| Sector |
Aerospace & Defense |
Last closing price
(08/02/2010) (p) |
3144 |
| 52 week High/Low (p) |
3318/1794 |
| Market Cap (£bn) |
1.10 |
Sector weight age by
Market Cap (%) |
3.69 |
| Average Volume (k) |
199.5 |
| P/E ratio (TTM) |
15.93 |
Sector P/E
ration (TTM) |
4.46 |
TTM: Trailing Twelve Month
Daily chart (CHG.L)
Business background and investment rationale
Chemring Group PLC designs, manufactures and sells energetic material products and decoy countermeasures. It provides solutions for specific customer requirements in the defence, security and safety markets. Its two operating divisions comprise Energetics and Countermeasures.
Strong growth in 2009
In a final year result announced in January 2010, Chemring’s revenue reached £503.9m, a rise of 42% from 2008’s £354.2m. Underlying profits before tax hit £102.6m, which represented an increase of 38% from last year’s £74.2m. Underlying earnings per share increased by 33% from 160.0p to 213.0p. The Energetics division performed well: its full-year revenue climbed 63%, operating profit grew by 59% to £72.8m since last year, and its order book reached a record level of £345.9m. The Countermeasures division also performed well with revenue increasing by 17% from £157m to £184m, while the year-end order book was up by 81% from £128m to £232m.
Growth from mergers and acquisitions
In January 2010 Chemring acquired Allied Defense Group (ADG) for a cash consideration of $59m. As a prime contractor, ADG’s focus on ammunition for Light Armoured Vehicles fits well with Chemring's leading position in naval ammunition. In September 2009 Chemring acquired Hi-Shear Technology Corporation for a cash consideration of $132m. Its product range, technology and leading market position in US space and defence programmes provides the group with a solid platform for growth in the space market. In December 2008, Chemring acquired Niitek - a leading supplier of robot and vehicle-marked mine detection systems - for an initial cash consideration of $30m. In July 2009 the US Army awarded Niitek a $75m contract for the supply and support of 50 Husky Mine Detection Systems. This followed an earlier $50m contract, also from the US Army, awarded in the first half of 2009. Niitek’s revenue for 2009 is 250% higher than its pre-acquisition performance having reached £45.6m.
Technical outlook
On daily chart, Chemring continues in a positive trend and has marginally rebounded from its 52 week high of 3318.0p. It is still above 20 day EMA (exponential moving average) which is an encouraging sign. MACD (moving average convergence/divergence) is positive and 12 day EMA (exponential moving average) is below 26 day EMA, indicating a rebound from the 52 week high. 14 day RSI (relative strength index) is near 60 showing strength in uptrend. 14 day positive DMI (directional moving index) is above 14 day negative, while ADX (average directional index) is near 30 indicating an uptrend. Stock has support near 2900.0p and resistance near 3300.0p.
Trading strategy
The stock can be bought around 3100.0p with a profit target 3457.4p and stop loss of 2944.6p.
| Sector |
Tobacco |
Last closing price
(08/02/2010) (p) |
2061.0 |
| 52 week High/Low (p) |
2082/1412 |
| Market Cap (£bn) |
20.62 |
Sector weight age by
Market Cap (%) |
33.49 |
| Average Volume (mn) |
4.18 |
| P/E ratio (TTM) |
31.15 |
Sector P/E
ration (TTM) |
154.26 |
TTM: Trailing Twelve Month
Daily chart (IMT.L)
Business background and investment rationale
Imperial Tobacco Group PLC is an international tobacco company which manufactures, markets, distributes and sells a range of cigarettes, tobaccos, cigars, rolling papers and tubes. The company operates in two business segments: tobacco and logistics.
Versatility in balanced portfolio
In an interim management statement announced in February 2010, group revenue for the first quarter grew strongly. Growth was driven by an enlarged global footprint and increases in the value cigarette and fine cut tobacco brands within mature markets. Imperial also continued to develop mainstream and premium cigarette brands in emerging markets. In the UK Imperial’s average cigarette share for the year to December was 45.2%, which compares with 45.3% for the year to September 2009. On a monthly spot basis, group share has been on an upward trend since July 2009 and stood at 45.6% in December, with JPS Silver reaching a spot share of 3.7%. In the year to December Imperial’s fine cut tobacco share was 57.1%, down from 58% reported for the year to September 2009. Imperial achieved strong volume growth in the value segment with Gold Leaf and Golden Virginia Yellow continuing to perform well. The company grew its market share in the Africa and Middle East region, with Davidoff performing well in Eastern Europe and Maxim continuing its positive momentum in Russia. The group’s premium Cuban cigar business continues to show signs of recovery especially in Asia Pacific and some Western European countries.
Strong financial position
The group remains confident in its ability to access the debt capital markets successfully and it continues to review its options on an ongoing basis. Despite the challenges of the wider operating environment, Imperial’s Altadis integration is progressing well with cash conversion expected to exceed 100%. In June 2009 Imperial placed a three-year euro bond for €1.25bn and a 10-year sterling bond for £500m.
Technical outlook
Imperial is continuously making a higher low from its 52 week low of 1368.0p with a positive slope, which is an encouraging sign. Trend for the stock looks positive as MACD is positive and 12 day EMA is just below 26 day EMA, which indicates an uptrend. 14 day RSI is near 60 showing strength in trend. 14 day positive DMI is above 14 day negative DMI and ADX is near 40 indicating strong trend in the stock. If the stock breaks above 2100.0p a higher move to 2300.0p can be expected, with support at 2000.0p.
Trading strategy
The stock can be bought around 2040.0p with a profit target 2275.2p and stop loss of 1937.3p
Stocks Update
Whitbread PLC
On the daily chart, Whitbread is trading at the bottom of a channel between 1344.0p and 1417.0p after making a new 52 week high of 1457.0p. MACD is positive and 12 day EMA has crossed below 26 day EMA, indicating the formation of a downtrend. 14 day RSI is also below 50 supporting weakness in trend. Positive DMI is below negative DMI, while ADX is near 20 indicating consolidation and negative trend. Stock should be a hold with a reduced profit target of 1400.0p.
ARM Holdings PLC
On the daily chart, ARM hit a profit target of 207.4p but rebounded again from this high indicating the long-term positive trend is intact. Momentum oscillator MACD is positive and 12 day EMA is above 26 day EMA indicating strong uptrend. RSI is near 60 indicating a positive trend. 14 day positive DMI is above 14 day negative DMI which indicates an uptrend. All positions should be closed for the stock.
PartyGaming PLC
On the daily chart, stock was choppy with trading at a 52 week high of 300.0p and a low of 270.0p at its stop loss. Stock is below the positive trend line which is a discouraging sign. Momentum oscillator MACD is positive and 12 day EMA has cross below 26 day EMA indicating downtrend for the stock. RSI is not making a new high which is a discouraging sign, and is below 50 indicating weakness in trend. All positions should be closed for the stock.
Aveva Group PLC
On the daily chart, Aveva hit a stop loss of 1025.4p after it moved again to a support level of 1000.0p. MACD is positive and 12 day EMA has crossed below 26 day EMA, indicating downtrend in the stock. 14 day RSI is above 50 supporting the weakness in trend. Stock has crossed below 20 day and 50 day EMA which is discouraging. 14 day positive DMI is below 14 day negative DMI which indicates the stock is in a downtrend. All positions should be closed for the stock.
Wellstream Holdings PLC
On the daily chart, Wellstream is trading at the bottom of a channel between 490.0p and 576.0p. Today it crossed making a new low of 481.76p 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. 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 should be a hold with 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
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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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