| Sector |
Support services |
Last closing price
(07/06/2010) (p) |
217.6 |
| 52 week High/Low (p) |
249.7/121.25 |
| Market Cap (£mn) |
815.93 |
Sector weight age by
Market Cap (%) |
1.3 |
| Average Volume (mn) |
1.16 |
| P/E ratio (TTM) |
21.54 |
Sector P/E
ration (TTM) |
14.03 |
TTM: Trailing Twelve Month
Daily chart (PFL.L)
Business background and investment rationale
Premier Farnell PLC distributes electronic, electrical and industrial products to the design, maintenance and repair sectors. The company has two segments: the Marketing and Distribution Division (MDD), comprising the Americas, Europe and Asia Pacific and the Industrial Products Division (IPD).
Strong growth in the emerging markets
In the final result announced in March 2009, Premier recorded strong sales growth in developing markets during the fourth quarter. Eastern Europe and China grew 74.6% and 76.4% respectively over the quarter, while India was up 70.3%. The strong revenue growth seen in India, China and Eastern Europe meant developing markets sales accounted for 21.6% of the total fourth quarter sales, 1.6 percentage points above the group’s three-year target. Group sales and underlying operating profit returned year on year growth of 6% and 3.3% respectively, while sales per day gained momentum throughout the quarter with overall revenue up 9.5% in January. This strong performance accelerated in February where revenue grew over 15% year on year.
Improvement in gross margins
Premier’s gross margin in the fourth quarter was 40.3% compared with 39.3% for the same quarter last year, or 39.7% at constant exchange rates. This represents the 17th consecutive quarter of gross margin stability, demonstrating the group’s ability to manage business effectively throughout the downturn. Premier’s underlying operating profit was £21.7m, compared to £20.5m in 2008/9. This equated to an operating margin of 10.5%, compared to 10.2% in the fourth quarter of the previous year and a 1.3 percentage point increase over the third quarter. This was the second consecutive quarter in which Premier has seen an increase in profit. Premier’s cash performance also remained strong with the full-year underlying cash flow conversion at 145%, while net financial liabilities reduced by £31.7m in the year, including a £14.7m benefit from exchange rates.
Technical outlook
On the daily chart, Premier is bottoming out between 210.0p and 220.0p supported by the stock’s movement above the downward trendline joining its 52 week high of 249.7p. MACD (moving average convergence/divergence) is negative and 12 day EMA (exponential moving average) is just below 26 day EMA, indicating consolidation.14 day RSI (relative strength index) is near 50 and above the downward trendline indicating consolidation. Stock is trading above 200 day EMA, indicating the long-term uptrend is intact. 14 day positive DMI (directional moving index) is above 14 day negative supporting the uptrend. Stock has to stay above 200.0p for a further uptrend.
Trading strategy
The stock can be bought around 213.0p with a profit target 237.5p and stop loss of 202.3p.
| Sector |
Software & computer services |
Last closing price
(07/06/2010) (p) |
1803.0 |
| 52 week High/Low (p) |
1897.0/1121.0 |
| Market Cap (£bn) |
4.3 |
Sector weight age by
Market Cap (%) |
17.6 |
| Average Volume (k) |
952.6 |
| P/E ratio (TTM) |
30.54 |
Sector P/E
ration (TTM) |
10.54 |
TTM: Trailing Twelve Month
Daily chart (AU.L)
Business background and investment rationale
Autonomy Corporation PLC develops and distributes software and is engaged in related support, maintenance and consulting services. Autonomy’s technology underpins applications dependent on unstructured information including: call centres, customer relationship management, knowledge management, enterprise portals, enterprise resource planning, online publishing and security applications.
Strong organic growth
In a first quarter statement released in April 2010, Autonomy reported record results with revenues up by 50% to $194.2m following strong organic growth and the full quarter contribution from Interwoven (acquired in 2009). Gross profits (adjusted) were up by 48% to $172.6m from $117.0m in the same period last year. In the first quarter this year, Autonomy won contracts with AT&T, Genentech, Lloyds Bank, American Automobile Association, Carnival Cruises, Citi, Kraft, O2, Samsung, Tesco, Visa, Bank of America and Bayer. They also won new and repeat licenses with multiple government, defence and intelligence agencies around the globe. These include the US, UK, the European Commission, Canada, Spain and Abu Dhabi. The company signed 11 original equipment manufacturer (OEM) deals, including new and extended agreements with Adobe, Kana, Adobe, McAfee and Siemens.
Launch of new products
During the first quarter of 2010, Autonomy extended its market leadership by introducing key new and upgraded technologies. These included the launches of:
- The world’s first meaning based multichannel customer interaction analytics application
- Unique integrated web content management, search, optimisation and rich media on a single platform
- DSMail self-service archiving solutions for email management, governance and eDiscovery.
Technical outlook
Autonomy is in an uptrend after the stock moved above the down trendline indicating a bottom has formed in the stock. MACD is positive and 12 day EMA has cross above 26 day EMA supporting uptrend. 14 day RSI is trading near 60 from the oversold zone suggesting strength in the formation of a positive trend. 20 day EMA has also cross above 50 day EMA, supporting a positive trend. Positive 14 day DMI is above negative 14 day DMI indicating a positive trend. If the stock holds the level above 1650.0p a higher move can be expected, with resistance near 1900.0p.
Trading strategy
The stock can be bought around 1780.0p with a profit target 1985.0p and stop loss of 1690.7p.
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.
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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.
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