Broker tips: William Hill, Rio Tinto, IG Group

20th Jan 2015 13:19

Prospects for bookie William Hill are looking up thanks to the company's proprietary, differentiated products and technology, analysts said.On 19 January the bookmaker reported full-year results where operating profits on an EBITA basis were 2% ahead of the consensus forecast at £371m despite customer-friendly sports results. However, fourth quarter headwinds in terms of gross margin win persisted into the new year.Even so, the company's underlying performance "remains strong", Credit Suisse analysts told clients in a research note.Credit Suisse reiterated its 'outperform' recommendation and 455p target price on the stock. Shares of Rio Tinto are undervalued given the prospects for commodity prices and the stock's current valuation, analysts at Canaccord Genuity said on the heels of the company's fourth quarter production report.The broker pointed out how the stock was trading at a multiple of enterprise value to operating profits (EV/EBITDA) of 7.2 on the basis of estimates for the company's earnings in 2015, but on a multiple of just 5.2 for 2016.That compared favourably to a historical valuation, since 2001, of seven times the firm's enterprise value over operating profits, especially when most commodity prices were offering upside to the analysts' mid-cycle estimates.The conditions facing the mining outfit are more those which are seen near the bottom of a cycle instead of at the top. So therefore the shares ought to be changing hands at a price closer to the peak of their historic trading band of between four to 10 times EV/EBITDA rather than in the middle of it, analysts Peter Mallin-Jones and Nick Hatchwrote in a research note e-mailed to clients.Cannacord Genuity maintained its buy recommendation and 3,750p target price on the shares.The Swiss central bank last week shocked markets by announcing its decision to remove its three-year old cap on further strengthening in the Swiss franc.That event on 15 January led stockbroker IG Group to incur in £30m of losses which when the company published its latest half-year results, on 20 January, management attributed to client credit losses (£18m) and market losses (£12m).The firm's executives said they would seek to learn the appropriate lessons from that episode. Analysts Arun Melmane and Robin Savage at Canaccord Genuity want to know just what exactly those will be, they explained in research sent to clients following the release of IG's latest results.In particular, they point out how IG's numbers seem to indicate that a certain level of leverage was allowed for its client positions.The analysts reiterated their 'hold' recommendation and 650p target on the stock.