Market Report: Downbeat analysts hurt microchip duo

 

The UK microchip designers Imagination Technologies and Arm Holdings were shaken yesterday after a downbeat note from UBS. David Mulholland at the bank said FTSE 250-listed Imagination, which designs mobile graphics and microprocessor chips, is set to see a decline in business from major customer MediaTek.

Mr Mulholland thinks MediaTek, which licenses designs from Imagination to build smartphone and tablet semiconductors, will diversify its graphics chips, adopting Arm designs alongside Imagination’s. While licensing fees will remain unchanged, it means royalties will be hit as fewer Imagination chips make it into finished products.

With first-half results due next month, Mr Mulholland reiterated a sell rating, and Imagination slid 6.7p to 263.2p.  Arm also fell as Gareth Jenkins at UBS warned investors that graphics chips have a lower “stickiness” compared with processors, meaning customers may chop and change. Arm fell 6.99p to 969p.

The outsourcing giants G4S and Serco were in trouble after the Serious Fraud Office confirmed it has opened a criminal investigation into the pair over electronic tagging contracts. It follows an audit earlier in the year that suggested the companies overcharged the taxpayer by billing for tagging criminals who were either dead, in jail or not tagged in the first place. G4S dropped 0.9p to 253.8p while Serco fell 6.5p to 545.5p.

Aerospace engineer Meggitt continued to fall after warning on Friday that profits for 2013 would be hit by a slowdown in trading activity. Jefferies called the company “the principal laggard within the UK industrials sector”, as the shares dropped 14.4p to 494.5p.

Turbulence at Ryanair pushed the FTSE 100’s airlines into freefall yesterday, after  the budget carrier issued its second profit warning in as many months, saying downward pressure on fares would hit profits.

The announcement knocked the confidence of the wider travel sector, with easyJet and British Airways owner IAG both slipping. EasyJet lost 52.9p to 1243p while IAG fell 5.6p to 348.2p. Travel agent Thomas Cook also took a battering, dropping 3.9p to 140.5p.

Troubled Indonesian miner Bumi finally got some good news from scribblers at Liberum. The business’s founders, the Bakrie family and Nat Rothschild, have been warring over what to do with the company for months, but a split from the Indonesian family is now on the cards. Richard Knights at Liberum is expecting good news on the split’s progress after interim results were pushed forward by a week.

Mr Knights said: “The big news to our minds is the acceleration of publishing of these results, suggesting the separation deal may well be completed before year-end.” Mr Knights rated Bumi a buy and the company added 7.5p to 202p.

The wider mining sector was also buoyant. Anglo American was up 25p to 1485p after it completed the sale of its Amapá iron ore operation to Zamin Ferrous following regulatory approval. Antofagasta added 18.2p to 855.2p and Rio Tinto jumped 105.5p to 3289.5p, with both among the FTSE 100 index’s biggest risers. The index added 28.88 points to 6763.62.

HSBC shot to the top of the climbers after a strong set of third-quarter results. Despite revealing that it had been dragged into an ongoing currency fixing probe, the bank’s investors cheered the news that profits soared 30 per cent in the quarter.

But Michael Hewson, chief market analyst at CMC markets, said: “While on the face it, the numbers look good, revenues were down from the same period a year ago, even though profits were higher, suggesting that the cost savings programme is driving the improvement, and not an increase in turnover.” HSBC jumped 14.75p to 702p.

Royal Bank of Scotland slid after a downgrade from Oriel and price cuts by UBS, Société Générale  and Barclays. Vivek Raja at Oriel reckons that “the accelerated loss of ‘bad bank’ assets will dilute long-term shareholder value” and squeeze profits. RBS fell 8.3p to 331.7p.

Scribblers at Panmure were keen on Countrywide, the estate agent. Keith Baird at the broker reiterated his buy rating and upped his forecast for growth in transactions. Countrywide added 8p to 559p.

Buy: BT

Tune in to BT, say the analysts at HSBC. After a strong set of results last week that highlighted customers flocking to BT’s new sports channel, the bank reckons “content investment is showing early signs of vindication”. The UK fixed-line market also continues to be attractive. HSBC sets a target of 440p for shares that closed yesterday at 377.2p.

Sell: Telecity

Ditch Telecity, says Liberum. The data centre company yesterday said it was on track to meet targets after winning the highest number of orders for any quarter this year in the last three months. But Liberum says the list of doubters is growing in the face of “lacklustre” returns, increasing concern over capacity and pricing, and the surprise departure of the chief financial officer last week. It sets a target price of 720p for stock currently at 740p.

Hold : Glencore Xstrata

Goldman Sachs thinks investors should hang on to commodities giant Glencore Xstrata, saying the mining and trading group remains attractive on two key fronts: it is well-placed to grow earnings, and has a strong free cashflow. Goldman thinks it is one to watch, and puts a target price of 355p on stock at 335.4p.

Start your day with The Independent, sign up for daily news emails
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.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor