Tuesday tips round-up: Rolls-Royce, GlaxoSmithKline

11th Mar 2014 09:03

Daimler's decision to exercise its option to sell its 50 per cent stake in its Rolls-Royce Power Systems (RRPS) joint venture to Rolls-Royce has divided analysts. For some it was in line with Rolls-Royce's strategy and well flagged, whereas others underlined the fact that the firm will now be able to squeeze synergies from the unit, thus benefitting its margins. However, the number crunchers over at UBS were rather more critical. They highlighted how for many, following their conversation with investors, the main rationales for investing in Rolls-Royce are the prospects for its Trent series of engines. Diversification into other businesses is therefore not something positive for the company; rather, it entails a certain dilution of the main investment thesis. As well, given that revenues and profits are not expected to grow before 2015 the stock is a 'hold', notwithstanding the recent fall in its price, The Daily Telegraph's Questor team says. Shares of GlaxoSmithKline have traded largely unchanged over the past year despite, for example, having won the most approvals among big pharma groups for compounds from the US Food and Drug Administration. Yes, allegations of bribery in China have cast a shadow over the group. Even so, analysts at Panmure Gordon believe that the above research and development (R&D) successes are not yet reflected in the price. In total there are 10 treatments going into phase-III trials in 2014, any of which may prove to be the good news which may serve as a catalyst for the stock. Hence, as long as the Chinese uncertainty reaches a "tolerably acceptable" resolution then the shares look worth buying even if for their 4.8% dividend yield alone, writes The Times' Tempus.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