| Sector |
Oil & gas producers |
Last closing price
(26/05/2009) (p) |
2341 |
| 52 week High/Low (p) |
3571/1125 |
| Market Cap (£bn) |
3.29 |
Sector weight age by
Market Cap (%) |
1.24 |
| Average Volume (k) |
668.5 |
| P/E ratio (TTM) |
14.17 |
Industry P/E
ration (TTM) |
7.51 |
TTM: Trailing Twelve Month
Daily chart (CNE.L)
Business background and investment rationale
Cairn Energy PLC is an oil and gas exploration company. The firm’s operating activities are organised into two distinct sub-groups, which comprise the Capricorn Group and the Cairn India Group. The Capricorn Group’s operations focus on the company’s South Asian assets in Bangladesh and Nepal, together with new exploration activities in Tunisia and the rest of the world. The Cairn India Group’s operations are entirely within India.
Cairn India to commence oil production in 2009
Cairn has discovered 25 oil fields in Rajasthan of which the largest three are Mangala, Bhagyam and Aishwariya. The Cairn Mangala, Bhagyam and Aishwariya (MBA) development project is on track and funded to deliver its first oil from the core Mangala development in the second half of 2009.
Construction of the Mangala Processing Terminal (MPT) is underway with plans for four processing trains targeting a capacity of 205,000 barrels of oil per day (bopd). There is further scope for expansion.
Until the company completes its pipeline project in northern India, Cairn Energy will use hundreds of lorries to take the first oil (30,000 bopd) from its Mangala production to the refineries. Additional Mangala production through trains (50,000 bopd capacity) is to commence in Q4 2009, via an export pipeline. Mangala’s production is scheduled to reach a 125,000 bopd plateau after the train (50,000 bopd capacity) commences in the first half of 2010. Production will be increased in four stages, reaching a plateau of 175,000 bopd in 2011.
Increase in exploration activity
Cairn India is on track for the construction of a 600km insulated and heated pipeline which will allow access to an extensive, existing pipeline infrastructure and refinery network. The pipeline has a final coastal delivery point that also affords access to the majority of India’s refining capacity. In exploration activity, the Government of Sri Lanka has awarded Cairn India with a block of water covering 3000km2 for exploration of oil and natural gas in the Mannar Basin. Its subsidiary, Capricorn, has acquired a leading acreage position offshore West and Southern Greenland and is in the process of building a 10,000km 2D seismic is underway. In March 2009 Cairn Energy raised £116m from institutions by placing 6.5 million shares at 1775.0p, thereby reducing its reliance on troubled credit markets and freedom for further exploration activities. Recently the Iraqi Government announced that Cairn has pre-qualified to participate in the second bid round (greenfield) and therefore all subsequent bids.
Technical outlook
On daily chart, Cairn has come off from recent high of 2500.0p and is making a positive slope from the November 2008 low. Cairn has also broken upside from a channel between 1700.0p and 2000.0p, which is an encouraging sign. MACD (moving average convergence/divergence) is positive, and 12 day EMA (exponential moving average) has cross below 26 day EMA, indicating a small pullback. 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 25 indicating uptrend. Stock is also above 20 day and 50 day EMA which supports strength in trend. Stock has strong support near 2000.0p and resistance near 2500.0p.
Trading strategy
The stock can be bought around 2290p with a profit target 2519p and stop loss of 2190.4p.
| Sector |
Tobacco |
Last closing price
(26/05/2009) (p) |
1725 |
| 52 week High/Low (p) |
1941/1350 |
| Market Cap (£bn) |
33.15 |
Sector weight age by
Market Cap (%) |
67.1 |
| Average Volume (mn) |
4.12 |
| P/E ratio (TTM) |
13.53 |
Industry P/E
ration (TTM) |
2.66 |
TTM: Trailing Twelve Month
Daily chart (BATS.L)
Business background and investment rationale
British American Tobacco PLC is an international company engaged in the sale of cigarettes, cigars, leaf and other tobacco products. It has over 300 brands in its portfolio which are sold in more than 180 markets. BATS has four Global Drive Brands (GDB): Dunhill, Kent, Lucky Strike and Pall Mall.
Strong growth in Global Drive Brands
In an interim management statement announced in May 2009, group revenue for the first three months of 2009 grew strongly, driven by continued good pricing and volume growth from the acquisitions made in the middle of last year (Skandinavisk Tobakskompagni (ST) and Tekel). Group volumes from subsidiaries were up 7% to £170bn, mainly as a result of these.
The four global drive brands continued their strong performance and achieved overall volume growth of 7%. Dunhill was up 8%, Kent 3%, Lucky Strike 4% and Pall Mall grew by 11%.
Improvement in productivity and strong financial position
BATS has made further progress with productivity savings and is on track to reduce costs by £800m in 2012, which is in addition to the £1bn saved between 2003 and 2007. The group remains confident in its ability to successfully access the debt capital markets and reviews its options on an ongoing basis. BATS successfully repaid EUR900m of maturing debt at the end of February 2009, financed from bonds issued during 2008 and from cash generated from operations. The group has sufficient financing and facilities available for the foreseeable future and on 31 March 2009 its guaranteed revolving credit facility of £1.75bn was undrawn.
Technical outlook
BATS has made a higher low in April 2009 from its 52 week low of 1350.0p with a positive slope which is an encouraging sign. Trend for the stock looks positive as MACD is positive and 12 day EMA above 26 day EMA, indicating uptrend. 14 day RSI is above 50 showing strength in trend. It is also trading above 20 day and 50 day EMA, supporting an uptrend. 14 day positive DMI is above 14 day negative DMI and DMI is near 20 supporting consolidation. If stock holds the level above 1650p a higher move can be expected, with support between 1665.0p–1591.0p and resistance at 1820.0p and 1940.0p levels.
Trading strategy
The stock can be bought around 1695p with a profit target 1890.43p and stop loss of 1610p (Hedge position: Short position in spread betting with £0.73 bet per point).
Reckitt Benckiser PLC
On daily chart, Reckitt has hit a reduced profit target of 2730.0p. 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 near 20, indicating consolidation. Stock is also above 20 day and 50 day EMA which supports strength in trend. All positions should be closed for the stock.
BG Group PLC
BG Group is trading above positive slope and making a higher low indicating a bullish move with a strong support at 1000.0p and immediate resistance of 1100.0p. 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 DMI is near 23 indicating uptrend. Stock is also above 20 day and 50 day EMA which supports strength in trend. If stock sustains above 1100.0p, profit should be booked at 1125.0p.
SSL International PLC
SSL has hit a profit target of 500.76p, but entry could be taken only at 471.25p. MACD is positive and 12 day EMA has cross above 26 day EMA, indicating correction. 14 day RSI is above 50 showing strength in trend. 14 day positive DMI is above 14 day negative and DMI is near 25, indicating uptrend. Stock is also above 20 day and 50 day EMA which supports strength in trend.
ICAP PLC
ICAP has hit a profit target of 434.96p, but entry could only be taken at 399.5p. Stock is trading above positive slope and consolidating between 350.0p and 400.0p. MACD is positive and 12 day EMA below 26 day EMA indicating consolidation and RSI is above 50 indicating strength in trend. 14 day DMI is near 27 indicating strong upside strength. Stock is also above 20 day and 50 day EMA which supports strength in trend.
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.
