Market Report: Imagination has Apple to thank as shares shine
Friday 04 March 2011
As the blue-chip index surged back above the 6,000-point mark, Imagination Technologies found itself in demand yesterday in the wake of Apple announcing its latest iPad. With analysts in agreement that its technology has been used in the newest iteration, revealed on Wednesday evening, the graphic-chip designer shifted up 17.4p to 448.4p.
Traders said the rise was largely down to hopes that the tablet computer will blow away the competition, with one saying the stock received particular support from US investors who "seem to understand the Apple products more than the UK".
Evolution Securities' Philip Sparks was certainly positive, describing the iPad 2 as "very impressive next to the latest wave of Android tablets". The analyst said that although the "news will not have a major impact on volume expectations for Imagination... it will give a great deal of support to the average royalty rate."
However, the announcement did not persuade Seymour Pierce's Ian Robertson to change his "sell" advice on the group. Despite saying the iPad 2 "is solid evidence that Imagination's graphics technology is still at the leading edge", Mr Robertson maintained his bearish stance largely because of "the issue that [the company's] profits and valuation from the video and graphics business is being potentially fruitlessly invested in the non-graphics technologies that have a relatively low chance of success".
On the other hand, Apple's announcement did not prevent ARM Holdings creeping back 1p to 595p, even though its technology is also believed to be in the device.
Overall, the FTSE 100 added 90.2 points to close at 6,005.09, its highest level for eight sessions. Further good employment data from the US played a part, as did a dip in the price of oil following raised hopes of a peaceful end to the turmoil in Libya.
TUI Travel has been one of the groups which have slipped back recently as a result of the unrest in the Middle East and North Africa, but yesterday the tour operator jumped up 10.7p to 241.8p. As well as citing a relief rally, market voices also said investors were heartened by the fact that it and Thomas Cook – 4.5p stronger at 189.4p – are adding a surcharge for fuel to their prices. Predicting an increase in earnings as a result, analysts from Royal Bank of Scotland said they did not believe either "would do it if the bookings market wasn't reasonably robust".
Meanwhile, TUI's parent company Tui AG revealed it had disposed of some of its shares in the Hapag-Lloyd shipping group while approving a potential IPO that could see its stake decrease further. Speculation has been rife inrecent months that the German company could use the proceeds from selling its shares to buy the portion of TUI Travel that it does not already own.
On the FTSE 250 there was a surge of 6.6p to 340p for Soco International following positive news from a number of development wells off the shore of Vietnam and the re-emergence of vague takeover speculation.
There was little cheer to be found among the pub groups, with Greene King and Marston's driven back 3.1p to 458.6p and 3.25p to 93.7p respectively. Both had their ratings cut to "hold" from "buy" by Altium Securities' Greg Feehely, as did Mitchells and Butlers, though it pushed up 2.1p to 311.9p.
Mr Feehely said conditions would only get tougher for the sector thanks to an increase in "rising supplier prices [particularly beer] and the soon-to-be-announced alcohol duty escalator", as well as the VAT rise.
In another hectic session for company updates, IMI took pole position on the top-tier index with the engineer – 58p higher at 943p – revealing a 44 per cent profit rise.
Following in its wake was Amec as its preliminary results managed to beat expectations. With earnings in 2010 nearly a third higher than the yearbefore, the oil services group – which announced it was in the market for making major acquisitions – advanced 61p to 1,190p.
The insurer Aviva rose 7.6p to 457.3p after it managed to beat the market's expectations with its numbers, while Kazakhmys was lifted 50p to 1,487p as the miner looked forward to a strong future for copper.
Meanwhile, on the second line, both Cobham and PartyGaming were high up the leaderboard – climbing 15.7p to 224.6p and 16p to 191p respectively – after their annual numbers, though the former warned that the lack of growth in US defence spending will see its revenue take a hit this year.
At the other end, Spirent Communications declined 2.8p to 152.5p even though Panmure Gordon's George O'Connor praised its "very strong" final results and its "confident 'on the front foot' outlook statement".
Trinity Mirror plummeted 18.25p to 66p after the small-cap publisherreleased its final results, despite its full-year operating profits having increased by 17 per cent, with investors deserting the group following its cautious outlook for the year ahead.
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