| Sector |
Oil Equipment services & Distribution |
Last closing price
(19/07/2010) (p) |
862.0 |
| 52 week High/Low (p) |
891.0/656.0 |
| Market Cap (£bn) |
2.86 |
Sector weight age by
Market Cap (%) |
22.7 |
| Average Volume (mn) |
1.02 |
| P/E ratio (TTM) |
18.54 |
Sector P/E
ration (TTM) |
10.3 |
TTM: Trailing Twelve Month
Daily chart (AMEC.L)
Business background and investment rationale
Amec PLC is an international consultancy, engineering and project management company providing services to the world’s energy, power and process industries. The company designs, maintains and manages the delivery of strategic and complex assets, including offshore oil & gas production facilities, metals/mineral mines and power infrastructure.
Improved EBITA margin and strong financial position
Driven by its own internal initiatives, Amec delivered a 110 basis points improvement in earnings before interest, taxes and amortization (EBITA) margin in 2009. In 2010 the firm will invest £5m in an Operational Excellence program with an annual benefit of £40m; up from £18m in 2009. The program is expected to be the major contributor in achieving the target EBITA margin of 8.5% in 2010. The group is in an exceptionally strong financial position with a relatively well funded pension scheme and £650m in net cash as at 30 April 2010. In 2009 Amec increased its dividend by 15% to 17.7p.
Strong order book
By 30 April 2010 Amec’s order book was £3.55bn and the company expects the project pipeline to accelerate as the year progresses. For the first four months the new order intake was 20% above the same period last year. This year Amec won numerous contracts including the front-end engineering design for both the off and onshore elements of the £600m Gateway underground gas storage scheme in January 2010. In February 2010 the company was selected by Brazilian company, QUIP, to perform basic engineering services for the topsides of the P-63 floating production, storage and offloading (FPSO) vessel, to be operated on behalf of Petrobras, Brazil’s national oil company. In April 2010 Amec and its joint venture partners Jacobs and Stork secured a three-year integrated services contract extension worth €200m per year with Shell ONEgas Southern North Sea (SNS) as a result of continued exceptional performance and business improvement. In the same month, EDF awarded Amec with an 11-year contract to support its architect engineering operation for the proposed delivery of four new European Pressurised Water Reactor nuclear reactors at Hinkley Point and Sizewell in the UK. Last week BP Azerbaijan awarded Amec a five-year Master Services Agreement including the Chirag Oil and West Chirag project valued at $340m.
Technical outlook
On the daily chart, Amec is on the verge of breaking out from a channel between 733.0p to 876.0p, indicating the formation of an upward trend for the stock which is supported by trading above 20 day and 50 day EMA (exponential moving average). MACD (moving average convergence/divergence) is positive and 12 day EMA is above 26 day EMA, showing an uptrend in the stock. 14 day RSI (relative strength index) is near 60 supporting strength in the trend. Both the indicators are making a higher low also supporting the uptrend. 14 day positive DMI (directional moving index) is above 14 day negative DMI which indicates the stock is in an uptrend. Stock has resistance at 950.0p and support at 825.0p level.
Trading strategy
The stock can be bought around 850.0p with a profit target 948.0p and stop loss of 807.3p.
| Sector |
Automobiles & Parts |
Last closing price
(19/07/2010) (p) |
132.0 |
| 52 week High/Low (p) |
155.0/78.0 |
| Market Cap (£bn) |
2.04 |
Sector weight age by
Market Cap (%) |
96.7 |
| Average Volume (mn) |
8.98 |
| P/E ratio (TTM) |
– |
Sector P/E
ration (TTM) |
6.84 |
TTM: Trailing Twelve Month
Daily chart (GKN.L)
Business background and investment rationale
GKN PLC is a global engineering business serving the Automotive, Off Highway and Aerospace markets.
Stabilisation in sales
In the interim results for the first quarter of 2010 announced in April, GKN group sales (including subsidiaries and joint ventures) increased by 22% to £1.2bn compared to £1.07bn last year. Overall demand in GKN's major markets improved for the first quarter and government incentive programs continue to provide support for sales of smaller light vehicles, boosting production demand in the automotive market. Production of mid-sized vehicles where GKN has greater exposure also increased in a number of markets as sales show some signs of recovery and inventory levels stabilised. GKN Aerospace continues to perform well with military aircraft production remaining solid and no further material reduction in civil aircraft schedules. The acquisition of the wing component and sub-assembly facility at Filton is expected to provide excellent growth opportunities, as the site becomes the group’s globally competitive UK centre of excellence, for the design and manufacture of composite aircraft wing structures. GKN’s Off Highway market remains weaker but since the end of last year has continuously shown signs of improvement, mainly driven by strong demand for mining and heavy construction equipment.
Restructuring programme
As markets have weakened in Automotive and Off Highway, GKN has restructured these two business divisions, along with Powder Metallurgy, and repositioned the Aerospace business for lower aircraft production volumes in 2009. With the exception of Off Highway, all divisions were profitable in the fourth quarter and GKN reported a trading margin of 6.5%. Thirteen manufacturing sites were closed and 3,500 employees left the group last year, while in June GKN raised £423m through a rights issue to repay revolving credit facilities. Five months later in November 2009 GKN announced an offer to purchase up to £150m of its outstanding £325m, 7% 2012 bonds. The purchase will reduce the company’s gross indebtedness and future interest expense, with the saving in interest expected to be £9m per annum from 2010.
Technical outlook
On the daily chart, GKN is trading above the negative trendline joining its 52-week high of 155.0p indicating an uptrend in the stock. MACD is positive and 12 day EMA is above 26 day EMA, suggesting a positive trend. 14 day RSI is near 60 indicating an uptrend in the stock. Both the indicators are making higher lows which support the uptrend. Positive DMI is above negative DMI, while ADX (average directional index) is near 23 indicating an uptrend is forming. Recently 20 day EMA crossed above 50 day EMA supporting a positive trend for the stock. The stock has strong support near 125.0p and immediate resistance can be found near 155.0p.
Trading strategy
The stock can be bought around 130.0p with a profit target 145.0p and stop loss of 123.5p.
Stocks Update
Hikma Pharmaceutical PLC
On the daily chart, Hikma is continuously moving above the positive trendline making a new 52-week high of 731.0p yesterday, which indicates a positive trend for the stock 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 60 suggesting strength in the trend. Positive DMI is above negative DMI, while ADX is near 30 showing an uptrend. The stock should be a hold with the same profit target.
BATS PLC
Last week BATS PLC hit the profit target of 2299.0p making a new high of 2303.0p indicating a positive trend in the stock. MACD is positive and 12 day EMA is above 26 day EMA indicating an uptrend in the stock. 14 day RSI is trading above 60 with higher lows suggesting strength in the formation of a positive trend. It is also above 20 day and 50 day EMA supporting a positive trend. Positive 14 day DMI is above negative 14 day DMI indicating a positive trend, but ADX is near 18 supporting a consolidation. All the positions should be closed for the stock.
SSL International PLC
On the daily chart, SSL is still trading above the top of the channel between 770.0p and 850.0p making a new 52- week high of 898.5p with higher lows indicating a positive trend in the stock. MACD is positive and 12 day EMA is above 26 day EMA, indicating a positive trend in the stock. 14 day RSI is near 60 indicating strength in the trend. Both the indicators are above the negative trend line joining its 52-week high of 893.5p which confirms the uptrend in the stock.14 day positive DMI is above 14 day negative and ADX is near 25 indicating an uptrend. The stock should be a hold with the same profit target.
Fenner PLC
On the daily chart, Fenner is still trading above 200.0p indicating an uptrend in the stock, but entry could only be taken at 214.0p above 210.0p recommended supported by 20 day EMA crossing above 50 day EMA. MACD is positive and 12 day EMA is above 26 day EMA, indicating an uptrend is forming in the stock. 14 day RSI is above 60 and both the indicators are making higher lows supporting strength in the trend. 14 day positive DMI is above 14 day negative DMI which indicates the stock is in uptrend. The stock should be a hold with the same profit target and new stop loss of 203.7p.
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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.
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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 April to 30th June 2010:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
88.5% |
23 |
| Hold |
0 |
0 |
| Sell |
11.5% |
3 |
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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