| Sector |
Pharmaceuticals & Biotechnology |
Last closing price
(22/03/2010) (p) |
599.5 |
| 52 week High/Low (p) |
611.5/341.2 |
| Market Cap (£bn) |
1.12 |
Sector weight age by
Market Cap (%) |
0.91 |
| Average Volume (k) |
192.4 |
| P/E ratio (TTM) |
25.36 |
Sector P/E
ration (TTM) |
3.75 |
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, the US and a focus in the Middle East and North Africa (MENA) region. The company develops, manufactures and markets branded and unbranded generic, as well as in-licensed products in both oral and intravenous dosage forms.
Improvement in sales
In the preliminary full year results for 2009 announced on 17 March 2010, Hikma’s revenue increased by 9.7% to $636.9m, compared to $580.7m in 2008. On a constant currency basis, group revenues increased by 12.5%. Hikma’s gross margin was 47.8% in 2009; a gain on the 44.2% in 2008 and well ahead of the targeted two percentage point improvement set for 2009. This growth reflects the increase in profitability in the Generics business, which was driven by strategic price increases across the portfolio and a shift in product mix. Operating margin also increased to 16.8%, up from 13.9% in 2008. The group’s continuing focus on working capital management and driving quality sales delivered a notable improvement in cash flows from operations across all regions. Consequently, Hikma’s net debt position reduced to $116.9m at the end of December 2009 from $170.9m for the same period in the previous year.
Marketing license of patented products
The Branded business continues to represent 55% of Hikma’s sales and the combined Branded and Injectables’ sales in MENA now make up 63.5% of total group sales. In 2009, the Branded business launched 71 products across all markets, including six new compounds and 18 new dosage forms and strengths. The Branded business also received 69 regulatory approvals across the region, including 10 for new products. In July 2009 Hikma signed two agreements with Faes Farma SA, which covers the entire MENA region. In the same period the group 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 making a new 52 week high of 613.0p and the stock is in a consolidation phase at around 600.0p after hitting this level. Positive trend is intact for the stock supported by trading above 20 day EMA (exponential moving average) and 50 day EMA. MACD (moving average convergence/divergence) is positive and 12 day EMA is just above 26 day EMA, which indicates a positive trend with consolidation near 600.0p. 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 32 indicating a strong uptrend.
Trading strategy
The stock can be bought around 590.0p with a profit target 658.1p and stop loss of 560.4p.
| Sector |
Automobiles & Parts |
Last closing price
(22/03/2010) (p) |
131.0 |
| 52 week High/Low (p) |
133.3/43.2 |
| Market Cap (£bn) |
1.93 |
Sector weight age by
Market Cap (%) |
94.04 |
| Average Volume mn) |
5.76 |
| P/E ratio (TTM) |
– |
Sector P/E
ration (TTM) |
37.8 |
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 preliminary full year result for 2009 announced in February 2010, overall demand in GKN's major markets improved for the fourth quarter. Government incentive programs continue to provide support for sales of smaller light vehicles and have boosted production demand in the automotive market. Production of mid-sized vehicles, where GKN has greater exposure, also increased in a number of markets as sales show some signs of recovery while inventory levels stabilised. GKN Aerospace continues to perform well with military aircraft production remaining solid and no further material reduction in civil aircraft schedules. The acquisition of the wing component and sub-assembly facility at Filton is expected to provide excellent growth opportunities as the site becomes the group’s globally competitive UK centre of excellence for the design and manufacture of composite aircraft wing structures. GKN’s Off Highway production for 2009 is significantly down on the previous year; figures show the division is 43% lower than the comparable period in 2008, although there was some sign of stabilisation reported in the fourth quarter.
Restructuring programme
As markets have weakened in Automotive and Off Highway, GKN has restructured these two business divisions along with Powder Metallurgy and repositioned the Aerospace business for lower aircraft production volumes in 2009. As a result, all divisions were profitable in the fourth quarter, with the exception of Off Highway and GKN reported a trading margin of 6.5%. Thirteen manufacturing sites were closed and 3,500 employees left the group last year, while in June GKN raised £423m through a rights issue 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. The purchase will reduce 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 at the top of the channel between 100.0p and 126.0p near its 52 week high of 133.3p indicating a positive trend for the stock. MACD is positive and 12 day EMA is above 26 day EMA, indicating a positive trend. 14 day RSI is near 70 indicating uptrend in the stock. Positive DMI is above negative DMI, while ADX is near 33 indicating an uptrend. Recently 20 day EMA has crossed above 50 day EMA supporting a positive trend for the stock. The stock has strong support near 125.0p and resistance can be found near 150.0p.
Trading strategy
The stock can be bought around 128.0p with a profit target 142.8p and stop loss of 121.58p.
Stocks Update
Imperial Tobacco Group PLC
Imperial consolidated near its entry price last week and stock is still in a downtrend movement supported by MACD which is in negative territory, while 12 day EMA is below 26 day EMA. 14 day RSI is below 50 showing weakness in trend. 14 day negative DMI is above 14 day positive DMI and ADX is near 21 indicating weakness in the positive trend. Looking at the negative trend forming in the stock it should be a hold with a reduced profit target of 2150.0p.
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 1560.0p. MACD is positive and 12 day EMA is above 26 day EMA, indicating an uptrend for the stock. 14 day RSI has moved 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 rebounding from its 52 week high of 1563.0p indicating weakness in uptrend. MACD is positive but 12 day EMA has crossed below 26 day EMA, indicating a retreat in the prices. 14 day RSI is near 50 indicating fall in stock prices. Negative DMI is just above positive DMI, while ADX is near 20 indicating some consolidation. Stock is still trading below 20 day but above 50 day EMA indicating weakness in the positive trend. Stock should be a hold with a reduced profit target of 1600.0p.
John Wood Group PLC
On the daily chart, stock hit the reduced profit target of 390.0p making a new 52 week high of 391.3p, but is trading at the entry price again today indicating weakness in the positive trend. 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. All positions should be closed for the stock.
Centrica PLC
Last week Centrica moved above the ‘V’ Pattern between 263.0p and 288.0p making a new 52 week high of 300.0p, indicating a positive trend is forming in the stock. MACD is positive and 12 day EMA is above 26 day EMA, which indicates a positive trend. 14 day RSI has fallen below 60 indicating some weakness in the positive trend. Positive DMI is above negative DMI, while ADX is near 31 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 should be a hold with the same profit target.
Admiral Group PLC
On the daily chart, stock is continuously in an uptrend after making a new 52 week high of 1285.0p. Momentum oscillator MACD is positive and 12 day EMA is just below 26 day EMA indicating consolidation. RSI is also above 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 31 indicating strong uptrend in prices. 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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