Investment Column: Rich seam to be mined with Kazakhmys

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The Independent Online

Kazakhmys

Our view: buy

Share price: 1,577p (+19p)

last year, when Kazakhmys chairman Vladimir Kim sold part of his stake in the mining group to the Kazakh government, there was some concern about the creeping hand of the central Asian state in the FTSE 100-listed group's affairs. At the time, Mr Kim agreed not to sell any more shares – save for a 4 per cent stake to promote liquidity during a possible secondary listing in Hong Kong – for a year.

Last night, the miner said Mr Kim had had a change of heart. That 4 per cent is off the table and he now intends to "retain his current holding [of around 28 per cent] in full". The entire stake will be locked up until October, effectively putting concerns about the prospect of rising state influence to rest, at least until the end of this year. The group also clarified that the possible Hong Kong listing remains on the agenda, though the size of the offering is likely to be smaller than was originally envisaged.

All this is positive, in our view. A Hong Kong listing will cement the miner's relationships in China, which is the world's biggest consumer of metals. And the smaller offering is the result of the strength of the Kazakhmys balance sheet. The potential dilative impact of the Hong Kong listing – which will likely require a new equity issuance because Mr Kim's stake is off the table – will be small.

But this is only part of the story. As with much of the mining sector, the investment case is underpinned by the recent boom in commodity prices. Copper has made a habit of striking new records week after week, helping drive interest in the likes of Kazakhmys. Results from other miners have cheered investors, with higher metals prices boosting profits. There is nothing to suggest that the same will not be true of Kazakhmys, which trades on undemanding multiples of less than 10 times forward earnings, when it updates next month. Buy.

Harvey Nash

Our view: buy

Share price: 64.99p (+6.99p)

amid all the talk of savage public-sector job cuts, it is easy to forget that some industries, such as IT, are hiring robustly again. Certainly, Harvey Nash, the recruitment consultancy and IT outsourcing service provider, has delivered a buoyant performance over the last year, which has helped its shares bounce back from a 12-month low of 31.75p in February 2010.

Harvey Nash said trading in the second half to 31 January had been "strong", leading it to boast that its full-year results would be ahead of expectations. The group – which derives the lion's share of its revenues from searches for IT and finance functions – expects pre-tax profits to be up by 46 per cent to £6m, on revenues of £425m. The search company has also seen improving trends in its outsourcing and off-shoring division, as firms keep a tight rein on costs.

Harvey Nash, with 37 offices globally, has also proved adept at managing its finances, ending the year with £8m on its balance sheet and no long-term debt. The group increased its total dividend by 10 per cent to 2.42p a share.

Despite the rise in its shares overthe past year, Harvey Nash trades on multiples of just of 10.5 times forecast earnings, making us want to plug in. Buy.



Titan Europe

Our view: buy

Share price: 83p (+4.75p)

when we last looked at the wheel-and undercarriage maker, Titan Europe, in the recessionary chill of 2009, we advised a swift sell. Now is the time to go back in. Hot on the heels of its last upbeat trading statement, in September, the group issued another yesterday, confirming its rosy view of the outlook with full-year forecasts of revenues at £355m, some £7m ahead of market predictions.

Last year has seen a boost in all market sectors, the company says, pushing revenues up by 44 per cent in the agriculture business, 61 per cent in the construction division and a whopping 104 per cent in mining.

Net debt is down by around £10m, despite the boost to business activity. And the group is looking to further expand manufacturing facilities in Turkey, Brazil and China.

But the market has not really woken up: Titan's shares are trading on a very modest 7.4 times forecast 2011 earnings, The stock shot up 14 per cent in January, before falling back again. The dip is temporary. Make the most of it. Steam in and buy.

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