Sunday newspaper share tips

By This Is Money
Updated: 09:55 EDT, 26 September 2010

We round-up the Sunday share tips from the Financial Mail and The Sunday Telegraph.

It says here: The newspaper share tips digested.

FINANCIAL MAIL

Gold exploration company Red Rock Resources started by investing in other mining companies and now has sizeable holdings in two listed Australian businesses - iron ore and manganese producer Jupiter Mines and uranium group Resource Star.

But chairman Andrew Bell is moving Red Rock into gold and has acquired interests in two mines - one in Kenya, another in Colombia.

Colombia used to be synonymous with drug-related lawlessness but there has been a crackdown on crime and Bell has high hopes for Red Rock's mine there.

The Latin American country was once one of the world's largest gold producers and Red Rock expects to start benefiting from gold production in the country over the coming 12 months.

The Kenyan mine also has significant potential and by the end of 2011 Red Rock intends to be producing substantial amounts of gold. Analysts expect profits of £1.6m in 2010, rising to £1.8m next year and increasing steadily thereafter.

Red Rock shares are 4.5p and analysts believe the shares are worth nearer 20p.

Another gold mining firm Goldplat, run by mining veteran Demetri Manolis, makes its money in a rather unusual manner. It takes wood chippings, old mills and other bits and pieces from other mining companies and extracts gold from them.

These pieces of wood could have been stuck down a mine for years, during which time fragments of gold became ingrained in them. Goldplat is one of the few companies in the world that can extract the metal from the wood.

In the year to June 2010 Goldplat made £1.9m, but profits are expected to hit £3m next year and more than £5m the year after as its mines start producing and its business in Ghana develops.

Goldplat stock is 10.8p and again analysts believe the shares are worth nearer 20p.

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SUNDAY TELEGRAPH

HSBC Infrastructure Company, which trades under the symbol HICL, is a dividend play for income seekers. The group holds a number of assets that have already been constructed for their income streams.

The fund was launched in 2006 and it was the first infrastructure fund to list on the London Stock Exchange.

Last week, the group held an informal investor day, in which it said that the fund's managers had identified a number of new potential investments. They are in exclusive negotiations regarding a number of these.

As is usual for the fund, it will use its bank facilities to pay for the transaction - and then raise new equity to de-leverage once the purchase has completed.

The next fundraising is expected to be through a placing and offer for subscription - and if things go as planned, new funds are likely to be raised before the end of the year.

This means that you may be asked to buy new shares in the business later this year to fund these purchases - something that new investors in the company need to note.

Currently the fund owns 33 assets, including the building that houses the Home Office in London, and stakes in hospitals, such as Oxford John Radcliffe and Blackburn.

It also owns a half share in all of Ealing's schools. The assets are all vital pieces of the country's infrastructure and, apart from the Dutch high-speed rail stake, the assets are found in the UK.

The shares were first recommended at 109.5p on June 5 last year and are up 4% since that point, at 113.7p.

Ryanair last week confirmed that everything was on track in the current year. Mr O'Leary said he was comfortable with guidance of a net profit of €350m (£298m) to €375m (£319m) in the year to March 2011.

Since Ryanair cancelled a huge order for 200 new planes from Boeing last December, there have been expectations of a cash payout.

A special dividend was approved by 100% of investors at last week's AGM. The payout is for 34 euro cents (28p) a share and it will be paid on October 1.

However, Mr O'Leary hinted that it was unlikely another dividend would be paid in the next few years, and the prospect of a purchase of new planes was on the agenda.

Analysts expect that the company's free cash flow will hit about €1bn (£850m) in the medium term.

Ryanair can be an easy target for critics, but it is an exceptionally run business that gives its customers what they want - cheap flights abroad. Despite the expected absence of a dividend for a few years, shares, currently at €3.8 (320p) a share, are a buy.

SUNDAY TIMES

The Inside the City column takes a look at Smiths Group. It says Smiths still has the hallmarks of a takeover target for cas-rich firms from overseas.

The company has benefitted in the US from spending on homeland security.

However, the shares have risen 44% in a year and the Sunday Times says that is high enough for now.

The Sunday Times is more keen on Betfair and its up-coming stock market flotation.

It says the betting exchange will have to convince investors that it can break free of its rivalks and grow, but that there is reason to think it can. A buy.