The Week In Review: ARM best kept at length for now

At the height of the dot.com boom ARM Holdings was a FTSE 100 company and its shares traded at a couple of hundred times earnings. These days the semi-conductor designer is a FTSE 250 constituent and is valued at 24 times forecast earnings for 2007. Yet even this more modest valuation is too rich.

The 17 per cent rise in first-quarter revenues that ARM reported this week looked impressive but failed to meet analysts' forecasts. Only thanks to good cost control did the company manage to hit its earnings targets. It appears that ARM is finding it increasingly difficult to achieve its sales forecasts. In July it cut projected growth to 15-20 per cent from more than 20 per cent. Then in October it again guided down estimates to the lower end of that range.

ARM makes money by licensing its designs to semiconductor companies and by getting a royalty each time one of the consumer devices containing its designs hits the market.

Traditionally it has done well from mobile phones, 90 per cent of which contain at least one ARM product, and digital cameras, where the level stands at about 50 per cent.

In the future, ARM aims to have a more diverse range of consumer goods running on its microprocessors coupled with the penetration it enjoys in the mobile phone market.

But that will take some doing. In the meantime, its licensing revenues are disappointing. Best avoided.

REGUS

The temporary office space group Regus has bought back 58 per cent of its UK business from Alchemy for £88m. The purchase marks the end of Regus' recovery, but a word of warning. Regus has very high operational gearing. So when times are good they are really good, and when they are bad, life is truly grim. At current levels, that makes the stock just a hold while at the first sign of an economic downturn it should be ditched.

THEMUTUAL.NET

The online advertising sector is booming. It is growing at between 20 and 30 per cent a year and analysts forecast this trend will continue for years to come. Themutual.net is among a handful of AIM-listed companies cashing in on this explosive growth. Buy.

4IMPRINT

4imprint designs and distributes promotional goods such as golf balls and coffee mugs with company logos on them. 4imprint does this in Europe and the US. It may not sound exciting , but it is highly profitable and cash-generative. For the year ending 31 December 2005, the group made a pre-tax profit of £6.7m. This is forecast to rise to £7.3m in 2006 and to £8.3m in 2007. Buy.

CLARITY COMMERCE

Clarity Commerce Solutions hopes to pay a dividend at about this time next year. The group provides software to the hospitality and leisure sectors that helps operators manage their tills and check the performance of all their outlets. In the year to 31 March 2006, sales increased 14 per cent to £18m, but we don't yet know exactly how much profit has been generated. Wait for further clarity before buying.

MILLENNIUM & COPTHORNE

Anyone hoping to see M&C taken over by a larger hotel chain or carry out major asset disposals the way InterContinetal has done will be disappointed. M&C is 52 per cent owned by Kwek Leng Beng, its Singaporean chairman. Even so, on a long-term view, M&C offers good value. Its considerable freehold asset base underpins the company's value while management is doing a good job running the portfolio of 91 hotels. Hold.

HUNTSWORTH

Huntsworth, the international public relations group, is benefiting from all the deals being done in the City. It makes around 45 per cent of its sales from financial PR which sees the group earning juicy fees by spinning for the various parties involved. Trading at 12.5 times forward earnings, the shares offer good value. Buy.

EUROPEAN GOLDFIELDS

European Goldfields has good news - its recently submitted business plans for the Skouries and Olympias projects have been endorsed by the Greek government. This development is a significant milestone for the company and validates its approach of working closely with both the government and local community. Buy.

Oil's well for shareholders who've struck black gold

Just as it looked as if things could not get any better at Soco International, the oil explorer put out a drilling statement this week saying its Vietnam prospect is likely to be even bigger than originally thought. The offshore project in the Cu Long Basin has become a serious asset for Soco, where two years ago the shares cost 320p. This week's news sent them soaring 87p to 1,317p.

In the oil business it is one thing to have a big reservoir of "black gold" but another to be able to get it out of the ground at a cost that allows the whole project to become commercially viable. It is on this point that Regal Petroleum came unstuck last year. But Soco will have no such problem. Its Te Giac Trang well in Vietnam boasts a flow rate of about 17,500 barrels of oil per day. That makes it a world-class well.

Soco shares will certainly lose ground should the company suffer a drilling disappointment at one of its sites. But on a long-term view, they look set to go higher. Hold.

The above recommendations are taken from the daily Investment Column.

PROMOTED VIDEO
Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Sport
Shinji Kagawa and Reece James celebrate after the latter scores in Manchester United's 7-0 victory over LA Galaxy
football
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
Life and Style
fashion Designs are part of feminist art project by a British student
News
Very tasty: Vladimir Putin dining alone, perhaps sensibly
news
Life and Style
Listen here: Apple EarPods offer an alternative
techAre custom, 3D printed earbuds the solution?
Arts and Entertainment
Top guns: Cole advised the makers of Second World War film Fury, starring Brad Pitt
filmLt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a uniform
News
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
News
The University of California study monitored the reaction of 36 dogs
sciencePets' range of emotions revealed
Arts and Entertainment
A scene from Shakespeare in Love at the Noel Coward Theatre
theatreReview: Shakespeare in Love has moments of sheer stage poetry mixed with effervescent fun
News
Joining forces: young British men feature in an Isis video in which they urge Islamists in the West to join them in Iraq and Syria
newsWill the young Britons fighting in Syria be allowed to return home and resume their lives?
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Transition Manager - Stirling - Banking - £400

    £400 - £420 per day: Orgtel: IT Transition Manager - Banking - Scotland - £400...

    Test Lead - Financial Reporting - Banking - London

    £350 - £400 per day: Orgtel: Test Lead, London, Banking, Financial Reporting, ...

    Business Analyst, Retail Bank, £375-400p/d

    £375 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...

    PMO Analyst - London - Banking - £350 - £400

    £350 - £400 per day: Orgtel: PMO Analyst - Banking - London - £350 -£400 per d...

    Day In a Page

    Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

    Screwing your way to the top?

    Good for Lana Del Rey for helping kill that myth, says Grace Dent
    Will the young Britons fighting in Syria be allowed to return home and resume their lives?

    Will Britons fighting in Syria be able to resume their lives?

    Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
    Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

    Beyoncé poses as Rosie the Riveter

    The wartime poster girl became the ultimate American symbol of female empowerment
    The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

    The quest to find the perfect pair of earphones

    Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
    US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

    Meet the US Army's shooting star

    Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
    Climate change threatens to make the antarctic fur seal extinct

    Take a good look while you can

    How climate change could wipe out this seal
    Should emergency hospital weddings be made easier for the terminally ill?

    Farewell, my lovely

    Should emergency hospital weddings be made easier?
    Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

    Crowdfunded novel nominated for Booker Prize

    Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
    Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

    Vladimir Putin employs a full-time food taster

    John Walsh salutes those brave souls who have, throughout history, put their knives on the line
    Tour de France effect brings Hollywood blockbusters to Yorkshire

    Tour de France effect brings Hollywood blockbusters to Yorkshire

    A $25m thriller starring Sam Worthington to be made in God's Own Country
    Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

    Will The Minerva Project change the face of higher learning?

    The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
    The 10 best pedicure products

    Feet treat: 10 best pedicure products

    Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
    Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

    Commonwealth Games 2014

    Great Scots! Planes and pipers welcome in Glasgow's Games
    Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

    Jack Pitt-Brooke

    Manchester City and Patrick Vieira make the right stand on racism
    How Terry Newton tragedy made iron men seek help to tackle their psychological demons

    How Newton tragedy made iron men seek help to tackle their psychological demons

    Over a hundred rugby league players have contacted clinic to deal with mental challenges of game