| Sector |
Pharmaceuticals & Biotechnology |
Last closing price
(25/07/2011) (p) |
725.0 |
| 52 week High/Low (p) |
908.0/658.0 |
| Market Cap (£bn) |
1.42 |
Sector weight age by
Market Cap (%) |
– |
| Average Volume (k) |
210.5 |
| P/E ratio (TTM) |
23.8 |
Sector P/E
ration (TTM) |
63.63 |
TTM: Trailing Twelve Month
Daily chart (HIK.L)
Business background and investment rationale
Hikma Pharmaceuticals PLC is a specialist pharmaceutical company with operations in Europe, the US, and the Middle East and North Africa (MENA) region. The company develops, manufactures and markets a range of generic and in-licensed pharmaceutical products in solid, semi-solid, liquid and injectable final dosage forms.
Improvement in sales
In preliminary annual results for the year 2010 announced in March 2011, Hikma’s revenue increased by 14.8% to $730.9m, which compared to $636.9m in 2009. Hikma’s gross margin was 48.9% in 2010; a gain on the 47.8% achieved in 2009. This growth reflects the increase in gross profit for the Generics business, as well as higher sales and profitability in the Injectables business. Operating margin also increased to 18.5%, up from 16.8% in 2009. The group’s continuing focus on working capital management and driving quality sales delivered a notable improvement in cash flows from operations across all regions. Hikma’s net debt position decreased to $101.1m compared to $116.9m at the end of December 2009. Hikma continued to deliver new products across all countries and markets. In 2010 the group launched 100 products and received 230 product approvals. The company started 2011 with double digit growth in branded business but following the recent unrest in the MENA region - particularly in Egypt, Libya and Tunisia - the group expects to deliver revenue growth of around 7% and gross margin of around 47% for 2011.
Expansion through partnerships
In April 2011 Hikma acquired a minority interest in Unimark Remedies Ltd for a cash consideration of $33.3m. Unimark is one of India's leading manufacturers of active pharmaceutical ingredients (API) and API intermediates and covers a number of therapeutic segments including; cardiovascular, anti-asthma and anti-infectives. Unimark’s strong technical and R&D capabilities will complement Hikma’s in-house R&D efforts and enable the company to bring more products in additional therapeutic categories to the global market. To enhance further its API sourcing capabilities, last week Hikma acquired a minority interest in a Chinese pharmaceutical company Hubei Haosun Pharmaceutical Co Ltd through the subscription of a new equity for a cash consideration of $5m. Through this partnership Hikma will have access to a high quality, long term source of API in the strategically important area of oncology.
Technical analysis
On the daily chart, Hikma is oversold after making a low of 715.5p last week indicating the stock has found a bottom above 700.0p. MACD (moving average convergence/divergence) is negative and 12 day EMA (exponential moving average) is below 26 day EMA, indicating a recent decline in the stock. 14 day RSI (relative strength index) is above 30 suggesting that the stock is oversold. 14 day positive DMI (directional moving index) is below 14 day negative DMI, while 14 day ADX (average directional index) is near 23 showing a weakness in the stock price. For a higher move the stock has to consolidate above 700.0p with resistance near 770.0p and support near 700.0p.
Trading strategy
The stock can be bought around 712.0p with a profit target 794.0p and stop loss of 676.0p.
| Sector |
General Retailers |
Last closing price
(25/07/2011) (p) |
337.0 |
| 52 week High/Low (p) |
522.0/329.6 |
| Market Cap (£mn) |
713.7 |
Sector weight age by
Market Cap (%) |
– |
| Average Volume (mn) |
1.02 |
| P/E ratio (TTM) |
8.72 |
Sector P/E
ration (TTM) |
16.46 |
TTM: Trailing Twelve Month
Daily chart (HFD.L)
Business background and investment rationale
Halfords Group PLC is a holding company engaged in retail of automotive, leisure and cycling products.
Weak performance
In an interim management statement for the 13 weeks to July 2011 announced last week group revenue increased by 0.3% after strong cycle and online sales offset a much lower return from car enhancements. Revenue from the group’s car enhancement operations fell 10% and 10.6% on a same-store basis, while revenue from car maintenance fell 2.2% and 2.8%, respectively. Despite the fall in sales in both divisions, Halfords increased its market share. The group expects a large decline in its car enhancement business in the coming quarters as cash-strapped consumers defer spending in car accessories such as satellite navigation, performance styling products and alloy wheels. Group cycle sales, on a same-store basis, rose 11.5% in the same period, driven by premium and new entry-level bikes. The Autocentres business, bought early last year, also saw an improvement in revenue, up 2.1%, as it gains traction as a brand.
Decline in gross margin
Due to increased focus on the cycle market, which is a lower margin business and the decision to invest more in driving sales, the company warned it expects its gross margin to fall by around 100 basis points at the year end. The company’s previous guidance was that gross margin would fall by over 30 basis points. Last year Halfords’ gross margin was around 54%.
Technical outlook
On the daily chart, Halfords has broken the key support level between 350.0p and 404.0p indicating a strong downtrend in the stock. MACD is negative and in MACD 12 day EMA is below 26 day EMA, indicating a negative trend. 14 day RSI is below 30 with both the indicators making lower highs, confirming the negative trend in the stock.14 day positive DMI is below 14 day negative DMI while 14 day ADX is rising to 24, confirming the negative trend breakout below 350.0p. The stock has strong support at 350.0p and resistance near 300.0p. It is also below 200 day EMA indicating a strong negative trend in the stock.
Trading strategy
The stock can be sold around 345.0p with a profit target 292.0p and stop loss of 367.9p.
Stocks Update
BATS PLC
BATS’ positive trend strengthened last week after the stock crossed above 2800.0p making a new 52-week high of 2868.0p. MACD is positive and 12 day EMA crossed above 26 EMA indicating strength in the uptrend. 14 day RSI is trading above 60 indicating the stock is resuming the uptrend. 14 day positive DMI is above 14 day negative DMI and 14 day ADX is at 23, indicating a positive trend in the stock. BATS is also above 20 day EMA indicating a positive trend. Looking at the strength in the positive trend the stock should be a hold with the same profit target of 2630.0p and a stop loss of 2889.0p.
Compass Group PLC
Compass is trading near its entry point of 585.0p, indicating a consolidation at entry point after last week’s fall in stock prices. MACD is negative and 12 day EMA is below 26 day EMA indicating a weakness in the uptrend. 14 day RSI is below 50 showing a weakness in the positive trend. 14 day positive DMI is below 14 day negative DMI and 14 day ADX is near 22 indicating a weakness in the uptrend. Looking at the weakness in the positive trend, the stock should be a hold with the same reduced profit target of 600.0p and a stop loss of 545.0p.
Premier Farnell PLC
Premier hit the stop loss of 195.0p indicating high volatility at its 52-week low of 180.3p. MACD is negative and in MACD 12 day EMA is above 26 day EMA, indicating the stock rebounded from heavy selling.14 day RSI is above 30 indicating the stock is oversold. Premier is also trading below 200 day EMA, indicating a long-term downtrend. 14 day negative DMI is above 14 day positive DMI while 14 day ADX is near 43 indicating volatility with a negative trend in the stock. All positions should be closed for the stock.
Cookson Group PLC
Cookson hit the stop loss of 646.0p indicating the stock has rebounded again from its support level of 621.0p and is still trading between a channel of 621.0p and 720.0p. MACD is negative and MACD 12 day EMA is below 26 day EMA, indicating a negative trend. 14 day RSI is near 50 with both the indicators making higher lows, confirming a rebound in the stock.14 day positive DMI is below 14 day negative DMI while 14 day ADX is at 18, confirming 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 April to 30th June 2011:
| |
% Distribution of recommendations |
No of recommendation |
| Buy |
54.55% |
12 |
| Hold |
0 |
0 |
| Sell |
45.45% |
10 |
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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