for advanced breast cancer. This level of progress is at the forefront of the industry and builds on the 10 product approvals GSK received in 2007. Glaxo recently bought the Egyptian business of Bristol-Myers Squibb Co for $210 million. After the deal Glaxo will become the leading pharmaceutical company in Egypt with a market share of 9% by acquiring 20 branded products. The pharmaceutical market in Egypt is worth $2.1 billion and grew by 19% in value last year.

Technical outlook

On daily chart, stock has rebounded from a 52-week low of 986.0p after a long consolidation between 1000.0p and 1400.0p. MACD is at historical low and 14-day RSI is above 40.0 crossing negative trendline indicating weak buy signal.14-day -DMI is above 14-day +DMI but declining with volatility decreasing showing consolidation between 1050.0p and 1100p. Stock has good support near 986.0p and strong resistance at 1160p and 1255.0p levels.

Trading strategy

The stock can be bought around 1070.0p with a profit target 1193.71p and stop loss of 1016.36p (Hedge position: Short position in spread betting with £1.167 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.

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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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CSS, CSS Partners and their respective officers, directors, shareholders and /or partners may have a shareholding in the companies reviewed in this report. They will not have access to this report until it is published, except those responsible for compliance issues concerning this report.
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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