| Sector |
Aerospace & Defense |
Last closing price
(14/06/2010) (p) |
3367.0 |
| 52 week High/Low (p) |
3711/1910 |
| Market Cap (£bn) |
1.17 |
Sector weight age by
Market Cap (%) |
3.81 |
| Average Volume (k) |
197.63 |
| P/E ratio (TTM) |
16.9 |
Sector P/E
ration (TTM) |
14.33 |
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 of 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. 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.
New contracts win
The Energetics division is performing well with strong growth generated by its US subsidiary NIITEK, which was awarded its first export order to supply the Husky Mounted Detection System to the Canadian Armed Forces offering the potential value of $34m. Last week NIITEK was awarded a $106.5m contract from the US Army, for the supply of seventy six Husky Mine Detection Systems. Deliveries under the contract will be made up to May 2011. The final contract for the seventy six systems spares and support is expected to be worth in excess of $210m. The Countermeasures division performed well after the US Department of Defense awarded their US subsidiary Kilgore Flares, a 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, with Kilgore Flares receiving a firm initial order valued at $24m for delivery over 2010 and 2011. The order book at Kilgore Flares is now 163% higher than at the same time last year.
Technical outlook
On the daily chart, Chemring continues in a positive trend after it broken above the negative trendline joining its 52 week high of 3711.0p supported by trading above 20 day and 50 day EMA (Exponential moving average). MACD (moving average convergence/divergence) is still negative but 12 day EMA close above 26 day EMA, indicating a positive trend is forming in the stock. 14 day RSI (relative strength index) has also climbed above 50 suggesting an upward trend. 14 day positive DMI (directional moving index) is above 14 day negative, while ADX (Average Directional index) is near 20 indicating an uptrend in the formation. Stock has resistance near 3500.0p and support near 3000.0p.
Trading strategy
The stock can be bought around 3300.0p with a profit target of 3630.0p and stop loss of 3156.0p.
| Sector |
Support services |
Last closing price
(14/06/2010) (p) |
735.5 |
| 52 week High/Low (p) |
735.5/513.5 |
| Market Cap (£mn) |
715.79 |
Sector weight age by
Market Cap (%) |
1.15 |
| Average Volume (k) |
188.62 |
| P/E ratio (TTM) |
8.93 |
Sector P/E
ration (TTM) |
14.33 |
TTM: Trailing Twelve Month
Daily chart (ATK.L)
Business background and investment rationale
WS Atkins PLC is one of the world’s leading design and engineering consultancy in the UK. The firm delivers engineering and design to a range of clients in the public, regulated and private sectors. The Middle East business provides design and engineering services for buildings, transportation and other infrastructure.
Stability in operating performance
In the half-year results announced in November 2009, Atkins’ revenues were down by 1% to £701.2m. Group operating profits increased to £51.1m, with operating margin up 0.5 points to 7.3%. The majority of the groups work is for clients within the public and regulated sectors where infrastructure investment is publicly committed. Atkins is adjusting its workforce in deteriorating markets, such as its water business and building design in the UK. The Middle East business, which represents more than 10% of the group, is performing well with revenue down just 4% on the previous year, with an operating margin of 8.3% for the period, after restructuring costs of around £2m. In a trading update announced in April 2010 Atkins’ cash position remains strong with net funds of £300m.
New contracts win
In the design and civil engineering business, Atkins has secured a number of major projects. These include a ten year contract worth £350m from Oxfordshire County Council for Highways Maintenance, Design and Construction and appointment as architect engineer for ITER (International Thermonuclear Experimental Reactor) as part of a consortium contract worth EUR150m. In addition Atkins' highways & transportation business has been extremely successful over the last 12 months, winning £1.1bn of work including a five year contract with Somerset County Council (commenced 1 April 2010), a three year extension by Gloucestershire County Council (starts 1 April 2011) and a share of the M25 Operations and Maintenance contract (commenced 13 September 2009).
Technical outlook
On daily chart, Atkins has broken above major resistance of 726.0p making a new 52-week high of 734.0p with higher low indicating uptrend for the stock. MACD is positive and 12 day EMA has cross above 26 day EMA indicating strength in the uptrend. 14 day RSI is above 60 showing a strong positive trend. 14 day positive DMI is above 14 day negative and ADX is near 20 indicating positive trend. Stock is also above 20 day EMA and 200 day EMA supporting the long term uptrend in the stock. Stock has resistance near 900.0p and support near 700.0p.
Trading strategy
The stock can be bought around 720.0p with a profit target 803.5p and stop loss of 683.9p
Stocks Update
Randgold Resources PLC
On the daily chart, Randgold made a high of 6210.0p this week near to its 52-week high of 6285.0p indicating an uptrend in the stock. The stock is trading above 20 day and 200 day EMA, indicating an uptrend in the stock. MACD is positive and 12 day EMA has crossed below 26 day EMA indicating consolidation. 14 day RSI is above 60, with both making higher lows which suggests an uptrend. 14 day positive DMI is above 14 day negative supporting the uptrend. Stock should be a hold with the same profit target.
BATS PLC
BATS is continuing an uptrend after the stock moved above 2150.0p supported by crossing above 20 and 50 day EMA. MACD moved in a positive direction and 12 day EMA moved above 26 day EMA supporting the uptrend. 14 day RSI is above 60 suggesting strength in the formation of a positive trend. Positive 14 day positive DMI is above negative 14 day DMI indicating a positive trend. Stock should be a hold with reduced profit target of 2200.0p.
Premier Farnell PLC
On the daily chart, Premier hit the profit target of 237.5p making a high of 247.9p near to its 52 week high of 249.7p. MACD is positive and 12 day EMA is above 26 day EMA, indicating positive trend.14 day RSI is near 60 indicating a positive trend. Stock is trading above 200 day EMA, indicating the long-term uptrend is intact. 14 day positive DMI is above 14 day negative DMI supporting the uptrend. All positions should be closed for the stock.
Autonomy Corporation PLC
Autonomy is in an uptrend after the stock made a new 52-week high of 1945.0p and has broken above the major resistance level of 1900.0p. MACD is positive and 12 day EMA is above 26 day EMA supporting the uptrend. 14 day RSI is trading near 60 suggesting strength in the positive trend. Positive 14 day DMI is above negative 14 day DMI indicating a positive trend. Stock should be a hold with the same profit target.
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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.
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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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