| Sector | Personal goods |
| Last closing price (28/11/2011) (p) | 1197.0 |
| 52 week High/Low (p) | 1610.0/991.5 |
| Market Cap (£ bn) | 5.09 |
| Average volume (mn) | 2.36 |
| P/E ratio (TTM) | 21.68 |
| Sector P/E ratio(TTM) | 9.59 |
Business background and investment rationale
Burberry Group PLC designs, sources, manufactures and markets luxury men’s, women’s and children’s clothing and non-apparel accessories globally through a diversified network of retail, wholesale, franchise and digital commerce channels worldwide.
Strong revenue growth
In an interim result announced in November 2011, Burberry delivered good growth for the six months to 30 September. Revenues increased to £830m which was an increase of 29% on the same period last year. In the retail business, revenue increased by 45% from 2010 to reach £527.4m. The group saw double-digit growth in all regions with same store revenue increasing by 16% compared to 2010. Wholesale business revenue increased by 9% to £247.9m compared to last year. In the licensing business, revenue in the first half increased by 4% to £54.3m in line with the group’s previous guidance. The Group’s gross margin also increased by 240 basis points to 66.7% from 64.3% compared to last year. The majority of the increase came from the shift to retail (64% of revenue compared to 57% in the first half last year), especially in China.
Expansion in emerging markets
During the first half of year 2011/12, Burberry opened eight mainline stores with average retail selling space for the first half increasing by 14%. Chinese acquisitions contributed an additional 11% increase in retail selling space. For the second half of 2011/12 Burberry plans a 15% increase in average retail selling space, this includes 8 to 10 additional mainline stores with a bias towards China and Latin America, and a flagship store in Paris.
Technical outlook
Burberry is rebounding from its strong support level of 1140.0p indicating the stock will find a bottom above this level. MACD (Moving Average Convergence/Divergence) is negative and in MACD 12 day EMA (Exponential Moving Average) is below 26 day EMA supporting a recent fall in the stock from 1400.0p. 14 day RSI (Relative Strength Index) is trading above 30 indicating the recent sell-off in the stock. Both of these indicators are making higher lows with recent fall in stock price means Burberry will rebound upside above 1140.0p.14 day positive DMI (Directional Moving Index) is below 14 day negative DMI indicating a negative trend, while 14 day ADX (Average Directional Index) is at 18 supporting a consolidation in the stock. The stock has support at 1140.0p and resistance near 1270.0p.
Trading strategy
The stock can be bought around 1180.0p with a profit target 1316.0p and stop loss of 1120.0p.
| Sector | Technology hardware & equipment |
| Last closing price (28/11/2011) (p) | 574.0 |
| 52 week High/Low (p) | 652.0/386.0 |
| Market Cap (£ bn) | 7.48 |
| Average volume (mn) | 4.42 |
| P/E ratio (TTM) | 69.29 |
| Sector P/E ratio(TTM) | 19.58 |
Business background and investment rationale
ARM Holdings PLC designs microprocessors, physical library solutions, and related technology & software, in addition to selling development tools.
Growth in non-mobile applications & an upbeat outlook
In a third quarter result announced in October 2011, ARM technology-based chips continued to gain market share in both mobile and non-mobile applications driven by end market requirements for smarter, low-power chips. During the quarter ARM signed 28 processor licenses, including 14 new customers, many of whom are established semiconductor companies buying their first ARM processor license. In addition, leading semiconductor vendors renewed their commitment to ARM's technology roadmap by relicensing and upgrading their ARM technology. ARM enters the fourth quarter of 2011 with a healthy order backlog and a robust opportunity pipeline, which are expected to deliver strong performance in license revenues. Over the last year ARM has seen a strong growth in shipments of ARM technology-based chips, with a 50% increase of shipments into non-mobile markets such as digital TVs, microcontrollers and networking applications.
Strong revenue growth
The rapid growth of smart phones and the introduction of mobile computers, such as tablets, continue to benefit the company. Total dollar revenues in Q3 2011 were $192.3 m; up 22% compared to the same period last year. Total dollar license revenues in Q3 2011 increased by 38% year-on-year to $72.6m, representing 38% of group revenues. Total dollar royalty revenues in Q3 2011 increased year-on-year by 19% to $96.8 million, representing 50% of group revenues. This compares with industry revenues increasing by about 1% in the shipment period (i.e. Q2 2011 compared to Q2 2010), demonstrating ARM's continuing market share gains over the last 12 months. Profit before tax was £43m in Q3 2011 compared to £19.6m in the same quarter last year.
Technical Outlook
On the daily chart, ARM is again rebounding upside from its strong support level of 550.0p indicating the stock will find the bottom above 550.0p. Momentum oscillator MACD is negative and 12 day EMA is below 26 day EMA supporting the recent decline in the stock. 14 day RSI is above 40 indicating the recent sell-off in the stock. 14 day positive DMI is below 14 day negative DMI, while 14 day ADX is near 16 indicating a consolidation in stock. The stock is above 200 day EMA supporting the positive trend. It has support near 550.0p and resistance near 633.0p.
Trading strategy
Stock can be bought around 562.0p with a profit target of 626.8p and stop loss of 533.8p.
Compass Group PLC
Compass hit the reduced profit target of 575.0p and the stock is still in consolidation between 540.0p and 570.0p. MACD is just negative and 12 day EMA has crossed below 26 day EMA indicating a consolidation in the stock. 14 day RSI is above 50 showing strength in the trend. 14 day positive DMI is below 14 day negative DMI and 14 day ADX is near 13, also indicating a consolidation in the stock. All positions should be closed for the stock.
Associated British Foods PLC
ABF is in consolidation after the stock rebounded from a low of 1170.0p. MACD is negative and in MACD 12 day EMA is below 26 day EMA indicating a weakness in the uptrend. 14 day RSI is below 50 indicating a weakness in the positive trend. 14 day positive DMI is below 14 day negative DMI and 14 day ADX is at 11 indicating a consolidation in the stock. Looking at the rebound in the stock to entry point, ABF should be a hold with an improved profit target of 1180.0p and stop loss of 1047.0p.
Amec PLC
Amec hit the stop loss of 864.0p after the stock fell below 900.0p. MACD is negative and in MACD 12 day EMA is below 26 day EMA indicating a weakness in the uptrend. 14 day RSI is below 50 indicating weakness in the positive trend. 14 day positive DMI is below 14 day negative DMI and 14 day ADX is at 17 indicating a consolidation in the stock. All positions should be closed for the stock.
Diploma PLC
On the daily chart, the stock is trading above strong support of 300.0p with higher lows indicating it is rebounding from this level. Momentum oscillator MACD is negative and 12 day EMA is just below 26 day EMA, indicating the stock is finding a bottom above 300.0p. 14 day RSI is at 50 indicating strengthening in the positive trend.14 day positive DMI has just crossed above 14 day negative DMI, while 14 day ADX is near 10, indicating a consolidation in stock. The stock should be a hold with the same profit target of 332.0p and stop loss of 283.0p.
Restaurant Group PLC
The Restaurant Group is in consolidation above 280.0p indicating a small movement for the stock. MACD is positive and in MACD 12 day EMA is just below 26 day EMA indicating the stock is consolidating above 280.0p. 14 day RSI is below 50 indicating a weakness in the uptrend. 14 day positive DMI is below 14 day negative DMI while 14 day ADX is at 12 indicating consolidation in the stock. The stock should be a hold with the same profit target of 317.0p and stop loss of 270.7p.
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