| Sector |
Pharmaceuticals & Biotechnology |
Last closing price
(28/06/2010) (p) |
710 |
| 52 week High/Low (p) |
730.0/430.0 |
| Market Cap (£bn) |
1.36 |
Sector weight age by
Market Cap (%) |
1.18 |
| Average Volume (k) |
219.6 |
| P/E ratio (TTM) |
26.37 |
Sector P/E
ration (TTM) |
14.04 |
TTM: Trailing Twelve Month
Daily chart (HIK.L)
Business background and investment rationale
Hikma Pharmaceuticals PLC is a specialist pharmaceutical company with operations in Europe, the US and 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. 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. In an interim management statement announced last month Hikma is performing well so far in 2010, benefitting from the strength of its diversified business model
Expansion in MENA region
In April 2010 Hikma’s 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 been constructed recently to the highest international standards, as well as 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 has broken out after consolidating between 660.0p and 700.0p and is continuously moving above the positive trendline, indicating a positive trend for the stock supported by stock trading above 20 day EMA (exponential moving average) and 50 day EMA. MACD (moving average convergence/divergence) is positive and 12 day EMA has crossed above 26 day EMA, which indicates an uptrend in the stock. 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 30 showing an uptrend. For a higher move the stock has to consolidate above 700.0p.
Trading strategy
The stock can be bought around 695.0p with a profit target 775.1p and stop loss of 660.1p.
| Sector |
Support services |
Last closing price
(28/06/2010) (p) |
1433 |
| 52 week High/Low (p) |
1496/492.5 |
| Market Cap (£bn) |
3.93 |
Sector weight age by
Market Cap (%) |
6.31 |
| Average Volume (mn) |
1.19 |
| P/E ratio (TTM) |
22.9 |
Sector P/E
ration (TTM) |
15.02 |
TTM: Trailing Twelve Month
Daily chart (AGK.L)
Business background and investment rationale
Aggreko PLC provides electrical power and temperature control to customers in need of them quickly, or for a short or indeterminate length of time. The company operates globally with 133 service centres and offices in 31 countries.
Strong start in 2010
In a trading update announced at the beginning of this month the group revealed a strong start to the year. For the first half, total revenues grew by 10% on a constant currency basis excluding pass-through fuel, while trading profits climbed by 20%. Demand for International Power Projects has continued to be strong and the group expects to secure orders for a record 900MW (megawatts) of new work in the first half. Much of the new work has come from Asia and Central & South America regions which have been a strategic focus for International Power Projects business. New contracts won in the first half include 200MW in Bangladesh, 215MW in Indonesia, and 180MW in Central & South America. Aggreko expects the growth rate of capacity on rent to accelerate markedly during the second quarter as recent project wins are commissioned. Local business revenues in constant currency basis are expected to grow by 16%, helped by revenues from the Vancouver Winter Olympics and the FIFA World Cup.
Debt reduction and strong outlook for 2010
In the first three months to 31 March 2010, net debt decreased by £12m to £164m and was £163m lower than at 31 March 2009. In light of the strong order intake in International Power Projects, the group expects fleet capital expenditure to be around £265m, which is £45m higher than previous guidance. With total facilities of £467m, Aggreko has ample headroom to finance the needs of the business. The group expects to deliver a strong first half and will benefit in the strengthening of the dollar against sterling because 70% of the group’s earnings is in the US currency.
Technical Outlook
On the daily chart, Aggreko is consolidating near its 52 week high of 1496.0p, after a steep rise in the stock. MACD is positive and 12 day EMA is below 26 day EMA indicating consolidation in the stock. RSI is also above 50 indicating a small correction following a sharp rise in the stock. Stock prices are also trading above 20 and 50 day EMA confirming the short-term positive trend for the stock. Positive DMI is above negative DMI indicating a positive trend. Stock has resistance at 1500.0p and support at 1300.0p
Trading Strategy
Stock can be bought around 1400.0p with a profit target of 1561.4p and stop loss of 1329.8p.
Stocks Update
Randgold Resources PLC
On the daily chart, Randgold made a new 52 week high of 6600.0p today indicating an uptrend in the stock. The stock is trading above 20 day and 200 day EMA, indicating an uptrend. MACD is positive and 12 day EMA has crossed above 26 day EMA indicating an uptrend in the stock. 14 day RSI is above 70, 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.
Chemring Group PLC
On the daily chart, Chemring hit the stop loss of 3156.0p in a volatile trading session after it fell below 3300.0p making a low of 2806.0p. MACD is negative and 12 day EMA is below 26 day EMA, indicating a negative trend in the stock. 14 day RSI is trading near 30 suggesting the stock is oversold. 14 day negative DMI is above 14 day positive, while ADX is near 26 indicating a downtrend in the stock. All positions should be closed for the stock.
Fidessa PLC
On the daily chart, Fidessa is consolidating above the negative trend line joining its 52 week high of 1491.0p supported by trading above 20 day EMA and 50 day EMA. MACD is positive and 12 day EMA is above 26 day EMA, indicating an uptrend in the stock. 14 day RSI is above 50 indicating strength in the trend. 14 day positive DMI is above 14 day negative and ADX is near 15 indicating an uptrend. Stock has a strong resistance near 1500.0p and support near 1250.0p. Stock should be a hold with same profit target.
Electrocomponents PLC
On the daily chart, Electrocomponents is consolidating between 220.0p and 230.0p and still trading above the negative trendline, joining its 52 week high of 245.0p, supported by 20 day EMA cross above 50 day EMA. MACD is positive and 12 day EMA closed above 26 day EMA, indicating a positive trend in the stock. 14 day RSI is near 50 suggesting strength in the trend. 14 day positive DMI is above 14 day negative, while ADX is near 20 indicating an uptrend. The stock has to trade above 230.0p for further upside. Stock should be a hold with 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.
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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.
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.
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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.
