The Week In Review: Acquisition leaves Xstrata mining a rich seam

Xstrata, the mining company, has finally got the go-ahead from shareholders for the £8bn acquisition of the remaining stake in its Canadian rival, Falconbridge. The deal gives Xstrata yet more scale, as well as diversification into the nickel market.

While the management has yet to be drawn on the extent of the synergies from the takeover, analysts forecast that the deal could increase earnings by as much as 25 per cent by next year.

At a time when commodity price growth has cooled, the deal is the perfect next step for a company that has delivered its shareholders phenomenal returns for the past few years. Having more than quadrupled in size in four years, it remains one of the best long-term performing stocks in the FTSE 100.

Compared to the largest mining stocks in the UK, Xstrata does not look overpriced. It is trading on less than 10 times this year's forecast earnings, and even after accounting for potential falls in commodity prices and cost inflation, several analysts believe there could be up to 30 per cent upside to its current price. Tread carefully, but for those with an appetite for risk, Xstrata is worth a punt. Buy.

OXONICA

Oxonica was spun out of Oxford University in 1999 and floated last year. This week came news of a key deal, which analysts believe will be worth up to $13m for the company. Oxonica will supply Turkey's national oil company with its Envirox fuel additive, which not only increases diesel fuel efficiency by 10 per cent, but also cuts carbon dioxide emissions. Buy.

AT COMMS

AT Communications, named after founder and chief executive Alex Tupman, has agreed to buy rival Rocom, so called as its founder is Robert Old. Both have done well out of the tie-up; Old is set to walk away from the business more than £17m richer, while Tupman has doubled AT's revenues by making the deal, its fourth since listing on AIM in July last year. Buy.

COUNTRYWIDE

Estate agency chain Countrywide has turned in an impressive set of first-half results, cashing in on a recent mini-revival in the UK housing market. All well and good. But can such growth in the housing market be sustainable after such a long bull run? Avoid.

PIPEX

Pipex Communications is the country's fifth-largest supplier of broadband internet services, and the price war that has erupted in the industry over the past few months has done its shares no good. However, the falls look to have been overdone. Trading at 18 times forward earnings, with a high probability that the group will eventually be taken over, Pipex shares are worth tucking away.

HOT TUNA

Hot Tuna is the only company on AIM with an ex-supermodel on its board. But Elle Macpherson is not an executive director of the surf brand just because she has a pretty face. Having built up her own clothes brand over the past 10 years, Macpherson could be just what Hot Tuna needs. The 18 to 25 age bracket it is aiming at is worth more than £1bn. Still, with little sales revenue yet, wait and see.

HAMMERSON

Prospects for growth look good at property company Hammerson, though the company is stingy with dividends - a yield of 1.6 per cent is set to more than double as a Reit, but will remain well shy of the sector average. However, this is a well-run company with good growth prospects. Buy.

SEEING MACHINES

Seeing Machines may not be large enough to catch the eye of many investors, but it is well worth a look. Shares in the AIM-listed imaging software developer leapt nearly 10 per cent this week after it won funding from the Australian government to continue development of its glaucoma diagnostic device. Buy.

HOMESERVE

Emergency repair group Homeserve sealed what could prove to be a truly transformative deal this week, giving itself access to another 3.4 million potential customers in the US. The tie-up with electricity group FirstEnergy may take several years to make a serious impact on the company's bottom line, but in the long term, the deal should give the group a strong foothold in a massive market. Buy.

INSTORE

Angus Monro spent three-and-a-half years and more than £16m transforming the bulk of the Poundstretcher retail estate into a new format called Instore. Now, Trevor Coates, his successor at Instore, is embarking on another overhaul of the business. Coates is certainly well incentivised to make a good go of it - he stands to make £6m if he can get the group's shares up to 60p over the next three years. That's a big if though. Avoid.

BTG

On Wednesday, BTG unveiled the sale of its WebNav online navigation tracking patents for $5m and a share of future profits. On Thursday, it said that TolerRx, a licensee of its diabetes treatment TRX4, had raised enough money to finance late stage clinical trials of the drug. If TRX4 makes it on to the market, BTG can expect substantial royalties. Buy.

These recommendations are taken from the daily Investment Column

Boom time continues for Balfour Beatty's projects

Balfour Beatty has done very well out of the Government's private finance initiative (PFI) scheme over the years. This week, Ian Tyler, the construction group's chief executive, assured the City that PFI is going to continue to be a key part of the Government's procurement programme for a good time to come. And it seems that the PFI model is catching on abroad. Tyler revealed that Balfour Beatty is looking at bidding for a number of projects in Asia, Europe and the US.

Meanwhile, the group continues to do very well with its core UK construction and engineering operation. It posted a 15 per cent rise in first-half profits before exceptional items to £60m. There was also news that the group's order book had hit a record £8.8bn.

Balfour Beatty, which builds railways, schools and hospitals, is the single biggest contractor working on the Heathrow Terminal Five development at present. Along with Amec and the US group Jacobs, it hopes to win the contract to manage the site where the London 2012 Olympics are to be held.

Trading at nearly 14 times forward earnings, the group's shares stand at a premium to the wider sector. However, for a quality operator like Balfour Beatty this is not expensive. Buy.

m.jivkov@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Marketing Services Manager - (communications, testing, DM)

    £32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

    Guru Careers: Finance Account Manager

    £Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

    £45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

    Day In a Page

    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas
    La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

    Deaf community outraged by La Famille Bélier

    The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
    10 best high-end laptops

    10 best high-end laptops

    From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
    Susie Wolff: A driving force in battle for equality behind the wheel

    Susie Wolff: A driving force in battle for equality behind the wheel

    The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
    Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

    'No abs Adam' plans to muscle in on Usain Bolt's turf

    After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
    Calls for a military mental health 'quality mark'

    Homeless Veterans campaign

    Expert calls for military mental health 'quality mark'
    Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

    Meet Racton Man

    Analysis shows famous skeleton was a 6ft Bronze Age superman
    Garden Bridge: St Paul’s adds to £175m project’s troubled waters

    Garden Bridge

    St Paul’s adds to £175m project’s troubled waters
    Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

    Stuff your own Christmas mouse ornament

    An evening class in taxidermy with a festive feel
    Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

    Joint Enterprise

    The legal doctrine which critics say has caused hundreds of miscarriages of justice
    Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

    Freud and Eros

    Love, Lust and Longing at the Freud Museum