| Sector |
Oil equipment service & distribution |
Last closing price
(31/01/2011) (p) |
780.0 |
| 52 week High/Low (p) |
828.0/429.1 |
| Market Cap (£bn) |
1.0 |
Sector weight age by
Market Cap (%) |
6.1 |
| Average Volume (mn) |
0.28 |
| P/E ratio (TTM) |
42.59 |
Sector P/E
ration (TTM) |
14.16 |
TTM: Trailing Twelve Month
Daily chart (HTG.L)
Business background and investment rationale
Hunting PLC is a holding company engaged in the provision of oil and gas services. It has two sectors: Hunting Energy Services and other operations, which includes an energy ship broker and Field Aviation.
Improved outlook for the year
In the interim result announced in August 2010 Hunting’s revenue from continuing operations for the six months ending 30 June 2010 increased to £214.2m from £209m reported for the 2009 comparable period. Profit before tax and exceptional items experienced a 77% improvement compared with the six months to 31 December 2009. From mid 2009 to August 2010 the North American average rig count increased 86% with the International rig count increasing 15% during the same period. Rig counts within the company’s various operating regions continue to improve and the demand for high pressure, high temperature products is robust. Margins and backlogs are returning to historical norms and looking at the modest improvement in the world economy and sustained recovery in oil prices, plus new developments from shale gas. Hunting is well positioned to exceed market expectation for the full year.
Acquisition of Innova-Extel
In August 2010 Hunting acquired Innova-Extel a leading supplier of harsh environment electronics technology to the global energy industry, for a cash consideration of $125m. With the addition of Innova products and services, the company is able to provide a complete drilling system from mud motors, shock tools and non-magnetic drill collars. The global directional drilling market grew at an annual average rate of 22% per annum from 2000 to 2008.
Technical outlook
On the daily chart, Hunting is resuming the uptrend after it made higher lows by trading below 20 day EMA (exponential moving average). MACD (moving average convergence/divergence) is positive and 12 day EMA crossed below 26 day EMA, indicating consolidation in the stock. 14 day RSI (relative strength index) is above 60 and both the indicators are making higher lows which indicate an uptrend. 14 day positive DMI (directional moving index) is above 14 day negative and 14 day ADX (average directional index) is near 31 indicating an uptrend. The stock has strong resistance near 800.0p and support near 750.0p.
Trading strategy
The stock can be bought around 770.0p with a profit target 858.5p and stop loss of 731.0p.
Babcock International Group PLC
BAB.L
| Sector |
Support services |
Last closing price
(31/01/2011) (p) |
577.0 |
| 52 week High/Low (p) |
638.5/489.0 |
| Market Cap (£bn) |
2.07 |
Sector weight age by
Market Cap (%) |
3.024 |
| Average Volume (mn) |
1.56 |
| P/E ratio (TTM) |
16.78 |
Sector P/E
ration (TTM) |
25.99 |
TTM: Trailing Twelve Month
Daily chart (BAB.L)
Business background and investment rationale
Babcock International Group PLC is an engineering support services company. It operates in six segments: Marine, Defence, Rail, Nuclear, Networks, and Engineering and Plant.
Strong order book
By 25 January 2011 the group’s order book remained stable at around £12bn reflecting the constant flow of new contracts, rebids and contract extensions from the pipeline into the order book. The pipeline of opportunity bids increased to £6bn from the £5bn announced in November’s half year result. Babcock anticipates that the Comprehensive Spending Review (CSR) and Strategic Defence and Security Review (SDSR) by UK Government will lead to significant new outsourcing opportunities. In the last quarter Babcock has been selected as bidder for many contracts including work with the Canadian Government as one of three bidders providing refit and upkeep support to their fleet of 30 minor warships and naval auxiliary vessels. In Australia the group has been selected to bid for refit and upkeep support contracts for the Australian surface ship fleet, the first of these is for their eight Anzac frigates. In the United States Babcock was selected as one of four contractors to install Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) systems for the US navy and the company expects to share in contracts worth in the order of $840m over the next three years.
Strong revenue growth and on track integration of VT group
For the first half year results announced in November 2010, group revenue increased to £1.2bn; a rise of 31% on the same period last year including £255.5m from VT. Marine revenue increased by 8% to £502.4m with strong performance from overseas operations and higher activity levels in warships as well as £10m from VT activities. Group operating increased by 38% to £113.7m including a £27m contribution from VT businesses and represented an operating margin of 9.3%, up from 8.8% last year. Babcock is speedily integrating VT group and is on track to achieve £50m (pre-tax) in total and as scheduled, achieving a run rate of £11m by 31 March 2011, with annualised financial efficiencies of £8m.
Technical outlook
Babcock is in a consolidation phase between 500.0p and 600.0p with a higher high above 500.0p indicating a consolidation with a positive trend in the stock. MACD is positive and 12 day EMA has crossed above 26 day EMA supporting a consolidation in the stock. 14 day RSI is trading above 50 with a positive trend. The stock is also above 20 day and 200 day EMA, with 50 day EMA crossing above 200 day EMA which supports a positive trend. 14 day positive DMI is just below 14 day negative DMI, while 14 day ADX is near 19 supporting consolidation. If the stock holds the level above 550.0p a higher move can be expected, with resistance near 600.0p.
Trading strategy
The stock can be bought around 570.0p with a profit target 636.0p and stop loss of 541.5p.
Stocks Update
BATS PLC
BATS hit a reduced profit target of 2400.0p and the stock is in a downtrend after it fell below 2300.0p. MACD is negative and 12 day EMA is below 26 EMA indicating a downtrend. 14 day RSI is trading below 40 suggesting a downtrend. 14 day negative DMI is above 14 day positive DMI and ADX is falling which indicates a downtrend in the stock. Looking at the downtrend all positions should be closed for the stock.
Misys PLC
On the daily chart, Misys confirmed the downtrend after the stock moved below 320.0p last week and 14 day RSI has fallen below 50. MACD is falling but positive and 12 day EMA is below 26 day EMA indicating a downtrend in the stock.14 day negative DMI is above 14 day positive DMI and 14 day ADX is near 24 with both indicators falling which indicates a downtrend in the stock. The stock is also below 20 day EMA which supports weakness in the trend. Looking at downtrend the stock should be a hold with the same profit target.
Amec PLC
On the daily chart, the stock is making lower highs above its strong support of 1100.0p, indicating an uptrend is forming in the stock supported by stock climbing above 20 day EMA. Momentum oscillator MACD is positive and 12 day EMA is above 26 day EMA indicating that a positive trend is forming in the stock. 14 day RSI is above 60 but both the indicators are making higher lows supporting an uptrend. 14 day positive DMI is above 14 day negative DMI , while 14 day ADX is near 13 indicating a consolidation. Stock should be a hold with same profit target.
Whitbread PLC
On the daily chart, Whitbread is in downtrend with the stock rebounding from its 52 week high of 1899.0p, supported by falling below 20 day EMA . MACD is positive but 12 day EMA has crossed below 26-day EMA, indicating a consolidation in the stock. 14 day RSI has fallen near 50 from a level of 70 clearly indicating downtrend is forming in the stock.14 day negative DMI is above 14 day positive DMI which indicates the stock is forming a downtrend, while 14 day ADX is 14, indicating that stock will consolidate near 1800.0p. Stock should be a hold with same profit target.
Admiral PLC
On the daily chart, Admiral is in uptrend supported by the stock going above 20 day EMA. Momentum oscillator MACD is positive and 12 day EMA is above 26 day EMA indicating a positive trend in the stock. 14 day RSI is above 60 and both the indicators are making higher lows supporting an uptrend. 14 day positive DMI is above 14 day negative DMI, while 14 day ADX is near 22 indicating an uptrend. The stock has immediate resistance at 1700.0p and support near 1600.0p. The stock should be a hold with the same profit target.
Fidessa PLC
Fidessa is in a consolidation phase between 1500.0p and 1600.0p with a higher high indicating a consolidation with a positive trend in the stock. MACD is positive and 12 day EMA is above 26 day EMA supporting a positive trend in the stock. 14 day RSI is trading above 50 indicating strength in the positive trend. The stock is also above 20 day and 200 day EMA, which supports a positive trend. 14 day positive DMI is above 14 day negative DMI indicating a positive trend, while 14 day ADX is above 20 also supporting consolidation. The stock should be a hold with the same profit target.
Tullow oil PLC
On the daily chart, Tullow Oil is recovering from a correction from its 52-week high of 1395.0p above its support level of 1300.0p. MACD is positive and 12 day EMA is below 26 day EMA indicating consolidation in the stock.14 day RSI is also above 50 indicating an uptrend is forming in the stock. The stock price is also trading above 20 day and 200 day EMA, which supports a positive trend in the stock. 14 day positive DMI is above 14 day negative DMI indicating a positive trend, while 14 day ADX is near 30 also supporting a positive trend. The stock should be a hold with the same profit target.
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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 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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