| Sector |
Software & Computer services |
Last closing price
(10/08/2009) (p) |
113 |
| 52 week High/Low (p) |
145.5/ 57.5 |
| Market Cap (£bn) |
1.79 |
Sector weight age by
Market Cap (%) |
9.53 |
| Average Volume (mn) |
16.54 |
| P/E ratio (TTM) |
31.37 |
Industry P/E
ration (TTM) |
6.24 |
TTM: Trailing Twelve Month
Daily chart (LOG.L)
Business background and investment rationale
Logica Plc is an information technology (IT) and business services company engaged in providing business consulting, systems integration, IT and business process outsourcing services to clients across diverse markets including telecoms, financial services, energy and utilities, distribution, transport and the public sector.
Outsourcing opportunities in economic downturn
Logica foresees an increase in outsourcing business opportunities in the fourth quarter as its customers were more constrained in first half of 2009. Logica are looking for cost reductions as its consulting framework contracts and systems integration projects have seen significant reduction in demand. In the first half of 2009 Logica won major contracts in outsourcing: a 7 year, £76.5m contract to design, build and operate the UK's Police National Database, a contract with TeliaSonera to provide managed workspace services to 34,000 IT users and HR and Business Process Outsourcing (BPO) contracts from Channel 4 and Ford. The Group also made significant progress in building its outsourcing business which represents 36% of group revenue exceeding its target of 35% set in 2008, this will maintain its margin in line with last year.
Cost cutting measures
In light of deteriorating market conditions Logica announced its intention to accelerate cost savings and to slow investments in November 2008 and February 2009. The Group set a target of £75m for cost savings in 2009 and £110m for 2010 with a £30m investment in sales and marketing. Logica’s overall one-off cost for this remains at £145m, of which £61m is expected to be incurred in 2009. Onshore and offshore recruitment has slowed whilst also reducing the number of employees where demand is weakest. In addition, Logica achieved considerable savings through the execution of companywide procurement activities and processes in the first half of 2009.
Technical outlook
On the daily chart a steep rise in Logica from a low of 78p to 113p is indicating that a sell-off is near. MACD (moving average convergence /divergence) is positive and at an historical high of 8 indicating a strong positive trend. 14 day RSI (relative strength index) is at 90 above the overbought zone of 70 indicating steep rise. Positive DMI (directional moving index) is way above negative DMI, which indicates a strong positive trend confirmed by ADX (Average directional index) near 60. Stock has resistance near 102p and support near 120p.
Trading strategy
The stock can be sold around 117p with a profit target 103.5p and stop loss of 122.86p (Hedge position: short position in spread betting with £10.67 bet per point).
| Sector |
Software & computer services |
|
Last closing price
(10/08/2009) (p) |
1255 |
| 52 week High/Low (p) |
1573/704 |
| Market Cap (£bn) |
2.92 |
Sector weight age by
Market Cap (%) |
15.88 |
| Average Volume (mn) |
1.59 |
| P/E ratio (TTM) |
27.31 |
Industry P/E
ration (TTM) |
11.81 |
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, online publishing and security applications.
Record second quarter performance
In a second quarter result announced in July 2009, Autonomy reported record results with revenues up by 55% to $195.2m. The climb from last years revenues of $125.6m was driven by strong organic growth and the Interwoven PLC acquisition in March 2009. Gross profits (adjusted) were up by 50% to $171.6m from $114.3m in the second quarter of 2008. In the second quarter, Autonomy won contracts with Barclays Bank, Burgess Salmon, Commerzbank, Aiken Gump, Standard Chartered Bank, Tesco, Shell, Novell, Kaiser Foundation, AT&T, Morgan Stanley, Johnson & Johnson, EDF, Wolters Kluwer, General Electric, Banco do Brasil, Bayer, Deloitte and eBay. The group also secured new and repeat licenses with multiple government, defence and intelligence agencies in the US, UK, Singapore, Croatia, Malaysia and Japan. The company also signed 12 original equipment manufacturers (OEM) which include new and extended agreements with Cisco, CCI, VMS and Siemens.
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
From its high of 1537p Autonomy has rebounded from its slump and is consolidating near 1200p with higher low indicating a short-term bottom. Stock also has cross above 200 day EMA indicating positive trend. Momentum oscillator MACD is negative and 12 day EMA has cross above 26 day EMA indicating uptrend is forming .14 day RSI is below 50 and making higher lows and stochastic above 50 indicating short-term positive trend forming. Negative DMI is above positive DMI, but gap is closing up indicating consolidation. Stock has support near 1000.0p and resistance near 1413.0p
Trading strategy
Stock can be bought near 1230p with a profit target of 1371.81p and stop loss of 1168.3p (Hedge position: short position in spread betting with £1.01 bet per point).
Babcock International PLC
Last week Babcock hit the reduced profit target of 460p after consolidation in a narrow range of 460.0p and 475.0p, indicating that the channel between 450.0p and 500.0p is intact with lower highs. MACD is negative and 12 day EMA is below 26 day EMA indicating consolidation and 14 day RSI is also near 50 indicating lack of movement. All position should be closed for the stock.
FirstGroup PLC
On daily chart, FirstGroup hit the reduced profit target of 360.0p and is still making an upward trend from its low of 323.0p with MACD positive, and 12 day EMA above 26 day EMA indicating a positive trend. 14 day RSI is increasing and near to 60 indicating strength in uptrend. Positive DMI is above negative DMI, which indicates a positive trend, and rise in ADX indicating further upside move. All Position should be closed for the stock
WS Atkins PLC
On daily chart, Atkins is giving a sell signal after a rebound from 679p and recent slump once again after making a lower high of 655p. MACD is still positive, and 12 day EMA is below 26 day EMA indicating downtrend. 14 day RSI is below 50 showing weakness in trend. 14 day negative DMI is above 14 day positive and ADX is near 20 indicating downtrend starting. Stock should be a hold with reduced profit target of 635p
Compass Group PLC
On daily chart, Compass showing consolidation with higher low. MACD is negative and 12 day EMA near to cross 26 day EMA indicating that prices will not slump further. 14-day RSI is making higher low but below 50 indicating rebound. ADX is above 20 and positive 14-day DMI is above negative 14-day DMI showing consolidation. Stock should be hold with reduced profit target of 332p.
EasyJet PLC
EasyJet looks overbought on the daily chart after stock made a steep high of 325p today near to its profit target of 327p. MACD is positive and 12 day EMA is above 26 day EMA indicating uptrend. RSI is above 70 and stochastic near 94 indicating overbought of stock. Looking at trend, profit should be booked at 323p.
Bellway PLC
On daily chart, Bellway completed a ‘U’ Pattern between 800.0p and 600.0p, but couldn’t breakout to profit target of 829p indicating a bottom has formed in the stock. Momentum oscillator MACD is positive and 12 day EMA is above 26 day EMA indicating strength in trend. RSI is near 70 indicating an overbought trend. 14 day positive DMI is above 14 day negative DMI supporting uptrend. Looking at the overbought trend, profit for the stock should be booked at 800p
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.
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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 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.
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