Friday tips round-up: Cobham, Rio Tinto

8th Aug 2014 09:27

Cobham's first-half results were "landmark" as revenues from its commercial activities surpassed those from the defence sector for the first time ever, as the firm progresses on its transformation into a true technology outfit. Indeed, two thirds of the company's sales now come from 'connectivity' - including from satellite technology, micro-electronics and 4G base station testing. As part of its move into higher growth markets, the firm also recently purchased US rival Aeroflex for £869m. That gave the firm a foothold in components used in communications technology, The Times's Tempus pointed out. So while Thursday's results were weak on other fronts, such as a 25% drop in the order intake, the company is nevertheless successfully transforming itself. Similarly, commercial activities tend to have less visibility than military ones, but growth looks set to improve over the coming years. Hence, the stock's rating of 10.5 times earnings looks reasonable, Tempus said. Even as Rio Tinto looks to diversify investors must remember just how important iron ore is to the company. Rio posted $8.7bn in cash flow for the first six months of the year, an 8% increase year-on-year and managed to reduce its costs by an impressive $3.2bn over the last two years, while its capital spending came in $2bn under expectations for this year. Hence the promise to shareholders of "a material increase" in the amount of cash it will return to them, although the exact amount remains hard to predict, writes the Financial Times' Lex column. However, it is not efficiency gains alone which enabled the company to be so generous. It is also the second largest miner of iron ore. That division provided almost all of the increase in operating cash flows, mainly thanks to increased volumes of production.Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB