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The Expert View: Imagination, G4S and GlaxoSmithKline

A roundup of some of the best analyst commentary on shares, including Petrofac and Drax Group.

Key stats
Market capitalisation£1,387m
No. of shares out265m
No. of shares floating236m
No. of common shareholdersnot stated
No. of employees967
Trading volume (10 day avg.)1m
Profit before tax£20m
Earnings per share7.45p
Cashflow per share9.56p
Cash per share25.08p

*Correct as at 13 Feb 2013

Deutsche Bank lifts target price for Imagination Technologies

Deutsche Bank analyst Johannes Schaller has increased his target price for Imagination Technologies (IMG.L) amid signs that Samsung may turn to the chipmaker for its latest smartphone.

'Over 2012 Imagination's share price underperformed the European Tech sector by 50%, partially due to IMG losing its mobile graphics design win at Samsung's highend Galaxy smartphone range to competitor ARM,' Schaller said.

'With IMG management commenting on re-gaining momentum at Samsung in FY14e (April end) and Samsung not confirming ARM as the graphics provider at the launch of its latest high- end smartphone processor, we are now getting more confident in potential share re-gains for IMG here.'

Schaller's target price rises from 520p to 600p.

Shares in the group closed at 527p on Wednesday, up 4.7p or 0.9%.

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Key stats
Market capitalisation£4,001m
No. of shares out1,404m
No. of shares floating1,390m
No. of common shareholdersnot stated
No. of employees657000
Trading volume (10 day avg.)3m
Profit before tax£207m
Earnings per share14.73p
Cashflow per share33.17p
Cash per share35.82p

*Correct as at 13 Feb 2013

G4S bill: it could have been worse

JP Morgan analyst Robert Plant has reiterated his 'overweight' recommendation on G4S (GFS.L) after its final bill for messing up the Olympics security staffing came in well below the worst-case scenario.

The settlement with the London Olympic Committee will see G4S pay £88 million, which is higher than the £50 million initially taken as an exceptional last summer. However, Plant noted that it was much less than the £107 million worst-case scenario.

'Some politicians such as Keith Vaz, the chairman of the Home Affairs Committee, had demanded that G4S also hand back the £57 million management fee,' he added.

'We think the news is a small positive as it will help put the Olympic story behind G4S and the final settlement is smaller than it could have been. We have an Overweight on G4S and believe the shares will continue to recover as the negative from the Olympics fades,' he concluded.

Shares in the group closed at 283.7p on Wednesday, up 3.3p or 1.2%.

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Key stats
Market capitalisation£71,877m
No. of shares out4,904m
No. of shares floating4,895m
No. of common shareholdersnot stated
No. of employees97389
Trading volume (10 day avg.)7m
Profit before tax£4,565m
Earnings per share89.53p
Cashflow per share123.67p
Cash per share88.36p

*Correct as at 13 Feb 2013

Drug approvals key for GlaxoSmithKline

Berenberg Bank analyst Alistair Campbell has reiterated his 'buy' recommendation on pharmaceuticals giant GlaxoSmithKline (GSK.L) in spite of its subdued outlook for the year ahead.

At its full-year results presentation last week GSK said that it expects earnings per share growth of 3-4%, with turnover growth of about 1%. The company also announced a £1.5 billion programme, which should generate annual savings of over £1 billion by 2016.

Calling the trading update a quiet start to an exciting year for the group, the analyst noted that approval of a raft of new drugs could galvanise the shares.

'Our investment thesis relies on GSK delivering the next leg of growth,' he said. '2013 will be key in terms of securing this future revenue through drug approvals – highlights include Relvar, dolutegravir, albiglutide and the BRAF/MEK inhibitors.'

Shares in the group closed at £14.55 on Wednesday, down 2p or 0.1%.

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Key stats
Market capitalisation£5,744m
No. of shares out346m
No. of shares floating249m
No. of common shareholdersnot stated
No. of employees15400
Trading volume (10 day avg.)1m
Turnover3,705m USD
Profit before tax345m USD
Earnings per share1.00 USD
Cashflow per share1.15 USD
Cash per share2.99 USD

*Correct as at 13 Feb 2013

Give Petrofac another look, UBS urges

Investors shouldn't let gloom surrounding the oil engineering and construction market colour their view of Petrofac (PFC.L), according to UBS analyst Amy Wong, who has upgraded the group from 'neutral' to 'buy'.

'We think Petrofac has a solid business model within the onshore engineering & construction (E&C) end market,' she said. Her comments follow yesterday's decision by Italy's Saipem to trim its 2012 dividend by 2.9% after its oil services company slashed its earnings guidance.

'While Saipem’s warning may have cast doubt on the business model, we think that Petrofac’s portfolio of projects is profitable and the order intake momentum is strong and hence we upgrade the stock to Buy,' she added. Her target price rises from £15.75 to £18.75.

Shares in the group closed at £16.74 on Wednesday, up 51.4p or 3.2%.

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Key stats
Market capitalisation£2,213m
No. of shares out365m
No. of shares floating363m
No. of common shareholdersnot stated
No. of employees1150
Trading volume (10 day avg.)1m
Profit before tax£465m
Earnings per share126.42p
Cashflow per share141.99p
Cash per share63.81p

*Correct as at 13 Feb 2013

Seymour Pierce downgrades Drax

Seymour Pierce analyst Angelos Anastasiou has downgraded power-plant operator Drax Group (DRX.L) from 'reduce' to 'sell'.

Anastasiou warned that its plans to convert the Drax Power Station in Selby, North Yorkshire, to burn biomass were not without risk. 'The group remains exposed to carbon costs even after the planned unit conversions,' he added.

'Hence, we remain slightly wary and given that there is now 14% downside to our unchanged target price of 524p, we are moving to sell (from reduce). FY12 results are due on 19 February.'

Shares in the group closed at 605p on Wednesday, down 7.6p or 1.2%.

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