Friday tips round-up: Imagination, Premier Oil, Smith&Nephew

7th Feb 2014 07:11

Shares of Imagination Technologies jumped on Thursday after it confirmed that Apple had opted to extend a long-running trading relationship with the firm which dates all the way back to 2007. The collaboration is an odd one, not least because the US outfit has an almost 9% stake in the firm. It buys its graphics chips for the ubiquitous iPhones and iPads from the British company, accounting for at least half of revenues. The terms of the extended agreement are not known, although it is thought to apply for a number of years with the specific commercial terms little changed. Nonetheless, it comes as a significant vote of confidence at a moment when there was talk that Imagination had some more bad news in store for shareholders. The agreement with the US technology icon offers a degree of support and Imagination has room to grow in areas such as the MIPS Technologies business bought early last year. Yet selling on 21 times´ earnings it is still too early to chase the shares, writes The Times´ Tempus column.Orthopedic products manufacturer Smith & Nephew has a solid market position and is seeing an acceleration in revenues. It is the largest maker of artificial joints, such as hips and knees, in Europe. This is an attractive business as the proportion of the world´s population suffering from ageing and obsesity continues to grow. That trend is already impacting on its financial results. Strong sales of artifical joints Stateside saw revenues accelerate to a 6% pace in the final quarter, after a rise of 2% in the first half. Furthermore, it sports medicine joint repair and advanced wound management segments saw double-digit gains in revenues. To top it all off, in the last year alone the firm invested $231m on research and design and recently agreed to purchase US outfit Arthrocare for $1.7bn, further expanding its armoury of products. The market has rewarded the company with a 22.5% rise in its shares over the last 12 months, but at 17 times´ forecast earnings - falling to 16 times next year - current growth rates seem insufficient to justify the current rating. Hence, the shares are no better than a 'hold' for now, the Daily Telegraph´s Questor writes. Oil exploration outfit Premier Oil´s update on its Catcher field in the North Sea and its stake in the Sea Lion asset off the Falklands was positive. The company believes it can increase the quantity of recoverable oil at the former without little additional investment and will keep its 50% stake absent a compelling offer from one of the oil majors. Sea Lion is more complex. On the one hand, Premier Oil confirmed that it is looking to bring a bigger partner on board to fund its development, which is projected to reach a total of $5.2bn. In any case, the company´s business model and balance sheet are strong enough to see the project through. However, the firm is in the midst of finding a new Chief Executive, which may take time to arrive. Then there is the political risk which emanates from Argentina given the appaling state of its economy. Both factors are imponderables and mitigate against a purchase despite the shares continuing to trade below analysts' estimates of net asset value, Tempus writes. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB