| Sector |
Travel & Leisure |
Last closing price
(13/07/2009) (p) |
341 |
| 52 week High/Low (p) |
657.5/192.9 |
| Market Cap (£bn) |
1.59 |
Sector weight age by
Market Cap (%) |
3.97 |
| Average Volume (mn) |
5.08 |
| P/E ratio (TTM) |
11.03 |
Industry P/E
ration (TTM) |
0.01 |
TTM: Trailing Twelve Month
Daily chart (FGP.L)
Business background and investment rationale
FirstGroup PLC provides passenger transport services which operate across four divisions: UK bus services, UK rail services, North America yellow school buses and Greyhound intercity coach transportation in the United States and Canada.
Balanced portfolio of business
FirstGroup’s balanced portfolio of businesses continues to generate strong operating cash flows and good opportunities for future growth. Approximately 50% of the company’s revenues are secured under medium-term contracts. The group’s contracts with government agencies and other large organisations in the UK and North America represent a robust annual revenue stream. After completing a $3.5bn acquisition of Laidlaw International Inc in the US, FirstGroup achieved $150m per annum run rate synergies during the first half of the year, taking it well ahead of original estimates. Further cost-cutting measures will deliver additional savings of £200m in 2009/10.
Resilient performance in UK rail & bus services
In a final year result announced in May 2009, FirstGroup's revenue climbed to £6.187bn. This represented an increase of 31.4% from the £4.708bn revenue in 2008. Adjusted operating profit increased by 38.2% reaching £497.5m compared with £360.1m in 2008. In the UK rail division passenger revenue grew by 7.7% and the firm is also implementing a substantial cost savings programme, which includes headcount reduction, to weather the weakening economy in rail operations. The UK bus division had strong trading performance with revenue hitting £1.182bn; a rise of 7% from last year's £1.105bn. Passenger volume grew by approximately 2% as a result of revenue growth initiatives coupled with increased passenger journeys and concessions. Operating profit rose by 9.8% to £134m compared with £122m in 2008, while operating margin increased by 0.3% to 11.3%. In addition the group has a strong focus on cost control and continues to implement actions that ensure services match the high customer demand.
Technical outlook
On daily chart, FirstGroup has made a downward trend supported by trading below 20 day and 50 day EMA (exponential moving average), but volatility has decreased indicating some consolidation. MACD (moving average convergence /divergence) is negative and 12 day EMA is below 26 day EMA indicating a negative trend is forming. 14 day RSI (relative strength index) is near the oversold zone of 30 indicating weakness in trend. Negative DMI (directional moving index) is above positive DMI, which indicates a negative trend. Stock has support between 314.0p-330.0p and resistance at 400.0p. Stock has to hold the 320.0p level for a higher move.
Trading strategy
The stock can be bought around 334p with a profit target 372.5p and stop loss of 317.25p (Hedge position: short position in spread betting with £3.74 bet per point).
| Sector |
Software & computer services |
Last closing price
(13/07/2009) (p) |
1314 |
| 52 week High/Low (p) |
1573/704 |
| Market Cap (£bn) |
3.11 |
Sector weight age by
Market Cap (%) |
18.87 |
| Average Volume (mn) |
1.13 |
| P/E ratio (TTM) |
31.25 |
Industry P/E
ration (TTM) |
8.40 |
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.
Record first quarter performance
In a first quarter result announced in April 2009, Autonomy reported record results with revenues up by 23% to $129.8m. The climb from last year's revenues of $105.1m was driven by strong organic growth and the Interwoven PLC acquisition in March 2009. Gross profits (adjusted) were up by 25% to $117m from $93.5m in the first quarter of 2008. Cash flow from operations more than doubled and represented a climb of 104% year-on-year, reaching $51.1m in Q1 2009 from $25.1m in Q1 2008. In the first quarter, Autonomy won contracts with Telecom Italia, Play.com, NetApp, Society of Petroleum Engineers, Toyota, Barclaycard, MetLife, Oxford Press, Lockheed Martin, Genentech, Telmex, T-Mobile, Sky, Bank of America, Bank of Thailand, Deutsche Bank, CMS Cameron McKenna, Singapore Airlines, Lloyds TSB, JPMC and Nikon. The group also secured new and repeat licenses with multiple government, defence and intelligence agencies in the US, UK, Netherlands, Singapore, France, Australia, Canada, Malaysia, Mexico and South Africa. The company also signed 12 original equipment manufacturers (OEM) which include deals with Symantec, Proof Point and Verdasys.
Acquisition of Interwoven
In March 2009 Autonomy completed the acquisition of Interwoven. With this addition Autonomy will redefine how 2000 global corporations interact with the web, as well as how leading law firms and government regulators discover, analyse and manage information and interactions. Further, 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 1573.0p and is falling with high volatility, and has to consolidate near 1300.0p for a short-term bottom. Stock is still trading above 200 day EMA indicating the long-term upside trend is intact. Momentum oscillator MACD is negative and 12 day EMA is below 26 day EMA indicating weakness .14 day RSI is near 30 indicating and stochastic below 20 indicating short-term oversold. Negative DMI (directional moving index) is above positive DMI, which indicates a negative trend. Stock has support near 1200.0p and resistance near 1413.0p
Trading strategy
Stock can be bought near 1290p with a profit target of 1438.73p and stop loss of 1225.33p (Hedge position: short position in spread betting with £1 bet per point).
John Wood Group PLC
John Wood Group hit stop loss of 242.1p and is trading near its stop loss after making a low of 232.0p. Momentum oscillator MACD is negative and 12 day EMA has cross below 26 day EMA indicating weakness in uptrend. RSI has rebounded from the oversold level indicating weakness in downtrend. All positions should be closed for the stock.
Babcock International PLC
On daily chart, Babcock's triple top pattern is still intact, giving a sell signal and is supported by trading below 20 day and 50 day EMA. MACD is negative and 12 day EMA has cross below 26 day EMA indicating a negative trend is forming. 14 day RSI is also below 50 indicating weakness in trend and negative DMI is crossing above positive DMI, which indicates a negative trend is forming. Stock has to break resistance of 450.0p for a lower move. Stock should be held with a new profit target of 445.0p and with a new stop loss of 500.12p
Aveva Group PLC
During choppy trading Aveva hit stop loss of 674.4p and is trading between 670.0p and 700.0p without any clear direction. MACD is positive and 12 day EMA is below 26 day EMA indicating weakness in uptrend supported by 14 day RSI below 50. 14 day ADX (average directional moving index) 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 April to 30th June 2009:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
95.5% |
21 |
| Hold |
0 |
0 |
| Sell |
4.5% |
1 |
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.
