Casino and bingo operator shows fatigue

By Graeme Dickson
Updated: 12:14 EDT, 2 February 2011

Last March I suggested that Rank Group (RNK), the casino and bingo club operator was due for an upwards re-rating and that 95p-100p would provide decent entry levels given its technical support down there.

The charts proved to be an invaluable help and the stock eventually hit 140p two months ago before profit taking emerged. The stock is now showing signs of fatigue so perhaps one should reverse their perspective of Rank?

Yesterday the stock showed a dead cross, in this case where the 20 day exponential moving average crossed the 50 day exponential moving average.

There is a good chance that the shares will find support at 120-121p, which is where the 200 week exponential moving average sits. Below this level and one should see solid support at 110p.

The company announced in December that its full year results will exceed analysts' expectations.

However, it warned that its fiscal year ending December 2011 will be tougher given the VAT hike and the public sector cut-backs.

The company's current net debt of £133 million, albeit shrinking, will be enough to cause some concern given its £494 million market capitalisation.

It also has a high exposure to Spain with its Top Rank Espana brand, where the unemployment rate is said to be around 20 per cent: not exactly a conducive figure to inspire confidence in investing.

The gaming stocks as a whole are taking a bashing, particularly the online gaming companies of which Rank owns the Blue Square brand and meccabingo.com.

The chart suggests a pull-back is likely and to make it meaningful, I would expect the stock to test 110p at some stage, close to on near after 25 February when it is scheduled to issue its preliminary results.

Alternatively a close above 140p would signal that the current bear-patch has come to an end.

Update

Debenhams (DEB) – suggested as a sell at 67.15p, the stock closed yesterday at 66.75p. Keep the stop based on a close above 73p.

McBride (MCB) – suggested to sell at 160.6p, the shares closed yesterday at 153.1p. Continue to hold for now but lower the stop based on a close above 165p.

Aquarius Platinum (AQP) – suggested to sell at 338.5p, the shares closed yesterday at 361.5p. The company announced good second quarter production results last week, albeit it is not 'exceeding' expectations. Hold for now but if it closes above 370p cut the position.

Intertek (ITRK) – suggested to sell at 1799p, the shares closed at 1761p. The stock is starting to attract bears - keep the stop at 1900p.

Randgold Resources (RRS) – suggested to sell at 5770, the shares have drifted to 4816p: lower the stop at 5260p – the Ivory Coast situation coupled with the uneasy tensions in Egypt are not ideal for the Pan-African gold miner while the drifting gold price is also negative in the short term.

The writer does not hold any shares or derivatives in the above mentioned companies. The material for this report comes from Sharescope.