| Sector |
Travel & Leisure |
Last closing price
(26/07/2010) (p) |
1466.0 |
| 52 week High/Low (p) |
1645.0/827.5 |
| Market Cap (£bn) |
2.58 |
Sector weight age by
Market Cap (%) |
4.4 |
| Average Volume (k) |
534.0 |
| P/E ratio (TTM) |
15.93 |
Sector P/E
ration (TTM) |
6.6 |
TTM: Trailing Twelve Month
Daily chart (WTB.L)
Business background and investment rationale
Whitbread PLC is a hotel and restaurant group managing several brands which include; Premier Inn, Brewers Fayre, Table Table, Beefeater and Costa Coffee.
Expansion of Premier Inn and Costa Coffee
With a robust balance sheet and reduced property market prices, Whitbread is looking to expand its budget Premier Inn hotels and Costa Coffee chain. For 2010/11 Premier Inn predict to increase room numbers by 6% to 2,500, with Whitbread targeting a 32% increase to reach 55,000 rooms in the UK by the end of 2014/15. The group will also continue its international expansion. Whitbread plans to increase its Costa coffee shop numbers by 16% to 250 stores in 2010/11 and target an 88% increase to reach 3,000 stores by 2014/15. This growth will ensure the firm maintains market leadership in the UK while building five key overseas businesses in China, India, Russia, the Middle East and Central Europe. Premier Inn opened three new hotels in UAE and India, and acquired a 50.1% stake in an Indian joint venture with real estate developer Emaar-MGF, which sees Whitbread take forward the development of new properties independently. Whitbread is on track to deliver a cumulative £25m in structural savings by the end of 2010/11 by outsourcing its logistics operation to Kuehne & Nagel.
Improvement in sales
For the 13 weeks to 3 June 2010, the Premier Inn hotel chain started the new financial year strongly with sales up by 14.1% and like-for-like sales up by 10.5% for the first quarter. Like-for-like revenue per available room at Premier Inn was up 9.1%, and the group achieved occupancy levels of 75.7%, reflecting both an improvement in the market and a significant increase in market share. The business account continues to attract customers with sales up by 21% to over £50m after many large national companies choosing to switch to Premier Inn driven by their search for value. Pub restaurants have achieved a robust performance attracting a 5.2% growth in new customers with sales up by 4.2% and like-for-like sales up by 3.6%, reflecting the strength of joint pub/restaurant sites. Total sales achieved in Costa during the period are up 26.9% and like-for-like sales are up 8.5%.
Technical outlook
On the daily chart, Whitbread is trading above negative trendline joining its 52-week high of 1645.0p indicating the formation of an upward trend for the stock, which is supported by 20 day EMA (exponential moving average) cross above and 50 day EMA. 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 higher lows which also support 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 1500.0p and support at 1370.0p level.
Trading strategy
The stock can be bought around 1450.0p with a profit target 1595.0p and stop loss of 1387.0p.
| Sector |
Support Services |
Last closing price
(26/07/2010) (p) |
227.0 |
| 52 week High/Low (p) |
245.0/142.25 |
| Market Cap (£mn) |
999.25 |
Sector weight age by
Market Cap (%) |
1.59 |
| Average Volume (mn) |
1.29 |
| P/E ratio (TTM) |
19.18 |
Sector P/E
ration (TTM) |
10.28 |
TTM: Trailing Twelve Month
Daily chart (ECM.L)
Business background and investment rationale
Electrocomponents PLC distributes electronics, electrical, industrial and commercial supplies and services to engineers worldwide, through its operating companies and distributors.
Improvement in sales
In an interim management update announced this month, Electrocomponents sales for the first quarter of 2010 showed revenue growth of around 24% year-on-year, with the international business expanding by approximately 30% and the UK by 12%. Within the international business Continental Europe grew by around 22%, North America by 43% and Asia Pacific by 30%. Group e-Commerce continues to account for an increasing proportion of the group sales taking a 47% share at the end of quarter. Group eCommerce revenue has grown by around 43% in the first quarter while the North American business reported eCommerce sales growth of over 100%. The group raised its longer term target for e-Commerce revenue share to 70%.
Cost savings and improvement in margins
In light of the sales downturn in 2008/09 the group reduced its operating costs by 5% on a constant foreign exchange basis. It achieved a further £18m in savings by reducing 8% of its workforce as well as other significant measures including process optimisation between the UK and Continental European businesses. In logistics activity the group successfully redistributed its two UK warehouses and also benefited from catalogue cost efficiencies.
Technical outlook
On the daily chart, Electrocomponenents is trading near the top of the channel between 234.0p and 201.0p making higher lows. This indicates a positive trend for the stock supported by trading above 20 day and 50 day EMA. MACD is positive and 12 day EMA cross above 26 day EMA, indicating a positive trend in the stock. 14 day RSI is also above 50 suggesting strength in the trend. 14 day positive DMI is above 14 day negative, while ADX (average directional index) is near 18 indicating a consolidation. Stock has resistance near 245.0p and support near 200.0p and has to cross above 234.0p for a positive trend.
Trading strategy
The stock can be bought around 224.0p with a profit target 249.8p and stop loss of 212.7p.
Stocks Update
Hikma Pharmaceutical PLC
On the daily chart, Hikma continuously moved up in a narrow range of 720.0p to 746.0p making a new 52-week high of 746.0p yesterday, which indicates a positive trend with slow momentum. 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 33 showing an uptrend. Looking at the slow movement in the stock it should be a hold with a reduced profit target of 750.0p.
SSL International PLC
SSL gave a whopping profit of 38.06% after stock opened 33.6% higher at 1179.0p following Reckitt Benckiser’s all cash 1163.0p offer to SSL which made a new 52-week high of 1190.0p. MACD is positive and 12 day EMA is above 26 day EMA, indicating a positive trend in the stock. 14 day RSI is above 80 indicating a strong uptrend.14 day positive DMI is above 14 day negative and ADX is near 40 indicating strong uptrend. All positions should be closed for the stock.
Fenner PLC
Last week Fenner hit the profit target of 234.2p making a new 52-week high of 237.4p indicating an uptrend in the stock. 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 an uptrend. All positions should be closed for the stock.
Amec PLC
On the daily chart, Amec has broken out positively from a channel between 733.0p to 876.0p making a new 52-week high of 909.5p yesterday, indicating an upward trend in the stock. MACD is positive and 12 day EMA is above 26 day EMA, showing an uptrend in the stock. 14 day RSI is above 60 supporting strength in the trend. Both the indicators are making a higher low also supporting the uptrend. 14 day positive DMI is above 14 day negative DMI which indicates the stock is in an uptrend. Stock has to stay above 900.0p to sustain current upward trend with resistance at 950.0p and support at 825.0p level. Stock should be a hold with same profit target.
GKN PLC
GKN hit the profit target of 145.0p indicating strong uptrend momentum in the stock. MACD is positive and 12 day EMA is above 26 day EMA, suggesting a positive trend. 14 day RSI is above 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 is near 28 indicating an uptrend in the stock. All positions should be closed for the stock.
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.
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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.
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.
