| Sector |
Support services |
Last closing price
(16/02/2009) (p) |
350 |
| 52 week High/Low (p) |
477.75/250 |
| Market Cap (£mn) |
392.68 |
Sector weight age by
Market Cap (%) |
0.887 |
| Average Volume (mn) |
0.20 |
| P/E ratio (TTM) |
19.75 |
Industry P/E
ration (TTM) |
0.32 |
TTM: Trailing Twelve Month
Daily chart (MCHL.L)
Business background and investment rationale
Mouchel Group is a support services company specialising in a range of activities including road management, public buildings, rail infrastructure, homes, schools and utilities. Much of the firm’s work comes from partnerships with government, local authorities and industry.
Earning visibility and bidding pipeline
Mouchel’s prospects are underpinned by the continuation of its strong order book and bidding pipeline, which provide excellent visibility of future earnings. The order book and bidding pipeline currently stand at £2.1bn and £2bn respectively and include significant opportunities in Mouchel’s three businesses: Government Services; Regulated Industries and Highways.
New contracts
In 2008, Severn Trent Water awarded Mouchel a contract to undertake up-front feasibility and preliminary design ahead of Severn’s AMP 5 capital program. Mouchel also won a new two-year network modelling and drainage commission with Severn Trent Water and extended the existing leakage detection contract by a further year, with the possibility of extending it by another five years. Mouchel is benefiting from the combined capabilities from the HBS and Hedra acquisitions which took place in 2006 and 2008. In particular it has pursued new outsourcing deals and assignments with the Abu Dhabi government; organisational design for the UK Skills Funding Agency; review of operational and service improvement opportunities for Thames Water; procurement advice for the National Police Improvement Agency; and further project management support on the National Healthy Schools program. Potential future opportunities include support for the Identity and Passport ID cards program and advice on setting up an electricity regulator in the United Arab Emirates. In addition, the government’s “fiscal stimulus” is aiding activities in several markets, notably within Highways.
Technical outlook
On daily chart, Mouchel is in a consolidation phase and has strong support in a band of 340.0p and 350.0p. MACD (Moving average convergence/divergence) is positive and 12 day EMA (Exponential moving average) has cross below 26 day EMA, indicating weakness in uptrend. This is supported by 14 day RSI (Relative strength index) which is below 50 and indicates a short-term correction. 14 day DMI (Directional moving index) is flat indicating a consolidation around 340.0p. Stock has support of around 326.0p with resistance at 382.0p. For an uptrend, stock should consolidate above 350.0p.
Trading strategy
The stock can be bought around 343.0p with a profit target 382.5p and stop loss of 325.8p (Hedge position: Short position in spread betting with £3.63 bet per point).
| Sector |
Travel & Lesuire |
Last closing price
(16/02/2009) (p) |
327.25 |
| 52 week High/Low (p) |
396.25/235.5 |
| Market Cap (£bn) |
5.98 |
Sector weight age by
Market Cap (%) |
15.72 |
| Average Volume (mn) |
14.79 |
| P/E ratio (TTM) |
16.04 |
Industry P/E
ration (TTM) |
2.98 |
TTM: Trailing Twelve Month
Daily chart (CPG.L)
Business background and investment rationale
Compass Group PLC is a contract food service company providing a range of consumer-facing food services to clients located in 70 countries. It operates in North America, Continental Europe, the United Kingdom and the rest of the world.
Adequately handling food inflation
Through the MAP (Management & Performance) framework, Compass improved its gross margin by 70 basis points, while its organic revenue grew by 5.9% for the full year ending November 2008. These improvements came from: menu planning; a focus on reducing waste; product and supplier rationalisation; and client and consumer price increases. Each of these measures helps to address food inflation which falls into three categories: purchasing and supply chain efficiencies; unit cost efficiencies including menu re-engineering; and client and consumer price increases.
Acquisition and currency benefits
In North America, Compass acquired the KIMCO Corporation for a cash consideration of US$75m, with a further maximum US$15m performance-related payment. Primarily, KIMCO provides soft support services to the Business & Industry sector across North America, and the acquisition strengthens Compass’ ability to deliver soft support services to additional segments of the market. Meanwhile in Continental Europe, Compass acquired the Plural Group for a consideration of €27.5m with a further maximum payment of €4.2m based on performance over the next three years. This second acquisition allows Compass to leverage an excellent business in Germany and to capitalise on the growing demand for multi services in the Business & Industry and Healthcare sectors. The significant weakening of sterling, particularly against the euro and dollar, increased reported revenues of approximately £30m after translating the company’s first three months operating profit. Compass commenced a further £400m share buy-back programme on 1 July 2008 which will support the share price.
Technical outlook
On daily chart, Compass is moving in a band of 320.0p and 362.0p. Stock has once again come to the support of 320.0p. MACD is positive and 12 day EMA has cross below 26 day EMA, indicating a weakness in uptrend. This is supported by the 14 day RSI which is below 50 and indicates a short-term correction. 14 day DMI is flat but negative 14 day DMI has cross above positive 14 day DMI which indicates a negative trend is forming. Stock has support at 325.0p and 308.0p and strong resistance near 350.0p.
Trading strategy
The stock can be bought around 322.0p with a profit target 359.12p and stop loss of 305.85p (Hedge position: Short position in spread betting with £3.88 bet per point).
SSL International PLC
On daily chart, SSL is trading above a strong resistance of 500.0p which indicates a strong upside. For short term, stock is above the down trendline indicating a bullish signal. MACD is positive and 12 day EMA is cross above 26 day EMA, indicating a weak buy signal. 14 day RSI is above 50 showing strength in trend, while stochastic is above 80 indicating that some consolidation is expected. Stock should be hold with the same profit target of 535.43p.
Aveva Group PLC
Last week Aveva hit a stop loss of 579.43p and is still falling. Stock has support near 556.0p and if it can not hold this level it could fall to 477.0p. MACD is still positive and 12 day EMA has cross below 26 day EMA which indicates weakness. 14 day RSI is also 50 and showing downside. Losses should be book at stop loss of 579.43p.
Rolls-Royce Group PLC
The stock is trading above positive slope and is also above 20 day and 50 day EMA, indicating uptrend. MACD is positive and 14 day RSI is near 50; both indicators are making a positive slope and indicating uptrend. 14 day DMI is flat and indicating a consolidation between 320.0p 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 the 290.0p and 300.0p level. Stock should be hold with same profit target.
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.
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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.
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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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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.
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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.
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