| Sector |
Oil & Gas producer |
Last closing price
(23/08/2010) (p) |
1306.0 |
| 52 week High/Low (p) |
1375.0/979.5 |
| Market Cap (£bn) |
11.49 |
Sector weight age by
Market Cap (%) |
4.4 |
| Average Volume (mn) |
2.21 |
| P/E ratio (TTM) |
684.63 |
Sector P/E
ration (TTM) |
82.12 |
TTM: Trailing Twelve Month
Daily chart (TLW.L)
Business background and investment rationale
Tullow Oil PLC is an independent oil and gas company with over 90 licenses in 25 countries. The company is principally engaged in oil and gas exploration, along with the development, production and sale of hydrocarbons and other related activities.
Record exploration success
In 2009 exploration and appraisal activity continued apace delivering a record 87% success rate for Tullow. In Africa, the company drilled seven wells of which six encountered oil, including the 300 million barrel Jobi-Rii discovery in Uganda and the 100 million barrels Tweneboa discovery in Ghana. The successful Venus B-1 exploration well in Sierra Leone demonstrated a petroleum system which significantly extends the region for exploration. In the second half of 2010, Tullow plans on drilling over 15 wells in Ghana and Uganda, starting with the Owo-1 exploration well in Ghana and the Nsoga-5 and Ngiri-2 appraisal wells in Uganda.
On track with the Jubilee Phase 1 development
The Jubilee Phase 1 development project continues to meet key project milestones; it’s on track for oil production to commence in December 2010 at a cost of $3.35bn which is within 10% of the original $3.15bn budget. Production capacity at start-up is expected to be approximately 60,000 barrels of oil per day (bopd) and will ramp up to 120,000 bopd over the following three to six months. The total gross resource base for the Greater Jubilee Area is considered to range from 600 million barrels of proven reserves through to an estimated 1,200 million barrels of probable reserves, to an upside 1,800 million barrels of possible reserves. Last month Tullow completed $1.35bn in acquisitions, taking a 50% interest in Blocks 1 and 3A from Heritage Oil & Gas Limited in Uganda with an additional contractual settlement amount of $100m. With its partners CNOOC and TOTAL, the group is expected to deliver 200,000 bopd in Uganda by around 2014 or 2015.
Technical outlook
Tullow is near its major resistance level between 1000.0p and 1330.0p indicating a consolidation with a positive trend in the stock. MACD (moving average convergence/divergence) is positive and 12 day EMA (exponential moving average) is below 26 day EMA supporting a consolidation. 14 day RSI (relative strength index) 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, which supports a positive trend. 14 day positive DMI (directional moving index) is above 14 day negative DMI indicating a positive trend, while ADX (average directional index) is near 20 also supporting a positive trend. If the stock holds the level above 1270.0p a higher move can be expected, with resistance near 1330.0p.
Trading strategy
The stock can be bought around 1280.0p with a profit target 1408.0p and stop loss of 1234.0p.
| Sector |
Non Life Insurance |
Last closing price
(23/08/2010) (p) |
1477.0 |
| 52 week High/Low (p) |
1520.0/1003.0 |
| Market Cap (£bn) |
3.73 |
Sector weight age by
Market Cap (%) |
21.8 |
| Average Volume (k) |
378.6 |
| P/E ratio (TTM) |
24.79 |
Sector P/E
ration (TTM) |
14.33 |
TTM: Trailing Twelve Month
Daily chart (ADM.L)
Business background and investment rationale
Admiral’s principal activity is the administration and sale of private motor insurance and related products. The company sells, administers and underwrites private car insurance in the UK through four brands: Admiral, Bell, Diamond and elephant.co.uk.
Strong performance in first quarter of 2010
In an interim management statement announced in April 2010, Admiral’s first quarter turnover increased by 28% to £345m from £269.53m in the previous year. The number of group customers was up 20% to 2.22 million from 1.85 million in 2009. At the same time, the company continued to increase premium rates during 2010, broadly in line with the UK market where premiums are rising to compensate for hikes in inflation over recent years.
UK ancillary contribution per vehicle showed a modest improvement versus the financial year 2009, while turnover from non-UK car insurance increased by 31% to £21m from £16m in 2009.
Expansion in new markets
In March 2009, Admiral launched its price comparison website into other markets, by launching Rastreator.com in Spain, followed by LeLynx.fr in France and Chiarezza.it in Italy earlier this year. The group also sold its 25% stake of Rastreator.com to Mapfre, Spain’s leading insurance group. This deal sharply reduced the need to employ Admiral’s own capital and therefore lowered the group’s overall risk.
In 2009 Admiral entered the US market with Elephant Auto Insurance. The group will take 33% of the risk in Elephant, while Munich Re and Hannover Re share the remaining risk equally. In 2010 Elephant will concentrate on running operations effectively in Virginia before Admiral considers taking on an additional stake.
Technical outlook
On the daily chart, the stock is continuously in an uptrend and has made a channel between 1450.0p and 1514.0p near to its 52-week high of 1514.0p. Momentum oscillator MACD is positive and 12 day EMA is below 26 day EMA indicating a consolidation. RSI is below 60 and both the indicators are making lower lows with consolidation in the stock indicating a downtrend is forming. 14 day negative DMI is above 14 day positive DMI, while ADX is near 14 indicating a consolidation. Admiral is still trading above 20 day and 200 day EMA indicating an uptrend for the stock. Stock has immediate resistance at 1450.0p and support near 1520.0p.
Trading strategy
Stock can be sold near 1500.0p with a profit target of 1350.0p and stop loss of 1565.0p
Stocks Update
Hikma Pharmaceutical PLC
Last week Hikma hit the reduced profit target of 735.0p and reached a high of 738.0p for the week and is trading around 720.0p without any direction. MACD is positive and 12 day EMA is below 26 day EMA, which supports a consolidation in the stock. 14 day RSI is still above 50 suggesting strength in the trend. 14 day positive DMI is above 14 day negative DMI, while ADX is near 24 showing an uptrend. The stock is still above 20 day and 50 day EMA indicating the uptrend is intact. All positions should be closed for the stock.
Amec PLC
Amec hit the reduced profit target of 900.0p and reached a high of 903.0p for the week. The stock is still in a consolidation phase with lower lows indicating a negative trend is forming in the stock. MACD is positive and 12 day EMA is below 26 day EMA, indicating a weakness in the uptrend. 14 day RSI is near 50 indicating weakness in the trend. 14 day negative DMI is above 14 day positive DMI which indicates consolidation in the stock. All positions should be closed for the stock.
Afren PLC
Afren is trading at a key level of 100.0p, although it is the second time the stock has reached this level and it has held the position above 96.0p indicating a breakout is near. Momentum oscillator MACD is positive and 12 day EMA is above 26 day EMA indicating an uptrend. RSI is near 60 indicating an uptrend which is supported with a positive breakout trend in both the indicators. 14 day positive DMI is above 14 day negative DMI, while ADX is near 26 indicating an uptrend in prices. The stock should be a hold with the same profit target.
Autonomy Corp. PLC
Autonomy moved above 1600.0p indicating a major trend change in the stock which suggests an upward trend is forming. MACD is negative and 12 day EMA has crossed above 26 day EMA supporting bottoming and that an upward trend is forming in the stock. 14 day RSI moved above 30 indicating the stock has bottomed out. 14 day negative DMI is above 14 day positive and ADX is near 30 indicating a negative trend. Looking at the change trend, the stock should be a hold with a new reduced profit target of 1660.0p.
Fidessa Group PLC
On the daily chart, Fidessa is in a strong downtrend after it made lower lows and is trading below the negative trendline joining its 52-week high of 1593.0p, which is supported by trading below 20 day and 50 day EMA. MACD is in negative territory and 12 day EMA crossed below 26 day EMA, indicating a downtrend in the stock. 14 day RSI is below 40 indicating further potential for the stock price to lower, while both the indicators are making lower lows indicating a strong downtrend. 14 day positive DMI is below 14 day negative and ADX is near 20 indicating negative trend. The stock should be a hold with the same profit target.
Compass Group PLC
On the daily chart, Compass is trading at the bottom of a channel between 502.0p and 575.0p indicating the stock is still bottoming out. The entry in the stock is taken at 501.0p above entry price of 495.0p recommended. The stock is still holding above 200 day EMA, indicating the long-term uptrend is intact. MACD is negative and 12 day EMA is below 26 day EMA, indicating a recent fall in the stock. 14 day RSI is above the oversold level of 30 showing some strength in the trend. 14 day positive DMI is below 14 day negative DMI showing weakness the in share price. For a higher move the stock has to consolidate above 500.0p with immediate resistance near the 545.0p level. The stock should be a hold with the same profit target and new stop loss of 475.0p.
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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.
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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