Wednesday tips round-up: BAE Systems, Chemring, Rio Tinto...

20th Oct 2010 06:50

BAE, Europe's largest defence company, will update the City in a trading statement tomorrow on how it expects the defence spending review to affect its British operations. It would be reasonable to assume that its UK business will be broadly flat in the coming years as the upside from Typhoon, JSF and shipbuilding is offset by contract downgrades and restructuring costs. It is, therefore, difficult to justify BAE's current discount to its American peers, particularly given that the British company is better positioned than most of its rivals to take advantage of growth in regions such as the Middle East and India, says the Times.Chemring has been the best performer in the defence sector over the past 10 years, supplying British and American Armed Forces with countermeasures (decoy flares) and munitions for missions in Iraq and Afghanistan. But there is concern that Chemring's flare may burn itself out when operations in Afghanistan start winding down next year, the Times adds.That Rio Tinto's iron-ore joint venture with BHP Billiton in the Pilbara region of Western Australia is not going ahead should not be a surprise to anyone that has been watching the situation play out. So, Rio and BHP are now going it alone. Rio plans to expand iron ore production to 330m tonnes a year by 2015 - up from 220m tonnes now. BHP Billiton plans to increase production to 240m tonnes a year by 2014. Rio shares are trading on a December 2010 earnings multiple of 9.6, falling to 8.2 next year. The shares have risen 21% since May and are still a buy says the Telegraph.Shares in satellite group Inmarsat have been under pressure since the news broke that US fund Harbinger has sold down a stake in the group. Inmarsat's BGAN mobile broadband satellite service was used last week to broadcast ongoing coverage of the Chilean mine rescue. Some investors have been concerned over recent weakness in Maritime revenues, as well as the introduction of competition. The shares are trading on a December 2010 earnings multiple of 19.7 times, falling to 17.5 next year. The yield is 3.6%. Hold says the Telegraph.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.