| Sector |
Travel & Leisure |
Last closing price
(03/08/2009) (p) |
299.6 |
| 52 week High/Low (p) |
423.25/206.25 |
| Market Cap (£bn) |
1.28 |
Sector weight age by
Market Cap (%) |
2.97 |
| Average Volume (mn) |
1.75 |
| P/E ratio (TTM) |
35.63 |
Industry P/E
ration (TTM) |
0.7 |
TTM: Trailing Twelve Month
Daily chart (EZJ.L)
Business background and investment rationale
EasyJet PLC is a low-cost airline covering short-haul and medium-haul point-to-point routes principally within Europe.
Resilient performance in economic downturn
In an interim result announced in July 2009 EasyJet’s total revenue was up by 12% to £721m. Passenger numbers have increased by 2.9% reaching 11.9m, with a 12% growth in passengers from mainland Europe. EasyJet’s total revenue per seat also improved by 10.9% to £51.42 in the quarter - up 4.8% per seat on a constant currency basis. This followed an overall reduction in supply to the European short-haul market of 4% over the summer and an increase in non-UK originating passengers. EasyJet also strengthened its market share across Europe particularly at Gatwick, Milan, Paris and Madrid where it recorded 8%, 86%, 9% and 10% respective growth in passenger numbers in the third quarter. The group expects a 4% increase in seat capacity in the fourth quarter with over 75% of the available summer seats now booked for the second half of 2009. The company also expects total revenue per seat in the second half of the year to be the same as last year on a constant currency basis.
Fuel hedging and strong cash flow
To reduce short-term earnings volatility caused by fuel and currency, EasyJet is hedged for the second half of 2009 and for the entire 2010. For 2009, 75% of the fuel requirement is hedged at $1031 per tonne, while 71% of the euro surplus is hedged at EUR 1.24/GBP. For 2010, 51% of the fuel requirement is hedged at $771 per tonne and 38% of the euro surplus is hedged at EUR 1.23/GBP. EasyJet is financially strong with £962m of cash and money market deposits on the balance sheet as at 30 June 2009 and current untapped facilities are $0.5bn.
Technical outlook
On daily chart, EasyJet has a breakout from the downward trendline indicating a buy signal for the stock supported by most of the indicators. 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 near 60 showing strength in trend. 14 day positive DMI (directional moving index) is above 14 day negative and ADX (Average directional Index) 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 260.0p and resistance near 350.0p.
Trading strategy
The stock can be bought around 293p with a profit target 327p and stop loss of 278.3p (Hedge position: Short position in spread betting with £4.23 bet per point).
| Sector |
Household goods and home construction |
Last closing price
(03/08/2009) (p) |
759 |
| 52 week High/Low (p) |
802.5/383.75 |
| Market Cap (£mn) |
845.14 |
Sector weight age by
Market Cap (%) |
3.06 |
| Average Volume (k) |
630.3 |
| P/E ratio (TTM) |
- |
Industry P/E
ration (TTM) |
0.12 |
TTM: Trailing Twelve Month
Daily chart (BWY.L)
Business background and investment rationale
Bellway PLC and it’s 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 increase production
Bellway has changed its focus from simple debt reduction to selectively increasing production in certain parts of the country where demand is strongest. In addition, the group has instructed its land teams to begin acquiring suitable sites for traditional two storey housing. By June 2009 Bellway’s bank debt was £111.3m; 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.
Stability in home sales pricing structure
With the mortgage market still restricted and cancellation rates running at historically high levels, Bellway’s net reservations since 1 February 2009 have continued to average at 105 per week, thereby securing the volume target of 4,200 homes by June 2009. To achieve these reservations Bellway is giving incentives to customers in the form of cash discounting, part exchange and shared equity. However this is not increasing as a percentage of selling prices, therefore bringing some stability to the group’s pricing structure. Bellway continues to focus on an early sale of completed stock units, although to enhance the company’s cash position the target has reduced from 1,000 at the end of January to 660 at 31 May 2009.
Technical Outlook
On daily chart, Bellway is making a ‘U’ Pattern between 800.0p and 600.0p indicating a bottom has formed in the stock and is near to breakout if it crosses above 800.0p. Momentum oscillator MACD is positive and 12 day EMA is above 26 day EMA indicating strength in trend. RSI is near 60 indicating strength in trend. 14 day positive DMI is above 14 day negative DMI supporting uptrend. Stock has to consolidate above 700.0p for an uptrend. Stock has resistance at 800.0p and support near 600.0p.
Trading strategy
Stock can be bought near 740p with a profit target of 829p and stop loss of 703p (Hedge position: short position in spread betting with £1.61 bet per point).
Babcock International PLC
Last week Babcock consolidated in a narrow range of 460.0p and 480.0p, indicating that the channel between 450.0p and 500.0p is intact and giving a sell signal supported by trading below 20 day and 50 day EMA. MACD is negative and 12 day EMA is above 26 day EMA indicating a recent upwards move. 14 day RSI is also below 50 indicating weakness in trend and negative DMI is crossing above positive DMI. Looking at the lack of movement stock should be a hold with profit target of 460.0p.
FirstGroup PLC
On daily chart, FirstGroup is making an upward trend from its low of 323.0p with MACD still negative, but 12 day EMA has cross above 26 day EMA indicating a positive trend is forming. 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 360.0p. Stock should be a hold with last week’s profit target of 360.0p and stop loss of 322.0p.
Misys Group PLC
On daily chart, Misys has breakout upside from its 52 week high of 180.0p, a hitting reduced profit target of 185.0p. MACD is still positive and 12 day EMA is above 26 day EMA indicating some strength. 14 day RSI is near 60 showing strength in trend. ADX 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.
WS Atkins PLC
On daily chart, Atkins rebounded from 621.0p and is trading near 650.0p. MACD is still positive, and 12 day EMA is below 26 day EMA indicating some strength weakness in uptrend. 14 day RSI is below 60 showing strength in trend. 14 day positive DMI 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. Stock should be a hold with the same profit target of 679.21p and a new stop loss of 586.6p.
Aquarius Platinum Limited
Following a choppy trade, Aquarius hit stop loss of 232.7 and is trading above the profit target of 273.2p, with a higher low indicating strong uptrend. MACD is positive and 12 day EMA is above 26 day EMA indicating formation of upside trend. 14 day RSI is near 60 showing strength in trend. ADX is near 26 indicating strong positive trend. Stock is also above 20 day and 50 day EMA which supports strength in trend. All positions should be closed for the stock.
Compass Group PLC
On daily chart, Compass rebounded from sell-off following the interim result. MACD is negative and 14-day RSI is near 50 indicating rebound. ADX is above 25 and negative 14-day DMI is above positive 14-day DMI showing strong downtrend. Stochastic oscillator still shows oversold. Stock has resistance near 350.0p level and support near 281.0p. Stock should be hold with the same profit target of 351p.
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.
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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.
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.
