| Sector |
Software & Computer services |
Last closing price
(01/02/2010) (p) |
1096 |
| 52 week High/Low (p) |
1112/460 |
| Market Cap (£mn) |
740.27 |
Sector weight age by
Market Cap (%) |
3.36 |
| Average Volume (k) |
320.6 |
| P/E ratio (TTM) |
19.99 |
Sector P/E
ration (TTM) |
12.64 |
TTM: Trailing Twelve Month
Daily chart (AVV.L)
Business background and investment rationale
Aveva Group PLC develops computer software for the engineering sector including the plant, power and marine industries.
Strong result
In an interim result announced in November 2009, Aveva’s short-term trading was impacted by the global economic uncertainty, particularly in the marine market. Total revenue decreased by 7% to £69.9m compared to £74.8m delivered in 2008. Recurring revenue amounted to £48.1m compared to £40.9m in 2008; accounting for 69% of total revenue and representing an increase of 18%. Recurring revenue accounted for 55% of 2008’s total revenue. A research and development investment of £10.3m to enhance and develop products to support future revenue growth did not impact on strong operating margins which were at 33%. Aveva continues to generate cash, and between 31 March and 30 September 2009 net cash increased by £7.7m to reach £133.9m. The company expects the oil & gas markets to remain relatively robust, particularly in developing countries such as Brazil where large complex projects are stimulating demand, delivering new customer wins and generating growth in the existing customer base. The group also benefitted from exchange rate movements in the first half of the year which delivered approximately £5m.
Completion of restructuring program
In July 2009 Aveva completed its restructuring program which combined its Central, Eastern, Southern and Western Europe sales region with the Middle East and Africa to form one EMEA region. The program cost £1.8m and created annualised savings of £5m. The firm also reduced headcount across the business by approximately 10%. The group continues to invest in improving sales and support, focusing on Aveva NET and other identified opportunities in growth markets like South America and the Commonwealth of Independent States.
Technical outlook
On the daily chart, Aveva rebounded to its 52 week high of 1112.0p and is on the verge of completing a ‘V’ pattern between 1112.0p and 1033.0p. MACD (moving average convergence/divergence) is positive and 12 day EMA (exponential moving average) has crossed above 26 day EMA, indicating an uptrend in the stock. 14 day RSI (relative strength index) is above 60, supporting the uptrend. Stock is also above 20 day and 50 day EMA which is quite encouraging. 14 day positive DMI (directional moving index) is above 14 day negative DMI which indicates stock is in uptrend. Stock has resistance at 1300.0p and support at 1000.0p level.
Trading strategy
The stock can be bought around 1080.0p with a profit target 1204.5p and stop loss of 1025.8p
| Sector |
Oil Equipment services & Distributions |
Last closing price
(01/02/2010) (p) |
498.2 |
| 52 week High/Low (p) |
702/354.75 |
| Market Cap (£mn) |
518.69 |
Sector weight age by
Market Cap (%) |
4.84 |
| Average Volume (k) |
444.7 |
| P/E ratio (TTM) |
12.03 |
Sector P/E
ration (TTM) |
25.62 |
TTM: Trailing Twelve Month
Daily chart (WSM.L)
Business background and investment rationale
Wellstream Holdings PLC provides piping equipment to the energy production industry. The company’s portfolio includes offshore products such as risers and flow lines for deep and ultra-deepwater environments, and products for use in onshore applications including high-temperature/high-pressure drilling.
Decline in order book
In a trading statement announced in January 2010, the year-end order backlog was over £160m, down from £170m reported in November 2009. The company anticipates uncertainty around the timing of awards outside of Brazil and it expects this to impact earnings for the first half of 2010. However, due to short-term market weakness caused by project delays, Wellstream initiated a cost reduction program, although it hasn’t outline the savings it plans to achieve.
Increased production
Wellstream maintained a good performance in 2009 with revenue expected ahead of last year’s £369.9m, and second half-year earnings better than the first six months. Wellstream’s growth was generated by doubling installation revenue and additional capacity available in Brazil. The group’s production capacity increased by 40% in the first half of 2009, attributable to the Newcastle plant’s 300 normalised km per annum increase and the Brazilian Niteroi increase of 270 normalised km per annum. In October 2009, Wellstream signed a lease on the land adjacent to the Niteroi facility, providing the opportunity to generate operational efficiencies and offer key customers logistics support. Wellstream also sold its onshore Flex Steel business to Prime Natural Resources Inc. for $30m in cash, leaving the company to focus on its core offshore business which have greater margins.
Technical outlook
On the daily chart, Wellstream is trading at the bottom of a channel between 490.0p and 576.0p. It recently crossed below this channel indicating a downtrend is forming in the stock. MACD is negative and 12 day EMA is below 26 day EMA, indicating a downtrend is forming. 14 day RSI is below 50 but is above the oversold level indicating a weakness in trend and the potential to fall further. 14 day positive DMI is below 14 day negative and ADX is near 20 indicating the formation of a downtrend. Stock is also below 20 day and 200 day EMA supporting both the long and short-term down trend. Stock has immediate resistance near 475.0p and if it crosses this level it can further fall to 450.0p with a support at 533.0p.
Trading strategy
The stock can be sold around 505.0p with a profit target 446.7p and stop loss of 530.3p
Stocks Update
Whitbread PLC
On the daily chart, Whitbread is still trading at the top of a channel between 1344.0p and 1417.0p. MACD is positive and 12 day EMA is on the verge of crossing above 26 day EMA, indicating a formation of an uptrend. 14 day RSI is also above 50 supporting strength in trend and consolidation. Positive DMI is above negative DMI, while ADX is near 20 indicating consolidation. Stock should be a hold with the same profit target.
ARM Holdings PLC
On the daily chart, ARM just missed the profit target with a high of 205.0p during the week but rebounded again from this high indicating the long-term positive trend is intact. Momentum oscillator MACD is positive and 12 day EMA is below 26 day EMA indicating the recent fall to its entry price. RSI is near 60 indicating a positive trend. 14 day positive DMI is above 14 day negative DMI which indicates an uptrend. Stock should be a hold with the same profit target and new stop loss of 178.3p.
PartyGaming PLC
On the daily chart, stock was choppy with a new 52 week high of 300.0p and low of 273.0p near to its stop loss. Stock is still above the positive trend line which is an encouraging sign. Momentum oscillator MACD is positive and 12 day EMA is still above 26 day EMA indicating an uptrend for the stock. RSI is not making a new high which is slightly discouraging, but it is above 50 indicating strength in trend. 14 day positive DMI is above 14 day negative DMI supporting an uptrend. Stock should be a hold with the same profit target.
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 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.
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.
