| Sector |
Aerospace and defense |
Last closing price
(26/04/2011) (p) |
637.5 |
| 52 week High/Low (p) |
664.19/519.58 |
| Market Cap (£bn) |
11.7 |
Sector weight age by
Market Cap (%) |
36.59 |
| Average Volume (mn) |
3.49 |
| P/E ratio (TTM) |
22.48 |
Sector P/E
ration (TTM) |
14.82 |
TTM: Trailing Twelve Month
Daily chart (RR.L)
Business background and investment rationale
Rolls-Royce Group PLC is a global business providing power systems for use on land, sea and air. It operates in five segments: Civil Aerospace, Defence Aerospace, Marine, Energy and Financial Services.
Resilient performance in a challenging environment
Despite the challenging economic environment, the disruption caused by volcanic eruptions in Iceland and an uncontained disc release on a Trent 900 engine on a Qantas operated Airbus A380 in 2010, Rolls-Royce’s order book remains strong at £59.2bn for 2010 with new orders worth £12.3bn secured for the full year. Group revenues increased by 6.44% to £11.08bn compared with £10.41bn in the 2009. Service revenues also increased, climbing 13% to reach £5.54bn on an underlying basis. This allowed the group to pay 9.6p per share as a final payment to shareholders; an increase of 6.7% on 2009 making 16p share for the full year. The group maintained its strong financial position with average net cash balances improving by £325m to £960m compared to 2009. For 2011 Rolls-Royce expects to see good growth benefiting from a strong trading performance in the civil aerospace business. The Marine and Defence aerospace businesses are expected to deliver stable performances despite the current challenges in their markets and the Energy business is expected to deliver good profit growth in the year.
Investment in growth
Rolls-Royce continued to make progress in 2010 achieving a number of major development and commercial milestones in the civil business. Major milestones on flight test programmes included the Boeing 787, Gulfstream G650 and the Embraer Legacy 650. Development schedules remain on target for these programmes to enter service over the next two years, further expanding the group’s portfolio and market share and underpinning long-term growth. Orders totalling £7.5bn were received during 2010, including requests for 300 Trent and 188 V2500 engines. In the Defence Aerospace portfolio a significant number of new Rolls-Royce powered helicopter, transport and combat aircraft programs continue to make good progress. In 2010 investment in research and development was £923m compared to £864m in 2009. Increased investment in research will continue in 2011 as more engineering resource is devoted to early-phase programmes, such as the Trent XWB.
Technical outlook
Rolls-Royce is forming an uptrend with the stock consolidating between 560.0p and 665.0p. The stock is trading near the top of the channel with higher lows indicating an uptrend. MACD (moving average convergence/divergence) is positive and in MACD 12 day EMA (exponential moving average) is above 26 day EMA indicating an uptrend in the stock. 14 day RSI (relative strength index) is near 60 making higher lows with the recent incline in prices supporting the uptrend. 14 day positive DMI (directional moving index) is above 14 day negative DMI, while 14 day ADX (average directional index) is near 16 indicating consolidation. Recently 20 day EMA crossed above 50 day EMA supporting the uptrend. If the stock stays above the support level of 620.0p a higher move can be expected.
Trading strategy
Stock can be bought near 630.0p with a profit target of 702.0p and stop loss of 598.4p.
| Sector |
Travel & Leisure |
Last closing price
(26/04/2011) (p) |
1715.0 |
| 52 week High/Low (p) |
1899.0/1260.0 |
| Market Cap (£bn) |
2.97 |
Sector weight age by
Market Cap (%) |
4.9 |
| Average Volume (k) |
631.8 |
| P/E ratio (TTM) |
14.6 |
Sector P/E
ration (TTM) |
8.57 |
TTM: Trailing Twelve Month
Daily chart (WTB.L)
Business background and investment rationale
Whitbread PLC is a hotel & 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, Whitbread plans to open at least 2519 new rooms in up to 26 new hotels. By the end of 2013/14 Whitbread is targeting a 28% increase in Premier Inn rooms to 55,000 in the UK from the current portfolio of 43,000. The group will also continue its international expansion. For 2010/11 Whitbread planned to open 300 new Costa stores taking the number of stores to 1200 in the UK and 650 outlets abroad, bringing the total at the end of the year to around 1,850 with a commitment 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. To accelerate further growth of the Costa business, last month Whitbread acquired Coffee Nation for £59.5m and it plans to launch a new brand, Costa Express which will target the self-serve coffee bar sector. In the next five years Whitbread is targeting 3000 bars across the UK from its current 900 bars.
Improvement in sales
Whitbread’s 39 weeks result announced in December 2010 showed improvement with revenue up by 14% and like-for-like sales up by 7%. At Premier Inn, sales rose by 13.5%, driven by a combination of increased volumes with like-for-like occupancy improving by 14.2 percentage points to 80%, while like-for-like sales increased by 13.5%. Restaurant sales grew 3.5%, with like-for-like sales up 3.3%. At Costa, sales increased by 30% on international expansion, with like-for-like sales up 9.4%.
Technical outlook
On the daily chart, Whitbread is rebounding after the stock slumped from its 52-week high of 1899.0p, supported by higher lows indicating it has bottomed above 1560.0p. MACD has turned positive and 12 day EMA is above 26 day EMA, indicating a positive trend in the stock. 14 day RSI is above 50 indicating an uptrend is forming in the stock. 14 day positive DMI is above 14 day negative DMI which indicates the stock is forming an uptrend, while 14 day ADX is 17, indicating consolidation. The stock has resistance at 1800.0p and support at 1650.0p.
Trading strategy
The stock can be bought around 1700.0p with a profit target 1870.0p and stop loss of 1626.0p.
Stocks Update
Tullow Oil PLC
Tullow hit a reduced profit target of 1420.0p indicating the stock is in uptrend after it moved above 1450.0p. MACD is positive and 12 day EMA is below 26 day EMA indicating consolidation in the stock. 14 day RSI is above 50 indicating strength in the uptrend. 14 day positive DMI is above 14 day negative DMI and 14 day ADX is near 16 indicating a positive trend is forming in the stock. All positions should be closed for the stock.
John Wood Group PLC
On the daily chart, John Wood resumes its uptrend making a new 52-week high of 719.0p. MACD is positive and in MACD 12 day EMA is above 26 day EMA indicating a positive trend. 14 day RSI is above 60 indicating strength in the positive trend. 14 day positive DMI is above 14 day negative DMI, while 14 day ADX is near 17 showing consolidation in the stock. The stock should be a hold with the same profit target.
Imagination Group PLC
Imagination hit the stop loss of 446.0p and making a new 52-week high of 495.5p indicating choppy trading last week. Momentum oscillator MACD is positive and 12 day EMA is above 26 day EMA indicating strength in trend. 14 day RSI is above 60 indicating a positive trend. 14 day positive DMI is above 14 day negative DMI and 14 day ADX is above 23 indicating an uptrend. All the positions should be closed for the stock.
Hikma Pharmaceuticals PLC
On the daily chart, Hikma is forming an uptrend and stabilising above strong support of 700.0p, but entry could be only taken at 743.0p above recommended price of 730.0p. The stock is above 20 and 200 day EMA with higher lows indicating an uptrend is forming in the stock. MACD has turned positive and 12 day EMA is above 26 day EMA, which indicate an uptrend is forming in the stock. 14 day RSI is above 50 suggesting a positive trend in the stock. 14 day positive DMI is above 14 day negative DMI, while 14 day ADX is near 19 showing an uptrend in the stock. The stock should be a hold with the same profit target and new stop loss of 706.0p.
Fenner PLC
On the daily chart, Fenner hit stop the loss of 362.2p and again is trading at the top of the channel between 340.0p and 375.0p indicating an uptrend in the stock, supported by trading above 20 day EMA and 50 day EMA. MACD is positive and 12 day EMA is above 26 day EMA indicating an uptrend in the stock. 14 day RSI is above 50 supporting the positive trend. 14 day negative DMI is below 14 day positive DMI and 14 day ADX is near 16 indicating consolidation 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 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.
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.
