| Sector |
Oil equipment services and distribution |
Last closing price
(10/05/2010) (p) |
359.4 |
| 52 week High/Low (p) |
411.7/231.25 |
| Market Cap (£bn) |
1.76 |
Sector weight age by
Market Cap (%) |
15.2 |
| Average Volume (mn) |
1.9 |
| P/E ratio (TTM) |
15.6 |
Sector P/E
ration (TTM) |
65.53 |
TTM: Trailing Twelve Month
Daily chart (WG.L)
Business background and investment rationale
John Wood Group PLC is an energy services company operating in 46 countries, split across three business divisions: Engineering & Production Facilities, Well Support and Gas Turbine Services. The company provides a range of engineering, production support, maintenance management, industrial gas turbine overhaul and repair services to the oil & gas and power generation industries worldwide.
Resilient performance in Engineering & Production Facilities
In the full-year results for 2009 announced on 2 March 2010, John Wood Group performed in line with expectations for the year thanks to a continued focus on production support, longer term capital projects, wide international exposure and a high quality customer base. The group generated a $546m cash flow from operations, representing a 54% increase on 2008. The performance in Engineering & Production Facilities was driven by increased activity across all engineering sectors, coupled with continued strong demand for production facilities in the North Sea and international markets. Last month Total E&P UK LTD awarded Wood Group a three-year extension to its existing contract, plus two optional years to provide engineering design, procurement, construction and ancillary services for Total’s offshore assets. The estimated potential value of the contract is £50m per year. In March 2010, the company won a three-year contract worth $25m from BP to provide engineering, modifications and maintenance to its Sullom Voe Terminal. This followed February’s long-term service and maintenance contract with Peri LNG to maximise machine availability of the gas turbines, compressors and generators at its Pampa Melchorita site south of Lima. The deal is worth $150m over an 18-year term.
Growth through acquisition
John Wood Group made three acquisitions to increase its presence in the Middle East, Africa and Asia-Pacific. First it acquired Baker Energy Production Facilities, establishing a market leadership position in the US Gulf of Mexico and expanded the group’s deepwater presence. The deal significantly enhanced the group’s capability and market position in Australia and Africa, resulting in an important contract from Statoil in Brazil. Second, in Power Solutions, John Wood Group strengthened its Eastern Hemisphere execution capability with the acquisition of Shanahan Engineering; a company providing power plant installation with commissioning and maintenance services to the power and industrial sectors. Finally, to further strengthen its proposition in the Middle East, the company acquired Al-Hejailan Consulting, a Saudi Arabian engineering company that delivers engineering and project management services in the oil, gas, chemical and power industries in the region.
Technical outlook
On the daily chart, the stock has crossed above the positive trend line indicating that John Wood Group will consolidate near 350.0p. This is supported by stock trading above 200 day EMA (exponential moving average) which suggests the long-term uptrend is intact. MACD (moving average convergence/divergence) is negative and 12 day EMA (exponential moving average) is below 26 day EMA indicating a recent fall in prices. RSI (relative strength index) just crossed above 30 indicating the stock is oversold. 14 day negative DMI (directional moving index) is above 14 day positive DMI, while ADX (average directional index) is near 18 showing a negative trend in the stock. Stock has support at its 200 day EMA near 336.0p and resistance near 392.0p.
Trading strategy
Stock can be bought near 352.0p with a profit target of 392.5p and stop loss of 334.5p
| Sector |
Travel & Leisure |
Last closing price
(10/05/2010) (p) |
527.5 |
| 52 week High/Low (p) |
545.5/307.75 |
| Market Cap (£bn) |
9.25 |
Sector weight age by
Market Cap (%) |
16.8 |
| Average Volume (mn) |
5.98 |
| P/E ratio (TTM) |
16.74 |
Sector P/E
ration (TTM) |
2.8 |
TTM: Trailing Twelve Month
Daily chart (CPG.L)
Business background and investment rationale
Compass Group PLC is a contract food service company providing a range of food services to clients in 70 countries. It operates four geographic segments; North America, Continental Europe, the United Kingdom and the rest of the world.
Strong revenue growth and expansion in margins
In a trading update announced on 31 March 2010, Compass’ organic revenue declined by 1.7%, an improvement on 2009’s fourth quarter decline of approximately 3%. The continued focus on the management and performance framework has helped the group to accelerate operating and overhead efficiencies, which have delivered £100m growth in profit and 60 basis points of margin growth for 2009. For the first half of 2010, Compass expects an improvement in the operating margin of around 50 basis points, with all four geographic segments contributing to this strong performance. The company continues to see strong growth in new customers both in food services and the fast-growing support services business. Retention rates remained high in the first quarter of 2010 with the company winning new contracts from Aviva, Banca d'Italia, Visa and CSN Corporative Brasil.
Mergers and acquisitions
Compass identified a significant market opportunity in growing its core food service business organically. In addition, the firm continues to create value through acquisitions and buy-outs. At the start of this month Compass acquired Caterine Restauration S.A.S, the French caterer, which specialises in the provision of services in the education and healthcare sectors for €34m. In February 2010 Compass acquired Canadian company Hurley Corporation for a cash consideration of C$50m. Hurley’s predominant occupation in soft support services will further strengthen Compass’ ability to offer multi services across the healthcare, education business and industry sectors. Last year Compass successfully integrated Professional Services and Medi-Dyn, two healthcare support services companies in the USA; Kimco, a support services company based in the US business and industry sector; a number of McColls retail outlets in the UK; and Plural, a support services business in Germany. All acquisitions are delivering results on target against the group’s strict criteria.
Technical outlook
On the daily chart, stock has crossed above a positive trend line and is trading above 50 and 200 day EMA, indicating the long-term uptrend is intact for the stock. For a higher move the stock has to consolidate above 500.0p. MACD turned negative and 12 day EMA is below 26 day EMA, indicating a recent fall in the stock. 14 day RSI is near 50 from the overbought level of 30 showing some strength in trend. Positive 14 day DMI is below negative 14 day DMI showing weakness in share prices. Stock has immediate resistance near 545.0p level and support near 500.0p.
Trading strategy
The stock can be bought around 520.0p with a profit target 580.0p and stop loss of 493.3p.
Stocks Update
Bellway PLC
On the daily chart, Bellway hit a stop loss of 726.6p making a low of 693.0p, which indicates a downward trend in the stock. MACD is negative and 12 day EMA is below 26 day EMA showing a downward trend in the stock. 14 day RSI is below 50 showing weakness in trend. 14 day negative DMI is 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 the downward trend. All positions should be closed for the stock.
SSL International PLC
On the daily chart, SSL hit the stop loss of 801.1p making a low of 762.0p, although the stock has recovered losses, indicating a downward trend is forming in the stock. MACD is positive and 12 day EMA is below 26 day EMA, indicating weakness in uptrend. 14 day RSI is also below 50 showing weakness in uptrend. 14 day positive DMI is below 14 day negative and ADX is near 30, showing strong volatility in share prices. The stock is also above 200 day EMA which suggests the long-term uptrend is intact. All positions should be closed for the stock.
AMEC PLC
On the daily chart, AMEC hit the stop loss of 814.3p and is trading below the support level of 825.0p indicating a downtrend in the stock. MACD is negative and 12 day EMA is below 26 day EMA, showing a downward trend in the stock. 14 day RSI is below 50 from the overbought level of 30 indicating a weakness in the uptrend. 14 day negative DMI is above 14 day positive DMI which suggests a correction, but the long-term trend is intact. All positions should be closed for the stock.
Hikma PLC
On the daily chart, Hikma maintained consolidation above the positive trendline 620.0p, indicating a positive trend for the stock, which is also supported by trading above 20 day and 50 day EMA. MACD is positive and 12 day EMA is below 26 day EMA, which indicates consolidation above 620.0p. 14 day RSI is above 50 suggesting strength in uptrend. Positive DMI is above negative DMI, while ADX is near 32 showing an uptrend. For a higher move the stock has to consolidate above 650.0p. Stock should be a hold with the same profit target.
Chemring Group PLC
On the daily chart, Chemring continues in a negative trend after falling below 20 day EMA, indicating a negative trend is forming in the stock. MACD is positive but 12 day EMA has cross below 26 day EMA, indicating a negative trend is forming in the stock. 14 day RSI has fallen below 50 from an overbought level of 70 suggesting a downward trend. 14 day positive DMI is just above 14 day negative, while ADX is near 30 indicating downward trend. Although stock has breached the 3400.0p level but it has to fall below the resistance level of 3300.0p to break long term uptrend.
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.
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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.
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.
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.
