| Sector |
Pharmaceuticals & Biotechnology |
Last closing price
(04/05/2010) (p) |
648 |
| 52 week High/Low (p) |
667.5/387.0 |
| Market Cap (£bn) |
1.2 |
Sector weight age by
Market Cap (%) |
1.05 |
| Average Volume (k) |
188.5 |
| P/E ratio (TTM) |
24.05 |
Sector P/E
ration (TTM) |
5.07 |
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 is engaged in the development, manufacture and marketing of a range of generic and in-licensed pharmaceutical products in solid, semi-solid, liquid and injectable final 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.
Expansion in MENA region
In April 2010 Hikma subsidiary, Arab Pharmaceutical Manufacturing Company (APM) signed an agreement to acquire a 50% stake in the Algerian company Al Dar Al Arabia Pharmaceutical Manufacturing Company for $18.5m. The company owns a 6000m2 manufacturing facility, which has recently been constructed to the highest international standards and approximately 21,000 m2 of land in an industrial zone in Algiers. The Al Dar Al Arabia plant will double Hikma’s manufacturing capacity in Algeria and provide significant scope for further expansion. In the same month, Hikma signed an agreement with South Korea-based Celltrion Inc. and Celltrion Healthcare Inc. (Celltrion). Under this agreement Hikma has the exclusive rights for the distribution and marketing of nine biosimilar products throughout the MENA region under its own brand. The company estimates the total biologics market in the MENA region will reach $500m in 2010. In March 2010, Hikma paid $5m to increase its interest in Industries Pharmaceutiques Ibn Al Baytar, a Tunisian pharmaceutical manufacturing and marketing company, to 66%. Ibn Al Baytar and its subsidiary Medicef have a combined sales force of 23 representatives covering the Tunisian market, which sells 41 products in 78 dosage strengths and forms. The Tunisian pharmaceutical market grew by 15.6% in 2009 to reach $655m and continues to offer excellent growth opportunities.
Technical analysis
On the daily chart, Hikma is consolidating above the positive trendline at around 620.0p indicating a positive trend 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 below 26 day EMA, which indicates consolidation near 620.0p. 14 day RSI (relative strength index) is above 50 suggesting strength in trend. Positive DMI (directional moving index) is above negative DMI, while ADX (average directional index) is near 32 showing an uptrend. For a higher move the stock has to consolidate above 650.0p.
Trading strategy
The stock can be bought around 635.0p with a profit target 708.2p and stop loss of 603.1p.
| Sector |
Aerospace & Defense |
Last closing price
(04/05/2010) (p) |
3558 |
| 52 week High/Low (p) |
3711/1910 |
| Market Cap (£bn) |
1.28 |
Sector weight age by
Market Cap (%) |
3.96 |
| Average Volume (k) |
177.67 |
| P/E ratio (TTM) |
18.55 |
Sector P/E
ration (TTM) |
11.76 |
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 start in 2010
In an interim management statement announced in March 2010, Chemring’s trading for the four-month period to the end of February was 5% higher than during the same period in 2009, calculated on a constant currency basis. The group’s order book increased 17% to reach £653m; notably higher than at this time last year. The Countermeasures division performed well after the US Department of Defense awarded their US subsidiary Kilgore Flares a four-year indefinite delivery and quantity contract for the supply of MJU-39 and MJU-40 infra-red decoy flares used to protect the F-22 Raptor aircraft from the threat of IR guided missiles. This contract has a maximum potential value of $54m, of which Kilgore Flares received a firm initial order valued at $24m for delivery over the 2010 and 2011 period.
The order book at Kilgore Flares is now 163% higher than at the same time last year. The Energetics division also performed well with strong growth generated by its US subsidry NIITEK, which was awarded its first export order, offering a maximum potential value of $34m, to supply the Husky Mounted Detection System to the Canadian Armed Forces. Although severe adverse weather conditions in the first few weeks of 2010 disrupted production and delivery in most of US and UK subsidiaries, Chemring is confident the outlook for 2010 remains in line with its expectations.
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 November 2009, Chemring completed the acquisition of Hi-Shear Technology Corporation for a cash consideration of $132m. Its product range, technology and lead market position provides the group with a solid platform for growth in this space.
Technical outlook
On the daily chart, Chemring continues in a positive trend but over the last two days it has fallen from its 52 week high, indicating a negative trend is forming in the stock. It is still above 20 day and 50 day EMA but in MACD 12 day EMA is close to falling below 26 day EMA, indicating a negative trend is forming in the stock. 14 day RSI has fallen below 60 from an overbought level of 70 suggesting a downward trend. 14 day positive DMI is above 14 day negative, while ADX is near 40 indicating an uptrend. Stock has resistance near 3300.0p and support near 3700.0p.
Trading strategy
The stock can be sold around 3600.0p with a profit target 3184.0 p and stop loss of 3780.4p.
Stocks Update
Aquarius Platinum PLC
Aquarius platinum hit stop loss of 417.9p after it fall more than 6% today after it consolidated near its entry point. MACD is positive and 12 day EMA is below 26 day EMA, showing weakness in the upside trend. 14 day RSI is below 50 showing weakness in trend. 14 day negative DMI crossing below 14 day positive DMI indicating a negative trend is forming in the stock. Stock is also below 20 day and 50 day EMA which supports downward trend. All position should be closed for the stock.
Bellway PLC
On the daily chart, Bellway again falling below the negative trendline joining its 52 week high of 927.5p, is indicating downward trend in the stock. Momentum oscillator MACD is positive and 12 day EMA has crossed below 26 day EMA showing downward trend in the stock. 14 day RSI is below 50 showing weakness in trend. 14 day negative DMI crossing below 14 day positive DMI indicating a negative trend is forming in the stock. Stock is also below 20 day and 50 day EMA which supports downward trend. Stock should be a hold with reduced profit target of 791.0p.
SSL International PLC
On the daily chart, SSL is consolidating around 850.0p after a small correction with upside trend still intact. MACD is positive and 12 day EMA has crossed below 26 day EMA, indicating some correction from its 52 week high of 893.5p. 14 day RSI is above 50 showing some strength in uptrend. 14 day positive DMI is above 14 day negative and ADX is above 30, indicating a strong long-term uptrend. Stock is also above 20 day and 50 day EMA which supports the strength in trend. Looking at negative trend in the market stock should be a hold with reduced profit target of 877.0p.
BATS PLC
BATS hit stop loss of 2055.0p on last Friday. Although stock prices recovered today but the trend for the stock looks negative as MACD is negative and the 14 day RSI is trading near to 40. It is also trading below 20 day and 50 day EMA, supporting a downward trend. Negative 14 day DMI is above positive 14 day DMI indicating a negative trend. All position should be closed for the stock.
Amec PLC
On the daily chart, AMEC is trading above support level of 825.0p after it fall from a round pattern between 733.0p to 876.0p, indicating consolidation, supported by trading above 200 day EMA indicating long term trend is intact for the stock. MACD is positive and 12 day EMA has cross below 26 day EMA, showing correction in the stock. 14 day RSI is near 50, supporting some strength in trend. 14 day positive DMI is above 14 day negative DMI indicates correction but long term trend is intact. Looking at consolidation in stock it should be hold with reduced profit target of 880.0p
Aveva group PLC
On the daily chart, hit stop loss of 1339.8p indicating downtrend in the stock. MACD is positive and 12 day EMA is below 26 day EMA, indicating a downward trend in the stock. 14 day RSI is below 50 indicate weakness in trend. 14 day positive DMI is below 14 day negative DMI which indicates downtrend trend. All position should be closed for the stock.
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 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.
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.
