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The Expert View: Imagination, TUI Travel and Smith & Nephew

The best analyst commentary on shares, also featuring Homeserve and Greene King.

Key stats
Market capitalisation£1,057m
No. of shares out265m
No. of shares floating235m
No. of common shareholdersnot stated
No. of employees967
Trading volume (10 day avg.) 1m
Turnover£128m
Profit before tax£20m
Earnings per share7.45p
Cashflow per share9.56p
Cash per share25.08p

*Correct as at 4 Dec 2012

FinnCap cuts target price for Imagination Technologies

Lorne Daniel, analyst at FinnCap, has slashed his target price for chipmaker Imagination Technologies (IMG.L) amid reports that Intel is to stop using its graphics chips.

'The shares were hit in September by news that Texas Instruments was ceasing development of the OMAP mobile system-on-chips,' Daniel said. 'Prior to that, Samsung dropped IMG’s graphics chips for a combined ARM CPU/GPU in its core Exynos SoC.

'Now some leaked presentation slides in the US have added credence to the rumours that Intel will also be dropping IMG’s graphics chip designs too. These rumours have been floating around all year but would still be a shock.'

Daniel noted that the veracity of the leaked slide remains unknown, but he said graphics is a weakness in Intel's mobile processors, suggesting it might look to make more of its R&D team to develop this area.

His target price falls from 500p to 375p, and he reiterated a 'hold' recommendation.

Shares in the group closed at 402.91p on Tuesday, down 8.59p or 2.09%.

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Key stats
Market capitalisation£3,113m
No. of shares out1,118m
No. of shares floating643m
No. of common shareholdersnot stated
No. of employees53247
Trading volume (10 day avg.) 2m
Turnover£14,687m
Profit before tax£89m
Earnings per share7.96p
Cashflow per share29.07p
Cash per share82.65p

*Correct as at 4 Dec 2012

Shore Capital backs TUI Travel as profits surge

Karl Burns, analyst at Shore Capital, has reiterated his 'buy' recommendation on TUI Travel (TT.L) following an 8% jump in full-year profits.

In the year to the end of September pre-tax profits came in at £390 million, on revenues that fell 2% to £14.46 billion.

The group, which owns First Choice and Thompson, said poor weather over the summer in the UK, Germany and Nordic countries drove growth, though its French business continued to under perform.

Burns said Thomas Cook's ongoing troubles, TUI's strong management, and its growth potential from increased sales of differentiated and online products all support his 'buy' recommendation.

Shares in the group closed at 277.75p on Tuesday, up 8.75p or 3.25%.

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Key stats
Market capitalisation£6,008m
No. of shares out901m
No. of shares floating891m
No. of common shareholdersnot stated
No. of employees11000
Trading volume (10 day avg.) 2m
Turnover2,667m USD
Profit before tax364m USD
Earnings per share0.41 USD
Cashflow per share0.58 USD
Cash per share0.13 USD

*Correct as at 4 Dec 2012

Morgan Stanley says wait for cheaper entry to Smith & Nephew

Michael Jungling, analyst at Morgan Stanley, has reiterated his 'equal weight' recommendation on medical devices maker Smith & Nephew (SN.L), urging investors to wait for a better entry window following a strong 2012 for the share.

Although Jungling said S&N could potentially be an attractive value play in 2013, he said current growth expectations look optimistic.

'While the opportunities for further margin expansion through its cost restructuring program remain intact and there is potential to return excess cash to shareholders, we remain concerned consensus may be too bullish on CY13E Orthopedic Recon growth,' he said.

The analyst said growth in this sector could slow to 0% following a return to growth of 2% this year. 'The investment community assigns a lot of weight to the Orthopedics growth rate and as such, we believe disappointment in Q1 CY13 could result in overall weakness of the global orthopedics peer group,' he said.

Shares in the group closed at 667.77p on Tuesday, up 5.27p or 0.8%.

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Key stats
Market capitalisation£797m
No. of shares out330m
No. of shares floating285m
No. of common shareholdersnot stated
No. of employees4036
Trading volume (10 day avg.) 0m
Turnover£535m
Profit before tax£114m
Earnings per share34.64p
Cashflow per share43.00p
Cash per share16.31p

*Correct as at 4 Dec 2012

Seymour Pierce stays bearish on Homeserve

Caroline de La Soujeole, analyst at Seymour Pierce, has reiterated her 'reduce' recommendation on emergency home repairs business Homeserve (HSV.L), saying the recent surge in the shares isn't really justified.

Half-year results to the end of September showed sales up 8% to £229.6 million and adjusted pre-tax profits of £25.6 million (+9%). The shares have outperformed the sector by 7% over the past month, having leapt about 10% in the wake of the results.

However, de La Soujeole warned the UK business remains problematic. 'The 7% share price outperformance over the past month is hard to justify, in our view, given the continued uncertainty surrounding the core UK business.

'Profitability will remain turbulent until the impact of the FSA fine has played out and the structure of the ongoing business model is understood. A REDUCE recommendation is warranted until visibility improves.'

Shares in the group closed at 240p on Tuesday, down 4.1p or 1.68%.

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Key stats
Market capitalisation£1,339m
No. of shares out218m
No. of shares floating206m
No. of common shareholdersnot stated
No. of employees11065
Trading volume (10 day avg.) 0m
Turnover£1,140m
Profit before tax£102m
Earnings per share47.50p
Cashflow per share73.38p
Cash per share17.00p

*Correct as at 4 Dec 2012

Peel Hunt says 'buy' Greene King

Nick Batram, analyst at Peel Hunt, has reiterated his 'buy' recommendation on pubco Greene King (GNK.L) following what he called a solid trading update in the context of a harsh trading backdrop.

Adjusted pre-tax profits for the 24 weeks to 12 October came in at £82.7 million, beating Batram's £80 million estimate. The interim dividend rises 6.7% to 7.15p.

'Greene King has delivered another strong retail performance and there may be room to nudge our numbers higher,' the analyst said. 'The trading backdrop remains challenging but the group has well-positioned brands and a well-executed strategy. We continue to view Greene King as the core buy in the sector.'

Shares in the group closed at 615.5p on Tuesday, up 5.5p or 0.9%.

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