Imagination Tech turning a corner but Investec stays at 'hold'

17th Sep 2014 10:14

A corner is being turned at Imagination Technologies after an in-line first quarter, according to Investec, though the broker kept a 'hold' recommendation on the stock ahead of an uncertain second half.The company said that trading in the licensing division during the first quarter has been good with "encouraging levels of activity" across all three main internet protocol (IP) product areas and its customer base.Royalty revenues have been in line with forecasts, reflecting growth from some partners as well as the impact from known product transitions with others, it said.Investec said that the trading update "appears in line with the progression of expectations" since Imagination's annual results in June.Negative comments in the statement about the recent strength in sterling and non-MIPS shipments being weighted towards the second half (H2) "should already be baked into consensus", the broker said."While there is a sense of a corner being turned after a torrid 18 months, we remain on 'hold' because second-half GPU [graphics processing unit] volumes implied in consensus look a difficult ask to us, even with any iPhone 6 ramp and share gain in Mediatek," Investec said.The broker has trimmed its target price for the shares from 250p to 220p.The stock was up 4.6% at 197.6p in morning trade.