Imagination Technologies still a 'buy' despite disappointing interims, says Investec

Never mind the numbers, look at the intellectual property, advises Investec, as it reiterates its 'buy' recommendation of Imagination Technologies.

Interims from Imagination were 'very weak', Investec said

Interims from chip designer Imagination Technologies (LON:IMG) were “very weak”, according to Investec, with disappointment in all revenue lines, while control over the operating expenditure base was merely a damage limitation exercise.

Unit volume declines are alarming, but especially for the MIPS division. Nevertheless, Investec is sticking with its 'buy' recommendation, saying the company is no stranger to reporting disappointing numbers, having done so for several years.

The broker says the steps needed to run a company such as Imagination, with its trove of intellectual property, in a financially disciplined way appear obvious, and a catalyst for change is evident.

Last month Liberum raised its target price and forecasts for trendy retailer SuperGroup (LON:SGP), but the time has come to take profits, it says.

Analyst Tom Gadsby seems to be conflicted, however, advising the broker's clients to bank gains, yet the rating merely moves from 'buy' to 'hold'.

The shares are up 85% since Gadsby upgraded to a 'buy' rating a year ago so the analyst has every right to treat himself to a celebratory pre-Christmas tipple, and with the shares trading at a 50% premium to the long-term average price/earnings ratio, he sees more risk to the downside in the absence of positive catalysts.

The price target is cut to 1,500p; the shares currently trade at 1,492p, down 130p, or 8% today.

Barclays has cooled on UK specialist lenders OneSavings Bank (LON:HSB) and the Paragon Group of Companies (LON:PAG).

Both are downgraded from 'overweight' to 'equal weight', as potential changes to the buy-to-let (BTL) market suggested by the Basel Committee last week “may be a game changer”.

“Whilst it is likely that the Basel proposals may be watered down, we believe some incremental capital against BTL is increasingly probable, reducing future ROEs [returns on equity],” Barclays reckons.

Hargreaves Services (LON:HSP) is facing global head-winds, according to Jefferies, which has chopped its price target from 325p to 270p.

The bulk materials processor and transporter faces challenging global coal and steel markets, with volumes and prices declining.

The broker has reduced its fiscal 2016 earnings forecasts by 44%, but sticks with its 'hold' recommendation, saying the group retains a strong financial position, with minimal net debt, while it continues to make progress on property development opportunities.

Yesterday's announcement of positive data from the RENEW study of the PneumRx coil implant has increased Deutsche Bank's confidence in the base business of BTG (LON:BTG).

The broker has reiterated its 'buy' recommendation and 755p price target.

“Positive data from the RENEW Phase III trial removes a key remaining risk to launch. As a result, we have increased confidence that the shares are

Citigroup has initiated coverage on roadside recovery outfit The AA (LON:AA) with a 'buy' rating, and suggests that investors revisit the investment case now the shares – down 21% year-to-date- have fallen to a realistic level (280p).

Citi sees the shares driving on to 390p in the next 12 months, based on a discounted cash flow (DCF) model with reference to the valuations of its peers.

“We would highlight however we use arguably conservative DCF assumptions and do not factor in any potential upside from new management growth initiatives,” said Citi analyst Christopher McVey.

Among the small caps, Cenkos has reiterated its 'buy' recommendation for ANGLE (LON:AGL) after the medtech company secured the first commercial sales of its Parsortix device for research use.

“We view this latest milestone as highly positive,” the broker said.

“Although the company is not disclosing the names of the commercial customers, we understand that several sales have been made to various research centres, following positive findings from the centres’ evaluation of the system,” Cenkos continued.

The broker sees ANGLE gradually growing sales for research use and is forecasting revenue of half a million pounds for fiscal 2016, which is barely scratching the surface of a research market Cenkos puts at £250mln. 

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