Sunday share tips: Rio Tinto, Greencoat, Carclo

17th Feb 2013 15:54

Rio Tinto posted its first ever full-year loss of 2.6bn pounds (1.7bn pounds) after writing down 14.4bn dollars of its assets following an M&A spree. The charges were mostly in its aluminium and energy businesses. However, stripping those out profits were better than expected, as was the 15 per cent increase in the dividend to 167 cents. This is a smart move by Mr Walsh. Investors are clamouring for more cash returns as spending eases. The next major catalyst could be the start-up of Rio's 6.6bn dollar Oyu Tolgoi copper mine in Mongolia. However, there are issues that Mr Walsh needs to work through first, although they do not appear unresolvable and it is likely that the mine will start up at the end of June as planned. But there is a risk should talks with the government lead to an impasse. Rio Tinto shares suffered last year as commodity prices slumped. The company got 90 per cent of its net earnings last year from iron ore operations. The group's exposure to the steel-making ingredient will further increase when Rio's 290m-tonne expansion in the Pilbara region of Western Australia kicks in during the fourth quarter. However, prices are buoyant and Rio is a low-cost producer. Although the shares have been caught up in the broad market rally, it is from a low base. Trading on a 2012 multiple of 9.6, Questor keeps a buy for future cash flows.Whatever the Government decides to do about building more wind farms, there are already upwards of 4,000 turbines in Britain generating enough electricity for millions of homes. All this electricity is subsidised by businesses and consumers and will be for the foreseeable future. Greencoat UK Wind intends to take advantage of this by listing on the London Stock Exchange next month and using the money raised to buy wind farms. The Department for Business is buying £50m of shares, while SSE itself is investing up to £43m in the fundraising. The remaining shares will be available to institutional and individual investors, but they should be particularly attractive for those wanting stable, long-term income. Brokers expect this company to double in size over the next three to five years, primarily through buying existing wind farms. Even as the business grows, the commitment to delivering generous dividends will remain, because the group can rely on subsidised turnover. A prospectus will be released tomorrow, Monday, and investors will have four weeks to think about whether they are interested in buying. The founders, Stephen Lilley and Laurence Fumagalli, are experienced and the company has strong growth prospects. Buy, says the Financial Mail on Sunday´s Midas column.The FT´s David Schwartz recently topped up on one of his long-time favourites, Carclo, the technical plastics company, he writes this Sunday. Its growing role in touchscreen technology suggests significant profit potential in several categories including computers and mobile phones, Schwartz believes. Yet both Carclo and its US partner Atmel are secrecy-obsessed, a common trait in the highly competitive world of Silicon Valley. The result is that investors are starved for solid facts and often must deduce corporate prospects from information fragments plus the sporadic regulatory filings that companies must make. Carclo's recent update upset some investors who feared that the pace of sales to top-tier computer and telephone manufacturers was slower than expected. But a single comment in Carclo's update strongly hinted to him that investor concerns were misplaced. Carclo revealed for the first time that several new assembly lines were being built and would be production-ready in the second half of 2013. It was a clear signal to me that the Carclo/Atmel partnership was expecting a significant sales surge beyond current capacity.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.