Thursday tips round-up: Genel, Rio Tinto, J.Sainsbury

21st Mar 2013 07:27

Iron ore miners, particularly Rio Tinto, are about to get hit by a large rise in supply, with the three biggest planning to add 200m tonnes of capacity by 2015, which is not far below Rio's annual output today. Hence, while demand is not falling off a cliff and Chinese steel mills have cleared excess capacity, prices are expected to come under pressure. Thus, Australia's official commodities forecasting agency said yesterday - in its latest quarterly report - that iron ore prices could fall to $90 a tonne over the next five years, from $134 today, the FT's Lex column writes. Short-term shares in Kurdistan-focused oil exploration firm Genel will likely be driven by politics; in particular, those between Baghdad and the Kurdish Regional Government (KRG). However, the company's Chief Executive thinks this matter will be resolved 'sooner rather than later.' As well, there is the possibility of an agreement being reached between Turkey and Kurdistan for the construction of an oil pipeline. As if that were not enough, the company has $1bn of cash sitting in the bank, an experienced management team and next year the African licenses will become a significant catalyst for the shares, The Telegraph's Questor team points out. Hence, they upgrade the stock to buy from hold. J.Sainsbury's investment in its convenience stores and 'on-line' channel is paying off. The group's own-label products are also proving extremely popular. Thus, over the period spanning the 12 weeks ending February 17th the company's like-for-like sales increased by 3.6% once food is taken out, data from Kantar Worldpanel showed yesterday. If that chapter is thrown into the basket as well then sales were up by 4.6%. Then there is the 'chatter' about possible corporate actions from Qatar's sovereign wealth fund, which The Telegraph's Questor team takes with a large pinch of salt. Despite the share price's recent sharp run-up they are only trading at a forward price-to-earnings ratio for next year of 9.1 (2013: 12.5). Hence, Questor remains comfortable with a hold recommendation. 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