Investment Column: Payout shows Antofagasta's confidence

Weir; Inchcape


Our view: Hold

Share price: 1,382p (-38p)

Copper, as we have noted before, is the key to deciding whether or not to invest in Antofagasta.

This is not to downplay the importance of the company's strengths and weaknesses; they still matter. But the copper miner's shares are, along with sector peer Kazakhmys, among the most geared to commodity markets.

Turning first to the business itself, the full-year figures published yesterday were strong. Revenues rose by a heady 54.5 per cent to $4.6bn on higher copper prices and good production, but best of all for investors Anto-fagasta said it would pay a final dividend of 112 cents, made up of an ordinary payout of 16 cents, up from 9.4 cents last year, and a stonking special dividend of 100 cents per share, up from 14 cents last year.

Driving the company's confidence, in our view, are the underlying fundamentals of the copper market, with the prospect of a yawning mismatch between demand and supply looming on the horizon for 2011.

The problem for us is that the industrial metal has already been on quite a rally, with average prices on the London Metal Exchange up 46 per cent last year. That may open the door to some profit-taking, we fear. Moreover, there is a question of rising costs as energy prices pick up. So far, that has not mattered as the impact has been offset by rising commodity prices. But a sharp pull-back in the copper price may change that.

Of course, these concerns – all of them short to medium term in nature – can be offset by the valuation. But, alas, Antofagasta already trades at "considerably higher multiples than those of Kazakhmys or indeed the major diversified miners", according to the scribblers at Evolution. Given that, we would not buy. But the company's strengths and the confidence evidenced by the special dividend means this is not a sell.

Weir

Our view: Buy

Share price: 1,695p (-84p)

Weir's shares were out of favour last night, despite thoroughly respectable results showing orders surging by 39 per cent to £1.9bn last year.

The company also posted pre-tax profits up by more than 60 per cent, on revenues of £1.6bn. And yet, the stock slumped in afternoon trading, in part on unexpectedly high debts, but also as investors took profits from an eight-month run of gains.

But the engineering group remains attractive, in our view. Of its three divisions, oil and gas was the stellar performer last year. Order input for the year almost doubled to £626m, thanks to the recovery in the US shale market, sending profits soaring by 122 per cent to £117m.

Roaring demand for commodities also played well, pushing the minerals division's orders up by more than a quarter to £984m. The only slight drag was the power and industrial unit, as weakness in developed markets outweighed strong activity in Asia.

Keith Cochrane, the Weir Group chief executive, said the company had demonstrated "great agility" in improving mining and oil and gas markets in 2010, and said it is "well on track" to double 2009 profits by 2014, as planned.

In the short term, Weir has a strong order book and a clear growth strategy. Over the longer term, its exposure to growth markets such as mining and oil and gas give it plenty of potential.

Inchcape

Our view: Hold

Share price: 393.6p (+2.1p)

Inchcape became the latest UK-based car dealership operator to wheel out an impressive set of figures yesterday, following on from rivals Vertu Motors and Pendragon over the past fortnight.

A rigorous focus on costs – mostly notably, a reduction in headcount and disposal of 15 sites – and a robust performance in most of its 26 markets helped Inchcape accelerate profit growth by 38 per cent to £214m for the 12 months to December.

More good news for investors came from Inchcape recommending a final dividend of 6.6p, after passing on its final payment for 2008 and 2009.

For all the good news, Inchcape, which sells brands from Mercedes-Benz to Porsche, warned of an "uneven global recovery".

The company forecasts market growth in Australia, Russia, South America, Ethiopia, and the Baltics, but "declines" in Singapore, the UK, Belgium and Greece, which together account for more than half of group sales. Inchcape's caution makes us wary of wading in, but the fact that the stock trades on a modest forward earnings multiple of 11.6 argues against a negative view.

News
Patrick Stewart in the classiest ice bucket to date
peopleSir Patrick took a more understated approach to the challenge
News
The current recommendation from Britain's Chief Medical Officer, is that people refrain from drinking on at least two days a week
scienceTheory is that hangovers are caused by methanol poisoning
Arts and Entertainment
tvWe have created an infogaphic that looks back over the previous incarnations of the Doctor
Sport
Olivier Giroud celebrates after his late goal saved Arsenal a point at Goodison Park
football Giroud rescues a point for Arsenal after they trailed by two goals
PROMOTED VIDEO
News
i100
News
newsComedian Lee Hurst started trend with first tweet using the hashtag
News
i100
News
Australian rapper Iggy Azalea was left red faced but, thankfully, unhurt after taking a few too many steps backwards, sending her tumbling off the stage.
people
Life and Style
A nearly completed RoboThespian robot inside the Engineered Arts workshop is tested in Penryn, England. The Cornish company, operating from an industrial unit near Falmouth, is the world's only maker of commercially available life sized humanoid robots
techSuper-intelligent robots could decide destroying the human race is the kindest thing to do
Life and Style
techConcept would see planes coated in layer of micro-sensors and able to sense wear and tear
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
News
newsRyan Crighton goes in search of the capo dei capi
Life and Style
Customers can get their caffeine fix on the move
food + drink
News
i100
Extras
indybest

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.

iJobs Job Widget
iJobs Money & Business

Software Developer (Java /C# Programmer)- London

£30000 - £45000 per annum: Harrington Starr: A global investment management fi...

Senior Network Engineer-(CCIE, CCNP, Cisco, London)

£65000 - £75000 per annum: Harrington Starr: Senior Network Engineer-(CCIE, CC...

Senior Network Analyst - (CCIE, Cisco, CISSP)

£70000 - £80000 per annum: Harrington Starr: Senior Network Analyst - (CCIE, C...

Senior Network Engineer-(Design, Implementation, CCIE)

£60000 - £80000 per annum: Harrington Starr: Senior Network Engineer-(Design, ...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition