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The Expert View: Imagination, G4S and GlaxoSmithKline
by Harry Brooks on Feb 14, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, including Petrofac and Drax Group.
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%.
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%.
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%.
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%.
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%.