CSS Partners FTSE350 Market Report

Market Report

24 November 2008

Amec PLC
AMEC.L

Sector	Oil Equipment services & Distribution
Last closing price (24/11/2008) (p)	465
52 week High/Low (p)	961.0/373
Market Cap (£bn)	1.429
Sector weight age by Market Cap (%)	30.35
Average Volume (mn)	2.25
P/E ratio (TTM)	10.38
Industry P/E ration (TTM)	0.97

TTM: Trailing Twelve Month

Daily chart (AMEC.L)

Business background and investment rationale

AMEC PLC is an international consultancy, engineering and project management company providing services to the world’s energy, power and process industries. The company designs, manages the delivery of, and maintains strategic and complex assets such as offshore oil and gas production facilities, metals or mineral mines, and power infrastructure

Improve EBITA margin and strong financial position

AMEC expects to deliver improvements in EBITA margin over the next two years, driven by its own internal initiatives. The Operational Excellence program is expected to be the major contributor to AMEC achieving its target margin of 8.5% in 2010. The group is in an exceptionally strong financial position, with a relatively well-funded pension scheme and expects average net cash of over £600m for 2008.

Strong order book

In the second half of 2008, Amec was awarded £450m in contracts for Oil and Gas Services, Oil Sands and Minerals and Metals Mining, which it will deliv over the next five years. These included an Engineering and Maintenance Services contract for Chevron Australia; two contracts for Apache North Sea Limited; and a five-year management consultancy contract for Zakum Development Company in Abu Dhabi, United Arab Emirates. The Natural Resources order book at the end of October was £1.35bn, a gain of 12% since the beginning of the year. The division is expected to deliver an EBITA margin of 10.5% in the second half of 2008 and over 10% for the calendar year. Amec’s consortium with AREVA and URS Washington Division was recently awarded the Sellafield management and operations contract by British Nuclear Fuels Ltd. The contract is valued at £1.3bn per annum, with the associated fee of up to £50m per annum for a period of five years, and there is the potential for a further contract extension of 17 years subject to performance being met.

Technical outlook

On daily chart, stock has fallen 30% from a high of 600.0p, but is making a higher October low from 373.0p. Volatility in the stock has fallen indicating a consolidation above 400.0p. MACD is negative and RSI is below 50, but trend is positive for both of the indicators. DMI is flat and stochastic is oversold showing bottom above 400.0p. Stock has support between 415p-430.0p and resistance at 484-500.0p.

Trading strategy

The stock can be bought around 445.0p with a profit target 496.30p and stop loss of 422.69p (Hedge position: short position in spread betting with £2.80 bet per point).

Top

Compass Group PLC
CPG.L

Sector	Travel & Lesuire
Last closing price (24/11/2008) (p)	251.25
52 week High/Low (p)	396.25/235
Market Cap (£bn)	4.5
Sector weight age by Market Cap (%)	12.87
Average Volume (mn)	15.89
P/E ratio (TTM)	13.66
Industry P/E ration (TTM)	3.40

TTM: Trailing Twelve Month

Daily chart (CPG.L)

Business background and investment rationale

Compass Group PLC is a contract food service company that provides a range of consumer-facing food service solutions to its clients in 70 countries. It operates in North America, Continental Europe, the United Kingdom and the rest of the world.

Adequately handling food inflation

Through the MAP (Management & Performance) framework, Compass expects to improve its gross margin by 60 basis points and its organic revenue growth by over 5% for full year ending November 2008. These improvements will come from menu planning; a focus on reducing waste; product and supplier rationalisation; and client and consumer price increases. Eachof these measures help to address food inflation which falls into three categories: purchasing and supply chain efficiencies; unit cost efficiencies including menu re-engineering; client and consumer price increases.

Strong revenue growth and expansion in margins

In a trading statement today, Compass anticipates strong organic revenue growth in North America for the full year to be around 7%, while margins should improve by around 50 basis points. In Continental Europe full-year organic revenue growth is estimated at 5% and margin growth at approximately 60 basis points, with most of the main countries contributing strongly. In the Rest of the World, group expects around 9% organic revenue growth for the full year and another strong improvement in the margin of over 120 basis points. The weakening of sterling against most of the currencies to which group is exposed will also improve margins.Compass commenced a further £400m share buy-back programme on 1 July 2008 that will support share price.

Technical outlook

On daily chart, Compass has made a new 52-week low of 235.0p near to its October low making an inverted V pattern. If stock falls below this level support can be found at 215-226.0p, and from last three days it has not breached 235.0p indicating small consolidation. MACD is negative and 14-day RSI is around 30.0 showing oversold. 14-day DMI is above 25 and –DMI is above +DMI showing strong downtrend. Stochastic oscillator is also showing oversold. Stock has resistance near 272.0p level and if it rises above resistance can found near 287.0p.

Trading strategy

The stock can be bought around 240.0p with a profit target 267.24p and stop loss of 228.15p (Hedge position: Short position in spread betting with £5.2 bet per point).

Top | To unsubscribe please click here

Important Information

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.

The report is provided solely for your information and may not be reproduced or redistributed, in whole or in part to any other person without specific consent of CSS Partners.

In the preparation of this report, CSS Partners has had access to publicly available information, and other sources believed to be reliable. Whilst reasonable care has been taken to ensure that the facts stated herein are accurate and that the recommendations, forecasts, opinions and expectations contained herein are fair and reasonable, neither the author, nor CSS Partners, nor CSS has verified the public information upon which this is based. None of the author, CSS Partners, CSS or any of their respective directors, officers or employees (the “Parties”) makes any representation or warranty, express or implied as to soundness of the recommendation, the accuracy or completeness of the information or opinions contained herein. Investors must make their own investment decision and not rely on this report. The Parties shall not be liable for any loss, costs, liability, expenses (together “losses”) suffered by you following your utilising any of the services we provide other than losses arising directly as a result of fraud or wilful default on our part or as a result of any liability that may not be excluded under the UK regulatory system. In no event shall we be liable for special, indirect or consequential damages of any kind, even though we may have been informed about the possibility of such loss. You shall indemnify us and our officers and employees on demand and keep all such persons indemnified against all losses which may be incurred directly or indirectly by reason of or in consequence of providing this service save to the extent that such losses arise directly as a result of our, fraud or wilful default.

Any opinions, forecasts or estimates herein constitute a judgment as at the date of this report. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. This information is subject to change without notice. It may be incomplete or condensed and it may not contain all material information concerning the Company. This document does not constitute or form part of and should not be construed as any offer for sale or purchase of (or solicitation of or invitation to make any offer to buy or sell) any securities nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever.

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.

In accordance with section 12.4 of the FSA’s New Conduct of Business Rules, CSS Partners makes the following disclosures:

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.
The research analyst responsible for the content of this research report certifies that: (1) the views expressed and attributed to the research analyst or analysis in the research report accurately reflect his personal assessment about the subject securities and issuers and/or other subject matter as a appropriate; and (2) no part of his compensation was, is or will be, directly or indirectly related to the specific recommendations or views contained in this research report. On a general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts.
The analyst is not involved in any other activity of CSS Partners or CSS that is inconsistent with his objectivity in preparing the reports. His research information is confidential, the only persons privy to this data bar the analyst are the senior management. • The research recommendations will be updated, but neither CSS nor CSS Partners accept any responsibility for any delay or interruption of service in the submission of reports or updates to reports.
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.

Your attention is also directed to the terms of our client agreement with you that covers the provision of this service. To the extent that there is any conflict between the above and the client agreement, the provisions of the above disclaimer will take priority

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