Wednesday newspaper share tips: Rio Tinto, Whitbread

Shares in Rio Tinto should be avoided, they are already expensive and China's economy seems about to "roll-over", The Daily Telegraph's Questor column said.

The Anglo-Australian mining concern announced on 21 June that Jean-Sebastien Jacques will replace current chief executive Sam Walsh on the 2 July, and at the same time the head of the company’s iron ore business, Andrew Harding (the widely-presumed successor to Walsh) left and was replaced by Chris Salisbury, who ran the copper and coal division.

He joined the mining giant to head the copper and coal divisions in 2011, where he sold unwanted mines, brought Oyu Tolgoi copper mine in Mongolia to production and showed a good eye for choosing the most promising assets.

Salisbury, on the other hand, has shown a strong track record of "driving assets for cash".

Questor believes the company should reduce its reliance on iron ore. It generates about half its revenues and 90% of its earnings from iron ore and only 9% from aluminium, copper and other minerals.

Indeed, the company seems to be preparing for a renewed fall in commodity prices until competitors' loss-making mines are forced to close.

Rio Tinto increased its iron ore production last year by 11% to 3276m tonnes as mine companies as part of a Ulysses pact with peers to increase production purportedly because of Chinese growth.

Iron ore prices have risen more than 25% during the last five months, after reaching lows of $40 per tonne, but most industry-watchers expect them to tumble back to their prior levels.

So, while Questor believes the company is well-placed to "survive" the turbulent times that lie ahead for miners, after slashing its dividend, capital spending, workforce, and wages, the recent bounce in the share price is ultimately predicated on debt-fuelled growth in China and hence destined to be short-lived.

Trading on 17 times expected earnings, the shares are likely to drift lower the next 12months so it would be best to wait till they get to around £13 and £14, Questor said.

Whitbread offers good long-term value, with management having set itself ambitious but achievable targets by the looks of the company's most recent performance, The Times's Tempus said.

Like-for-like revenues at both its budget hotel chain and Costa coffee arm were both up in the first quarter.

Furthermore, newly arrived boss Alison Brittain has stuck to her goals for growing the company, with plans to increase the number of Premier Inn rooms from 65,000 to 85,000 by 2020 and sales at Costa from £1.6bn to £2.6bn.

Given the fragmented nature of the budget hotel market and the estimated 50% return on capital of each new Costa establishment, those target seem "achievable", Tempus said.

"The budget hotel market is still fragmented, heaven knows when we will lose our taste for Costa coffee and the overseas side gives scope for expansion," the tipster said.

Whitbread's restaurant side is also keeping its ahead above water.

After falling back from £55 last year the stock price is now trading at 16 times earnings "which suggests good long-term value".

Buy, says Tempus.