Tuesday tips round-up: Rio Tinto, WANdisco, Berkeley Holdings

3rd Sep 2013 07:20

Rio Tinto's interim figures out yesterday showed pre-tax profits halved, to 3.2bn dollars. Yet given the improvement in prospects for China, a rise in commodity prices, a reduction in capital expenditures and significant cost-cutting measures analysts expect the company's cash-flows to double over the next two years. In fact, operating cash-flows were actually stable at the half-way mark for the year as a result of all of the above. Further, the company's forecast full-year dividend enjoys a cover of 2.5 times earnings per share. The shares look cheap, having fallen by around 15% this year. The 2013 earnings multiple of 10 times, falling to 7.5 times next year is at a discount to BHP Billiton. The dividend growth also looks well underpinned. Hence, The Daily Telegraph's Questor team retains its advice to buy.WANdisco is not expected to turn a profit until after 2014 but since its initial public offering [IPO] its shares have multiplied their value by a factor of six. That is because it has tapped into one of the fastest growing technology markets - data storage through the Apache Hadoop system. The company has developed one of the most efficient programmes for accessing and using that data. Independent analysts estimate the big data market could reach $50bn by 2017. As well, the company has already lined up several blue-chip clients such as Nokia [now Microsoft], Cisco and Apple.Last May it also managed to convince Paul Harrison to jump ship at FTSE 100-listed Sage and come on-board as Chief Financial Officer; that would seem to be a vote of confidence in the company from someone in the "know." The only fly in the ointment is that investors have yet to see how fast, or not, the firm has been burning through its cash. Investors will learn the answer on September 26th, when the firm releases its results. So with shares at record highs it's a hold until then, The Daily Telegraph's Questor team says. Berkeley Group ? the gold standard among house builders ? is sitting pretty with a forward order book of more than £1.5bn. It is the strongest it has ever had. As well, the company yesterday announced that there was a 10% rise in British buyers between May and the end of August alone. Stronger buyer activity and a healthy future cash-flow should give even more confidence to shareholders that Berkeley is more than well on track to meet its ambitious target of returning £1.7bn cash by 2021. Nevertheless, the company is still investing, continuing to buy land on better terms. Furthermore, about 85% of its development pipeline already has planning consent and its future potential gross margin in its land bank could hit £3bn by the end of the current financial year. As house building goes, this is a solid foundation. There is a question mark as to how much further house builders recent run in the stock market can go but, with demand increasing and a bulging forward order book, Berkeley, which operates only in the strong London and the Home Counties' markets, looks like a good bet, The Times's Tempus says. 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