UK Mid Cap Technical Review
The FTSE 250 index finds support at the bottom of the 2023 range but is still losing relative momentum vs. the FTSE 100 index. Messels continues to see selective improvement in IT Services stocks such as Computacenter (renews price and relative bases at 2020 peaks), Kainos (has rallied from support at the bottom of recent ranges) and Softcat (finding 6-year uptrend support). They have a new Buy on Playtech (reaches support from the prior range and holds the relative base). In Real Estate, they highlight opportunities in Big Yellow and Safestore. They have also closed their long in Plus500 after the stock found resistance at the highs and lost relative momentum.
Edition: 158
- 14 April, 2023
Technology
Multiple new red flags picked up from SCT’s FY22 Annual Report - the 14% Y/Y increase in DSO is particularly concerning as it comes off an already elevated level. Investors should be concerned about the scale of receivables (~£500m) sitting on the balance sheet, representing ~6 months of sales. "Unbilled Receivables" have also been rising sharply (+150% Y/Y). Receivables "past due" >30 days now represent 16% of the total (11% of which are past due >2 months vs. 3% last year). Investors should closely monitor the receivable level in future quarters to corroborate management's narrative that this situation will unwind in FY23.
Edition: 148
- 11 November, 2022
UK: The Manufacturing fan club still looks expensive
Despite Croda, Halma and Spirax having seen 40%+ share price falls YTD, Willis Welby, who specialise in expectations analysis, still struggle to make sense of the share prices. Their caution is compounded when they consider what is available elsewhere. The UK market is not renowned for its growth names, but that does not mean there are none. They see Rightmove, Auto Trader, Softcat and Experian as looking particularly attractive.
Edition: 138
- 24 June, 2022