| Sector |
Support services |
Last closing price
(14/04/2009) (p) |
506.5 |
| 52 week High/Low (p) |
1099/415 |
| Market Cap (£mn) |
498.3 |
Sector weight age by
Market Cap (%) |
1.13 |
| Average Volume (k) |
393.9 |
| P/E ratio (TTM) |
7.46 |
Industry P/E
ration (TTM) |
2.2 |
TTM: Trailing Twelve Month
Daily chart (ATK.L)
Business background and investment rationale
WS Atkins PLC is a professional design and engineering consultancy services company in the UK. The firm delivers engineering and design to a range of clients in the public, regulated and private sectors. The Middle East business provides design and engineering services for buildings, transportation and other infrastructure.
High visibility of future earnings
In a half year result announced in November 2008, Atkins’ outlook for the rest of the year remains good; 87% of full year forecast revenue has been secured, taking the company ahead of the same period last year (2007: 85%). Despite the recent slowdown of the UK economy, Atkins is not experiencing any material impact within it’s UK-based businesses, which generate around 75% of the group’s revenues. The majority of group work is for clients within the public and regulated sectors where infrastructure investment is publicly committed. Demand for the majority of it’s services, many of which feature high barriers to entry, remains strong. The Middle East business, which represents more than 10% of the group, is performing well and whilst economic growth in the region may also slow, prospects for the remainder of the year are positive. Atkins’ cash position remains strong with net funds at 30 September 2008 of £164.5m. The cash inflow in the period was also strong with cash generated from operations of £38.2m, which compares to the £16.8m in 2007.
New contracts win
In the design and civil engineering business, Atkins has secured a number of major projects. These include a five-year contract to provide design services for the provision of residential and training facilities for the Royal School of Military Engineering and a number of awards under the Learning and Skills Council (LSC) framework. In the highway services business, mobilisation for the Highways Agency Area 6 MAC contract, which commenced on 1 June 2008, was successfully achieved. In addition, Atkins was awarded a five and a half year contract (extendable to nine and a half years) by Bath and North East Somerset which commenced in October. In aerospace, Atkins won further contracts with Airbus on the A330 and A400m, confirming the success of the acquisition of Nedtech last year.
Technical outlook
On daily chart, Atkins has rebounded from it’s 52 week low of 415.0p and is consolidating around 500.0p. Stock has strong support near 500.0p and resistance near 563.0p and it has to hold above 500.0p for a higher move. MACD (moving average convergence/divergence) is positive and 12 day EMA (exponential moving average) is above 26 day EMA indicating strength in uptrend. 14 day RSI (relative strength index) is above 50 showing strength in trend. 14 day positive DMI (directional moving index) is above 14 day negative and DMI is near 20 indicating consolidation. Stock is also above 20 day and 50 day EMA which supports strength in trend.
Trading strategy
The stock can be bought around 495.0p with a profit target 552.07p and stop loss of 470.18p (Hedge position: Short position in spread betting with £2.52 bet per point).
| Sector |
Software & computer services |
Last closing price
(14/04/2009) (p) |
600.5 |
| 52 week High/Low (p) |
1640/449.5 |
| Market Cap (£mn) |
394.03 |
Sector weight age by
Market Cap (%) |
2.76 |
| Average Volume (k) |
373.7 |
| P/E ratio (TTM) |
9.19 |
Industry P/E
ration (TTM) |
1.65 |
TTM: Trailing Twelve Month
Daily chart (AVV.L)
Business background and investment rationale
Aveva Group PLC develops 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 it’s 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 it’s 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, which compares to £54.5m in 2007. Operating margins reached 37% representing an increase of 9% over the year. Given the strong first half performance, the board has increased the interim dividend by 76% from 1.65p in 2007, to 2.86p for 2008. Aveva sees no indication that the global financial turbulence has affected demand for it’s 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 been recognised as one of the strongest players in the engineering software market, in both 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 is forming a cup and handle continuation pattern and has made a cup between 641.0p and 473.0p, while handle is in formation between 568.0p and 641.0p. For a breakout stock has to rise above 641.0p. On technical, MACD is positive and 12 day EMA is above 26 day EMA indicating strong uptrend. 14 day RSI is near 60 showing strong upside. 14 day DMI is above 25 supporting uptrend. Stock needs some consolidation before a higher move as stochastic is indicating short term overbought. Stock is also above 20 day and 50 day EMA which supports strength in trend. Stock has support at 578.0p and resistance at 641.0p and 758.0p level.
Trading strategy
The stock can be bought around 588.0p with a profit target 655.79p and stop loss of 558.52p (Hedge position: short position in spread betting with £2.12 bet per point).
Serco Group PLC
On daily chart, Serco hit the reduced profit target of 370.0p and is still trading between 360.0p and 370.0p. MACD is negative and 12 day EMA has crossed above 26 day EMA, indicating a weak uptrend is forming. 14 day RSI is below 50 but making a positive slope which indicates a weak uptrend. 14 day negative DMI is above 14 day positive which also indicates weakness in trend. Stock has strong support near 320.0p and 350.0p and resistance near 400.0p. All positions should be closed for the stock.
Misys PLC
Misys hit the profit target of 130.49p and is trading around 8% above profit target at142.0p. MACD is positive and 12 day EMA is above 26 day EMA indicating strength in uptrend. 14 day RSI is above 70 showing overbought. 14 day positive DMI is above 14 day negative and DMI is near 40 showing overbought. Stock is also above 20 day and 50 day EMA which supports strength in trend. All positions should be closed for the stock.
PartyGaming PLC
On daily chart, PartyGaming hit the profit target of 257.0p and rebounded from it’s high of 262.0p to entry price recommended 219.0p. Entry for the stock could be only taken at 234.75p. Stock is still above 50 day and 200 day EMA, indicating the long-term uptrend is intact. Momentum oscillator MACD is positive, but 12 day EMA has cross below 26 day EMA indicating weakness in trend. RSI is below 50 indicating weakness in trend. 14 day positive DMI is above 14 day negative DMI supporting uptrend. All positions should be closed for the stock.
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: 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.
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 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 January to 31st March 2009:
| |
% 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.
