Spread Betting Aggreko PLC
Aggreko PLC [AGK] is a major temporary power generation company, providing power and other services for large international events such as the US Open Golf Tournament, as well as the provision of emergency supplies in case of breakdowns. It has grown progressively over the last few years and its share price has risen steadily for the period from 2009 to 2012, helped by such contracts as the Beijing 2008 Olympic Games where it had the exclusive contract for providing temporary power and temperature conditioning.
Aggreko is a FTSE 100 company operating in the Support Service sector. The company is headquartered in Glasgow, Scotland, having moved there in 1973 from the Netherlands where it was founded. It was first listed on the London Stock Exchange in 1997. Another major milestone for the company was acquiring GE Electric’s energy rental business in 2006. Despite being based in Glasgow, it has offices around the world including the US, Europe, and Australia.
The FTSE 100 enterprise has two divisions: International Power Projects which manufactures and operates temporary power plants that provide energy to clients such as utilities, the military, mining and oil and gas companies and a Local Business section which rents power and temperature control systems, ranging from small generators to large industrial cooling towers. When there is a need for any temporary supplies, Aggreko is usually in a position to satisfy that need. Apart from the expected electrical power generation, including diesel generators and natural gas generators, Aggreko can cope with most cooling requirements, providing temporary chillers for rent, together with cooling tower services if those are required. The opposite effect is also available, with a range of electric heaters. And they have machines available to cater for any air compressor requirements.
The company also benefits from natural disasters as it is in a unique position to offer emergency power requirements. The range of applications is also impressive, as it includes film sets, offshore oil platforms, construction sites, and power plants that can be shipped to anywhere in the world and power a city as an emergency response. For those who are not sure what they need, Aggreko has an event services division which will help design the required facilities, whether for a wedding, or a Presidential inauguration.
As you can imagine, this is a capital intensive business to become involved with, but once you have the equipment you can charge a high price in return for your rapid response and capabilities. Aggreko has a massive organization and the ability to cope with virtually any needs or disasters. This doesn’t mean that the company is insulated from drawdowns. Aggreko’s stock price rally was stopped abruptly by two profit warnings in succession recently. The company first attributed the decreasing revenue to bad debts and unfavourable currency movements but subsequently Aggreko issued a warning over reduced work as military operations continue to be wound up in Afghanistan. Aggreko also admitted that 2013 won’t have last year’s London Olympics to boost its business.
Temporary Power Market: Aggreko plc Rolling Daily
A specialist in temporary supplies, Aggreko has been aggressively marketing and expanding its generator rental business. The current price for a daily rolling spread bet is 2229.8 – 2234.2. Say you notice that the price seems to be retracing, with a drop below its 20 day moving average, you may choose to place a short bet at £5 per point with a potential price target of the lower Bollinger band at 2185.
Perhaps the price continues to fall as you expect, and you decide to close your bet and collect your winnings when it reaches 2186.2 – 2190.6 as it seems that the upward trend is about to recommence. For this bet, the difference in points is 2229.8-2190.6, which is 39.2 points. As you staked £5 per point, this means you won £196.
Of course, the price could have gone the other way and lost you money. Say the price continued upwards, you might choose to close your bet when it reaches 2265.2 – 2269.6. In this case you lost 2269.6 less 2229.8 points, which is 39.8 points. That amounts to £199.
If you did not have time to keep an eye on the price, it might have been worth putting a stop loss order at a lower level than this, and it would automatically close the bet for you and minimize your losses. Say you put your stoploss at 2250.0, the order would be filled if the price rose to around that level – it is not precise because the stoploss simply tells your spread betting provider to close the bet, and this happens at the current price. Say the bet was closed automatically when the quote was 2248.6 – 2253.0.
In this case you have lost 2253.0 less 2229.8 points, which is 23.2 points. The stoploss order protected you from losing as much as the previous example, and in this case your losses were £116.
Aggreko plc Future Based SpreadBet Contract
If you’re looking at the long-term progress of the shares of Aggreko, the worldwide provider of temporary power and other services, you may be interested in placing a futures based spread bet, for which the current pricing is 2244.9 – 2256.9 for a date nine months away, the so-called far quarter. Convinced of the profitable prospects, you might place a long bet for £3 per point at this price. The bet goes on at 2256.9, as it is a long or buy bet.
If you are correct, and the price continues marching upwards, you can hold onto your spreadbet for several months until you see the possibility of a retracement in the price. Perhaps the price goes up to 2412.6 – 2420.5, and you decide that the momentum has temporarily left the stock, and close your spread trade for a profit.
Your bet has gone from 2256.9 to 2412.6 – a long bet closes on the selling or lower price – which means you have gained 155.7 points. At the level of stake you wagered, this works out to £467.10 won.
When you’re looking to hold a spread bet for a longer time, there is a good chance that it will fluctuate and lose you money. Say the quote went down to 2123.2 – 2134.6, you might decide that you had to cut your losses and close the spread trade.
In this case your points difference is 2256.9-2123.2, which is 133.7 points, and costs you £401.10.
As an alternative, and a good practice to have, you might have placed a stop loss order when you opened the bet. Your stoploss could have been 50 points down, which means that your bet would be closed if the price moved more than that. So if the price went down to 2192.3 – 2204.1, you would automatically have it closed by your spread betting provider.
In this case you lost 2256.9 less 2192.3 points, which is 64.6 points so your loss has been kept down to £193.80.
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