Mindful Money Monday share tips: Glencore Xstrata, Persimmon

19th August 2013

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This week sees market updates arrive from house builder Persimmon, support services group Carillion as well as miners Glencore Xstrata and BHP Billiton writes Philip Scott. We look at what the brokers are saying about them.

Glencore Xstrata, which unveils its second quarter results on Tuesday like other miners has endured a tough period, as demand for commodities has slowed chiefly as a result of a retreating demand in China, the world’s second largest economy. The past 12 months has seen its stock fall by 12 per cent and by 21 per cent over six months. But better sentiment has seen the shares enjoy a 14 per cent rise in the month. Production figures reported last week were generally as anticipated, with copper production expanding 20 per cent and expansion of facilities in Columbia increasing coal production by 22 per cent during the first half of the year.

The broker consensus on share hub Digital Look has the stock rated as a ‘buy’ as does Sheridan Admans, investment research manager at stockbroker, The Share Centre. He says: “Investors will want to know how this translates into the sales numbers as both of these commodities are now key to the business and have experienced a material slide in prices since the beginning of 2013. Investors will also be looking for further commentary on the progress of the merger.”

Also reporting on Tuesday is Persimmon, with its half year results. Over past year, the UK’s largest house builder, has witnessed its shares rise by 74 per cent, and by 36 per cent in just the past six months.

As with rival housebuilders, its July first half trading update saw the company reporting strong momentum due largely to the government’s newly introduced ‘Help to Buy’ scheme. While its weekly private sale reservation rate for the half year had grown by 12 per cent year-over-year, the rate as measured from the date of introduction of the scheme had jumped by 30 per cent. The broker consensus on Digital Look has the stock rated as a ‘buy’, as does Hargreaves Lansdown Stockbrokers.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers: “As such, current trading is expected to head the agenda for investors, with ongoing strong momentum in both sale reservations and the forward order book likely to be reported. In all and despite an 80% plus rise in the share price over the last year, analyst opinion prior to the results remains positive in tone, currently denoting a ‘buy’.”

On Wednesday base metals giant BHP Billiton updates with its fourth quarter results. In the past 12 months, its shares have only managed a 1 per cent rise, and have fallen by 10 per cent over six months but like its fellow miner Glencore Xstrata, Digital Look has it rated a ‘buy’ via its broker research.  Admans says: “There has been a general rise in production levels across the group’s commodities exposure, many at record levels, however prices have remained weak during the financial year limiting any significant upside to the revenue figures. Investors will be looking out for progress on large scale projects and the shorter term outlook, especially the company’s views on China. We currently list BHP Billiton as a ‘buy’.”

FSTE 250 listed support Services group Carillion, which among others provides expertise in commercial and industrial building, reports its half year results on Thursday. First-half revenue is expected by management to be lower than it was over the same period last year, due mainly to a rescaling of its UK construction activities. However, the board’s expectation for an improvement in operating profit compared to the first half of 2012 will be tested, whilst any update on management’s existing expectation for an improvement in full year revenue compared to 2012 will also be closely scrutinised. Over the past year, its shares are up 10 per cent and down by 5 per cent over six months. Digital Look, has the group on a ‘neutral’ rating. Bowman says: “For now and despite some attractive valuation metrics – the shares currently yield over 5 per cent – generally challenging trading to date continues to leave many analysts sceptical, with opinion ahead of the announcement pointing towards a ‘hold’, albeit a strong one.”

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