Rio Tinto’s most voracious critic in the analyst community, Citigroup’s Clarke Wilkins, is at it again. Just three days after blasting Rio chief executive Sam Walsh for his $US5 billion Pilbara iron ore spending plan, Wilkins today urged Walsh to sell Alcan, release franking credits and cut spending.
A Rio spokesman told Markets Spectator the company does not comment on analyst reports. But Wilkins, who works at the number one ranked equities house in Australia, has some support. Richard Giles of the Australian Shareholders Association wants Rio’s dividend payout ratio to increase to 80 per cent from the current 20 per cent so as to keep a check on Walsh and his board from making another $US38 billion Alcan-like mistake. Giles also wants Rio to release more franking credits.
Giles says the company has $8 billion of such credits as of December 31. Rio has rejected Giles ideas and if its attitude to the cringingly polite shareholder association representative is anything to go by, the Citi analyst’s recommendations will also fall on deaf ears.
But Rio’s shareholders must be increasingly frustrated with the company’s performance. The stock today was down 1.9 per cent, or $1.06, to $54.71 at 11:34am AEST. It has fallen 2.6 per cent in the last 12 months compared with the 25 per cent gain in the benchmark S&P/ASX 200 Index.
Wilkins claims if all three of his recommendations were followed Rio’s stock will rise by at least 30 per cent. If two of the measures are followed the shares will gain 20 per cent at least. That would indeed be welcome relief for investors.