| Sector |
General retailers |
Last closing price
(20/04/2009) (p) |
167 |
| 52 week High/Low (p) |
306/101 |
| Market Cap (£mn) |
610.4 |
Sector weight age by
Market Cap (%) |
2.31 |
| Average Volume (mn) |
2.71 |
| P/E ratio (TTM) |
8.76 |
Industry P/E
ration (TTM) |
0.66 |
TTM: Trailing Twelve Month
Daily chart (GMG.L)
Business background and investment rationale
The Game Group PLC operates retail outlets specialising in computer software, video games and related products.
Strong Christmas trading update
In a trading update released over the Christmas period for the 50 weeks to 10 January 2009, Game Group’s total sales increased by 24.2%. The company’s like-for-like (LFL) sales were up by 9.5%, while sales for the UK and Ireland increased by 22.7% with LFL sales up by 11.4%. International sales increased by 28.1% with LFL sales growing by 5.0% – both were measured on a constant currency basis. The group has traded well for the year and the board expects profit – before non-recurring costs and tax for the 53 weeks to 31 January 2009 – to be above £122m. This compares with £75.5m in 2008 and is slightly ahead of market expectations. Throughout the year, five successful hardware formats have, as anticipated, led to an increase in the proportion of higher margin software in the sales mix. Game Group expects gross margin for the 53 weeks to 31 January 2009 to be approximately 140 basis points above last year at 26.2% and slightly ahead of previous guidance. The firm also raised it’s Gamestation synergy guidance from £9m to £10m for the 53 weeks to 31 January 2009 by improving the efficiency of the acquired operations through integration with the existing back office facilities and infrastructure.
Resilient performance in economic downturn
The UK base of third generation platforms now amount to 22 million and Game anticipates that these successful hardware formats will continue to lead to increased demand for software during 2009. The company experienced exceptional consumer demand for a number of single format games, including Mario Kart and Wii Fit on Nintendo Wii, Little Big Planet on Sony PS3, Gears of War 2 and Fable 2 on Microsoft Xbox360 and Brain Training and Professor Layton on Nintendo DS. Game has benefited from it’s expansion strategy and now trades from over 1,340 stores with nearly half of the portfolio within international operations. Game eCommerce has continued to evolve and in the 50 weeks to 10 January 2009, sales increased by 75.1% to £99.2m.
Technical outlook
On daily chart, Game has broken out from a range between 136.0p and 160.0p and is still trading above 160.0p. Stock has strong support near 160.0p and resistance near 190.0p and it has to hold above 160.0p 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 above 25 indicating uptrend. Stock is also above 20 day and 50 day EMA which supports strength in trend.
Trading Strategy
The stock can be bought around 162.0p with a profit target 180.67p and stop loss of 153.87p (Hedge position: short position in spread betting with £7.71 bet per point).
| Sector |
Software & computer services |
Last closing price
(20/04/2009) (p) |
1230 |
| 52 week High/Low (p) |
1421/704 |
| Market Cap (£mn) |
2.92 |
Sector weight age by
Market Cap (%) |
19.71 |
| Average Volume (k) |
1.89 |
| P/E ratio (TTM) |
30.24 |
Industry P/E
ration (TTM) |
4.66 |
TTM: Trailing Twelve Month
Daily chart (AU.L)
Business background and investment rationale
Autonomy Corporation PLC develops and distributes software and is engaged in related support, maintenance and consulting services. Autonomy’s technology underpins applications which are dependent on unstructured information including call centres, customer relationship management, knowledge management, enterprise portals, enterprise resource planning and online publishing and security applications.
Strong trading performance
In a trading update on 9 April 2009 Autonomy expects to report record first quarter results, with revenues ahead of consensus estimates. Revenues are expected to be between $128m and $130m, versus analyst consensus revenue estimates of $126m. Fully diluted earnings per share (adjusted) is expected to be significantly ahead of analyst consensus estimates of 15 cents. In the fourth quarter last year, Autonomy won contracts with JP Morgan, CitiGroup, BBC, BAE Systems, Statoil, Societe Generale, Symantec, Avaya, CNN, State of Texas, American Automobile Association, Lloyds TSB, McAfee, Bank of Thailand, Deutsche Bank, European Patent Office, Xerox, AT&T and Clifford Chance. The group also secured new and repeat licenses with multiple government, defence and intelligence agencies including the US Army and the US DEA, as well as in the UK, Italy, Singapore, Canada, Hungary, the European Commission, Slovakia and Mexico. The company also signed 12 original equipment manufacturers (OEM) which include deals with Symantec, Dassault and Tridion.
Acquisition of Interwoven
In March 2009 Autonomy completed the acquisition of Interwoven PLC. With this addition Autonomy will redefine how 2000 global corporations interact with the web and how leading law firms and government regulators will discover, analyse and manage information and interactions. Furthermore the intelligence of Autonomy’s IDOL technology can be used to extend Interwoven’s web content capabilities across 100,000 corporate websites, intranets and extranets already powered by Interwoven. As the only vendor capable of automating operations across all forms of unstructured information, Autonomy remains uniquely positioned in the market.
Technical outlook
Autonomy has rebounded from a 52 week high of 1421.0p and is falling with low volatility indicating a bottom. Stock is still trading above 200 day EMA indicating the long-term upside trend is intact. Momentum oscillator MACD is positive but 12 day EMA below 26 day EMA indicating weakness in uptrend.14 day RSI is below 50 which indicates weakness in trend and stochastic is indicating short-term oversold. For a higher move stock has to consolidate above 1170.0p–1200.0p level.
Trading strategy
Stock can be bought near 1200.0p with a profit target of 1338.86p and stop loss of 1139.84p (Hedge position: short position in spread betting with £1.04 bet per point).
WS Atkins
WS Atkins hit the profit target of 552.07p and is still trading above that point. MACD is positive and 12 day EMA is above 26 day EMA indicating strength in uptrend. 14 day RSI is above 50 showing strength in trend. 14 day positive DMI is above 14 day negative and DMI is above 23 indicating uptrend. Stock is also above 20 day and 50 day EMA which supports strength in trend. All positions should be closed for the stock.
Aveva Group
Aveva hit stop loss of 558.52p and is trading near stop loss. Trend for the stock looks negative because MACD is positive, but 12 day EMA has cross below 26 days EMA indicating weakness in trend. 14 day RSI is trading below 50 indicating weakness in trend. It is also trading below 20 day, 50 day and 200 day EMA, supporting a downward trend. Negative 14 day DMI is above positive 14 day DMI indicating a negative trend, but DMI is near 20 supporting consolidation. 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.
