| Sector |
Personal goods |
Last closing price
(17/05/2010) (p) |
825 |
| 52 week High/Low (p) |
893.5/447.2 |
| Market Cap (£bn) |
1.73 |
Sector weight age by
Market Cap (%) |
26.8 |
| Average Volume (k) |
555.8 |
| P/E ratio (TTM) |
26.34 |
Sector P/E
ration (TTM) |
6.05 |
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 3.1p per share, which compares to 2.6p 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 held above 800.0p from last week indicating a positive trend is forming, supported by the stock trading above 50 day and 200 day EMA (exponential moving average). MACD (moving average convergence/divergence) is negative and 12 day EMA is below 26 day EMA, indicating a recent fall in prices from its 52 week high of 893.5p. 14 day RSI (relative strength index) is near 50 from its oversold level of 30 showing some strength in trend. 14 day positive DMI (directional moving index) is below 14 day negative and ADX is near 26, indicating consolidation. Stock has resistance near 870.0p and support at 800.0p.
Trading strategy
The stock can be bought around 810.0p with a profit target 903.9p and stop loss of 769.3p.
| Sector |
Software & Computer services |
Last closing price
(17/05/2010) (p) |
1148 |
| 52 week High/Low (p) |
1237/561.5 |
| Market Cap (£mn) |
809.03 |
Sector weight age by
Market Cap (%) |
3.19 |
| Average Volume (k) |
222.1 |
| P/E ratio (TTM) |
21.85 |
Sector P/E
ration (TTM) |
12.23 |
TTM: Trailing Twelve Month
Daily chart (AVV.L)
Business background and investment rationale
Aveva Group PLC develops computer software for the engineering sector including the plant, power and marine industries.
Strong result
In an interim result announced in November 2009, Aveva’s short-term trading was impacted by the global economic uncertainty, particularly in the marine market. Total revenue decreased by 7% to £69.9m compared to £74.8m delivered in 2008. Recurring revenue amounted to £48.1m compared to £40.9m in 2008; accounting for 69% of total revenue and representing an increase of 18%. Recurring revenue accounted for 55% of 2008’s total revenue. A research and development investment of £10.3m to enhance and develop products to support future revenue growth did not impact on strong operating margins which were at 33%. Aveva continues to generate cash and between 31 March and 30 September 2009 net cash increased by £7.7m to reach £133.9m. The company expects the oil & gas markets to remain relatively robust, particularly in developing countries such as Brazil where large complex projects are stimulating demand, delivering new customer wins and generating growth in the existing customer base. The group also benefitted from exchange rate movements in the first half of the year which delivered approximately £5m.
Completion of restructuring program
In July 2009 Aveva completed its restructuring program which combined its Central, Eastern, Southern and Western Europe sales region with the Middle East and Africa to form one EMEA region. The program cost £1.8m and created annualised savings of £5m. The firm also reduced headcount across the business by approximately 10%. The group continues to invest in improving sales and support, focusing on Aveva NET and other identified opportunities in growth markets like South America and the Commonwealth of Independent States.
Technical outlook
On the daily chart, Aveva has rebounded from its low of 1030.0p and is near its 52 week high of 1237.0p, indicating the formation of an upward trend for the stock supported by trading above 20 day and 50 day EMA. MACD is negative and 12 day EMA has crossed above 26 day EMA, indicating an uptrend is forming in the stock. 14 day RSI is above 50 from the oversold zone and is trading above negative trend line which supports strength in trend. 14 day positive DMI has crossed above 14 day negative DMI which indicates the stock is forming an uptrend. Stock has resistance at 1200.0p and has to hold 1150.0p for a further rise.
Trading strategy
The stock can be bought around 1120.0p with a profit target 1249.1p and stop loss of 1063.8p
Stocks Update
Hikma PLC
On the daily chart, Hikma hit the profit target of 708.2p after making a new 52 week high of 730.0p. Although the stock has retraced from its high and is trading below 700.0p, the uptrend is intact for the stock. MACD is positive and 12 day EMA is above 26 day EMA, which indicates an uptrend. 14 day RSI is above 60 from its overbought level of 70 indicating that the stock will consolidate at 700.0p. Positive DMI is above negative DMI, while ADX is near 31 showing an uptrend. All positions should be closed for the stock.
Chemring Group PLC
On the daily chart, Chemring continues in a negative trend after the stock made a lower low of 3630.0p supported by it falling below 20 day EMA. MACD is positive but 12 day EMA has crossed below 26 day EMA, indicating a negative trend in the stock. 14 day RSI has fallen below 50 and making a lower low suggesting a downward trend. 14 day negative DMI is above 14 day positive DMI, while ADX is near 30 indicating a downward trend. Although the stock has fallen below 3500.0p it has to fall below 3400.0p for a further downtrend. The stock should be a hold with the same profit target.
John Wood group PLC
On the daily chart, the stock is still above the positive trend line indicating that John Wood Group has consolidated above 350.0p. This is supported by the stock trading above 200 day EMA which suggests the long-term uptrend is intact. MACD is negative and 12 day EMA is just below 26 day EMA indicating prices are consolidating. RSI is near to 50 from the oversold zone indicating consolidation. 14 day negative DMI is still above 14 day positive DMI, while ADX is near 17 showing a negative trend in the stock. The stock should be a hold with the same profit target.
Compass Group PLC
Compass is in bullish trend after it made a new all time high of 567.5p confirmed by the stock trading above 20 and 50 day EMA. MACD turned positive and 12 day EMA has crossed above 26 day EMA, indicating a sharp rise in prices. 14 day RSI is near 60 showing strength in trend. Positive 14 day DMI is above negative 14 day DMI showing strength in share prices. For a further uptrend the stock has to consolidate above 550.0p. The stock should be a hold with the 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.
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.
