| Sector |
Gas water & Multi-utilities |
Last closing price
(15/03/2010) (p) |
294.7 |
| 52 week High/Low (p) |
296.5/212.5 |
| Market Cap (£bn) |
14.88 |
Sector weight age by
Market Cap (%) |
36.37 |
| Average Volume (mn) |
14.4 |
| P/E ratio (TTM) |
23.3 |
Sector P/E
ration (TTM) |
2.25 |
TTM: Trailing Twelve Month
Daily chart (CNA.L)
Business background and investment rationale
Centrica PLC is an integrated energy company. Its main operations are in the UK, North America and Europe. Centrica’s two business types are downstream and upstream and the firm supplies energy and related services to homes and businesses.
Resilient performance in 2009
In the preliminary 2009 full year results announced in February 2010, group revenue from continuing operations was up 5% from £20.9bn in 2008 to £22bn last year. Group operating profit from continuing operations was down 9% at £1.814bn, compared to £1.992bn in the previous year, while adjusted operating profit was down 7% from £2.003bn in 2008 to £1.857m in 2009.
In addition to the interim dividend of 3.66p per share, Centrica declared a final dividend of 9.14p, giving a total ordinary dividend of 12.8p for the year; a climb of 0.6p, or 4.9%, from 2008. Revenue in all three downstream UK businesses increased due to a higher number of customer accounts, while revenue in the upstream UK segment was also slightly up following higher external sales volumes.
Acquisition in upstream business
Centrica has strengthened its upstream business model considerably by acquiring Venture for a total cash consideration of £1.3bn. In total the group gas and oil reserves base is now 400 million barrels of oil equivalent (mmboe). In January 2009 Centrica announced the acquisition of a 67% interest in the undeveloped York gas field in the Southern North Sea, adding to the 23% it acquired in 2002 as part of Centrica’s rough gas storage acquisition. In July 2009 Centrica signed a gas production sharing agreement with the Trinidadian Government on Block 2(ab), followed by a second transaction in February, seeing the group agree to purchase a portfolio of Trinidad & Tobago’s undeveloped gas assets. In the power business, the group successfully completed an improved deal with EDF in November 2009 to acquire a 20% equity interest in British Energy, the operator of eight existing nuclear power stations in the UK, for £2.3bn. Centrica further consolidated its offshore wind farm, after receiving final investment approval for the 270MW Lincs offshore wind development project. Construction is expected to commence this year.
Technical analysis
On the daily chart Centrica completed a ‘V’ Pattern between 263.0p and 288.0p making a new 52 week high of 296.0p, indicating a positive trend is forming in the stock. MACD (moving average convergence/divergence) is positive and 12 day EMA (exponential moving average) is above 26 day EMA, which indicates a positive trend for the stock. 14 day RSI (relative strength index) is above 70 indicating a positive trend supported by a positive slope in MACD and RSI. Positive DMI (directional moving index) is above negative DMI, while ADX (average directional index) is near 28 indicating a strong uptrend in stock prices. The stock is also above 20 day and 50 day EMA indicating a bullish signal for the stock. Stock has resistance near 320.0p and support near 270.0p.
Trading strategy
The stock can be bought around 290.0p with a profit target 323.4p and stop loss of 275.4p
| Sector |
Non Life Insurance |
Last closing price
(15/03/2010) (p) |
1251 |
| 52 week High/Low (p) |
1284.0/825.0 |
| Market Cap (£bn) |
3.29 |
Sector weight age by
Market Cap (%) |
19.84 |
| Average Volume (k) |
623.7 |
| P/E ratio (TTM) |
21.0 |
Sector P/E
ration (TTM) |
6.6 |
TTM: Trailing Twelve Month
Daily chart (ADM.L)
Business background and investment rationale
Admiral’s principal activity is selling and administrating private motor insurance and related products. The company sells, administers and underwrites private car insurance in the UK through four brands: Admiral, Bell, Diamond and elephant.co.uk.
Strong performance in 2009
In the preliminary full year result for 2009 announced on 2 March 2010, Admiral reported record profits before tax of £215.8m, up by 7% from £202.5m in 2008. Turnover also rose, climbing by 18% to £1.07bn from £910.2m in the previous year. The number of group customers was up 19% to 2.08m from 1.75m in 2008, with Admiral increasing its customer base by 17% to achieve a combined ratio of 85%. At the same time, the company boosted premium rates by 12% during 2009, broadly in line with the UK market where premiums are rising to compensate for hikes in inflation over recent years. The board has declared a second interim dividend of 29.8p in place of a final dividend declaring total dividends for 2009 at 57.5p; 10% higher than the 52.5p distributed in 2008.
Expansion in new markets
In 2009 Admiral launched its price comparison website into other markets, by launching Rastreator.com in Spain in March 2009, followed by LeLynx.fr in France and Chiarezza.it in Italy early this year. The group also sold its 25% stake of Rastreator.com to Mapfre, Spain’s leading insurance group. This deal sharply reduced the need to employ Admiral’s own capital and therefore lowered overall group risk.
In 2009 Admiral entered the US market with Elephant Auto Insurance. The group will take 33% of the risk in Elephant, while Munich Re and Hannover Re share the remaining risk equally. In 2010 Elephant will concentrate on running operations effectively in Virginia before Admiral considers taking on an additional stake.
Technical outlook
On the daily chart, stock is continuously in an uptrend after making higher lows and is consolidating near its 52 week high of 1284.0p. Momentum oscillator MACD is positive and 12 day EMA is just below 26 day EMA indicating consolidation. RSI is also near 60 indicating uptrend which is supported with a positive trend in both the indicators. 14 day positive DMI is above 14 day negative DMI, while ADX is near 30 indicating strong uptrend in prices. Stock has immediate resistance at 1284.0p, and support near 1200.0p.
Trading strategy
Stock can be bought near 1230.0p with a profit target of 1372.0p and stop loss of 1168.3p
Stocks Update
Chemring Group PLC
On the daily chart, Chemring hit the profit target of 3457.0p making a new 52 week high of 3491.9p and is still trading near its profit target, indicating a positive trend for the stock. It is still above 20 day and 50 day EMA which suggests the short-term uptrend is still intact. MACD is positive and 12 day EMA has just moved below 26 day EMA, indicating some profit booking in the stock. 14 day RSI is above 60 showing strength in trend. 14 day positive DMI is above 14 day negative, while ADX is near 29 indicating an uptrend. All positions should be closed for the stock.
Imperial Tobacco Group PLC
Imperial is continuously moving in a downtrend after making a new 52 week high of 2159.0p indicating weakness in uptrend for the stock. The trend for the stock looks negative as MACD is positive but 12 day EMA is below 26 day EMA, which indicates a downtrend is forming. 14 day RSI is above 50 showing weakness in trend. 14 day positive DMI is above 14 day negative DMI and ADX is near 27 indicating some consolidation. Looking at the negative trend forming in the stock it should be a hold with a reduced profit target of 2100.0p.
Aveva Group PLC
On the daily chart, Aveva hit the profit target of 1148.0p making a new 52 week high of 1153.0p, indicating the formation of an upward trend for the stock supported by trading above 20 day and 50 day EMA. MACD is positive and 12 day EMA is above 26 day EMA, also indicating an uptrend in the stock. 14 day RSI is above 60 supporting strength in trend. 14 day positive DMI is above 14 day negative DMI which indicates stock is in an uptrend. All positions should be closed for the stock.
Whitbread PLC
On the daily chart, Whitbread has broken out from the channel upside between 1344.0p and 1457.0p making a new 52 week high of 1518.0p. MACD is positive and 12 day EMA is above 26 day EMA, indicating an uptrend for the stock. 14 day RSI is moving below 70 indicating some consolidation before an upside move. Positive DMI is above negative DMI, while ADX is near 17 indicating some consolidation. Stock is also trading above 20 day and 50 day EMA indicating uptrend for the stock. Stock should be a hold with the same profit target.
Kazakhmys PLC
On the daily chart, Kazakhmys is at the top of ‘V’ pattern making a new 52 week high of 1563.0p. MACD is positive and 12 day EMA is above 26 day EMA, indicating an uptrend for the stock. 14 day RSI is moving below 60 indicating some consolidation before an upside move. Positive DMI is above negative DMI, while ADX is near 20 indicating some consolidation. Stock is still trading above 20 day and 50 day EMA indicating uptrend for the stock is intact. Stock should be a hold with a reduced profit target of 1600.0p.
John Wood Group PLC
On the daily chart, stock is still trading in a tight range of 332.0p and 384.0p and rebounding from its high indicating weakness in positive trend for the stock. Momentum oscillator MACD is positive and 12 day EMA is just below 26 day EMA indicating some weakness in uptrend. RSI is also below 60 indicating some weakness in uptrend. 14 day positive DMI is above 14 day negative DMI, while ADX is near 20 indicating a rebound in prices. Looking at the negative trend, stock should be a hold with reduced profit target of 390.0p.
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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.
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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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