| Sector |
Pharmaceuticals & Biotechnology |
Last closing price
(18/01/2010) (p) |
516 |
| 52 week High/Low (p) |
530/308.5 |
| Market Cap (£bn) |
1.0 |
Sector weight age by
Market Cap (%) |
0.82 |
| Average Volume (k) |
184.4 |
| P/E ratio (TTM) |
24.36 |
Sector P/E
ration (TTM) |
4.82 |
TTM: Trailing Twelve Month
Daily chart (HIK.L)
Business background and investment rationale
Hikma Pharmaceuticals PLC is a speciality pharmaceutical company with operations in Europe and the US and a focus in the Middle East and North Africa (MENA) region. The company: develops, manufactures, markets branded and unbranded generic, as well as in-licensed products in both oral and intravenous dosage forms.
Improvement in sales
In an interim management statement announced in November 2009, Hikma expected an acceleration of sales in the fourth quarter, following slower sales in the MENA region in the third quarter. The group expects to deliver full-year sales growth of approximately 10%, or 13% on a constant currency basis. Hikma’s gross margin continues to improve and the firm is confident it will deliver around 46% for 2009, up from 44% in 2008. Hikma’s branded sales were accelerating in the fourth quarter and the company expects to deliver growth of 10% for the full year. The group’s continuing focus on working capital management and on driving quality sales have delivered a notable improvement in cash flow from operations across all regions since the end of June. This has resulted in Hikma’s net debt position reducing to $155.7m at the end of September 2009, compared to $164.4m at the end of June 2009 and $170.9m at the end of December 2008.
Marketing license of patented products
In July 2009 Hikma signed two agreements with Faes Farma SA, which covers the entire MENA region. In the same period the group also signed a new distribution and promotion agreement with Astellas for Advagraf, Astellas' leading immunosuppressant tacrolimus.The completion of these and other agreements reflects the increasing recognition by leading pharmaceutical companies that Hikma is the partner of choice for marketing branded products in the region. The company expects to see the impact of these new long-term licensing agreements over the short and medium term.
Technical analysis
On the daily chart Hikma is trading above the positive trendline after a consolidation between 435.0p and 479.0p. It has broken its resistance level at 500.0p and is making a new 52 week high of 530.0p; an indication that a positive trend has formed in the stock. This is supported by trading above 20 day EMA (exponential moving average) and 50 day EMA. MACD (moving average convergence/divergence) is positive but 12 day EMA is below 26 day EMA, which indicates a positive trend with consolidation above 500.0p. 14 day RSI (relative strength index) is above 50.0 indicating strength in trend. Positive DMI (directional moving index) is above negative DMI, while ADX (average directional index) is near 20 indicating consolidation. Stock has resistance near 535.0p and support near 500.0p.
Trading strategy
The stock can be bought around 508.0p with a profit target 566.57.p and stop loss of 482.53.p.
| Sector |
Automobiles & Parts |
Last closing price
(18/01/2010) (p) |
129.8 |
| 52 week High/Low (p) |
131.5/36.45 |
| Market Cap (£bn) |
1.99 |
Sector weight age by
Market Cap (%) |
94.71 |
| Average Volume (mn) |
18.07 |
| P/E ratio (TTM) |
– |
Sector P/E
ration (TTM) |
0.37 |
TTM: Trailing Twelve Month
Daily chart (GKN.L)
Business background and investment rationale
GKN PLC is a global engineering business serving the automotive, off highway and aerospace markets.
Stabilisation in sales
In a trading statement released in December 2009, overall demand has improved in GKN's major markets for the fourth quarter. Government incentive programs continue to provide some support for sales of smaller light vehicles, and have improved production demand in the automotive market. Production of mid-sized vehicles, where GKN has greater exposure, has also increased in a number of markets as sales have shown some signs of recovery, while inventory levels stabilised. As a consequence, demand has continued at similar levels to those experienced in September 2009, and GKN's fourth quarter sales are now expected to show a good improvement compared with the third quarter. GKN Aerospace continues to perform well with military aircraft production remaining solid and no further material reduction in civil aircraft schedules. GKN off highway production in the fourth quarter remains significantly down; around 50% lower than the comparable period in 2008 with some sign of stabilisation seen in fourth quarter.
Restructuring programme
As markets have weakened in automotive and off highway, GKN has extended and accelerated its restructuring. Eight manufacturing sites will be closed and 3,600 employees will leave the group by July 2010, an increase of 1,200 on previous announcements. The group will incur costs of approximately £103m while annualised benefits will increase by £107m by July 2010. In addition, short-time working costs of £24m will be incurred which will deliver benefits of £56m in 2009. In June 2009 GKN raised £423m through a rights issues to repay revolving credit facilities. Five months later in November 2009 GKN announced an offer to purchase up to £150m of its outstanding £325m 7% 2012 bonds. This purchase will reduces the company’s gross indebtedness and future interest expense, with the saving in interest expected to be £9m per annum from 2010.
Technical outlook
On the daily chart, GKN is trading near a 52 week high after breaking out from a tight range of 100.0p and 121.0p. MACD is positive and 12 day EMA is above 26 day EMA, indicating a positive trend. 14 day RSI is above 70 supporting breakout movement. Positive DMI is above negative DMI, while ADX is near 30 indicating uptrend. Stock has strong support near 121.0p and immediate resistance can be found near 131.0p.
Trading strategy
The stock can be bought around 127.0p with a profit target 141.64p and stop loss of 120.63p.
Game Group PLC
On the daily chart, Game hit the stop loss of 100.68p on a weak trading update last week making a new 52 week low of 96.25p. Consolidation around this price from last week indicates that a bottom is forming in the stock, supported by MACD which is negative. However 12 day EMA has crossed above 26 day EMA indicating formation of an uptrend. 14 day RSI is above 30 and has rebounded from an oversold level. All positions should be closed for the stock.
Petropavlovsk PLC
On the daily chart, Petropavlovsk hit the stop loss of 1073.3p and is trading below the stop loss, indicating a negative trend in the stock. However, it has held the key support level of 1000.0p which is encouraging. MACD is negative and 12 day EMA has crossed below 26 day EMA on the daily chart, which indicates a negative trend is forming. 14 day RSI is also below 50.0 indicating a negative trend and the potential to move further downside. All positions should be closed for the stock.
Whitbread PLC
On the daily chart, Whitbread is still trading in a tight range of 1344.0p and 1417.0p after consolidating between 1200.0p and 1300.0p. MACD is positive and 12 day EMA has crossed below 26 day EMA, indicating consolidation. 14 day RSI is also above 50 supporting strength in trend and consolidation. Positive DMI is above negative DMI, while ADX is near 24 indicating consolidation. Stock should be a hold with the same profit target.
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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 October to 31st December 2009:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
82% |
18 |
| Hold |
0 |
0 |
| Sell |
18% |
4 |
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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