| Sector |
Software & computer services |
Last closing price
(20/07/2009) (p) |
175.75 |
| 52 week High/Low (p) |
180.25/78 |
| Market Cap (£mn) |
951.9 |
Sector weight age by
Market Cap (%) |
5.58 |
| Average Volume (mn) |
1.23 |
| P/E ratio (TTM) |
9.37 |
Industry P/E
ration (TTM) |
6.45 |
TTM: Trailing Twelve Month
Daily chart (MSY.L)
Business background and investment rationale
Misys PLC develops, manages and licenses a variety of software products and solutions to customers in the financial services and healthcare industries. The company’s business sectors consist of Banking, Treasury & Capital Markets (TCM), Healthcare and Central Services.
Allscripts-Misys benefits from US stimulus package
Last year Misys completed a merger with Allscripts Healthcare Solutions PLC in the US, creating Allscripts-Misys Healthcare Solutions Inc, of which Misys owns 56.7%. The newly integrated company is among the largest providers of electronic health records and practice management solutions in the US and has a client base of nearly one-third of the nation’s practising physicians. Allscripts-Misys is perfectly positioned to capitalise on the US$20bn in federal subsidies and incentives aimed at widening the adoption of electronic health records, which represent the largest source of the company’s revenue. The firm has seen a five-fold increase in subscribers to its Allscripts ePrescribe electronic prescribing software in the months since the federal government announced cash incentives for physicians to use the technology. For the year Allscripts-Misys revenues were up by 80% to £350m thanks to strength in ASP licensing revenues in the period, which produced 70% growth on a like-for-like basis.
Resilient performance by banking division in economic downturn
Misys Banking serves 1,200 banks and financial institutions across 120 countries. With strong recurring revenues and a focus on tier two and tier three banks and financial institutions, the Misys business model is proving resilient in the current economic environment. In a trading update announced in June 2009 total revenue for the Banking division was £180m, representing a rise of 15% for the year. Total order intake was £90m; up 9% compared to the same period last year on the back of strong growth in Initial Licence Fees (ILF). In Treasury & Capital Markets (TCM), the group won 25 new clients pushing revenues up 14% to £160m. Although TCM revenues declined about 2% on a like-for-like basis, total order intake rose 4% to about £75m but on a like-for-like basis, while orders declined about 10%.
Technical outlook
On daily chart, Misys is near to breakout upside from its 52 week high of 180.0p after trading in a range of 150.0p and 180.0p, with a higher low indicating strong uptrend. MACD (moving average convergence/divergence) is positive and 12 day EMA is below 26 day EMA indicating some weakness. 14 day RSI (relative strength index) is near 60 showing strength in trend. ADX (Average Directional index) is near 20 indicating consolidation. Stock is also above 20 day and 50 day EMA which supports strength in trend. For a higher move stock has to move above 180.0p with higher volume. The stock has immediate resistance near 200p and support near 165p.
Trading strategy
The stock can be bought around 172.0p with a profit target 191.83p and stop loss of 163.37p (Hedge position: Short position in spread betting with £7.26 bet per point).
| Sector |
Support services |
Last closing price
(20/07/2009) (p) |
621.5 |
| 52 week High/Low (p) |
941/415 |
| Market Cap (£mn) |
625.6 |
Sector weight age by
Market Cap (%) |
1.13 |
| Average Volume (k) |
454.19 |
| P/E ratio (TTM) |
7.37 |
Industry P/E
ration (TTM) |
1.53 |
TTM: Trailing Twelve Month
Daily chart (ATK.L)
Business background and investment rationale
WS Atkins PLC is one of the world’s leading design and engineering consultancies. 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 full year result announced in June 2009, Atkins’ revenues were up by 13.2%, while normalised diluted earnings per share were up 23%. The firm continued to make further increases in operating margin from 6.6% to 6.9%. Atkins’ outlook for the rest of the year remains good as 54% of budgeted revenue has been secured. Despite the recent slowdown of the UK economy, Atkins is not experiencing any material impact within its 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 its 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 with operating profit up by 82% at £17.3m. Atkins’ cash position remains strong with net funds of £234.2m and the cash inflow in the period was also strong with cash generated from operations reaching £125.2m.
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 formed a round bottom between 631.0p and 511.0p and is trading in an upside breakout range of 631.0p indicating strong uptrend. Stock has strong support near 570.0p and resistance near 742.0p, and it has to hold above 600.0p 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 near 70 showing strength in trend and needs consolidation above 600.0p for a higher move. 14 day positive DMI (directional moving index) is above 14 day negative and ADX is near 24 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 609.0p with a profit target 679.21p and stop loss of 578.4p (Hedge position: Short position in spread betting with £2.05 bet per point).
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 a hold with a new profit target of 450.0p.
FirstGroup PLC
On daily chart, FirstGroup’s downward trend has decreased with stock trading above entry point for a whole week. MACD is negative and 12 day EMA is below 26 day EMA indicating negative trend. 14 day RSI is increasing and near to 50 indicating weakness in downtrend. Negative DMI is above positive DMI, which indicates a negative trend, but ADX is flat indicating consolidation. Stock has support between 314.0p and 330.0p and resistance at 400.0p. Stock should be a hold with the same profit target and new stop loss of 322p
Autonomy Corporation PLC
Autonomy hit stop loss of 1223.53p with strong negative trend making a low of 1120.0p. Momentum oscillator MACD is negative and 12 day EMA is below 26 day EMA indicating strong downtrend. RSI is below 30 indicating stock is oversold supported by stochastic below 30. 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.
