| Sector |
Technology hardware & equipment |
Last closing price
(25/01/2010) (p) |
189.4 |
| 52 week High/Low (p) |
199.8/77.5 |
| Market Cap (£bn) |
2.43 |
Sector weight age by
Market Cap (%) |
38.71 |
| Average Volume (mn) |
7.72 |
| P/E ratio (TTM) |
54.21 |
Sector P/E
ration (TTM) |
15.83 |
TTM: Trailing Twelve Month
Daily chart (ARM.L)
Business background and investment rationale
ARM Holdings PLC designs microprocessors: physical library solutions, and related technology and software, and sells development tools.
Growth in mobile & non-mobile applications
In the third quarter result announced in October 2009, ARM technology-based chips continued to gain market share in both mobile and non-mobile applications. ARM signed a record 28 processor licenses during the quarter. Four of these licenses were for processors still under development and all the revenue associated with these agreements goes into backlog which will be recognised in future quarters once engineering milestones are achieved. The group’s backlog at the end of the quarter was up 3% sequentially and ARM continued to gain share in non-mobile markets. Shipments of ARM-based microcontrollers grew 75% sequentially, compared to 30% for the overall microcontroller market.
Upbeat outlook
ARM expects trading performance in the second half of 2009 to improve as demand for its latest technology remains robust. This positive outlook is driven by original equipment manufacturers (Acer, Dell, HTC, Nokia and Sharp) planning to use Cortex(TM)-A processors for smartphones and mobile computing. In the second quarter, smartphone shipments grew about 25% year-on-year while overall mobile phone shipments declined about 5%. For the third quarter, ARM achieved an average of 2.1 ARM technology based chips per mobile handset, up from 2 in the previous quarter.
Technical Outlook
On the daily chart, ARM has more than doubled from October 2008’s low and is trading above the trendline joining the January 2009 low, which indicates the long-term positive trend is intact. It is consolidating at 190.0 p and rebounding to its 52 week high of 199.8p, indicating a positive trend for the stock. Momentum oscillator MACD (moving average convergence/divergence) is positive and 12 day EMA (exponential moving average) is below 26 day EMA indicating consolidation. RSI (relative strength index) is above 60 indicating a strong positive trend. 14 day positive DMI (directional moving index) is above 14 day negative DMI indicating a strong uptrend. Stock has to consolidate above 186.0p for an uptrend, with support near 170.0p. Stock has held above 20 day EMA which also indicates a short-term uptrend for the stock.
Trading strategy
Stock can be bought near 186.0p with a profit target of 207.4p and stop loss of 176.67p.
| Sector |
Travel & Leisure |
Last closing price
(25/01/2010) (p) |
293.5 |
| 52 week High/Low (p) |
298.5/157.2 |
| Market Cap (£bn) |
1.16 |
Sector weight age by
Market Cap (%) |
2.13 |
| Average Volume (mn) |
1.51 |
| P/E ratio (TTM) |
21.72 |
Sector P/E
ration (TTM) |
0.34 |
TTM: Trailing Twelve Month
Daily chart (PRTY.L)
Business background and investment rationale
PartyGaming PLC is an online gaming company with a particular focus on internet poker and casinos. The poker business represents 66% of the firm’s total revenues. Trading under two brands, PartyCasino and Starluck Casino, the company offers a variety of casino games including blackjack, roulette, keno and video poker, in addition to slot machines. It also operates PartyBingo.com offering a variety of online bingo games.
Resilient performance in poker and casino business
In a third quarter result announced in October 2009, PartyGaming continued to make good progress despite pressures from a highly competitive market and adverse currency movements. Total revenue for the quarter was $112.7m largely driven by the Cashcade acquisition. This represents growth of 11% from the second quarter and compares with $117.7m in the same period for 2008. Poker revenue was down because although there were larger numbers of players, these were offset by lower yields. Revenue was $45.1m, marking a fall from 2008’s $65m, and down 8% versus the second quarter. However, higher player yields drove up casino revenue by 2% compared with Q2 2009, reaching $49.2m. This compares with the $45.6m delivered in 2008. Sports revenue was up 31% versus the second quarter last year, with an improved gross win margin despite poor sporting results. Revenues hit $4.2m which was down on 2008’s $5.1m. The group is expecting Q4 revenue to be slightly above the board’s expectations, and prospective licensing and regulation in Italy and France will offer exciting medium to long-term revenue potential.
Expansion in business to business operations
To increase its presence in business-to-business operations, PartyGaming has signed an exclusive five-year agreement to provide an online gaming poker and casino platform in Denmark for Danske Spil A/S. Danske Spil has also established a large online gaming business and already has over 500,000 registered online customers. In November 2009 PartyGaming launched an online poker service in Italy for Fueps, Italy’s leading casual games operator, as part of a three-year exclusive deal. More than 550,000 registered users play over 100 games on Fueps’ casual games website. Recently the group completed the acquisition of WPT Enterprises Inc. for a cash consideration of $12.3m plus an additional minimum aggregate payment of $3m over the next three years relating to an ongoing revenue share agreement. The ClubWPT subscription poker offering has more than 16,500 paying subscribers in 37 US states. It also has extensive library of over 150 hours of poker programming which is broadcast in more than 150 countries. PartyGaming continues to hold discussions with a number of companies in the gaming sector regarding potential consolidation opportunities.
Technical Outlook
On the daily chart, PartyGaming has broken out from a channel of 234.0p and 286.0p indicating a positive trend for the stock. Stock has also made a higher low and is making a positive slope, which is also an encouraging sign. Momentum oscillator MACD is positive and 12 day EMA has cross above 26 day EMA indicating strong trend in the stock. RSI is above 70 indicating positive trend. 14 day positive DMI is above 14 day negative DMI supporting uptrend. Stock has resistance at 360.0p and support near 234.0p.
Trading strategy
Stock can be bought near 287.0p with a profit target of 321.0p and stop loss of 272.6p
Stocks Update
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. Negative DMI is above positive DMI, while ADX is near 24 indicating consolidation. Stock should be a hold with the same profit target.
Hikma Pharmaceuticals PLC
On the daily chart, Hikma hit the profit target of 566.67p making a new 52 week high of 569.5p after it broke out from a range of 500.0p and 530.0p. MACD is positive and 12 day EMA has crossed above 26 day EMA, indicating an uptrend. 14 day RSI is also above 70 supporting strength in an uptrend. Positive DMI is above negative DMI, while ADX is near 33 indicating a strong uptrend. All positions should be closed for the stock.
GKN PLC
On the daily chart, GKN hit the stop loss of 120.63p and is trading below the stop loss, indicating a negative trend in the stock. However, if it can’t hold the key support level of 118.0p, it could fall further to 105.0p. MACD is positive but 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 50.0p indicating a negative trend and the potential to move further downside. All positions should be closed for the stock.
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.
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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.
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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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