Business Background and Investment rationale
Kesa Electricals PLC is a holding company with independent subsidiaries operating through 690 stores in nine European countries. The Company’s principal activity is electrical goods and furniture retailing.
Gloomy British Retail consortium data on retail sales
In its latest retail sales monitor, British Retail Consortium (BRC) said like-for-like retail sales in the UK fell 0.4% in June from the same month last year; far worse than predictions of a 1.1% increase. BRC blamed weather conditions for the drop in June’s retail sales. Sales have now fallen in three of the past four months and Kesa will face further difficulty in the tough electrical market. TV sales are slowing dramatically and the looming entrance of Best Buy in Europe coupled with growth in online sales will further deteriorate margins.
Negative outlook for medium term
In a trading statement last month, Kesa said it expects decline in consumer confidence to continue and anticipates further difficulty in trading conditions, with negative like-for-like sales for Comet throughout the rest of the year. The Company’s main priority for the year is to focus on maintaining product margins and improving productivity, while reinforcing strong service propositions and planned investments in the existing businesses and new markets to secure longer term growth.
Technical outlook
On daily chart, stock has risen from a 52-week low of 128.0p, but is struggling to make a new high above 150.0p. There is strong trend forming in a negative direction as ADX is above 40 and negative DMI is above positive DMI. 14-day RSI is near to the oversold zone and MACD is negative, trends for both indicators are declining. Stock has resistance near 180.0 and support at its 52-week low is at 128.0p. Looking at current market conditions and negative news flow, Kesa has not hit the bottom and indications are it will fall further if it breaches 128.0p level.
Trading strategy
The stock can be sold around 148.0p with a profit target 130.0p and stop loss of 155.8p (Hedge position: Long position in spread betting with £8.445 bet per point).
Business Background and Investment rationale
Thomson Reuters PLC delivers electronic information and decision support tools to businesses and professionals. It provides content and technology platforms to customers in the financial, legal, tax and accounting, healthcare and scientific sectors.
Negative outlook for finance industry
Thomson Reuters’ Markets division, which represented 60% of revenue in 2007, will have negative growth in the current financial crisis as big financial institutions look to cut costs by reducing spending on market data and news. Retrenchment in head count will impact demand for terminal numbers and price negotiations for euro-based terminal contracts will dent the Company’s profits.
Completion of share buyback
Thomson Reuters is unlikely to continue buying back its shares once the current $500 million buyback program ends, having already bought back around $450 million of stock since the merger. Share price has been supported by the $500 million share buyback program, which is almost complete, and once this support is removed there is further downside risk to the shares.
Technical outlook
On daily chart, Reuters has rallied 900.0p after its merger with Thomson and consolidates between 1900.0p and 1500.0p for considerable time. It has broken a key support level of 1360.0p and 1160.0p downside in a week. If stock falls below this level, next support is near 1000.0p. MACD is at historical low and negative and 14-day RSI is below indicating stock will have small technical rebound, although trend is negative and it should be sold on rise near current price. 14-day -DMI have cross below 14-day +DMI indicating strong downside trend. Stock has strong resistance between 1360.0p-1400.0p.
Trading strategy
The stock can be sold around 1250.0p with a profit target 1100.0p and stop loss of 1316.0p (Hedge position: Long position in spread betting with £1.0 bet per point).
British Sky Broadcasting
British Sky Broadcasting has made 52-week low on daily chart. MACD is negative and very near to historic low. 14-day RSI is near to 30 and stochastic is below 10.0 indicating oversold. On directional index positive 14-days DMI has cross below negative 14-day DMI indicating a downtrend. Looking at oversold, condition stock should be hold with an exit target of 434.0p.
Anglo American PLC
Anglo American PLC on daily chart is falling and very near to its March low. Stock has good support near 2700.0p and resistance near 3000.0p, MACD is negative and 14-day RSI is 30 indicating weakness and trend is downward. Profit should be book near 2800.0p.
National Express PLC
National Express is moving in a range of 1000.0p and 853.0p from last three months. At 1000.0 it is facing stiff resistance and consolidating at this level. On stochastic indicator a weak sell signal is generated and looks overbought. MACD is positive and 14-day RSI is above 50 and trend is also positive. Looking at volatile oil prices and weakness in the stock market, profit should be booked near 1020.0p.
