| Sector |
General Retailer |
Last closing price
(28/09/2009) (p) |
276.9 |
| 52 week High/Low (p) |
336.5/156.25 |
| Market Cap (£bn) |
2.51 |
Sector weight age by
Market Cap (%) |
7.57 |
| Average Volume (mn) |
5.6 |
| P/E ratio (TTM) |
- |
Industry P/E
ration (TTM) |
0.33 |
TTM: Trailing Twelve Month
Daily chart (HOME.L)
Business background and investment rationale
Home Retail Group PLC sells home and general merchandise. It is organised into three main business segments: Argos, Homebase and Financial Services together with Central Activities. Argos offers customers a catalogue of over 18,000 product lines which are available across all order and delivery channels. Homebase sells a range of home enhancement products and services alongside traditional do-it-yourself products and materials.
Weakness in sales and gross margins
In a trading statement announced in September 2009 total sales at Argos grew by 2.5% to £951m, while total sales at Homebase grew by 2.9% to £401m. New stores contributed 2.9% at Argos and 1.3% at Homebase. Home Retail opened four new Argos stores and two Homebase stores, taking the portfolio of outlets to 739 and 350 respectively. Like-for-like sales at Argos declined by 1.4%, although Homebase enjoyed increases of 1.6% during the quarter. The online ‘Check & Reserve’ service at Argos grew by nearly 50% in the quarter, with overall internet activity accounting for 28% of the store’s sales. Argos also reported continuing good growth in consumer electronics and toy sales, although the furniture and home wares markets remained challenging. Gross group margins in Argos were down by 125 basis points, while at Homebase they were down 400 basis points driven mainly by the sales mix. Home Retail expects the impact of adverse currency movements on the gross margin rate to increase through the course of the year.
Improvement in operating performance
In a particularly difficult trading environment, Home Retail managed costs and cash very effectively to limit the impact on profits. The group continues to develop a broad product range and is benefiting further from advantageous sourcing operations and investment in multi-channel operations. These elements have strengthened its position as the UK’s leading home and general merchandise retailer. The group has already made a number of organisational changes across the business to deliver annualised cost savings of approximately £50m, of which around £35m will be achieved in the new financial year. Home Retail will invest capital selectively so its businesses emerge from the consumer downturn in a strong position.
Technical outlook
On the daily chart, Home Retail is trading below a positive slope from the November 2008 low, indicating a sell signal on the stock which is supported by stock trading below 20 day and 50 day EMA (Exponential moving average). MACD (Moving average convergence/divergence) is negative and 12 day EMA has cross below 26 day EMA, indicating a downtrend. 14 day RSI (Relative strength index) is below 40 supporting weakness. 14 day negative DMI (Directional moving index) is above 14 day positive while ADX (Average directional index) is near 25 indicating downtrend. Stock has strong support near 300.0p and resistance near 250.0p.
Trading strategy
The stock can be sold around 282.0p with a profit target of 249.48p and stop loss of 296.13p (Hedge position: Long position in spread betting with £4.42 bet per point).
| Sector |
Pharmaceuticals & Biotechnology |
Last closing price
(28/09/2009) (p) |
1251.5 |
| 52 week High/Low (p) |
1319/982 |
| Market Cap (£bn) |
63.69 |
Sector weight age by
Market Cap (%) |
55.46 |
| Average Volume (mn) |
9.82 |
| P/E ratio (TTM) |
13.71 |
Industry P/E
ration (TTM) |
3.51 |
TTM: Trailing Twelve Month
Daily chart (GSK.L)
Business background and investment rationale
GlaxoSmithKline PLC (GSK) is a global healthcare group engaged in the creation, discovery, development, manufacture and marketing of pharmaceutical and consumer health-related products. It has operations in 114 countries with products sold in a further 140.
Improvement in operational efficiency and growth in emerging markets
GSK is making good progress in cost reduction through its restructuring programme. The firm is on track to deliver cumulative annualised cost savings of £900m, and £1.7bn in annual pre-tax cost savings by 2011. GSK has made changes in its commercial model in both the traditional and emerging markets. It has restructured its drug discovery operations and continues to streamline its Global Manufacturing and Supply organisation, including divestments and site closures. As part of its restructuring programme, GSK has started to reduce costs in its support functions to realise a target reduction of 20% by 2011. Over the last 12 months, GSK has entered into eight transactions to accelerate sales growth in emerging markets, with Pharmaceutical revenue up by 14% to £0.7bn and Consumer Healthcare sales up 9% to £1.2bn in these markets.
Substantial orders for H1N1 vaccine
GSK has made substantial investments of more than $2bn to develop and manufacture vaccines and treatments for influenza. By the end of 2009, GSK expects to have an annual Relenza production capacity of 190 million vaccines. By July 2009, GSK had won contracts to supply 195 million doses of the vaccine along with a variety of agreements with the US government to supply pandemic products worth $250m. GSK is also in discussions with over 50 other governments to supply the H1N1 vaccine.
Technical outlook
On the daily chart, stock is trading on a positive slope from the March 2009 low and has broken resistance of 1200.0p after a consolidation between 1150.0p and 1200.0p. MACD is positive and 12 day EMA has cross above 26 day EMA indicating an uptrend.14 day RSI is above 60.0 with a positive trendline indicating strength in trend.14 day positive DMI is above 14 day negative DMI and ADX is near 25 supporting uptrend. Stock has good support near 1200.0p and resistance near 1300.0p.
Trading strategy
The stock can be bought around 1235.0p with a profit target of 1395.3p and stop loss of 1165.26p (Hedge position: Short position in spread betting with £0.89 bet per point).
WS Atkins PLC
On the daily chart, Atkins is consolidating between 630p and 670p with negative outlook but stock still is trading above the upside breakout range of 631.0p. MACD is positive and 12 day EMA has cross below 26 day EMA indicating weakness in uptrend. 14 day RSI is above 50 showing strength in trend. 14 day positive DMI is above 14 day negative and ADX is near 20, indicating some consolidation. Stock should be a hold with profit target of 660p.
Chemring Group PLC
On the daily chart, Chemring is consolidating around 2400p during the week. MACD is positive and 12 day EMA is above 26 day EMA, after a recent fall indicating trend is positive. 14 day RSI has just cross above 70 indicating a higher move. 14 day positive DMI is above 14 day negative DMI, while ADX is near 41 indicating strong uptrend. Stock should be a hold with the same profit target.
Imperial Tobacco Group PLC
Imperial’s move above 1800.0p indicates trend for the stock is positive as MACD is positive and 12 day EMA is above 26 day EMA. 14 day RSI is above 60 showing strength in trend. 50 day EMA is still above 200 day EMA supporting an uptrend. 14 day positive DMI is above 14 day negative DMI and ADX is near 20 indicating constant rise in the stock. Stock should be a hold with the same profit target.
Kesa Electrical PLC
On the daily chart stock is forming a channel between 140.0p and 150.0p after rising nearly 44% from May 2009. Trend for the stock is in a consolidation phase around 150.0p. MACD is positive and 12 day EMA is just above 26 day EMA, indicating consolidation. 14 day RSI is also above 50 indicating strength in trend, but stock has to move to 150.0p for a clear upside trend. Positive DMI has cross above negative DMI, which indicates a positive trend. Stock should be a hold with same profit target
Babcock International group PLC
On the daily chart Babcock is still trading above key support of 550p, but entry could be made only 571.5p above recommended price of 550.0p. MACD is positive and 12 day EMA is above 26 day EMA indicating a positive trend. 14 day RSI is above 70 indicating it is overbought and needs consolidation above 550.0p. Positive DMI is above negative DMI, which indicates a positive trend. Stock should be a hold with new profit target of 637.3p and stop loss of 542.8p.
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.
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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.
