| Sector |
Personal goods |
Last closing price
(02/02/2009) (p) |
498.75 |
| 52 week High/Low (p) |
532.5/380 |
| Market Cap (£mn) |
967.22 |
Sector weight age by
Market Cap (%) |
33.01 |
| Average Volume (mn) |
1.09 |
| P/E ratio (TTM) |
27.24 |
Industry P/E
ration (TTM) |
2.84 |
TTM: Trailing Twelve Month
Daily chart (SSL.L)
Business Background and investment rationale
SSL International PLC (SSL) is a consumer products company whose diverse portfolio includes the global brands, Durex and Scholl, as well as locally owned companies, such as Meltus, Medised and Syndol in the UK and Sauber and Mister Baby in Southern Europe.
Strong sales and double digit operating profit growth
In an interim result for the six months ended September 2008, SSL sales grew 10%. This growth was driven by strong performances from the three major categories: Durex, Scholl footcare and Scholl footwear. Durex branded condom sales climbed by 10% thanks to continued strong growth in the UK, France, Eastern Europe, Russia and China. The ‘Play’ range rose by 27.3% to £21m. Scholl footcare sales were up 15.1%, to £84.4m on the back of strong performances from Scholl Cracked Heel Repair Cream and Scholl pharmacy ranges in France and Germany. Scholl footwear sales increased by 9.5% to £42.8m driven by excellent growth in the Asia Pacific region and the integration of the Orthaheel orthotic footwear and insoles business, which was acquired in November 2007. SSL is confident it will achieve double digit operating profit growth by March 2009 by investing in innovative new product developments, expanding distribution into new and developing territories and continued focus on cost control.
Improvement in operating margin
SSL restructured the European supply chain by transferring production to the company’s existing facilities in Thailand and India. This rationalisation of manufacturing capacity saw SSL’s gross profit margin hit 60.8% compared with 60.3% in prior year. The improvement was also supplemented by profit generation from Durex, Scholl and other brands. Weakness in the pound against dollar and euro will also improve operating margins.
Technical outlook
On daily chart, SSL is trading near strong resistance of 500.0p and has not broken this resistance on the last three upside rallies. Over the short term stock has broken the down trendline indicating bullish signal. Moving average convergence/divergence (MACD) is positive and 12-day Exponential moving average (EMA) has cross above 26-day EMA indicating a weak buy signal. 14-day Relative strength index (RSI) is above 50.0 showing strength in trend, stochastic is above 80 indicating some consolidation is expected. For an upside rally stock has to sustain above 500.0p level, support can be found for the stock around 450.0p
Trading strategy
The stock can be bought around 480.0p with a profit target 535.34p and stop loss of 455.93p (Hedge position: Short position in spread betting with £2.6 bet per point).
| Sector |
Support services |
Last closing price
(02/02/2009) (p) |
493.75 |
| 52 week High/Low (p) |
650/306 |
| Market Cap (£bn) |
1.16 |
Sector weight age by
Market Cap (%) |
2.58 |
| Average Volume (mn) |
0.874 |
| P/E ratio (TTM) |
15.27 |
Industry P/E
ration (TTM) |
1.57 |
TTM: Trailing Twelve Month
Daily chart (BAB.L)
Business background and investment rationale
Babcock International works primarily with public sector institutions. The company provides outsourcing services to government and private sector customers and works extensively with the UK armed forces. The company is split into six divisions - including defence and engineering and naval services – and has businesses across Europe, Africa and North America.
Strong order book
Babcock’s order book increased by 55% compared with the first half of 2007/08 and is now at £5.2bn (30 September 2007: £3.3bn). In September 2008, the group signed a 30-year contract worth £1.5bn to provide training and associated support to the Royal School of Military Engineering (RSME), which added significant opportunities to extend its position in the military training market. In July Babcock won manufacturing contracts worth £675m to construct the bow sections and to carry out the assembly and completion of the ships at the dockyard in Rosyth. The company also added a five-year contract worth approximately $250m (£125m) with the Canadian government to provide in-service support for their Victoria class submarines. The Canadian deal represents Babcock’s first opportunity to utilise submarine expertise in international markets. The company expects to win more contracts as the economic downturn worsens, particularly with governments looking to outsource more work to keep costs low.
Strong performance by marine and nuclear divisions
Babcock’s marine division, which represents just under half of the group, delivered a 45% increase in profits due to a full contribution from acquisitions and cost saving initiatives. Its nuclear division saw first-half profits rise 103% as it benefited from the integration of a recently purchased civil nuclear businesses. The group’s funding position is good and there are no refinancing requirements until 2012. At the end of September, Babcock identified a further £10m of expected annual savings by 2011, in addition to the initial £4m announced at the time of the acquisition of Devonport Management Ltd in May 2007.
Technical outlook
On daily chart, Babcock has cross below the upward trend line indicating a bearish signal. It is also trading below 200-day EMA supporting a downtrend. MACD is positive but 12-day EMA has cross below 26-day EMA indicating a weak sell signal. 14-day RSI is also below 50 indicating bearish trend. +14 day Directional moving index (DMI) is still above –14 day DMI and near 20, indicating flat trend and consolidation. Stock has support between 460p-480.0p and resistance at 550p.
Trading strategy
The stock can be bought around 460.0p with a profit target 513.0p and stop loss of 436.94p (Hedge position: short position in spread betting with £2.71 bet per point).
Associated British Food
AB Food handled the previous two week’s down turn in markets fairly well is still trading above support of 650 and is in a consolidation phase trading around an entry point of 665.0p. MACD is negative and 12-day EMA is cross below 26-day EMA indicating downtrend. 14- day RSI is also below 50 indicating weakness in trend and DMI is above 25 indicating a downtrend is forming. -14 DMI is cross above +14 DMI confirming the downtrend. AB Food has strong support at 650.0p and if it falls below this level stop loss should be booked at 635.0p with a new profit target of 680.0p.
Compass Group PLC
Stock has not broken uptrend on last week downturn, indicating a strong uptrend. It is still above 50-day and 200-day EMA which supports the uptrend. MACD is positive and 14- day RSI is above 50 showing positive trend. Last week, stock has made a new high of 355.0p and is near profit target of 359.12p. Looking at the weakness in market, stock should be hold with the profit target of 350.0p and stop loss of 308.94p.
Amec PLC
On daily chart, Amec is trading around entry point of 550.0p. Stock is in consolidation phase with MACD positive and 14- day RSI above 50 indicating strength in trend. Both the indicators are making a positive slope from October’s low, which is further strengthening the uptrend. DMI is flat and stochastic is overbought showing some consolidation above 530.0p for the short term. Looking at the weak trend in markets, profit should be book at 580.0p
Whitbread PLC
On daily chart, Whitbread has sustained last week’s downturn and consolidation is around 800.0p. Stock has risen 25% in the last two times from support of 800.0p. For the short term, MACD is negative and 12-day EMA is cross below 26-day EMA. 14-day RSI is also below 50 supporting a downward move. Stochastic is around 20 indicating oversold for short term, Stock should be hold with reduced profit target of 853.0p.
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.
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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.
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 1st October to 19th December 2008:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
100% |
22 |
| Hold |
0 |
0 |
| Sell |
0 |
0 |
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.
