Thursday tips round-up: RBS, Inmarsat

25th Sep 2014 08:50

With Wednesday's initial public offering of its Citizens' Financial unit RBS has passed another milestone on the road to cleansing its balance sheet. Although the reception afforded by investors to the new shares was tepid, once complete the disposal of that American unit will see the lender's common equity Tier 1 capital ratio improve by over two percentage points. If the "greenshoe" option is triggered RBS' stake will fall to 71%, although it is not yet known at what point Citizens' will be considered as deconsolidated.It could well take two years and the sale of three more tranches. Nevertheless, it will eventually turn into less of a distraction for the bank's chief Ross McEwan. Furthermore, results in the UK market are looking up as the bank writes back provisions and analysts believe this trend might go on further. On the downside, there are risks associated with legacy conduct issues and the revamping of its antiquated IT systems. "Be patient", but there may yet be bumps on the road ahead, writes The Times' Tempus.Inmarsat looks set to capitalise on trends in defence and digitalisation. The company has had some serious setbacks of late, including the explosion in May of a rocket when it was being launched. That was a serious setback to the introduction of its Global Xpress (GX) satellite network. Since then however, it has begun to work with Elon Musk's SpaceX for launches.More significantly, and as regards digitalisation, global mobile traffic is expected to reach 15.9 exabytes a month in 2018 from 1.5 exabytes now. The company also stands to gain as governments look to access its communications services in remote geographies or in places where assets have been destroyed. Enterprise services, such as WiFi services on commercial flights, also look set to take off. At a price-to-earnings ratio of 23.1 however the stock looks fully valued, so The Daily Telegraph's Questor team says hold; "but it is one to keep an eye on", Questor adds.