Consumers' voracious demand for mobile computing devices continues unabated and that proved a fillip for chip designer
The fourth quarter was particularly good for royalty revenues, which increased by 21 per cent year on year. These represent orders placed in the third quarter and are timed by manufacturers to hit the run-up to Christmas. In addition to the seasonal uplift, the surge in royalties was down to Arm winning market share as competitors such as Intel struggled to shift away from personal computer chips and failed to make much of a dent in the mobile devices market. In fact, Arm's management raised its guidance for royalty revenue growth this year to 15-20 per cent from its historic 10-15 per cent.
Brokerage Peel Hunt raised its current-year pre-tax profit estimates by 7 per cent to £349m, which translates into a 12 per cent upgrade in adjusted EPS to 20p, up from £276m and 14.7p, respectively, in 2012.
|ARM HOLDINGS (ARM)|
|ORD PRICE:||930p||MARKET VALUE:||£12.8bn|
|TOUCH:||930-931p||12-MONTH HIGH:||961p||LOW: 463p|
|DIVIDEND YIELD:||0.5%||PE RATIO:||79|
|NET ASSET VALUE:||87p*||NET CASH:||£520m|
Arm's unstoppable growth continues to wrong-foot us, but even stripping out 38p per share of net cash on the balance sheet, the forward PE ratio is still a sizeable 45, making this a high priced entry point. Hold.
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