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Cannacorde note..... We are reducing our Cineworld recommendation to SELL from Buy with a new, lowered share price target of 535p (from 620p), implying c10% downside. It’s time to take profits. Cineworld’s share price is up 75% over the last 12 months driven in large part by this year’s fantastic film slate that climaxes this quarter with three blockbusters: Bond Spectre, Hunger Games: Mockingjay Part 2 and Star Wars: the Force Awakens yet Cineworld traditionally under-indexes versus Odeon and Vue on blockbusters and our research suggests this quarter will be no exception. This quarter is as good as it gets for the cinema industry. Next year's film slate is less strong and it could be a 'crowded trade' when the market wakes up to a duller outlook not helped by the distractions of the Olympics and the UEFA European Football Championships next summer.Our analysis round the three autumn blockbusters shows that Odeon is more aggressive on the allocation of screens and Vue is more aggressive on price. Cineworld does not believe in revenue yield optimization. Until it does, we believe it will continue to underperform during industry peaks. We are coming to the view that Cineworld is better at building cinemas in unsophisticated East Europe where competition is weak than optimizing performance from its sophisticated UK portfolio where competition is intense. We estimate Cineworld could be missing out on as much as £2.2m of additional EBITDA per blockbuster in the UK. Assuming a blockbuster/quarter that puts Cineworld’s missed UK opportunity at £8.8m. For 4Q15, with three potential blockbusters, the scale of the missed opportunity may be as much as £6.6m. To put this in context, the UK accounts for c65% of Cineworld EBIT and we are forecasting an H2 EBIT contribution of £44.7m for the UK and £65.4m for group EBIT. It’s a very material lost opportunity for Cineworld. Potential year-end upgrades should not be mistaken for an excellent performance: a rising tide lifts all ships. Our new 535p target price valuation is equivalent to 18.8x PER, 10.0x EV/EBITDA, an 8.0% FCF yield and 3.0% dividend yield for FY15E. The current share price of 594p values the stock on a P/E of 20.9x for FY15E, 18.9x FY16E, an EV/EBITDA of 10.9x falling to 10.0x, a FCF yield of 7.2% rising to 7.9% and dividend yield of 2.7% rising to 2.9% over the same period. It now looks an expensive stock following its re-rating over the last 12 months.

Missed this the other day, research from Hargreaves L HL COMMENT (21 OCTOBER 2015) Q3 figures from ARM show the value of their royalty stream racing ahead of broader industry semiconductor sales growth. In Q3, dollar processor royalty revenues rose by 37% year on year. Processor licensing revenues were up 5% and overall Group revenues in US$ rose by 17% to $375.5m. Profits before tax and earnings per share rose by 27% and 29%, respectively for the quarter, and by a similar amount for the year to date. ARM are seeing higher chip values and higher royalty percentages per chip as shipping volumes of their newer, most capable processor designs ramp up. They have reiterated their previous comment that they expect their medium term royalty income to outpace the broader semiconductor market by around 15% per annum, with licensing revenues rising at a 5-10% pace. Our View: At over 1000p, ARM shares cost even more than a pint of Stella Artois. Trading on over around 30x current consensus earnings, few would consider them to be in the bargain basement on that measure either. Not many companies can credibly suggest that their revenues will outpace their markets by 15% per annum over the medium term, without inducing a round of tittering from the back of the room. But with royalty income rising by 37% at a time when much of the semiconductor industry is in sackcloth and ashes, ARM can do just that. Last year, ARM spent £224m, or 28% of sales on Research and Development. That generates a huge amount of intellectual property and creates barriers to entry. Customers come to ARM because they know they will get the benefit of that investment, and that the cost of licensing a processor design from ARM and then paying a small royalty for each silicon chip they produce is a lower risk model than spending tens or even hundreds of millions of dollars to design their own. ARM has always designed processors with very low power consumption. That allowed them to dominate the market for processors used in smartphones, where battery life is so important. Now the group is expanding its market presence across other categories, from servers to the connected devices that make up the Internet of Things, where devices communicate with each other, but hopefully get no cleverer than we want them to be. Their latest designs carry higher royalties and these are now driving revenues strongly forward. The huge growth in licence volumes seen in recent years gives ARM the confidence in their future royalty incomes, because typically, royalties arrive a few years after a licence was bought, when the finished product moves to market. That ought to give ARM good visibility of their future growth. We think ARM is a gem. It leads the world in its field, and the field is growing quickly. Mobile computing will grow for years to come, and the spread of ARM cores into new product categories only increases the growth opportunity. So although ARM is not obviously che

GKN GKN PLC GKN plc (LON:GKN)‘s stock had its “buy” rating restated by investment analysts at Beaufort Securities in a research note issued to investors on Friday, MarketBeat.com reports. In other news, insider Sclater,Jos bought 7,792 shares of the business’s stock in a transaction dated Friday, September 25th. The shares were acquired at an average price of GBX 255 ($3.94) per share, for a total transaction of £19,869.60 ($30,672.43). Also, insider Reynolds Smith,Andrew sold 168,353 shares of GKN plc stock in a transaction dated Thursday, September 10th. The stock was sold at an average price of GBX 284 ($4.38), for a total value of £478,122.52 ($738,071.19). A number of other analysts also recently issued reports on GKN. Credit Suisse reiterated an “outperform” rating and issued a GBX 410 ($6.33) target price on shares of GKN plc in a report on Wednesday, July 1st. Investec restated a “buy” rating and set a GBX 410 ($6.33) price objective on shares of GKN plc in a report on Thursday, July 2nd. JPMorgan Chase & Co. reiterated an “overweight” rating and issued a GBX 426 ($6.58) target price on shares of GKN plc in a report on Tuesday, July 7th. RBC Capital reissued a “sector perform” rating and issued a GBX 330 ($5.09) price target on shares of GKN plc in a research report on Friday, July 10th. Finally, Numis Securities Ltd reaffirmed an “add” rating and set a GBX 400 ($6.17) target price on shares of GKN plc in a research report on Monday, July 20th. Two equities research analysts have rated the stock with a sell rating, five have issued a hold rating and fourteen have issued a buy rating to the company. GKN plc has an average rating of “Buy” and a consensus target price of GBX 368.94 ($5.70). Shares of GKN plc (LON:GKN) traded up 2.09% during trading on Friday, hitting GBX 293.50. 7,402,048 shares of the company’s stock were exchanged. The firm has a 50-day moving average price of GBX 275.95 and a 200-day moving average price of GBX 321.58. GKN plc has a one year low of GBX 248.56 and a one year high of GBX 389.00. The stock’s market cap is GBX 4.83 billion. GKN plc is a worldwide engineering business, participated in the design, fabrication and service of systems and components for original equipment manufacturers. The Company operates in four segments: Aerospace, Driveline, Powder Metallurgy and Land Systems. Its Aerospace section is a supplier of engine products and aerostructures and systems to aerospace sector. Its Driveline is a supplier of alternatives and automotive driveline systems to the vehicle makers. Its Powder Metallurgy is a manufacturer of sintered components and a producer of metal powder. Its Land Systems is a provider of power management services and products for industrial, building, mining and agricultural equipment. Its other companies consist of GKN Zhongyuan Cylinder Lining Co Lt

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