Tuesday tips round-up: Miners, Centamin, IMI

7th Jan 2014 07:07

Mining company executives´ assurances aside, the worst may not be over yet for miners. Hence the need to look at all the available data meticulously, something which may not always be as easy as one might think. A case in point in this regard may be copper-miner Kazhakmys. Yes, the share price was down 75% last year. So the stock should be primed to bounce back should prices of the red metal bounce back. Right? Wrong. There are numbers which investors cannot see so easily for this company, such as the cash costs at each of its 16 individual mines. The firm only publishes an average for all of the same, while the fact is that there can be wide variations, according to broker Investec. Then there is Anglo American. The company says it may 'tighten' its portfolio [of mines] to offset the higher costs at some of those. Yet when the choice may come down to spinning off South African operations worth half the firm's market capitalisation that may not be so easy. Rio Tinto got ahead of the curve by cutting back on plans for future iron ore growth and even then its stock fell 8% in 2013. In any case, the simple truth is that if metals´ prices continue to fall miners will be all at sea, says the Financial Times´ Lex column. Egypt-focused gold miner Centamin yesterday announced a 36% year-on-year rise in production at its sole revenue-generating asset, the Sukari mine - that was well ahead of market expectations. Furthermore, the company´s all-in cash-costs for producing each ounce of gold is $850, at the lower end of the major gold players. Yet its stock price tumbled by 27% last year. That is because the company is waiting on a critical decision by The High Administrative Court of Egypt regarding the validity of the company´s permit to operate Sukari. The mine will still operate until the court decides otherwise, but the court ruling and political risk make this a very high-risk bet. Hold, says The Daily Telegraph´s Questor column. Over the past decade IMI transformed itself into a specialist flow control group that sells entirely to industrial end markets, with about 70% of sales being taken up by customised valves designed for individual customers. The company's nearly-20% margins reflect this. Inherent in the above, as well, there are very high barriers to entry into its sector. The question for analysts now is if the new Chief Executive, Mark Selway, can do better than his predecessor. In particular, Selway is expected to be much more aggressive on the acquisitions front. Yet that carries with it the potential for missteps. Time will tell. Nevertheless, IMI is heavily focused on markets which can only grow, such as: climate change, urbanisation and an ageing population. The shares sell on about 17.5 times' this year's earnings. "This is a high multiple, but worth it once the new team starts to show what it is capable of," The Times Tempus believes. 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