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.

VIDEO
Life & Style
Father and son: Michael Williams with son Edmund
lifeAs his son’s bar mitzvah approaches, CofE-raised Michael Williams describes the unexpected joys he’s experienced in learning about his family’s other faith
Arts & Entertainment
Ian Anderson, the leader of British rock band Jethro Tull, (right) and British guitar player Martin Barre (left) perform on stage
musicJethro Tull frontman leads ‘prog rock’ revival
Sport
Gareth Bale dribbled from inside his own half and finished calmly late in the final to hand Real a 2-1 win at the Mestalla in Valencia
sport
Arts & Entertainment
Who laughs lass: Jenny Collier on stage
comedy... writes Jenny Collier, the comedian whose recent show was cancelled because there were 'too many women' on the bill
News
House proud: keeping up with the Joneses now extends to children's playhouses
newsLuxury playhouses now on the market for as much as £800
News
news
Life & Style
Stir it up: the writer gets a lichen masterclass from executive chef Vivek Singh of the Cinnamon restaurants
food + drinkLichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines
Extras
indybest
Arts & Entertainment
Ken Loach (left) and Mike Leigh who will be going head to head for one of cinema's most coveted prizes at this year's Cannes Film Festival
filmKen Loach and Mike Leigh to fight it out for the Palme d'Or
News
The academic, Annamaria Testa, has set out on her website a list of 300 English words that she says Italians ought to stop using
newsAcademic speaks out against 'Italianglo' - the use of English words in Italian language
Life & Style
tech
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

1st Line Helpdesk Engineer Apprentice

£150.00 per week: QA Apprenticeships: This company has been providing on site ...

Telesales & Sales Support Apprentice

£221.25 per week: QA Apprenticeships: This company is a well established Inter...

Client Relationship Manager - SQL, Python

£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

**Financial Services Tax**

£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

Day In a Page

How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

How I brokered a peace deal with Robert Mugabe

Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

British Muslims's Happy video attacked as 'sinful'

The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

Michael Williams: Do as I do, not as I pray

Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

Jenny Collier: 'Sexism on stand-up circuit should be extinct'

The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

Cannes Film Festival

Ken Loach and Mike Leigh to fight it out for the Palme d'Or
The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

The concept album makes surprise top ten return

Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

Lichen is surprise new ingredient on fine-dining menus

Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
10 best baking books

10 best baking books

Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics

Is sexual harassment a fact of gay life?

Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics
Moshi Monster creator Michael Acton Smith: The man behind a British success story

Moshi Monster creator Michael Acton Smith

Acton Smith launched a world of virtual creatures who took the real world by storm
Kim Jong-un's haircut: The Independent heads to Ealing to try out the dictator's do

Our journalist tries out Kim Jong-un's haircut

The North Korean embassy in London complained when M&M Hair Academy used Kim Jong-un's image in the window. Curious, Guy Pewsey heads to the hair salon and surrenders to the clippers
A History of the First World War in 100 moments: A forgotten naval victory in which even Nature played a part

A History of the First World War in 100 moments

A forgotten naval victory in which even Nature played a part