| Sector |
Oil Equipment services & Distribution |
Last closing price
(09/03/2009) (p) |
511 |
| 52 week High/Low (p) |
961/373.5 |
| Market Cap (£bn) |
1.63 |
Sector weight age by
Market Cap (%) |
30.04 |
| Average Volume (mn) |
2.2 |
| P/E ratio (TTM) |
11.88 |
Industry P/E
ration (TTM) |
0.26 |
TTM: Trailing Twelve Month
Daily chart (AMEC.L)
Business background and investment rationale
AMEC is an international consultancy, engineering and project management company providing services to the world’s energy, power & process industries. The company designs, maintains and manages the delivery of strategic and complex assets. These include offshore oil & gas production facilities, metals or mineral mines and power infrastructure.
Improve EBITA margin and strong financial position
Driven by its own internal initiatives AMEC expects to deliver improvements in earning before interest, taxes and amortization (EBITA) margin over the next two years. The Operational Excellence program is expected to be the major contributor to achieving a target margin of 8.5% in 2010. The group is in an exceptionally strong financial position with a relatively well funded pension scheme, and it expects £625m average net cash for 2008.
Strong order book
In February 2009 AMEC was awarded a contract worth £100m from EDF Energy. The mandate covers the mechanical, electrical and instrumentation installation at EDF Energy’s new 1,300MW Combined Cycle Gas Turbine (CCGT) power station at it’s West Burton site in Nottinghamshire. AMEC also has a £3bn backlog in the natural resources and power & process divisions which provide good visibility for 2009 and beyond. Of the £2bn awarded to AMEC in new contracts, £1bn went to oil and gas including: technical consultancy services for JSC National Company KazMunayGas (KMG); the National Oil Company of Kazakhstan for all of it’s projects; an engineering and maintenance services contract for Chevron Australia; two contracts for Apache North Sea Ltd and a five-year management consultancy contract for Zakum Development Company in Abu Dhabi, United Arab Emirates. The natural resources order book at the end of December 2008 was £1.7bn, representing a gain of 40% since the beginning of the year. The division is expected to deliver an EBITA margin of 10.5% for the calendar year 2008. In the power and process division, AMEC’s consortium with AREVA and URS Washington Division recently landed the Sellafield management and operations contract from British Nuclear Fuels Ltd. The contract is valued at £1.3bn per annum, with an associated fee of up to £50m per annum for a period of five years. There is the potential for a further contract extension of 17 years subject to performance being met.
Technical outlook
On daily chart, AMEC is falling but still above the 52 week low of 373.0p. MACD (moving average convergence/divergence) is negative and 12 day EMA (exponential moving average) has cross below 26 day EMA, indicating downtrend. This is supported by the 14 day RSI (relative strength index) which is near the oversold zone 30, indicating a correction. 14 day negative DMI (directional moving index) is above positive 14 day DMI indicating negative trend. Stock has support around the 450–470.0p range with resistance at 534.0p.
Trading strategy
The stock can be bought around 495.0p with a profit target 543.0p and stop loss of 473.0p.
| Sector |
Mining |
Last closing price
(09/03/2009) (p) |
400 |
| 52 week High/Low (p) |
575/93 |
| Market Cap (£bn) |
2.85 |
Sector weight age by
Market Cap (%) |
3.1 |
| Average Volume (k) |
876.07 |
| P/E ratio (TTM) |
28.34 |
Industry P/E
ration (TTM) |
18.25 |
TTM: Trailing Twelve Month
Daily chart (FRES.L)
Business background and investment rationale
Fresnillo is a precious metals company engaged in all aspects of mining from exploration through to mine construction and operation. The company’s three operating mines are Fresnillo, Cienega and Herradura. The firm has a 56% interest in the development project at Soledad and Dipolos adjacent to the Herradura operating mine, which is held through the Penmont joint venture.
Increase in revenue on higher metal prices
In a preliminary result announced in February 2009, Fresnillo’s adjusted revenue increased by 6.9% from 2007, reaching US$839.6m in 2008. The growth was primarily attributable to the higher average realised precious metals prices and stable production. Total revenues increased to US$720.5m, 11.2% higher than at 31 December 2007. Earning before interest, taxes depreciation and amortization (EBITDA) rose 21.7% in the year and net profit was 5.1% lower. Average realised silver and gold prices for 2008 increased by 8.4% and 23.8% respectively when compared to 2007 and now account for 93% of the company’s revenue. Total silver production rose 1% to 34.8 million ounces in 2008, a new record for the Fresnillo Group.
Record reserve and resources
As at 31 December 2008, Fresnillo’s total attributable resources included 1,115.9 million ounces of silver and 12 million ounces of gold. These figures compare to 837 million ounces of silver and 9.5 million ounces of gold in 2007. Fresnillo intends to maintain it’s position as the world’s largest primary silver producer, aiming to approximately double production on a silver equivalent ounce basis by 2018. The company is on track to commence the Soledad-Dipolos and Saucito projects in 2010 and 2011 respectively. Soledad-Dipolos’ expected peak-rate production is estimated at 100,000 ounces of gold per year. Saucito is expected to be world-class silver mine, with operations scheduled to begin at an initial rate of 500 tones per day (tpd). Production rates will ramp up to 2,500 tpd by integrating the Saucito, Mezquite, Madroño and Jarillas veins during the initial development stage of the project.
Technical outlook
On daily chart, Fresnillo is making a positive trend with higher highs and is making a ‘V’ pattern between 312.0p and 471.0p. Stock has risen 25% from it’s low of 312.0p. MACD is positive and 12 day EMA has cross above 26 day EMA, indicating formation of uptrend. 14 day RSI is also above 50 supporting an upward move. 14 day positive DMI (directional moving index) is above negative 14 day DMI indicating a positive trend. Stock has support around the 352–370.0p range with resistance at 471.0p. For a higher move stock should close above 400.0p.
Trading strategy
The stock can be bought around 388.0p with a profit target 426.8p and stop loss of 370.7p.
AB Foods PLC
AB Foods has hit stop loss of 606.1p, 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 negative DMI above positive 14 day DMI indicating negative trend and stochastic is below 20, indicating consolidation for the short term.
BATS PLC
BATS is in a consolidation phase around the 1650–1700.0p range and volatility has decreased dramatically. Trend for the stock looks negative as MACD is negative and the 14 day RSI is near to the oversold zone of 30. It is also trading below 20 day, 50 day and 200 day EMA, supporting downtrend. 14 day negative DMI is above positive 14 day DMI indicating negative trend. Looking at the negative trend in the market, profit should be booked at 1750.0p.
Randgold resources PLC
Randgold hit the profit target of 3300.0p and is trading above 3400.0p on higher gold prices. MACD is positive and 12 day EMA has cross above 26 day EMA indicating an uptrend. This is supported by the 14 day RSI above 50, indicating upside move. Randgold is trading above 50 day and 200 day EMA, indicating the long-term uptrend is intact. Stock has support of around 3000.0p with resistance at 3500.0p.
Compass Group PLC
Compass hit stop loss of 283.0p and is still trading in a range of 280–300.0p, indicating a formation of bottom. 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. However, stock is still trading below 20 day, 50 day and 200 day EMA and has to close above 300.0p for uptrend.
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.
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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.
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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