Friday tips round-up: ARM Holdings, Tate & Lyle, Paragon

Apple's exciting new tablet computer, the iPad, looks like it will be a winner for Steve Jobs' group - but it's also going to be a real winner for ARM.

The chip in the device, called the Apple A4, is believed to be based on ARM technology. That's because both Apple and its suppliers do not generally comment on the components used in Apple devices.

Broker Panmure has estimated that ARM will get a royalty payment of 60 cents to 80c for each iPad sold and has increased its 2010 forecast by 1% in 2010 and 2% in 2011. Based on a consensus forecast for earnings of 5.25p this year, the shares are trading on a consensus forecast of 37 times, which is pretty stretched. The yield, at 1.2%, is also not worth getting too excited about. High risk given the valuation, but a buy says the Telegraph.

Soft drinks supplier Britvic now predicts that margins will increase by 50 basis points a year until 2013, compared with its previous guidance of 10 to 15 basis points. With market share growth elsewhere and future potential growth in bottling outside the UK, the stance on the shares remains buy says the Telegraph.

Sweetener group Tate & Lyle's net debt slid by £123m during the quarter to stand at £864m at the end of December. Investors' interest should also tick up as the new chief executive, Javed Ahmed, outlines his plans for the business in the months ahead. So the shares could actually prove sweet for investors. Buy says the Independent.

The Times adds that after a four-year, £1bn investment programme, Tate's capital expenditure requirements are light. Its US industrial starch division is geared to US recovery. The cost benefits of last year's consolidation of sucralose production in Singapore have yet to flow through and most powerful of all, is the potential for Mr Ahmed to reshape Tate's portfolio - perhaps by keeping its two most profitable divisions, At 388Ÿp, down 18œp, or ten times next year's earnings, hang on says the Times.

Mortgage lender Paragon may well prove to be a recovery play. However, it has not proved to be a brilliant judge of risk in the past. Lenders' arrears are relatively low (and falling) because interest rates are low, but that might not last as long as some people think. Paragon is cheap, there is no doubt about that. But see how it trades over the next few quarters before taking the plunge, even if that means missing out on some gains. Avoid say the Independent.

Paragon will get squeezed by sharp increases in interest rates, weakening property prices and rising defaults. However, the chance it will resume lending - so justifying a valuation closer to NAV - makes the shares, at 138p, a buy for the brave, the Times suggests.

Robert Wiseman's trading during the third quarter has been slightly better than expected, with business from Tesco, its biggest customer, especially buoyant and new work secured from J Sainsbury. With Wiseman's planned expansion of the final phase of its flagship Bridgwater dairy providing a further sign of confidence, the shares, at 490p, or 12 times forecast earnings, remain a solid hold says the Times.

Circulation at Sports Media's titles has begun to slide again and, while there are mobile and online operations, they operate in a crowded field. With the outlook uncertain for the media in general, SMG is always going to prove a risky play. Given its headwinds, it is too risky. Sell says the Independent.


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.