RIO - Rio Tinto

[Kauri]

Well, my trailing Moving average stop for RIO has been hit at $97.40 and I am out.... watch the flag break up now.. ...
.....Cheers
..........Kauri

 

[the barry]

Can't believe no one has posted about rio's take over of alcan yet. Would love to know peoples thoughts, seem to have paid a hefty premium over the share price. Some 60 percent over all time highs. Would people think this will move the share price up, or have they paid to much of a premium even though alcan have a supposed quality portfolio?

 

[Uncle Festivus]

Can't believe no one has posted about rio's take over of alcan yet. Would love to know peoples thoughts, seem to have paid a hefty premium over the share price. Some 60 percent over all time highs. Would people think this will move the share price up, or have they paid to much of a premium even though alcan have a supposed quality portfolio?

Yes it is a bit quiet? I think after some analysis is done the price may be shown to be generous, at a big premium over the nearest offer and share price. But, who am I to argue with the experts in the business? Depends if it's debt funded I suppose. I think the share price will initially rise the next few days but take a dip when all the maths is added up.

Combined debt jumps from approx 8.4B to 46.3. Maybe someone who is familiar with these arrangements can point out the positives here???

 

[Garpal Gumnut]

I was looking at some support and resistance points for RIO going back over the past 10 years and noted an amazing pattern of support and resistance points at $23 intervals. The next "$23" resistance point is $111.

I'm not given to predictions and am no Yogi. I am however smarter than the average bear, and would be interested should RIO retrace from $111 back down to $88 which was the last previous resistance.

Enclosed is the monthly chart of RIO back to 1997

Garpal

 

[Ferret]

Market psychology sure is a strange thing.

RIO have been going up on rumours of this takeover, but it was always going to be expensive at this time. When a deal is finally done, the share price takes a knock.

Meanwhile, BHP is going up on rumours that it will takeover Alcoa, but of course to pull this off they will have to pay top dollar too. So if BHP do announce something will their share price also be hit?

Ferret

 

[vishalt]

the market is confusing. when worleyparsons acquired some canadian firms, and zinifex acquired wolfden, the shareprices surged.

so its a gamble really.

 

[purple]

depends on how much the market values the purchase price...Alcan was viewed as an expensive buy.

from today's news here are some interesting ratios :
http://www.smh.com.au/news/business/rio-bets-on-prices-holding/2007/07/13/1183833769360.html

"EBIT to sales margin (Rio 57 per cent, Alcan 12.6 per cent),
return on equity (Rio 41 per cent, Alcan 16 per cent)."

but the bottom line imho, is that the market is sometimes tunnel visioned.

"Assuming Rio's bid for Alcan does succeed, the combined group would be the global aluminium industry leader, with about 17 per cent of the world's bauxite production, 12 per cent of alumina production and a similar share of the aluminium market."

good long term strategy for Rio...the market's too jittery, and most of them are not the deep analyst type..

 

[Ferret]

I can't believe RIO's half year result hasn't attracted some comment.

Here we are all counting on big profits from the miners to keep the market moving ahead, and RIO announces a drop in profit due to cost pressures.

BHP must be feeling the same pressures, are they going to dissappoint too?

How about the small miners and explorers? They don't have the income of the big guys to offset increased costs. Does this mean they are struggling?

 

[Gundini]

I was looking at some support and resistance points for RIO going back over the past 10 years and noted an amazing pattern of support and resistance points at $23 intervals. The next "$23" resistance point is $111.

I'm not given to predictions and am no Yogi. I am however smarter than the average bear, and would be interested should RIO retrace from $111 back down to $88 which was the last previous resistance.

Enclosed is the monthly chart of RIO back to 1997

Garpal

Interesting an excellent perspective how it has panned out Garpal, well done!

Ironically your post was made 1 day befor the all time high, but low today was $88.01, an amazing retracement indeed. The $23 theory seems to have some substance albeit I'm not sure why. Hope you shorted this one, cheers.

 

[ehwebba]

i see the recommendations for rio is still buy, forcasting $122.00 as the value. interesting with the $23 theory. its been sitting on around $100 for awhile. also interesting to see how it will go tomorrow with the alcan takeover bid approved by the gov.

 

[vishalt]

Morningstar, a company I'm doing temporary work with just recommended it, and I totally agree with the report!

Morningstar - http://www.investordaily.com.au/stockoftheweek.htm

Stock of the week

Current

Rio Tinto Limited (RIO)

Upgrade of Commodity Price Forecasts

Ongoing growth in Chinese metals consumption followed by India, mining industry input cost inflation, industry consolidation, infrastructure bottlenecks, a scarcity of quality resources due to years of exploration neglect and sovereign risk are all underpinning commodity price strength. The long run average marginal cost of production has jumped permanently higher for most commodities. Much of the new demand has been satisfied by substantially higher cost mines. Australia is a major beneficiary of the macro economic fundamentals and not surprising our currency continues to rise, at last count 86.8 US cents versus our long term forecast of 0.76. We have previously been in no great hurry to increase that long term number as our commodity price forecasts are cast with an eye more firmly on the A$ prices, rather than US dollar prices. The ratio of the A$/US$ exchange rate versus US dollar commodity prices is more important. We now upgrade our long term A$/US$ exchange rate outlook to 0.80. We also upgrade commodity prices and then some! Our commodity price upgrades show the exposure to iron ore and aluminium to a lesser extent. Rio is the class act in iron ore, by a whisker from BHP. The acquisition of Alcan may well prove a masterstroke. A nice free option on an energy and carbon constrained world, without the hassles of construction delays and cost blow outs that come with building capacity.

 

[vishalt]

It has begun!

Rio Tinto has stepped up to the next level in the commodities fight, I hope everyone who holds Rio is excited as I am about the Alcan acquisition.

Alcan joins Rio Tinto to create global aluminium leader

Alcan today joined the Rio Tinto group following the successful Offer for Alcan by a subsidiary of Rio Tinto. The expanded aluminium product group, formed by the combination of Alcan and Rio Tinto's existing aluminium assets, today became the new global leader in aluminium and will be known as Rio Tinto Alcan.

Rio Tinto chief executive, Tom Albanese and Rio Tinto Alcan chief executive, Dick Evans hosted special events at Rio Tinto Alcan's Montreal headquarters and highlighted the opportunities created by bringing Alcan into the Rio Tinto Group, and the potential for continued strong growth in the aluminium sector. Similar employee events took place in Brisbane.

Last I checked analysts at Morningstar & I think UBS and several others rated it $122+, but I think it could go much much higher given aluminum's potential.

 

[overule]

It has begun!

Rio Tinto has stepped up to the next level in the commodities fight, I hope everyone who holds Rio is excited as I am about the Alcan acquisition.



Last I checked analysts at Morningstar & I think UBS and several others rated it $122+, but I think it could go much much higher given aluminum's potential.

Not really sure if RIO will rise to $122. How long before RIO will rise to $122 ? in Months time?

Read from news saying that "Rio Tinto ratings downgrade due to Alcan".
http://news.ninemsn.com.au/article.aspx?id=311508

 

[vishalt]

Agencies are just jumping on a bandwagon and downgrading most big deals because of the sub-prime collapse.

Judge Rio & Alcan merge for yourself, it soared $6 today, they can keep downgrading howmuchever they want, these are 2 of the best managed businesses out there.

 

[michael_selway]

Agencies are just jumping on a bandwagon and downgrading most big deals because of the sub-prime collapse.

Judge Rio & Alcan merge for yourself, it soared $6 today, they can keep downgrading howmuchever they want, these are 2 of the best managed businesses out there.

RIO still has great forward numbers do you believe it (different to BHP)!

RIO - Earnings and Dividends Forecast (cents per share)
2006 2007 2008 2009
EPS 686.6 678.0 871.7 996.7
DPS 131.4 132.7 136.9 142.6

BHP - Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 275.0 305.4 356.0 316.6
DPS 55.4 62.4 74.1 76.1

thx

MS

 

[vishalt]

Yeah but note that CommSec has not published Rio's 2010 forecast, and Rio is the first one to have dropped its profit while BHP has maintained substantial rises.

Anyway those numbers could substantially appreciate should demand keep at current levels and US housing reverse past 2009.

 

[michael_selway]

Yeah but note that CommSec has not published Rio's 2010 forecast, and Rio is the first one to have dropped its profit while BHP has maintained substantial rises.

Anyway those numbers could substantially appreciate should demand keep at current levels and US housing reverse past 2009.

Different FY's it appears

RIO - EPS(c) PE Growth
Year Ending 30-12-07 678.0 15.8 -1.3%
Year Ending 30-12-08 871.7 12.3 28.6%

BHP - EPS(c) PE Growth
Year Ending 30-06-08 305.4 15.0 11.0%
Year Ending 30-06-09 356.0 12.9 16.6%

thx

MS

 

[Rainmaker2000]

Hey guys.......just a valuation question, are you guys happy to pay 14 X 2010 earnings for mining companies.......it just seems like things are getting a little out of hand......these aren't growth companies, they are cyclicals who just dig stuff out of the ground and sell it......unless these are last available deposits of these resources on earth making these guys an 'asset play', one would have to have grave doubts about these valuations.....just wouldn't mind discussion is all

 

[vishalt]

Hey guys.......just a valuation question, are you guys happy to pay 14 X 2010 earnings for mining companies.......it just seems like things are getting a little out of hand......these aren't growth companies, they are cyclicals who just dig stuff out of the ground and sell it......unless these are last available deposits of these resources on earth making these guys an 'asset play', one would have to have grave doubts about these valuations.....just wouldn't mind discussion is all

The valuations are fair, even the world's biggest company (Mobil) has a valuation of 13, and China/India demand is huge.

I don't see the point of sticking around and not doing anything while these companies keep soaring?

 

[Rainmaker2000]

Yeah, so I guess you want to make some cash trading....its tough to understand the valuations, like for the actual companies, cause Mobil or whatever may well actually be on a PE 13 for this year but BHP and RIO are PE 14 for 2010 which is still 3 years off.....they are closer to PE 20 for this year.... there are like, real growth companies trading at about PE 14 now.....it's going to be an interesting few years for the Aussie index!