| Sector |
Software & computer services |
Last closing price
(09/02/2009) (p) |
621.0 |
| 52 week High/Low (p) |
1640/449.5 |
| Market Cap (£mn) |
414.37 |
Sector weight age by
Market Cap (%) |
3.02 |
| Average Volume (mn) |
0.42 |
| P/E ratio (TTM) |
9.67 |
Industry P/E
ration (TTM) |
1.63 |
TTM: Trailing Twelve Month
Daily chart (AVV.L)
Business background and investment rationale
Aveva Group PLC is engaged in developing computer software and services for engineering and related solutions. The company provides engineering information technology (IT) software to the plant, power and marine industries.
Strong trading statement
In an interim result announced in November 2008, Aveva continued to see strong trading across all geographies in its principal markets of oil & gas and power & marine for the first half of the 2008. Sales in Asia Pacific continued to grow strongly with good performances across all regions particularly in China, India and Australia. Aveva continued to see growth in Central, Eastern and Southern Europe (CES), driven by new customer wins, increased orders from its existing user base and higher activity in the power market. The CES region delivered £22m in revenue; an increase of 46% on 2007’s £15.1m. Aveva continues to generate significant cash flows, resulting in net cash of £101m for the year, compared to £54.5m in 2007. Operating margins increased by 9% over the year, reaching 37%. Given the strong first half performance, the Board has increased the interim dividend by 76% to 2.86p (2007 - 1.65 pence). Aveva sees no indication that the global financial turbulence has affected demand for its products.
Contract wins in the emerging markets
In July 2008 SPP Shipbuilding, a Korean shipbuilder, signed a multi-million US dollar agreement with Aveva for the supply of marine design solutions to the company’s three shipyards. In China, Aveva has gained recognition as one of the strongest players in the engineering software market, both in the marine and process plant industries, with further penetration into the nuclear power sector. The company has also signed strategic alliances with national oil operator China Offshore Oil Engineering Company (COOEC). In Brazil, Aveva won a long-term contract from Petrobras and it secured a significant order in the Middle East from Abu Dhabi Shipbuilding, which will use Aveva Marine for both commercial and military new build programmes, as well as refit work.
Technical outlook
On daily chart, Aveva has made a positive slope from a 52-week low of 449.5p, indicating a higher low. On technical, MACD (Moving average convergence/ divergence) is positive and 12 day EMA (Exponential moving average) has cross above 26 day EMA. 14 day RSI (Relative strength index) is above 50 showing strong upside. 14 day DMI (Directional moving index) is above 25 supporting uptrend. Stock needs some consolidation before a higher move as stochastic is indicating short term overbought. Stock has support at 578p and resistance at 651.0p and 876.0p level.
Trading strategy
The stock can be bought around 610.0p with a profit target 680.33p and stop loss of 579.43p (Hedge position: short position in spread betting with £2.04 bet per point).
| Sector |
Aerospace and defense |
Last closing price
(09/02/2009) (p) |
321.75 |
| 52 week High/Low (p) |
455.56/237.27 |
| Market Cap (£bn) |
6.1 |
Sector weight age by
Market Cap (%) |
22.31 |
| Average Volume (mn) |
9.09 |
| P/E ratio (TTM) |
10.27 |
Industry P/E
ration (TTM) |
6.76 |
TTM: Trailing Twelve Month
Daily chart (RR.L)
Business background and investment rationale
Rolls-Royce Group PLC is a global business providing power systems for use on land, at sea and in the air. It operates in five segments: Civil Aerospace, Defence Aerospace, Marine, Energy and Financial Services.
Strong order book and recent order wins
By July 2008, the group’s order book had grown by 17% to reach a record £53.5bn. This compares with £45.9bn at year-end 2007. The profile of the order book continues to become more international, with the growing Asian and Middle East markets now accounting for over 40% of business. Recently Rolls-Royce won contract extensions worth $120m for continued work on the C-130J propulsion system for the US Air Force. In January 2009 the group was awarded a $198m contract by the UK Ministry of Defence (MOD) to support the Pegasus engines which provide the Harrier fleet with its unique Short Take Off and Vertical Landing (STOVL) capability. In December 2008 Rolls-Royce was awarded a contract from Gazkomplectimpex, a subsidiary of Gazprom, to supply eight industrial aeroderivative gas turbines driving centrifugal compressors for the new 1,200km Nord Stream gas pipeline from Russia to Europe. The company will also benefit from the weakening of pound against the US dollar and euro.
New projects
Since the launch of the Airbus A350 XWB in July 2006, Rolls-Royce received orders for 700 Trent XWB engines, till July 2008. The Trent engine addresses a sector of the market estimated to be worth $186bn over the next 20 years. In March 2008, Rolls-Royce launched the BR725, the exclusive engine for Gulfstream’s new G650 corporate jet which is targeting an engine market worth around $14bn. In July 2008, the group announced it was reshaping its nuclear business to apply Rolls-Royce’s existing capabilities to the expanding civil nuclear market, which is estimated £50bn a year in 15 years time.
Technical outlook
The stock is trading above positive slope and trading above 20 day and 50 day EMA indicating uptrend. MACD is positive and 12 day EMA is above 26 day EMA. RSI is near 50 and both indicators are making positive slope indicating uptrend. DMI is flat and indicating consolidation between 320.0 and 335.0p. If stock breaks out above 335.0p, a higher move can be expected. Stock has resistance at 350.0p and good support between 290.p and 300.0p level.
Trading strategy
Stock can be bought near 317.0p with a profit target of 353.5p and stop loss of 301.1p (Hedge position: short position in spread betting with £3.93 bet per point).
Associated British Food
AB Food has hit the reduced profit target of 680.0p last week and is trading around an entry point of 665.0p. MACD is still negative and 12 day EMA is below 26 day EMA indicating downtrend. 14 day RSI is also below 50 indicating weakness in trend, and DMI is near 20 indicating consolidation. -14 DMI is cross above +14 DMI confirming the downtrend. AB Food has strong support at 650.0p and a new entry can be taken at this level.
Compass Group PLC
Compass Group has hit the reduced profit target of 350.0p and is trading near the original profit target of 359.0p. Stock 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. Profit should be book for the stock as it will consolidate around 350.0p before a new entry can be taken.
Amec PLC
On daily chart, Amec has hit the reduced profit target of 580.0p and is trading around 580.0p. Stock is in a bullish phase and has strong resistance near 600.0p. MACD is 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. 14 day DMI is flat and stochastic is overbought showing some consolidation above 560.0p for the short term. If stock crosses above 600.0p level a new entry can be taken.
Whitbread PLC
On daily chart, Whitbread has sustained last week’s downturn but hit stop loss of 778.9p. Stock is trading above 800.0p most of the time indicating a bottom has formed around 800.0p. Stock has cross 20 day EMA, also indicating a bullish sign. For the short term, MACD is negative but 12 day EMA has cross above 26 day EMA indicating a weak buy signal. 14 day RSI is near 50 supporting an uptrend. If positions are open, profit should be booked at 850.0p.
Babcock International PLC
Last week Babcock hit the profit target of 513.0p, but stock has made a low of 490.5p, so entry position can be made only at that level. Stock has recovered last week’s bearish trend and trading above key resistance of 500.0p. MACD is positive and 12 day EMA has cross above 26 day EMA indicating a weak uptrend. 14 day RSI is also above 50 indicating uptrend. +14 day DMI is still above –14 day DMI and near 20, indicating flat trend for short term. Stock has support between 460p-480.0p and resistance at 550p.
SSL International PLC
On daily chart, SSL is trading above strong resistance of 500.0p indicating strong upside, but stock has made a low of 490.75, so entry can be taken at this level. Over the short term, stock is above down trendline indicating bullish signal. MACD is positive and 12 day EMA cross above 26 day EMA indicating a weak buy signal. 14 day RSI is above 50.0 showing strength in trend, stochastic is above 80 indicating some consolidation is expected. Stock should be hold with the same profit target of 535.43p.
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 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.
