CSS Partners FTSE350 Market Report

Market Report

22 July 2008

Home Retail Group PLC
HOME.L

Sector	General Retailers
Last closing price (21/07/08) (p)	231.25
52 week High/Low (p)	449.25/185.75
Market Cap (£bn)	2.03
Sector weight age by Market Cap (%)	9.098
Average Volume (mn)	11.96
P/E ratio (TTM)	6.16
Industry P/E ration (TTM)	0.38

TTM: Trailing Twelve Month

Daily chart (HOME.L)

Business Background and Investment rationale

Home Retail Group PLC is engaged in home and general merchandise retailing. The Company is organised into three main business segments: Argos, Homebase and Financial Services together with Central Activities. Argos offers customers a catalogue of over 18,000 product lines that are available across all order and delivery channels. Homebase sells a range of home enhancement products and services alongside traditional do-it-yourself products and materials.

Stable outlook for Home retail

In its latest retail sales monitor, British Retail Consortium (BRC) said like-for-like retail sales in UK fell 0.4% in June from the same month last year; far worse than the predicted 1.1% increase. Sales have now fallen in three of the past four months. The strength of the group balance sheet, consistent market share gains and the severe weakness of some competitors suggests that Home Retail is better managed and more defensive than its peers. Home Retail can use its balance sheet to be more flexible with expansion, buying terms, space deals and even acquisitions.

Growth in Argos sale

In a trading statement in June, like-for-like sales in Homebase fall 12%, while Argos’ sales were flat. Total sales at Argos grew by 4.0% to £929 million in the first 13 weeks of the financial year. There were further strong performances in consumer electronics categories although these areas have lower than average gross margins. The trading conditions were more difficult for seasonal categories and the furniture and homeware market. Argos’ internet sales grew by around one-third and represented 22% of all the firm’s sales. Argos’ strong sales have offset weak sales for Homebase indicating the diverse portfolio of Home Retail.

Technical outlook

On daily chart, stock has rebounded down for the third time from its resistance of 231.0p, below that stock has good support around 209.0p and 186.0p. MACD is negative, but 12-day EMA has cross above 26-day EMA and RSI is above 50 indicating strength in current uptrend. On directional index +DMI cross above –DMI indicating a trend is forming. On share price, MACD and stochastic break even from negative slope indicating a bullish signal

Trading strategy

The stock can be bought around 220.0p with a profit target 246.0p and stop loss of 208.7p (Hedge position: short position in spread betting with £5.785 bet per point).

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International Power PLC
IPR.L

Sector	Electricity
Last closing price (21/07/08) (p)	415
52 week High/Low (p)	494.25/359.75
Market Cap (£bn)	6.26
Sector weight age by Market Cap (%)	20.318
Average Volume (mn)	9.14
P/E ratio (TTM)	13.04
Industry P/E ration (TTM)	1.06

TTM: Trailing Twelve Month

Daily chart (IPR.L)

Business Background and Investment rationale

International Power PLC is a United Kingdom-based public limited company. Its principal activities are the generation and sale of electricity and it has interests in 32,000 megawatt (gross) of power generating capacity in 20 countries. The Company’s business is focused in five core regions: North America, Europe, Middle East, Australia and Asia.

Portfolio Growth through acquisition

International Power made important acquisitions that will significantly increase its energy generation and diversify its portfolio. The Company has signed an agreement to acquire an additional 40% shareholding in Turbogas the 1,008 MW gas fired plant located in Portugal and an additional 27% shareholding in the associated operations and maintenance company Portugen. The total cash consideration was Euro140 million taking its holding to 100% in both Turbogas and Portugen, and will be immediately earnings accretive.In March 2008, International Power completed the acquisition of an additional 31% shareholding in Uch (572 MW plant located in Pakistan) for a cash consideration of (£43 million) taking its shareholding to 71%. During 2007 International Power doubled the size of its European wind portfolio by acquiring the 636 MW Maestrale wind farm portfolio, which at acquisition comprised 581 MW in operation and 55 MW under construction. International Power also awarded 40% interest in the 2,000 MW and 130 MIGD (Million Imperial Gallons per day) Greenfield Fujairah F2 independent water and power project in the United Arab Emirates.

Technical outlook

On daily chart, stock has rebound from it support level of 403.0p and consolidating between 403.0p and 445.0p. MACD is negative and RSI is just below 50, but trend for both indicators are positive indicating an uptrend is forming. On stochastic a weak buy signal is generated, although DMI is flat and an uptrend can be expected after breakeven of resistance of 445.0p. Stock has resistance near 445.0 and 471.0p, support can be found near 400.0p and 379.0p

Trading strategy

The stock can be bought around 415.0p with a profit target 463.0p and stop loss of 392.0p (Hedge position: short position in spread betting with £3.017 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

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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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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