Tag: ASX:RIO

Shares of mining giant RIO Tinto are over 1% lower at $71.25 as company CEO, Jean-Sebastian Jacques expressed a negative view on the Chinese economy over the near-term.

While addressing investors in Sydney yesterday, Mr Jacques predicted a slowdown in construction, infrastructure growth and automotive demand from China over the next six months.

The company also announced that they would close some Iron Ore mines over the Christmas break as part of their “value over volume” strategy. Even with high-grade Iron Ore  price firming over the last 6-weeks, we consider the CEO’s message a negative signal for RIO shares.

Our ALGO engine triggered a buy signal in RIO back in April at $61.40. Even though the  ALGO engine has not triggered a sell signal, we suggest investors can take profits on long RIO exposure, sell a covered call to enhance cash flow, or go short the RIO CFD on our SAXO Go Platform 

The next significant level on the daily charts is near the October low of $68.50.

RIO Tinto

Shares of RIO Tinto have reached a one-month high of $70.40 following their announcement that they will return a further USD 2.5 billion to shareholders following the sale of Coal and Allied.

This will lift the total shareholder returns to USD 8.2 billion ($4 billion in share buybacks and $4.2 billion in dividends).

Considering that the share buyback scheme will be done off-market, its likely that the shares could be priced 8 to 10% below market value.

Nevertheless, with RIO’s balance sheet getting a shot in the arm, we expect additional returns in dividends in February 2018.

Our longer-term target on RIO is in the $76.00 to $76.50 area.

Rio Tinto

RIO is likely to free up additional capital through the proceeds from the complete exit of coal and high cost aluminium smelting.

We estimate that this could raise more than $7.5 billion, potentially more than doubling shareholder cash returns in FY19

Recent sentiment around iron-ore and aluminium have helped drive RIO’s share price. We consider RIO near the top end of the valuation range.

However the share price should remain well supported, and when complimented with a covered call, we’re delivering 12% annualised cash flow.

FY 18 EBIT forecast of $9.8 billion, EPS $4.50 and DPS $2.45, places the stock on a forward yield of 4%.

Rio Tinto

Rio Tinto posted a solid result for 1H17.

RIO is quoted Ex-Dividend this morning at AUD$1.3772, payable on the 21st of September 2017.

As expected, RIO opened lower today, although strong future capital returns via increased dividends will provide added buying support.

RIO reported 1H17 underlying earnings of US$3.9bn, which was largely in line with market  expectations. EBITDA of US$9.0bn was also in line.

Lower capex resulted in cash flow and net debt coming in slightly better than exceptions (gearing now 13%)  with net debt end of June US$7.6bn. 

Buy-back was boosted by US$1.0bn increase, helping to offset a softer interim dividend. The interim dividend announced was US$1.10 and assumes 50% payout ratio.

In 2018 we expect RIO to see flat earnings growth at best, and we have the stock trading  on a forward yield of 4.5%.

RIO has confirmed that Yancoal remains the preferred bidder of Coal & Allied post a revised and improved offer from Yancoal yesterday.

We expect material free cash-flow (FCF) to be passed through to shareholders despite iron ore falling from its February peak.  In FY18, RIO could return up to $3billion  through share buy-backs.

We remain cautious on the outlook for spot iron ore prices. However, the low levels of debt, low cost of production and aggressive capital management undertaking by RIO will help to provide share price support.

FMG, RIO & BHP will likely see a minor rally from the current oversold conditions,  before turning lower.

RIO posted lower-than-expected output in Q1 17 from its iron ore, copper and coal divisions.

Heavy rainfall in WA weighed on Pilbara volumes, with iron ore production down 10%. 2017 guidance was unchanged.

FY17 revenue $38b, net profit $8.8b, DPS $3.60 places the stock on a 6.7% yield.

RIO