Wednesday tips round-up: Glencore, Rio Tinto, BCA

8th Apr 2015 15:20

Analysts are wary regarding the prospects for a Glencore bid for Rio Tinto emerging any time soon and for good reason. For one thing, over the last six months shares in the latter have performed rather better. That means that for Glencore issuing new shares now, to finance a purchase, would be more costly. True, the potential for cost savings from a tie-up does exist, as Rio Tinto is more focused on iron ore whereas Glencore derives the lion's share of its revenues from copper.However, Rio will eventually start production of copper from its massive Oyu Tolgoi mine in Mongolia - indeed, the longer term prospects for the price of copper seem more favourable. Then there are the regulatory hurdles which would need to be overcome. Nonetheless, a take-over bid cannot be ruled out entirely, providing some support for Rio Tinto. Furthermore, and so as to defend itself, Rio has vowed to raise its shareholder returns. Even at this level Glencore is not sufficiently enticing but Rio Tinto is, so buy, says The Times's Tempus.Despite pulling its initial public offering last year, BCA, Europe's market leader in car auctions, finally made it to market through a reverse takeover. The main pillar of the company's business model is supplying dealers with inventory of second-hand vehicles, often from companies' former fleets. However, it is also increasingly active in the market for cars following the expiry of so-called personal contract purchases (PCPs).Those contracts allow clients to in effect rent the car which to a large extent remains owned by the finance house. Together with the growing continental market for car auctions the firm thinks that will allow it to grow by 10% a year. Nonetheless, changing hands on 22 times earnings much of that potential is already in the price of the shares - despite their current dividend yield of four per cent. "Model is attractive, but shares are on a high multiple," so avoid, Tempus says.