Strong demand for smartphones and mobile devices has driven underlying pre-tax profits 38 per cent higher to £230m at chip designer
In the fourth quarter, the group signed 25 new licenses and shipped some 2.2bn chips, which helped full-year licensing revenues increase 37 per cent to $285m (£182m). Arm has also been securing more license wins in non-mobile devices, such as microcontrollers and internet-enabled televisions, and this segment now accounts for 45 per cent of its end markets.
Moreover, previously secured licences deals are increasingly generating royalties which fuelled a 21 per cent in full-year royalty revenues to $405m - this compares favourably with the 8 per cent average growth seen across the industry. Chief financial officer Tim Score is certain that royalties will continue to grow to represent a larger portion of group sales going forward and says he is confident on achieving full-year sales of $860m in 2012. This implies just under 10 per cent growth sales growth, which in turn underpins analysts earnings estimates for this year. Paul Morland at Peel Hunt is expecting 2012 adjusted EPS of 14.5p (12.45p in 2011).
|ARM HOLDINGS (ARM)|
|ORD PRICE:||629p||MARKET VALUE:||£8.5bn|
|DIVIDEND YIELD:||0.6%||PE RATIO:||71|
|NET ASSET VALUE:||79p*||NET CASH :||£424m|
Arm's dominance in a lucrative and fast growing sector is as impressive as ever, but the shares, which trade on an eye-watering 43 times forecast earnings, fully reflect this. Hold.
Last IC view: High enough, 604p, 26 July 2011