| Sector |
Software & Computer services |
Last closing price
(02/11/2009) (p) |
1185 |
| 52 week High/Low (p) |
1341/450 |
| Market Cap (£mn) |
427.45 |
Sector weight age by
Market Cap (%) |
2.1 |
| Average Volume (k) |
58.06 |
| P/E ratio (TTM) |
24.29 |
Industry P/E
ration (TTM) |
18.38 |
TTM: Trailing Twelve Month
Daily chart (FDSA.L)
Business background and investment rationale
Fidessa Group PLC supplies multi-asset trading, portfolio analysis, decision support, investment compliance, market data and connectivity solutions for both the buy-side and sell-side globally.
Strong revenue
For the six months to 30 June 2009, Fidessa reported strong growth with revenue up by 36% to £116m from £85m for the same period last year. At constant currencies the revenue growth was 19%. This strong growth was driven by momentum in recurring revenue, which increased to £93.9m from £65.5m in 2008 and now represents 81% of the firm’s total revenue. Fidessa continues to generate cash from operations and the operating cash conversion rate was 170%. Following the acquisition of LatentZero and once 2008’s final dividend had been paid, the cash balance decreased to £25m from £33.1m.
Despite pressure in the financial markets, usage of Fidessa's network has continued to increase with traffic up by over 20% since the end of 2008, reaching approximately 220 million messages a month. This means Fidessa is carrying business flows of around $600bn per month.
Benefit from increased regulations
Following the economic crisis in 2008, the financial industry anticipates increased regulation. The outcome from ongoing regulatory reviews is likely to result in changes to workflow and increased reporting requirements. These changes should benefit Fidessa on both the buy-side and sell-side, as firms look for a leading automated compliance and reporting solution to meet their obligations without incurring substantial costs.
Technical outlook
On the daily chart, after making a 52-week high of 1341.0p Fidessa is trading below a channel between 1000.0p and 1217.0p with lower lows. Stock is near to breakout in the downside range if it can’t hold 1200.0p. MACD (moving average convergence/divergence) is positive but 12 day EMA (exponential moving average) has cross below 26 day EMA, indicating a downtrend is forming. 14 day RSI (relative strength index) has cross below 50 showing weakness in trend and both the indicators are making a downward trend. 14 day negative DMI (directional moving index) is above 14 day positive and ADX (average directional index) is near 20 indicating a negative trend. Stock is also below 20 day and 50 day EMA which supports weakness in trend. Stock has strong resistance near 1100.0p and support near 1300.0p.
Trading strategy
The stock can be sold around 1210.0p with a profit target 1070.4p and stop loss of 1270.6p (Hedge position: Long position in spread betting with £1.43 bet per point).
Babcock International Group PLC
BAB.L
| Sector |
Support Services |
Last closing price
(02/11/2009) (p) |
621 |
| 52 week High/Low (p) |
624.5/371 |
| Market Cap (£bn) |
1.39 |
Sector weight age by
Market Cap (%) |
2.22 |
| Average Volume (k) |
856.74 |
| P/E ratio (TTM) |
16.35 |
Industry P/E
ration (TTM) |
3.8 |
TTM: Trailing Twelve Month
Daily chart (BAB.L)
Business background and investment rationale
Babcock International Group PLC works primarily with public sector institutions. The company provides outsourcing services to government and private sector customers and works extensively with the UK armed forces. The company is divided into different divisions including Defence, Engineering and Naval services, with businesses across Europe, Africa and North America.
Strong order book
In the final year statement released in May 2009, Babcock’s order book increased by 90% to £5.7bn and the bid pipeline remains strong, providing long-term revenue visibility. Among the new deals announced in February 2009, Babcock was awarded the Long Overhaul Period and Refuel contract for HMS Vigilant. The three and a half year contract is expected to be worth in excess of £300m. In September 2008, the group signed a 30-year contract worth £1.5bn to provide training and associated support to the Royal School of Military Engineering, which represented a significant opportunity to extend its position in the military training market. In July 2008, Babcock also won manufacturing contracts worth £675m to construct the bow sections and carry out the assembly and completion of the ships at the Rosyth Dockyard. The firm was then awarded a five-year contract with the Canadian government worth C$250m (£125m) to provide in-service support for their Victoria class submarines; a deal which marked the group’s first opportunity to utilise submarine expertise in international markets. The company expects to win more contracts during the economic downturn, particularly with governments looking to keep costs low through outsourcing.
Strong performance by marine and nuclear divisions
Babcock’s marine division, which represents just less than half the group, delivered a 47% increase in profits due to a full contribution from acquisitions and cost saving initiatives. Its nuclear division saw operating profits rise 128% benefiting from the integration of a recently purchased civil nuclear business. To strengthen its nuclear business further, today Babcock completed the acquisition of the United Kingdom Atomic Energy Authority (UKAEA) for a net consideration of £38m. The acquired enterprise has over 50 years' experience in nuclear site management, operations and decommissioning and established advisory roles with a number of government organisations in both the UK and overseas. In the financial year ended 31 March 2009, UKAEA generated revenue of £32m.
Technical outlook
On the daily chart, Babcock has broken out from a channel between 560.0p and 600.0p, making a new 52 week high of 624.5.0p and hitting a reduced profit target of 600.0p. MACD is positive and 12 day EMA is above 26 day EMA indicating a positive trend. 14 day RSI is above 60 and below the overbought level, indicating there is further potential to move upside and stock needs consolidation above 600.0p. Positive DMI is above negative DMI, which indicates a positive trend and ADX is near 20 indicating that stock is slowly moving upside. Stock has support at 560.0p and resistance at 650.0p.
Trading strategy
The stock can be bought around 605.0p with a profit target 674.75p and stop loss of 574.6p (Hedge position: Short position in spread betting with £2.06 bet per point).
Imperial Tobacco Group PLC
Imperial fell below 1800.0p last week which indicates a negative trend has started for the stock. MACD is positive and 12 day EMA has crossed below 26 day EMA which indicates the recent fall back in shares. 14 day RSI is also below 50 showing a weakness in trend. Stock is still above 50 day and 200 day EMA supporting the long term uptrend. 14 day negative DMI is above 14 day positive DMI indicating a negative trend. Looking at the negative trend profit should be booked for the stock at a reduced profit target of 1820.0p.
Babcock International Group PLC
On the daily chart, Babcock has hit a reduced profit target of 600.0p after it broke out above 600.0p. MACD is positive and 12 day EMA is above 26 day EMA indicating an uptrend. 14 day RSI is above 60 which indicates strength in trend. Positive DMI is above negative DMI which indicates a positive trend. All positions should be closed for the stock.
GlaxoSmithKline PLC
On the daily chart, GlaxoSmithKline is consolidating near 1250.0p after making a high of 1286.0p. MACD is positive and 12 day EMA has just crossed below 26 day EMA indicating a recent price fall.14 day RSI is below 50 indicating a weakness in trend.14 day positive DMI is above 14 day negative DMI and ADX is near 20 indicating consolidation. Looking at the recent fall in the prices, stock should be a hold with a reduced profit target of 1270.0p.
Bellway PLC
On the daily chart, Bellway hit the stop loss of 750.39p making a downtrend after falling below the key support level of 800.0p. Momentum oscillator MACD is negative and 12 day EMA is below 26 day EMA indicating a negative trend. RSI is near 30 indicating an oversold level. All positions should be closed for the stock.
Aquarius Platinum Ltd
Aquarius hit the stop loss of 279.26p last week after falling below 300.0p; a key support level. MACD is negative and 12 day EMA is below 26 day EMA, indicating negative trend. 14 day RSI is near 40 showing a weakness in trend. ADX is below 20 with 14 day negative DMI above 14 day positive DMI indicating a negative trend. Stock is also below 20 day and 50 day EMA which supports the weakness in trend. All positions should be closed for the stock.
ARM Holding PLC
On the daily chart, ARM hit the stop loss of 146.25p after falling below key support level of 150.0p Momentum oscillator MACD is positive and 12 day EMA is below 26 day EMA indicating the recent fall. RSI is near 50 indicating stock has held 150.0p in the last two to three days. 14 day positive DMI is above 14 day negative DMI and ADX is near 30 indicating an uptrend. All positions should be closed for the stock.
Kazakhmys PLC
Kazakhmys hit the profit target of 1150.1p after stock fell from the key resistance level of 1300.0p, but position could only be taken at 1277.0p. MACD is positive but 12 day EMA is below 26 day EMA indicating the trend is still negative. 14 day RSI is below 50 indicating weakness in trend. Negative DMI is above positive DMI, confirming a negative trend in the stock. All positions should be closed for the stock.
Autonomy Corporation PLC
Autonomy has fallen below the positive trendline joining October 2008’s low of 789.5p, indicating a negative trend for the stock. 20 day EMA has cross below 50 day EMA confirming a negative trend for the stock. Momentum oscillator MACD is negative and 12 day EMA is also below 26 day EMA indicating a negative trend.14 day RSI is near 30 and stochastic below 10 indicating an oversold level, but could fall further if it cannot hold at 1300.0p. Looking at the negative trend, stock should be a hold with a new profit target of 1270.0p.
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 July to 30th September 2009:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
81% |
21 |
| Hold |
0 |
0 |
| Sell |
19% |
5 |
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.
