Tuesday tips round-up: Royal Dutch Shell, Carnival

21st Jan 2014 07:11

There might be more to Royal Dutch Shell's decision to pull out of the Wheatstone liquefied natural gas (LNG) project in Western Australia than initially meets the eye. For starters, the decision may have been taken some time last year. It is known that Shell means to focus on natural gas projects in which it has a decent-sized stake, instead of ones like Wheatstone, in which it only held a 6.4 per cent interest. However, the fact is that the value created by BP from its own rationalisation programme has not been lost upon analysts. Hence, for a company such as Shell, about which there were already worries regarding its declining cash-flows in the fourth quarter and high capital investment programme, the possibility that it might decide to break-up its integrated business model intrigues some number crunchers. The firm has the support of a 5 per cent dividend yield, with no one believing the payout is at risk. That remains the best reason to hold the shares. Nonetheless, "a break-up is an interesting prospect," writes The Times' Tempus. Despite changing hands at 26 times' forecast earnings now - and the fact that they have risen by 15% over the last eight weeks - shares of Carnival may have further to go this year. The Cruise Lines International Association (CLIA) last week estimated that the number of cruise passengers would hit 21.7m this year, up from 21.3m in 2013. Furthermore, oil prices could stabilise or even fall in 2014 as global supplies increase. This is quite significant given how fuel makes up about a quarter of the total cost of running a cruise liner. Not only that, analysts point out how the firm has been investing in advertising, helping to restore its image in the wake of the Costa Concordia tragedy two years ago. For all of the above reasons, and after having gone sideways over the past decade, in the process underperforming the FTSE 100 by approximately 50%, the Daily Telegraph's retained its advice to readers to 'buy' the shares. 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