Broker tips: Rio Tinto, Premier Farnell, Gold miners

27th Sep 2013 12:28

Nomura has reiterated its 'buy' rating and 3,700p target price for diversified mining group Rio Tinto, saying that the company may be able to find the happy balance between growth and returns.The broker said that Rio remains one of the cheapest stocks within its peer group, trading at just nine times 2014 earnings. It reckons the earliest shareholders will likely see a buy-back will be around the time of the 2014 results in February 2015. This should be around $3-4bn in magnitude.Shares in Premier Farnell gained strongly on Friday after analysts at UBS said that an acceleration of growth at the electronic components firm should be "around the corner"."Given forward indicators (e.g. PMIs) only improved from around May, with the normal six-month lag we note company growth should start to improve from November and so are unconcerned by the lack of acceleration seen so far," the bank said. UBS retained its 'neutral' rating for the stock, saying that it trades at 14.6 times current-year earnings compared with its mid-cycle valuation multiple of 13.5.Randgold Resources and African Barrick Gold remain the top picks of Bank of America Merrill Lynch in the gold sector, but the bank dampened sentiment on the market on Friday by cutting its gold prices sharply for the next two years.BofA has lowered its gold-price forecasts for 2014 and 2015 by 17% to $1,294 an ounce and by 18% to $1,291 an ounce in real terms, respectively. The bank said: "Gold prices have stabilised and they could remain supported as the US reaches the debt ceiling. However, we believe the focus of investors remains firmly on a gradual normalisation of US monetary policy. Hence, our base case anticipates sustained headwinds to gold prices.BC