| Sector |
Mining |
Last closing price
(02/03/2009) (p) |
3085 |
| 52 week High/Low (p) |
3523/1390 |
| Market Cap (£bn) |
2.35 |
Sector weight age by
Market Cap (%) |
2.731 |
| Average Volume (k) |
529.49 |
| P/E ratio (TTM) |
81.89 |
Industry P/E
ration (TTM) |
18.97 |
TTM: Trailing Twelve Month
Daily chart (RRS.L)
Business background and investment rationale
Randgold Resources is engaged in gold mining and exploration. It’s discoveries include the seven and a half million ounce Morila deposit in Southern Mali, the seven million ounce Yalea deposit at Loulo in Western Mali and the four million ounce Tongon deposit in the Cote d’Ivoire.
Increase in production and a reduction in cost
In a fourth quarter result announced last month, Randgold’s attributable gold production for the fourth quarter was up 6% on the previous quarter at 107,321 ounces. This brings the total for the year to 428,426 ounces compared to 444,573 ounces in 2007. The group’s total cash costs for the quarter were US$459 per ounce, down 11% on the previous quarter, partly as a result of a drop in the price of diesel which represents a major component of the company’s cost structure. Gold sales for the year were US$338.6m, marking a 17% increase on the previous year. This was due to an increase in the average price from US$652/oz in 2007 to US$792/oz in 2008.
Encouraging metallurgic results from Massawa, Senegal
Preliminary metallurgical test work in the Massawa region in Senegal suggests there may be good potential for gold mining. Recoveries of approximately 90% of sulphide material based on drilling work undertaken up to February 2009 suggests as much as 3.9 million ounces of gold could be retrieved. In a focused exploration strategy at Massawa, a diamond drilling program commenced which involved a new 5,000 metre (100 metre by 50 metre) infill. By quarter end, 16 holes covering 3,417 metres had been completed. As at February 2009, the mineralised system at Massawa extended over 7km and mineralization is now open in all directions. The program has been especially prevalent in the ‘Lion Extension’ to the north where the last drill hole ‘MWDH058’ returned 12.25 metres at 3.50g/t, drilled below the RAB hole ‘MWRAB343’, 42 metres at 7.60g/t.
Technical outlook
On daily chart, Randgold has fallen from a 52-week high of 3523.0p on weak gold prices and is in a consolidation phase with strong support in a band of 3000.0p and 3100.0p. 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 the 14 day RSI (relative strength index) near 50, indicating a short-term correction. Randgold is trading above 50 day and 200 day EMA, indicating the long-term uptrend is intact. 14 day DMI (directional moving index) is flat which indicates a consolidation around 3000.0p. Stock has support of around 2500.0p with resistance at 3500.0p. For an uptrend, stock should consolidate above 3200.0p.
Trading strategy
The stock can be bought around 3000.0p with a profit target 3300 and stop loss of 2865.0p.
| Sector |
Travel & Lesuire |
Last closing price
(02/03/2009) (p) |
306.25 |
| 52 week High/Low (p) |
396.25/235.5 |
| Market Cap (£bn) |
5.71 |
Sector weight age by
Market Cap (%) |
15.74 |
| Average Volume (mn) |
9.62 |
| P/E ratio (TTM) |
14.93 |
Industry P/E
ration (TTM) |
2.69 |
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 it’s gross margin by 70 basis points, while it’s 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 benefit’s
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 forming a bottom near 300.0p with stock closing above 300.0p from the last three days. MACD is negative and 12 day EMA has cross below 26 day EMA, indicating a weakness in trend. The 14 day RSI has recovered from the oversold level of 30 and stochastic, indicating a weak buy signal. 14 day DMI is flat and negative 14 day DMI is falling which indicates weakness in negative trend and consolidation. Although stock is still trading below 20 day, 50 day and 200 day EMA and has to close above 300.0p for uptrend. Stock has support at 300.0p and 283.0p and strong resistance near 327.0p.
Trading strategy
The stock can be bought around 298.0p with a profit target 332.35p and stop loss of 283.0p (Hedge position: Short position in spread betting with £4.19 bet per point).
SSL International PLC
Last week SSL had a stop loss of 466.1p in a morning whipsaws and is trading near 480p, which indicates a consolidation between 470.0p and 500.0p. MACD is negative and 12 day EMA has cross below 26 day EMA, indicating a weak sell signal. The 14 day RSI is also below 50 showing weakness in trend, while stochastic is below 20 indicating short-term oversold. Stock has support at 460.0p and resistance near 510.0p.
Mouchel Group
Mouchel hit stop loss of 325.85 and is trading below the support level of 326.0p. MACD is negative and 12 day EMA has cross below 26 day EMA, indicating negative trend. This is supported by the 14 day RSI which is near the oversold level 30. 14 day DMI is above 20 and negative DMI is way above positive DMI, indicating negative trend. Stock has support of around 300.0p.
AB Foods PLC
AB Foods trading came back to the support level of 640.0p after rising until 670.0p, and entry can be taken at 638.0p. Trend for the stock looks negative as MACD is negative and the 14 day RSI is trading near the oversold zone of 30. It is also trading below 20 day, 50 day and 200 day EMA, supporting a downward trend. 14 day DMI is flat and stochastic is below 20, indicating consolidation for the short term. If stock breaks out above 670.0p a higher move can be expected. Stock should be hold with new stop loss of 606.1p and reduced profit target of 670.0p.
BATS PLC
BATS has recovered from support level of 1700.0p. Trend for the stock looks slightly positive as MACD is still negative and the 14 day RSI recovered from being near to the oversold zone of 30. It is also trading just above 20 day, 50 day and 200 day EMA, supporting uptrend. 14 day DMI is flat and negative 14 day DMI is falling which indicates weakness in negative trend and consolidation. Looking at the negative trend in the market, profit should be booked at 1800.0p.
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.
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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.
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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.
The research analyst responsible for the content of this research report certifies that: 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 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.
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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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