Broker tips: Rio Tinto, WPP, TT Electronics

20th Aug 2009 13:01

Interim results from Rio Tinto came in slightly below market expectations but Jonathan Jackson, head of Equities at Killik & Co, believes that the group is broadly delivering on a number of commitments made at the end of last year, particularly in the area of debt reduction.The overall tone of the statement was more upbeat, in Killik's view, than in previous updates and optimistic noises about resuming dividend payments should be interpreted as a positive sign of long-term confidence.Killik maintains a preference in the sector for BHP Billiton, 'given its high quality asset base, strong financial position and growing dividend policy,' but considers Rio Tinto a viable alternative bearing in mind 'it currently trades on a discount valuation to the peer group.'Nomura Securities has reiterated its 'buy' recommendation on WPP ahead of the advertising giant's interim results next week.The Japanese brokerage notes that WPP shares have just about outperformed the Dow Jones STOXX 600 index of European companies recently but has lagged advertising peers such as Havas, Publicis and Aegis. 'If, as we expect, WPP can demonstrate that the balance sheet is secure, and that organic revenue growth and margin performance is broadly in line with peers in the first half, there remains considerable scope for the rating discount [to its peers] to close,' said Nomura analyst Colin Tennant.House broker KBC Peel Hunt has upgraded its 2010 earnings estimates for TT Electronics after the sensor and electronic component technology firm announced interim results that were ahead of expectations.'We are upgrading our 2010E PBT by £4.5m to £6.9m as additional cost savings are realised next year, including the anticipated elimination of the loss-making AB Automotive business. Net debt is forecast to fall to circa £90m by end-2009E, comfortably within existing facilities and covenants,' the broker said.KBC rates the shares a 'buy' and has a target price of 78p.