Tuesday newspaper share tips: Sports Direct, Anglo American

Shares in Sports Direct look cheap; indeed, founder Mike Ashley might one day even be tempted to take it private, but for now they’re best avoided, The Times’s Tempus said.

Mining

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The company is an odd one, what with its colourful deputy chairman and founder Ashley’s brief, impromptu and unhelpful announcements to the City and due to the fact that it pays no dividend.

Neither does the sports retailer provide a break-down of its overseas figures, Tempus added, although it is believed that it derives about half its sales from Asia and gets paid in dollars.

It only has limited hedging against future currency movements to boot.

Furthermore, it is facing a slowdown in the UK market which will require investments in larger city-centre shops – which are preferred by upmarket brands such as Adidas and Nike.

Changing hands at just 10 times earnings the stock looks ‘cheap’ but it’s one for gamblers.
“I would be sitting on my hands. Avoid for now,” Tempus says.

Anglo American is busy selling off its non-core assets to save its skin – its market capitalisation has plummeted by two-thirds in just two years - but it will not be easy, the Financial Times Lex column said.

The mining outfit is targeting the sale of assets worth between $3bn to $4bn to bring its net debt down from more than $10bn at present.

With that goal in mind, yesterday it announced the sale of a stake in Australian coal mine Foxleigh for $620m, but that will barely leave a scratch on its debt pile.

A sale of Brazilian iron ore miner Minas Rio would be another matter. The outfit was also purchased in 2007, for $5bn, just a few months before Foxleigh.

However, a disposal of Minas Rio is off the table until Anglo ramps up production and cuts its unit costs.

As for its assets in South Africa, where the economic and political situation is growing increasingly strained, the company is stuck with them, given that they make up about 45% of its ‘core’ assets.

Be that as it may, they are a large part of the more than 10% discount on Anglo American’s stock versus its rivals.

Anglo is moving in the right direction, but the path to achieving a new look will be a rocky one, Lex concluded.