| Sector |
Software & Computer services |
Last closing price
(25/10/2010) (p) |
1474.0 |
| 52 week High/Low (p) |
1504.0/856.5 |
| Market Cap (£mn) |
960.43 |
Sector weight age by
Market Cap (%) |
3.8 |
| Average Volume (k) |
138.1 |
| P/E ratio (TTM) |
28.79 |
Sector P/E
ration (TTM) |
12.55 |
TTM: Trailing Twelve Month
Daily chart (AVV.L)
Business background and investment rationale
Aveva Group PLC develops computer software for the engineering sector including; plant, power and marine industries.
Strong result in economic downturn
In the full year statement announced in May 2010, Aveva’s trading was impacted by the global economic uncertainty, particularly in the marine market. Total revenue decreased by 9.5% to £148.3m compared to the £164m delivered in 2009. Recurring revenue amounted to £102.7m compared to £94.2m in 2009; accounting for 69% of total revenue and representing an increase of 9.02%. In 2009 recurring revenue accounted for 57% of total revenue. The group also declared an 81% increment in the dividend payment by declaring a final dividend of 16.9p compared to 9.36p in 2009. In July 2009 Aveva completed its restructuring program at a cost of £1.9m which created annualised savings of £5m and helped to maintain a solid operating margin of 33% for the year.
Acquisition and better outlook
In June 2010 Aveva completed two acquisitions; the first was Logimatic Software A/S for a consideration of €14.5m, while the second was assets from ADB Systemer AS for £4.3m which will broaden its Aveva Marine portfolio. The company expects the oil and gas markets to remain relatively robust, particularly in developing countries such as Brazil and the Commonwealth of Independent States (CIS). In Brazil Aveva secured a two-year corporate agreement with Petrobras for the supply of design products. In addition, Aveva is looking to sell the Aveva Marine products into new shipyards which are expected to be commissioned to build Floating Production and Storage Offshore vessels and a fleet of very large crude carriers. In Russia OJSC Taneko, the operator of the new multibillion dollar refinery complex will use Aveva Net as the consolidation tool for all the engineering data for this mega project.
Technical outlook
On the daily chart, Aveva is trading at the top of the channel between 1400.0p and 1500.0p near its 52-week high of 1504.0p, indicating the formation of an upward trend for the stock supported by trading above 20 day and 50 day EMA (exponential moving average). MACD (moving average convergence/divergence) has turned positive and 12 day EMA has crossed above 26 day EMA, indicating an uptrend is forming in the stock. 14 day RSI (relative strength index) is above 60 and is trading above the negative trend line which supports strength in the trend. 14 day positive DMI (directional moving index) has crossed above 14 day negative DMI which indicates the stock is forming an uptrend, while 14 day ADX (average directional index) is 19, indicating that it is waiting for a breakout. The stock has resistance at 1500.0p and has to hold 1450.0p for a further rise.
Trading strategy
The stock can be bought around 1450.0p with a profit target 1595.0p and stop loss of 1386.0p
Stocks Update
Compass Group PLC
On the daily chart, Compass made little movement last week with higher lows indicating bottoming in the stock. MACD is negative and 12 day EMA has crossed above 26 day EMA indicating a positive trend is forming in the stock. 14 day RSI is just below 50 showing a strengthening in the positive trend. Positive 14 day DMI is below negative 14 day DMI showing weakness in the share price. Looking at the trend, the stock should be a hold with the same profit target of 550.0p.
Hikma Pharmaceuticals PLC
Hikma is in an uptrend after the stock made a new high of 765.0p for the week and 20 day EMA has crossed above 50 day EMA indicating a positive trend. MACD has turned positive and 12 day EMA has crossed above 26 day EMA, which also indicates a positive trend in the stock. 14 day RSI is above 50 suggesting that the positive trend is strengthening. 14 day positive DMI is above 14 day negative DMI, while 14 day ADX is near 24 showing that negativity is reduced in the stock and is on the verge of completing a ‘V’ pattern between 658.0p and 813.0p. The stock should be a hold with the same profit target.
Electrocomponents PLC
Electrocomponents showed little movement last week but is still trading above the channel between 234.0p and 201.0p and it stayed above 240.0p indicating a positive trend supported by trading above 20 day and 50 day EMA. MACD is positive and 12 day EMA is below 26 day EMA, indicating consolidation in the stock. 14 day RSI is near 60 suggesting strength in the trend. 14 day positive DMI is above 14 day negative, while 14 day ADX is near 30 indicating a strong positive trend. The stock has resistance near 255.0p and support near 200.0p. Looking at the small amount of movement in the stock it should be a hold with the reduced profit target of 247.0p
Rolls-Royce PLC
Rolls-Royce is in a breakout mode after the stock made a new 52-week high of 645.5p last week indicating an uptrend. MACD is positive and the 12 day EMA is above 26 day EMA indicating an uptrend in the stock. 14 day RSI is above 60 making higher lows with the recent incline in the price supporting the uptrend. 14 day positive DMI is above 14 day negative, while 14 day ADX is above 20 supporting the uptrend. The stock should be a hold with the same profit target.
Chemring Group PLC
On the daily chart, Chemring is in a strong uptrend after the stock moved above 3100.0p. This is supported by trading above 20 day EMA and 50 day EMA. MACD is positive and 12 day EMA has crossed above 26 day EMA, indicating a strong uptrend in the stock. 14 day RSI is above 70 indicating strength in the uptrend. 14 day positive DMI is above 14 day negative, while 14 day ADX is near 23 indicating an uptrend. Stock has resistance near 3300.0p and support near 2850.0p. The stock should be a hold with the same profit target.
Serco Group PLC
Serco is in an uptrend after it stayed above the negative trendline joining its 52-week high of 656.5p, indicating a positive trend for the stock. This is supported by the stock trading above 20 day EMA and 50 day EMA. MACD is positive and 12 day EMA has crossed above 26 day EMA, which indicates an uptrend in the stock. 14 day RSI is above 60 suggesting strength in the trend. 14 day positive DMI is above 14 day negative DMI, while 14 day ADX is near 22 showing an uptrend is forming. Stock has immediate resistance near 650.0p and support near 600.0p. The stock should be a hold with the same profit target.
Aggreko PLC
On the daily chart, Aggreko has broken out from the channel between 1400.0p and 1680.0p, and made a new 52-week high of 1698.0p yesterday, indicating a positive trend for the stock. MACD is positive and 12 day EMA is above 26 day EMA also indicating a positive trend in the stock. 14 day RSI is near 70 indicating an uptrend supported by higher lows in both the indicators. The stock price is also trading above 20 and 50 day EMA confirming the short-term positive trend. 14 day positive DMI is above 14 day negative DMI indicating a positive trend. The 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.
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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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Distribution of recommendations for the period 1st July to 30th September 2010:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
87.5% |
21 |
| Hold |
0 |
0 |
| Sell |
12.5% |
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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