CSS FTSE 350 Report
CSS Partners Service Letter
Game Group PLC
|Last closing price
|52 week High/Low (p)||291.75/101|
|Market Cap (£mn)||567.97|
|Sector weight age by
Market Cap (%)
|Average Volume (mn)||1.91|
|P/E ratio (TTM)||6.66|
TTM: Trailing Twelve Month
Daily chart (GMG.L)
Business background and investment rationale
Game Group PLC operates retail outlets specialising in computer software, video games and related products.
Strong final year sales
In preliminary results announced in April this year for the 53 weeks ended 31 January 2009, group turnover increased by 32.2% to £1.972bn. This compares with £1.492bn for the same period last year, with like for like (lfl) sales up by 8.8%. In the UK and Ireland, total sales increased by 25.7% and lfl sales were up by 10.7%. In international operations, total sales increased by 50.6% and lfl sales rose by 4.6%. The group’s gross margin improved by 140 basis points which was attributable to an increase in margins for new and pre-owned software from 59.7% to 62.2%, as well as purchasing synergies from Gamestation. Game achieved ongoing synergies of £10m in the 53 weeks ended 31 January 2009 of which around £8m came from a reduction in the cost of sales and a further £2m from a reduction in operating expenses. The group is targeting a further £6m of synergy benefits for this year, giving an annualised rate of £16m going forward.
Resilient performance in economic downturn
Third generation platforms have reached 225 million in the UK and Game anticipates that these successful hardware formats will continue to drive demand for software during 2009. The company experienced exceptional consumer demand for a number of single format games including Mario Kart and Wii Fit on Nintendo Wii, Little Big Planet on Sony PS3, Gears of War 2 and Fable 2 on Microsoft Xbox360 and Brain Training and Professor Layton on Nintendo DS. Game has benefited from an expansion strategy which saw it open 23 stores in the year to June 2009. The group now trades from over 1,365 outlets with nearly half of the portfolio within international operations.
On daily chart, Game has broken out from the downward trendline and rebounded from support of 150.0p indicating formation of uptrend. Stock has strong support near 150.0p and resistance near 175.0p, and it has to hold above 150.0p for a higher move. MACD (moving average convergence/divergence) is negative and 12 day EMA (exponential moving average) has cross above 26 day EMA indicating formation of uptrend. 14 day RSI (relative strength index) is below 50, but rebounded from oversold level and 14 day positive DMI (directional moving index) has cross above 14 day negative. ADX (average directional moving index) is near 20 indicating formation of uptrend.
The stock can be bought around 158.0p with a profit target 176.2p and stop loss of 150.07p (Hedge position: short position in spread betting with £7.91 bet per point).
John Wood Group PLC
|Sector||Oil equipment services and distribution|
|Last closing price
|52 week High/Low (p)||503.5/151.8|
|Market Cap (£bn)||1.34|
|Sector weight age by
Market Cap (%)
|Average Volume (mn)||2.39|
|P/E ratio (TTM)||8.71|
TTM: Trailing Twelve Month
Daily chart (WG.L)
Business background and investment rationale
John Wood Group PLC is an energy services company operating in 46 countries, split across three business divisions: Engineering & Production Facilities, Well Support and Gas Turbine Services. The company provides a range of engineering, production support, maintenance management and industrial gas turbine overhaul and repair services to the oil & gas, and power generation industries worldwide.
Resilient performance in engineering and production facilities
In an interim management statement announced in May 2009, Wood Group’s performance in the year to date was in line with expectations, thanks to a continuing focus on production support and longer term capital projects, wide international spread and a high quality customer base. The performance in Engineering & Production Facilities was driven by increased activity across all sectors in Engineering and the continued strong demand for Production Facilities in the North Sea and international markets. Recently, Wood Group was awarded FEED (Front End Engineering Design) services for Chevron’s Jack and St Malo project in the Gulf of Mexico and pre-FEED work for ExxonMobil's Scarborough development in Western Australia. To strengthen its position in Asia-Pacific Wood Group acquired Proteus in Australia, a provider of commissioning, operations support and engineering services.
Rapid expansion in gas based power plants
Wood Group expects Gas Turbine Services to continue to be the leading independent maintenance provider for industrial gas turbines. Approximately 85% of revenue is derived from operational support activity and the company anticipates a resilient aftermarket performance in 2009. Wood Group’s ability to locate, refurbish, install, warrant, operate and maintain equipment has secured a number of contracts to provide fast-track power packages in various locations including Ghana, Pakistan and the US. Wood Group is rapidly expanding its services in Asia-Pacific with a clear objective to increase its EBITA margin to 10% by 2010.
On daily chart, stock has rebounded from 300.0p, but is still trading above support trendline from the December 2008 low. Momentum oscillator MACD is negative and 12 day EMA is below 26 day EMA indicating weakness in uptrend. RSI has rebounded from the oversold level indicating weakness in downtrend. 14 day negative DMI is above 14 day positive DMI, but ADX is near 20 indicating some consolidation at 250.0p. If stock has to make an uptrend it should consolidate above 250.0p. Stock has resistance at 300.0p, and support near 216.0p.
Stock can be bought near 255.0p with a profit target of 284.4p and stop loss of 242.21p (Hedge position: short position in spread betting with £4.9 bet per point).
On daily chart Aggreko hit stop loss of 484.35p, but is still trading around the entry point of 510p. MACD is negative and 12 day EMA is below 26 day EMA indicating a sell signal. Stock prices are also trading below 20 and 50 day EMA confirming negative trend, but stock recently climbed above 200 day EMA indicating the long term uptrend is intact. RSI and stochastic are near to 30 indicating stock is oversold. Negative DMI is above positive DMI and ADX is above 25 indicating negative trend. All positions should be closed for the stock.
Kesa Electrical PLC
Kesa hit stop loss of 114.46p after making a low of 99.75p. Stock is forming a positive trend with ADX near 20, but negative DMI is declining above positive DMI. 14 day RSI is near to 50 and MACD is negative, while trend for both indicators are positive. It is also trading above 20, 50 and 200 day EMA indicating formation of uptrend. All position should be closed for the stock.
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Distribution of recommendations for the period 1st January to 31st March 2009:
|% Distribution of recommendations||No of recommendation|
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