Sunday share tips: Royal Dutch Shell, SAB Miller, Sable Mining

24th Nov 2013 18:29

Investors are sick of companies who spend buckets of cash on purchasing new assets with little or no regard for investor returns. That is what is known as "empire building" and it has seen several Chief Executives ousted as a result this past year. Unfortunately, not everyone seems to have got the message, with management at Royal Dutch Shell being a case in point. Yes, the costs of developing oil fields under thousands of metres of water and rock are ever-rising. Yet few have as much zeal for the world's toughest projects as Shell has. As well, no indications have been forthcoming that's its new Chief Executive might be thinking of changing things. No surprise really given that Ben van Beurden, currently still the head of the company's refining arm, hails from deep within the Anglo-Dutch behemoth's ranks. Furthermore, having started there in 1983, his are not fresh eyes. That explains why analysts at Macquarie recently wrote that "we expect that [the lack of capital discipline] will not be a good thing from the perspective of share price performance over the next 12-18 months," The Sunday Times's Danny Fortson writes. Beer giant SAB Miller rode out the tide of emerging market troubles quite well in the first half, with both profits and margins increasing. That is despite the sharp falls seen in the value of emerging market currencies. In fact, it is precisely the strength seen in emerging market regions such as Africa and Latinamerica which allowed the company to compensate for weakness in Europe and Northamerica. The company also faces challenges in the UK. Even so, those foreign exchange headwinds are hurting results when sales and profits are converted back into US dollars for reporting purposes. So with growth rates slowing down it is harder to justify SABMiller's premium rating. The shares trade on a punchy 21 times forecast earnings despite coming back from record highs at about £36 in May. The forecast dividend yield is 2.1%, and this is a solid company but no better than a hold for now, The Sunday Telegraph's Questor team says. Sable Mining Africa shares ought to increase substantially over the coming 12 months. Based in Guinea, the group has one of the largest high-quality iron mines in West Africa, which means its output is less costly to process. Furthermore, it has twice increased estimates of iron ore in the ground to more than 178m tons, a figure that is expected to hit 200m tons as exploration continues. Not only that, its main mine - Nimba - is just 15 miles from a railroad straight to the Liberian port of Buchanan and the company has already been given export rights. There are high hopes that the outfit will soon be allocated time and space on the same. Perhaps most importantly, its top management already has some successes in Africa under its belt. Mining in Africa is never risk-free but Sable is in a better position than most and the shares should gain ground as more good news emerges from the group. Buy, says The Financial Mail on Sunday's Midas column. ABPlease 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.