Wednesday tips round-up: Glencore, Meggitt, Ophir

6th Mar 2013 07:07

The rise in shares of Glencore and Xstrata, yesterday, was due to rising hopes that Beijing will indeed approve their merger. After all, it has already said 'yes' to the purchase of Viterra despite food security being a highly sensitive subject. Investors are also crunching the 'synergy' numbers although new information seems to have appeared on this front. In any case, one must point out the smaller drop in earnings before interest and tax and the much more modest write-downs at Glencore when compared to rivals such as Rio Tinto and BHP Billiton. That bodes well, as Glencore's next role is extracting value from Xstrata's assets, the FT's Lex column writes.Despite the risks to Meggitt linked to sequestration in the United States and drawdown of US forces in the Middle East in Central Asia, the company's shares are running at all-time highs. Nevertheless, the fact is that the high performance aerospace and energy components manufacturer's true exposure to defence cuts Stateside is fairly limited. Even so, brokers now point out that the firm can no longer be considered to be a bid candidate. The company could opt to grow its energy business non-organically but prices in the overheated energy sector look high at present. Trading at 12 times' earnings for this year the shares are not bad for the longer term, "although some caution is likely for now over US defence," The Times's Tempus says. Ophir Energy has armed itself with £550m to fund its capital expenditure programs and to improve its negotiating position versus the 'majors.' But what really matters is whether Tanzania is the next Mozambique, writes the Lex column. Investors in Ophir are in effect betting that the giant gas field off-shore Mozambique - Rovuma - does extend that far north. However, the assumption that the 'majors' need to be in east Africa is not water-tight. Ophir needs to show that it can now fight its own corner. 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