| Sector |
Support Services |
Last closing price
(28/02/2011) (p) |
303.2 |
| 52 week High/Low (p) |
306.9/180.9 |
| Market Cap (£bn) |
1.08 |
Sector weight age by
Market Cap (%) |
1.6 |
| Average Volume (k) |
884.02 |
| P/E ratio (TTM) |
17.31 |
Sector P/E
ration (TTM) |
13.22 |
TTM: Trailing Twelve Month
Daily chart (PFL.L)
Business background and investment rationale
Premier Farnell PLC distributes electronic, electrical and industrial products to the design, maintenance and repair sectors. The company has two segments: the Marketing and Distribution Division (MDD) - comprising the Americas, Europe and Asia Pacific - and the Industrial Products Division (IPD).
Strong growth in the emerging markets
In a third quarter result announced in December 2010, Premier recorded strong sales growth in developing markets. Eastern Europe and China grew 71% and 83.2% respectively over the quarter, while India was up 55%. The strong revenue growth seen in India, China and Eastern Europe meant developing markets sales accounted for 21.9% of the total third quarter sales; a 2 percentage point increase year on year. The group’s third quarter underlying return on sales was 11.3%, up 2.1% year on year, with North America's underlying return on sales doubling year on year. Underlying earnings per share grew 76.9% year on year. Group sales grew 23% year on year, which represents a 10 percentage point increase on the third quarter of two years ago, while sales per day for the month of October were the highest Premier has ever done.
Improvement in gross margins
Premier’s gross margin has improved for eight consecutive quarters, up 0.3% on the prior quarter to 41.1%. This represents the 20th consecutive quarter of gross margin stability, demonstrating the group’s ability to manage business effectively throughout the downturn. Premier’s underlying operating profit was £28.3m, compared to £18.4m in 2009/10. This equated to an operating margin of 11.3%, compared to 9.2% in the third quarter of the previous year. Premier’s cash performance also remained strong with the full-year underlying cash flow conversion at 99.6%, with net cash position of £50.9m by 31st October 2010.
Technical outlook
On the daily chart, Premier is trading in a channel between 280.0p and 304.0p from the last three months, with higher lows indicating the stock will breakout above its 52-week high of 306.9p. MACD (moving average convergence/divergence) is positive and 12 day EMA (exponential moving average) is below 26 day EMA, indicating consolidation.14 day RSI (relative strength index) is above 50 indicating strength in trend. The stock has crossed above 20 and 50 day EMA, indicating a short-term uptrend. 14 day negative DMI (directional moving index) is above 14 day positive while 14 day ADX (average directional index) is near 20 indicating consolidation. The stock has to cross above 305.0p for a further uptrend.
Trading strategy
The stock can be bought around 300.0p with a profit target 334.6p and stop loss of 284.9p.
| Sector |
Personal Goods |
Last closing price
(28/02/2011) (p) |
1646.0 |
| 52 week High/Low (p) |
1893.0/499.0 |
| Market Cap (£bn) |
1.30 |
Sector weight age by
Market Cap (%) |
16.17 |
| Average Volume (k) |
141.3 |
| P/E ratio (TTM) |
13.08 |
Sector P/E
ration (TTM) |
6.1 |
TTM: Trailing Twelve Month
Daily chart (SGP.L)
Business background and investment rationale
SuperGroup PLC is a United Kingdom-based retailer focusing on the youth fashion market with clothing and accessories for both men and women. It has 59 standalone retail stores, 69 concessions and a large number of wholesale relationships. Superdry is sold in approximately 70 countries worldwide via its websites, and in 36 overseas countries through a network of distributors, licensees, agents and franchisees.
Strong sales and significant expansion of the retail and wholesale division
In an interim management statement released at the start of this month for the three months to January 2011, SuperGroup’s total group sales were up by 91.8% to £81.7m from £43.7m in the same period last year. Retail division sales were up by 91.8 % to £61.4m from £32m driven by the successful Christmas trading period in the UK. Wholesale division sales were up by 73.3 % to £20.3m from £11.7m due to the ongoing international expansion of Superdry. During the quarter SuperGroup UK opened six new stores at key locations including London's Westfield Centre, the Trafford Centre in Manchester and an 18,000sq ft re-site at the St Enoch Centre in Glasgow. The group now trades from 59 UK standalone stores and further stores are planned. The Wholesale division opened a further 15 franchise stores in the same period, including five in Australia, two in France and Benelux with others in the USA, South Korea and Venezuela bringing the total to 69. By the end of April 2011 the group will open further stores in Holland, France, Italy, Switzerland, the US, Middle East and Far East.
Acquisition of CNC Collections BVBA
At the start of this month SuperGroup acquired CNC Collections BVBA together with its main subsidiaries for €40m. CNC has delivered a 150% increase in sales over the past year. SuperGroup expects sales to exceed €40m while consolidated profits should increase by around €8m in the first full 12 months of ownership. The acquisition will help SuperGroup to capture greater margins on growing sales within Belgium, the Netherlands, Luxembourg and France, accelerating its international franchise roll out and making possible the creation of owned larger format stores in key locations across Europe.
Technical outlook
SuperGroup is resuming an uptrend with higher lows after consolidation at 1600.0p indicating a bottom has formed in the stock. MACD is positive and 12 day EMA is below 26 day EMA indicating consolidation. 14 day RSI crossed above 50 suggesting strength in the formation of a positive trend. The stock is also above 20 day and 50 day EMA, supporting a positive trend. 14 day positive DMI is above 14 day negative DMI with 14 day ADX above 24 indicating a positive trend. If the stock holds the level above 1600.0p a higher move can be expected, with resistance near 1700.0p.
Trading strategy
The stock can be bought around 1634.0p with a profit target 1798.0p and stop loss of 1562.0p.
Stocks Update
Whitbread PLC
On the daily chart, Whitbread hit a reduced profit target of 1770.0p indicating that the stock is in consolidation between 1750.0p and 1880.0p and trading at the bottom of the channel. MACD has turned negative and 12 day EMA is below 26 day EMA, indicating a negative trend in the stock. 14 day RSI is also below 50 indicating weakness in the uptrend.14 day positive DMI is below 14 day negative DMI while 14 day ADX is near 21, indicating consolidation in the stock. All positions should be closed for the stock.
Tullow Oil PLC
Tullow Oil has resumed its uptrend after the stock moved above 1400.0p. MACD is positive and 12 day EMA crossed above 26 day EMA indicating an uptrend in the stock.14 day RSI is above 60 indicating strength in the positive trend. The stock price is also trading above 20 day and 50 day EMA, which supports a positive trend. 14 day positive DMI is above 14 day negative DMI and 14 day ADX is above 20 also supporting a positive trend. Looking at firmer oil prices, the stock should be a hold with the same profit target.
Hunting PLC
Hunting hit a reduced profit target of 790.0p last week and is still in a consolidation phase between 770.0p and 800.0p. The stock has fallen above 20 day EMA indicating a short-term bullish trend for the stock. MACD is positive and 12 day EMA is still below 26 day EMA, indicating consolidation in the stock. 14 day RSI is near 60 indicating strength in the uptrend. 14 day positive DMI is above 14 day negative and 14 day ADX is near 20 indicating consolidation. All positions should be closed for the stock.
Babcock International Group PLC
Babcock hit stop loss of 541.5p and the stock is in negative trend after it stayed below the entry point of 570.0p for a whole week. MACD is negative and 12 day EMA has crossed below 26 day EMA supporting weakness in the uptrend. 14 day RSI is trading below 50 indicating weakness in the positive trend. The stock is also below 20 day EMA supporting a negative trend. 14 day positive DMI is below 14 day negative DMI, while 14 day ADX is near 19 supporting a negative trend. All positions should be closed for the stock.
Randgold Resources LTD
Randgold hit stop loss of 4973.0p in choppy trading. MACD is negative but 12 day EMA is still above 26 day EMA, indicating the stock is bottoming. 14 day RSI is above 50, with both making higher lows which indicate a positive trend is forming in the stock. 14 day positive DMI is above 14 day negative DMI supporting a positive trend with 14 day ADX near 21 indicating some consolidation. Looking at the consolidation all positions should be closed for the stock.
Afren PLC
Last week Afren completed the ‘V’ pattern making a new 52-week high of 167.7p but could not elongate its positive trend and now is consolidating around 160.0p. Momentum oscillator MACD is positive and 12 day EMA is below 26 day EMA indicating consolidation. 14 day RSI is above 50 indicating an uptrend which is supported with a positive trend in both the indicators. 14 day positive DMI is above 14 day negative DMI, while 14 day ADX is near 25 indicating an uptrend in prices. 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
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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 October to 31st December 2010:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
95.25% |
20 |
| Hold |
0 |
0 |
| Sell |
4.75% |
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.
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