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
News
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own