SSL International PLC
SSL.L
| Sector |
Personal goods |
Last closing price
(19/04/2010) (p) |
847 |
| 52 week High/Low (p) |
893.5/432.0 |
| Market Cap (£bn) |
1.78 |
Sector weight age by
Market Cap (%) |
27.56 |
| Average Volume (k) |
503.0 |
| P/E ratio (TTM) |
27.15 |
Sector P/E
ration (TTM) |
9.45 |
TTM: Trailing Twelve Month
Daily chart (SSL.L)
Business background and investment rationale
SSL International PLC (SSL) is a consumer products company with a diverse portfolio including the global brands Durex and Scholl, as well as locally owned companies such as Meltus, Medised and Syndol in the UK and Sauber and Mister Baby in Southern Europe.
Strong sales and double digit operating profit growth
In an interim result for the six months announced in November 2009, SSL reported a 21.2% increase in sales, with a 7.3% growth in existing operations. The group revealed operating profits of £57.1m - 46% ahead of 2008’s £39.1m - while underlying operating profits were up 10.7%. SSL reported a 31.4% growth in earnings per share (EPS), which reached 15.5p from 11.8p. The company also declared an interim dividend of 3.1 pence per share, which compares to 2.6 pence in 2008. Durex sales grew 5.3% to £143.5m driven by strong growth in China, Poland, Hungary and Germany. In particular, sales of Durex condoms increased by 4.2% to £118.3m, with China continuing to be a significant contributor complemented by excellent performances in Poland, Hungary and in developing territories such as the Middle East. The Durex Play range also reported a 10.5% growth in sales, which reflects the launch of Play O and the continuing advance of the Durex Play Massage range. Scholl Footcare has performed strongly following launches such as the Deo-Activ fresh range of foot deodorants and Cracked Heel Repair Cream K+. Scholl Footwear benefited from positive growth in Asia and solid performances in the major European territories. A continued focus on costs and geographic diversity means SSL is confident it will achieve a 50% growth in EPS by March 2012.
Improvement in operating margin and acquisitions
SSL restructured the European supply chain by transferring production to the company’s existing facilities in Thailand and India, which saw the firm’s gross profit margin hit 62.6% compared with 60.8% in the previous year. The improvement was also supplemented by profit generation from Durex, Scholl and other brands. To increase its presence in the Commonwealth of Independent States (CIS) SSL made two acquisitions. First it increased its stake to 75% in Beleggingsmaatschappij Lemore BV (BLBV), a business primarily engaged in the packaging and distribution of condoms and medical products across CIS region, and agreed a further option to increase the shareholding to 100% exercisable in 2011. Second SSL acquired Gainbridge a holding company engaged in the packaging and distribution of condoms and medical products in the Ukraine
Technical outlook
On the daily chart, SSL is trading around 850.0p after a correction with the upside trend intact. MACD (moving average convergence/divergence) is positive and 12 day EMA (exponential moving average) has crossed below 26 day EMA, indicating some correction from its 52 week high of 893.5p. 14 day RSI (relative strength index) is above 60 showing strength in trend. 14 day positive DMI (directional moving index) is above 14 day negative and ADX is near 40, indicating strong long term uptrend. Stock is also above 20 day and 50 day EMA which supports the strength in trend.
Trading strategy
The stock can be bought around 835.0p with a profit target 931.2p and stop loss of 793.3p.
British American Tobacco PLC
BATS.L
| Sector |
Tobacco |
Last closing price
(19/04/2010) (p) |
2170.5 |
| 52 week High/Low (p) |
2335.0/1544.0 |
| Market Cap (£bn) |
42.9 |
Sector weight age by
Market Cap (%) |
68.6 |
| Average Volume (mn) |
3.14 |
| P/E ratio (TTM) |
15.78 |
Sector P/E
ration (TTM) |
9.45 |
TTM: Trailing Twelve Month
Daily chart (BATS.L)
Business background and investment rationale
British American Tobacco PLC is an international company engaged in the sale of cigarettes, cigars, leaf and other tobacco products. It has over 300 brands in its portfolio which are sold in more than 180 markets. BATS has four Global Drive Brands (GDB): Dunhill, Kent, Lucky Strike and Pall Mall.
Strong growth in emerging markets
In a preliminary final year result announced in February 2010, BATS’revenue increased by 17% to £14.2bn as a result of the favourable impact of exchange rate movements, continued good pricing momentum, volume from the acquisitions of Skandinavisk Tobakskompagni (ST) and Tekel in 2008, and the purchase of Bentoel Internasional Investama Tbk in 2009. Meanwhile, revenue increased by 10% at constant rates of exchange. The four GDB achieved good overall volume growth of 4%. Dunhill was up 9%, Lucky Strike 4% and Pall Mall grew by 10%, while Kent volumes fell 4%. In the Asia-Pacific region profits rose by £224m to £1.14bn, mainly attributable to strong performances in Pakistan, Vietnam, Bangladesh, Australia and Taiwan, as well as the favourable currency movement. In the Americas, profits rose by £134m to £1.18bn, thanks to a strong performance from Brazil, an improved product mix and exchange rate benefits. In Europe profits were up £234m reaching £994m as a result of the ST acquisition and excellent performances in Ukraine, Uzbekistan and Romania, and on the back of growth in Greece, France, Switzerland and Spain.
Improvement in productivity savings
BATS made further progress with productivity savings and is on track to reduce costs by £800m in 2012, which is in addition to the £1bn saved between 2003 and 2007. The principal areas of focus continue to be the supply chain through initiatives such as the Global Leaf Pool program, and a reduction in overheads and indirect costs. To increase its presence in the Asia-Pacific region BATS acquired Indonesia’s fourth largest cigarette maker PT Bentoel Internasional Investama Tbk (Bentoel) for £352m. In the period from 17 June 2009 to 31 December 2009, the acquired business contributed revenue of £105m and profit from operations of £6m.
Technical outlook
BATS is in a downtrend after the stock slipped below the uptrend trendline and needs some consolidation above 2100.0p. The trend for the stock looks negative as MACD is negative and the 14 day RSI is trading near to the oversold zone of 30. It is also trading below 20 day, 50 day and 200 day EMA, supporting a downward trend. Negative 14 day DMI is above positive 14 day DMI indicating a negative trend, but DMI is near 23 supporting consolidation. If stock holds the level above 2100.0p a higher move can be expected, with support between 2000.0p and 2100.0p. Stock has resistance near 2300.0p.
Trading strategy
The stock can be bought around 2145.0p with a profit target 2393.0p and stop loss of 2038.0p.
Stocks Update
Whitbread PLC
On the daily chart, Whitbread hit the reduced profit target of 1550.0p making a new 52 week high of 1582.0p, indicating rebound in prices. MACD is positive and 12 day EMA is above 26 day EMA which shows strength in uptrend for the stock. 14 day RSI is above 60 indicating strength in the stock. Positive DMI is above negative DMI while ADX is near 16, both indicate recovery in uptrend. Stock is trading above 20 day and 50 day EMA signifying an uptrend for the stock. All positions should be closed for the stock.
Kazakhmys PLC
On the daily chart, Kazakhmys fell below 1500.0p indicating the long-term uptrend is broken for the stock and it needs consolidation around 1500.0p. MACD is positive and 12 day EMA is below 26 day EMA, suggesting weakness in uptrend. 14 day RSI is below 50 indicating weakness in trend. Positive DMI is below negative DMI, while ADX is near 17 indicating downtrend in the stock. Stock should be a hold with a new reduced profit target of 1570.0p.
Centrica PLC
Last week Centrica made a new 52 week high of 304.8p indicating a positive trend for the stock. MACD is positive and 12 day EMA is just below 26 day EMA, which indicates an uptrend. 14 day RSI is below 60 showing some weakness in strength. Positive DMI is above negative DMI, while ADX is near 28 showing an uptrend in stock prices. The stock is also above 20 day and 50 day EMA indicating an uptrend in the stock. Looking at the low volatility in the stock, it should be a hold with new reduced profit target of 305.0p.
John Wood Group PLC
On the daily chart, the stock is in consolidation phase between 365.0p and 391.0p suggesting a negative trend in the stock. MACD is positive and 12 day EMA is just above 26 day EMA indicating a rebound in prices. RSI is below 50 indicating weakness in trend. 14 day positive DMI is below 14 day negative DMI, while ADX is near 14 indicating a negative trend is forming. Stock has resistance at 391.0p and support near 350. Stock should be a hold with new reduced profit target of 391.0p.
Anglo American PLC
On the daily chart, Anglo American fell below 2800.0p indicating the long-term uptrend is broken for the stock and it needs consolidation around 2800.0p. MACD is positive and 12 day EMA is below 26 day EMA, suggesting weakness in uptrend. 14 day RSI is near 50 indicating weakness in trend. Positive DMI is just above negative DMI, while ADX is near 27 indicating downtrend in the stock. Stock should be a hold with a new reduced profit target of 3050.0p.
Afren PLC
On the daily chart, the stock hit a stop loss of 98.72p. Momentum oscillator MACD is positive and 12 day EMA has crossed below 26 day EMA indicating weakness in the uptrend. RSI is below 50 indicating weakness in strength. 14 day positive DMI is below 14 day negative DMI, while ADX is near 27 indicating downtrend in prices. All positions should be closed for the stock.
Aquarius Platinum PLC
On the daily chart, Aquarius broke out from a ‘V’ pattern between 347.0p and 453.0p, just missing its profit target of 490.7 making a new high of 490.0p. It struggled later in the week and is trading near its entry price of 440.0p which indicates high volatility in the stock. MACD is positive and 12 day EMA is below 26 day EMA, showing an upside trend. 14 day RSI is above 50 showing strength in trend. ADX is near 20 indicating the formation of an uptrend, with 14 day positive DMI above 14 day negative DMI indicating a positive trend. Stock is also above 20 day and 50 day EMA which supports strength in trend. For a higher move the stock has to consolidate above 450.0p. Stock should be a hold with the same profit target.
Bellway PLC
On the daily chart, Bellway is still above the negative trendline joining its 52 week high of 927.5p indicating consolidation for the stock. Momentum oscillator MACD is positive and 12 day EMA is below 26 day EMA showing weakness in uptrend. RSI is below 50 indicating weakness in strength in the positive trend. 14 day positive DMI is below 14 day negative DMI and ADX is above 25 indicating consolidation. Stock has immediate resistance at 800.0p and support near 700.0p. Stock should be a hold 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.
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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 January to 31st March 2010:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
96% |
24 |
| Hold |
0 |
0 |
| Sell |
4% |
1 |
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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