CSS Partners FTSE350 Market Report

Market Report

01 December 2008

Game Group PLC
GMG.L

Sector	General Retailers
Last closing price (01/12/2008) (p)	150.25
52 week High/Low (p)	306/116.75
Market Cap (£mn)	561.91
Sector weight age by Market Cap (%)	3.016
Average Volume (mn)	2.01
P/E ratio (TTM)	8.06
Industry P/E ration (TTM)	0.43

TTM: Trailing Twelve Month

Daily chart (GMG.L)

Business background and investment rationale

The Game Group plc operates retail outlets, which specialize in the retailing of computer software, video games and related products. Strong Guidance for 2008 In an interim result on September 2008 Game group raised guidance for the full year Like for like sales performance from 5-10% to 8-12% on Good international sales up by 64.2%, acquisition of 19 store specialist retail chain in the Czech Republic and a 33 store concession deal with Borders in the UK . Gross margin growth guidance (including the gross margin benefit of the Gamestation synergies) for the full year raised to 80 - 110 basis points ('bps') from 50 - 100 bps. Group also raised its Gamestation synergy guidance for the current year from £7m to £9m and a total of £14m of annualized benefits expected in the year to 31 January 2010 by improving the efficiency of the acquired operations through integration with the existing back office infrastructure and facilities.

Good Christmas season

Due to a strong performance this year, a broad and growing installed base of console ownership, and a strong pipeline of new and innovative software the group is expecting exceptional sales on Christmas through operational store portfolio of 1245 across UK, Europe and Australia reflecting strong consumer demand for all product formats particularly on Sony 80Gb version of their PS3 launched on 22 August and Microsoft reduced entry level Xbox 360 to a mass market price point of £129 from £159 on 23 September 2008. The Nintendo Wii and DS Lite continue to be sought after and demand for software such as Wii Fit and Mario Kart is still exceeding supply. The UK installed base of third generation platforms now exceeds 17.3 million and group expect this to have reached an unprecedented base of around 21 million by Christmas 2008

Technical outlook

On daily chart stock is consolidating between 120.0p and 165.0p making a higher low. Stock has made a ‘W pattern’ and break out can be expected above 165.0p. Trend is up for the stock as it is trading above 20 day EMA. RSI is also above 50 and MACD is negative but 12 day EMA cross above 26 day EMA and positive slope supporting its strength. Stock has good support at 141.0p and 128.0p, on upside it has resistance at 179.0p level.

Trading Strategy

The stock can be bought around 144.0p with a profit target 160.34p and stop loss of 136.89p (Hedge position: short position in spread betting with £8.68 bet per point)

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First Group PLC
FGP.L

Sector	Travel & Lesuire
Last closing price (01/12/2008) (p)	435.5
52 week High/Low (p)	824.5/381.25
Market Cap (£bn)	2.12
Sector weight age by Market Cap (%)	5.80
Average Volume (mn)	2.73
P/E ratio (TTM)	22.53
Industry P/E ration (TTM)	0.10

TTM: Trailing Twelve Month

Daily chart (FGP.L)

Business background and investment rationale

FirstGroup PLC is engaged in the provision of passenger transport services. It operates in four divisions: UK bus services, UK rail services, North America yellow school buses, and Greyhound intercity coach transportation in the United States and Canada.

Balance portfolio of business

FirstGroup’s balanced portfolio of businesses continues to generate strong operating cash flows and good opportunities for future growth. Approximately 50% of the company’s revenues are secured under medium-term contracts. The group’s contracts with government agencies and other large organisations in the UK and North America represent a robust annual revenue stream worth £2.8bn. After completion of the $3.5bn acquisition of Laidlaw International Inc in the US, FirstGroup America has created a stronger, more robust business which operates in a vast, highly fragmented marketplace with clear opportunities for growth. FirstGroup expects to deliver better than anticipated synergies of $150m per annum from April 2009 following the Laidlaw acquisition.

Strong passenger growth

FirstGroup is Britain’s largest bus operator running more than one in five of all local bus services. A fleet of nearly 9,000 buses carries approximately three million passengers a day in more than 40 major towns and cities. FirstGroup introduced passenger growth initiatives such as the ‘Fuel buster ticket’ which allows passengers to fix travel costs for six months. Partnership with local authorities across the UK through targeted investment in new vehicles has delivered like-for-like passenger revenue increases of 7.5%, as soaring fuel prices are encouraging travelers to switch from cars to public transport. The group also operates one-quarter of the UK passenger rail network, with a balanced portfolio of intercity, commuter and regional service, carrying almost 280 million passengers a year.

Technical outlook

On chart, FirstGroup rebounded from 52-week low and consolidating around 450.0p making a positive slope indicating uptrend. MACD is negative but 12-day EMA has cross above 26-day EMA. 14-day RSI is above 50 and both the indicators making positive slope supporting uptrend. DMI index is above 24 indicating a trend is forming. Stock has support at 420.0p and resistance at 500.0p.

Trading strategy

The stock can be bought around 418.0p with a profit target 465.44p and stop loss of 397.7p (Hedge position: short position in spread betting with £2.99 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