Tuesday tips round-up: Glencore, Xstrata, Electrocomponents...

2nd Oct 2012 07:25

Lex in the Financial Times casts its eye over the long drawn-out Glencore/Xstrata saga and is not happy with Xstrata's behaviour. Xstrata's management looks to have held investors to ransom with its veiled threat to leave, yet it was technically the board that wanted a retention package. The £140m at stake is a side show, but the fracas caused almost sank the deal. That it has taken Xstrata's panoply of fee-grabbing advisers and board so long to put investors first is a disgrace. Will the merger happen, asks Lex. The market ratio is edging higher, and the reality is that Xstrata shareholders have more say under the current plan than they would if Glencore came back with a normal offer next year - by which time Glencore's balance sheet, the commodities cycle and Xstrata's board make-up are anyone's guess. Electrical components distributor Electrocomponents saw its shares hammered on Friday after a disappointing trading statement, but it is still doing better than its rivals, Questor in The Telegraph notes. The consensus range for full-year pre-tax profit was £110m to £120m ahead of the statement. This has since been trimmed by about 6%. Questor said 'hold' in July when the shares were at 208.7p because it appeared sales growth was slowing. The shares rose as high as 240p after that tip but are now a touch below that level after the recent falls. Its model of geographic expansion and a lower-cost internet-based sales distribution channel are sound. However, the macro backdrop at the moment is tough. Trading on a 2013 earnings multiple of 11.6 falling to 10.5 and yielding a prospective 6pc, Questor maintains its 'hold' rating.Tempus in The Times has recommended to 'hold' shares of asset manager City of London Investment Group, whose fortunes "fluctuate considerably".The company invests in closed-end funds, buying funds that trade at a discount to their net asset value, especially in the emerging markets. For the year to the end of May, funds under management (FuM) dropped 23% to $4.5bn mainly due to falling valuations.However, yesterday, the company said that FuM had held flat as markets regained their poise. Nevertheless, clients withdrew $360m in the first four months of the year after being spooked by Chinese slowdown and Eurozone worries."A 7% yield and a commitment to maintain the dividend in the current year has its attractions. But purists should note that the company may have to drop its 1.5 times dividend cover rule to meet that promise. Hold," the paper recommends.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.