| Sector |
Chemicals |
Last closing price
(01/06/2009) (p) |
1287 |
| 52 week High/Low (p) |
2049/640.5 |
| Market Cap (£bn) |
2.58 |
Sector weight age by
Market Cap (%) |
56.57 |
| Average Volume (mn) |
887.45 |
| P/E ratio (TTM) |
13.1 |
Industry P/E
ration (TTM) |
1.29 |
TTM: Trailing Twelve Month
Daily chart (JMAT.L)
Business background and investment rationale
Johnson Matthey PLC is a specialty chemicals company. The company focuses on catalysis, precious metals, fine chemicals and process technology. It has operations in over 30 countries which are organised into three global divisions: Environmental Technologies, Precious Metal Products and Fine Chemicals & Catalysts.
Growth in environmental technologies and Fine Chemicals & Catalysts Division
In a trading statement announced in April 2009, the Environmental Technologies Division experienced mixed trading conditions in the first quarter. Sales of auto catalysts were substantially down on last year as car companies continued to reduce production in response to falling auto sales. However, Process Technologies achieved good growth as concerns over energy security and environmental issues continue to support demand for syngas catalysts and purification products. The Fine Chemicals & Catalysts Division’s sales, excluding precious metals, were ahead of the same period in 2007/08 helped by favourable exchange translation. Good sales of active pharmaceutical ingredients offset some weakness in catalysts and chemicals. Johnson Matthey also plans to close a small fine chemical facility in Ireland and consolidate manufacturing of prostaglandin products in the USA. The closure is expected to give rise to a restructuring charge of about £9m in this year’s accounts.
Improvement in platinum prices and reduction in debt
Improvements in platinum prices, following the third quarter low experienced last year, and continuing weakness in sterling relative to the euro and US dollar will provide a good impetus for Johnson Matthey’s operating margin. For the year as a whole, the company expects underlying earnings per share to be well within the guidance range of 85p to 90p published in the company’s third quarter Interim Management Statement. Cash flow has been strong in the second half of 2008/09 with net debt estimated to be around £70m lower than at 31 March 2008, despite the effect of adverse exchange translation on foreign currency borrowings.
Technical outlook
On daily chart, Johnson is making a positive slope with a higher low from the November 2008 low, which is an encouraging sign. MACD (moving average convergence/divergence) is positive, and 12 day EMA (exponential moving average) has cross above 26 day EMA, indicating an 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 25 indicating uptrend. Stock is also above 20 day and 50 day EMA which supports strength in trend. Stock has strong support near 1150.0p and resistance near 1350.0p.
Trading strategy
The stock can be bought around 1240.0p with a profit target 1382.97p and stop loss of 1177.8p (Hedge position: Short position in spread betting with £1 bet per point).
| Sector |
Household goods and home construction |
Last closing price
(01/06/2009) (p) |
668 |
| 52 week High/Low (p) |
802.5/342 |
| Market Cap (£mn) |
742.23 |
Sector weight age by
Market Cap (%) |
3.04 |
| Average Volume (k) |
637.7 |
| P/E ratio (TTM) |
– |
Industry P/E
ration (TTM) |
0.22 |
TTM: Trailing Twelve Month
Daily chart (BWY.L)
Business background and investment rationale
Bellway PLC and its subsidiaries’ principal engagement is house building in the UK. The company is a volume house builder selling primarily in the private market and trading nationally in areas of high population. It also acquires and sells second hand homes taken in part exchange.
On target to reduce debt
Bellway is focused on reducing its debt and, at present, is on target to achieve this goal, with net borrowings down by £40m from July 2008 to the end of January 2009 at £178.8m. It is targeting £120m by the end of July 2009. The group continues to operate well within its current committed banking facilities of £402m, which were negotiated and agreed in the second quarter of 2008 and extend out in annual tranches to 2015.
Increase discounting to accelerate sales and inline trading
In an interim result in March 2009, Bellway completed the sale of 2,014 homes in the six months ending 31 January 2009. This compares to 3,252 homes in 2008, with the average selling price reducing from £174,800 to £156,100. The falls are a reflection of increased levels of discounting and the rise of social housing which has increased to 20% of total completions in the period. Cash discounting, part exchange and shared equity have been used as incentives in virtually every private sale to maintain a sales rate in line with the group’s expectations. Margins continue to come under extreme pressure and are 9.2% compared to 18.1% posted in the six months ending 31 January 2008. At the end of January, Bellway’s order book stood at £370m which compares to £670m in 2008. Currently the group has achieved 98% of its annual target secured compared with the 88% secured at this point in 2008. Bellway will continue to focus on the early sale of stock properties, currently standing at 850 homes, to enhance the cash position.
Technical Outlook
On daily chart, Bellway has rebounded from its high of 800.0p and stock is in consolidation phase between 600.0p and 700.0p making a negative trend. Momentum oscillator MACD is negative and 12 day EMA has cross below 26 day EMA indicating weakness in trend. RSI is below 50 indicating weakness in trend. 14 day negative DMI is above 14 day positive DMI supporting downtrend. Stock has to consolidate above 650.0p for an uptrend. Stock has resistance at 716.0p and support near 553.0p.
Trading strategy
Stock can be bought near 640.0p with a profit target of 713.79p and stop loss of 607.9p (Hedge position: short position in spread betting with £1.95 bet per point).
BG Group PLC
BG Group has hit the reduced profit target of 1125.0p on higher oil prices. It is 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. All position should be closed for the stock.
Cairn Energy PLC
Cairn has made a sharp ‘V’ pattern by hitting the profit target of 2519.0p. Cairn has also broken upside from a channel between 1700.0p and 2000.0p and resistance of 2500.0p, which is an encouraging sign. MACD is positive and 12 day EMA is above 26 day EMA, indicating an upside rally. 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.
BATS PLC
BATS is consolidating between 1650.0p and 1700.0p. 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. Stock holds a strong support level of 1650.0p and a higher move can be expected, with support between 1665.0p and 1591.0p and resistance at 1820.0p and 1940.0p levels. Stock should be hold with reduced profit target of 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.
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.
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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.
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