Should you buy Vedanta Resources plc, CLS Holdings plc and Mondi plc following today’s news?

Royston Wild considers whether investors should pile into Vedanta Resources plc (LON: VED), CLS Holdings plc (LON: CLI) and Mondi plc (LON: MNDI) today.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I’m considering the investment case for three Thursday headline makers.

Stop digging!

Metals and energy giant Vedanta Resources (LSE: VED) has dipped 3% in Thursday trading, the firm’s full-year update failing to stoke investor appetite.

Vedanta saw revenues in the period to March 2016 slump 17%, to $10.7bn, causing full-year EBITDA fell to $2.3bn from $3.7bn in 2015.

The digger has subsequently slashed 2016’s dividend to 30 US cents per share, a colossal markdown from last year’s 63 cent reward.

Vedanta is attempting to hurdle the impact of low resources values by hiking output across its key commodity classes — the company started expansion of its aluminium, iron ore and electricity divisions last year, while zinc, lead, silver and copper cathode output all surged higher in fiscal 2016.

Still, expectations of prolonged commodity price weakness is expected to push Vedanta into the ‘loss’ column both this year and next, according to City brokers. And with the company also nursing a colossal $7.3bn net debt pile, I reckon shrewd investors should steer well clear of the battered stock.

Property star

In stark comparison, investor appetite for CLS Holdings (LSE: CLI) has taken off after announcing a massive share buy-back programme, the stock last dealing 6% higher on the day.

The property investor said that “the current share price, which is at a significant discount to its last reported NAV per share, does not adequately reflect the value of its property portfolio and development pipeline.”

CLS Holdings will pay a maximum of 105% of the average market value of the shares in the five business days proceeding the purchase, it said, and will buy no more than 4,140,618 ordinary shares. The scheme will start immediately and end no later than 30 June.

Robust economic conditions across Europe have underpinned steady earnings expansion at CLS in recent years, and the City expects this trend to keep on rolling with growth of 5% and 11% chalked in for the firm for 2016 and 2017, respectively.

I reckon consequent P/E multiples of 17.1 times for this year and 14.9 times for 2017 represent fair value given the company’s strong momentum.

Paper giant

Packaging play Mondi (LSE: MNDI) has also risen following a positive trading update, the stock last 2% up from Wednesday’s close.

Mondi advised that underlying operating profit had galloped 14% higher during January-March, to €269m, prompting the firm to reaffirm its full-year guidance.

So while Mondi advised it had seen “some price weakness in certain of our packaging paper grades,” it added that “demand for these products remains strong and we believe the fundamentals remain robust.”

The company is also benefitting from higher uncoated fine paper prices, lower energy and input costs, and the contributions from capital investment programmes, it advised.

The City expects earnings at Mondi to keep chugging along during the medium-term at least — indeed, growth of 4% and 3% is pencilled-in for 2016 and 2017. And I believe subsequent earnings multiples of 11.6 times for this year and 11.1 times for 2017 represent splendid value.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »

Investing Articles

I think the Rolls-Royce dividend is coming back – but when?

The Rolls-Royce dividend disappeared in 2020 and has not come back. But with the company performance improving, might it reappear?

Read more »

British Pennies on a Pound Note
Investing Articles

Should I snap up this penny share in March?

Our writer is considering penny shares to buy for his portfolio next month. Does this mining company merit a place…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Stock market bubble – or start of a bull run?

Christopher Ruane considers whether the surging NVIDIA share price could be symptomatic of a wider stock market bubble forming.

Read more »

Investing Articles

Buying 8,254 Aviva shares in an empty ISA would give me a £1,370 income in year one

Harvey Jones is tempted to add Aviva shares to his Stocks and Shares ISA this year. Today’s 7.37% yield isn't…

Read more »

Investing Articles

Is the tide turning for bank shares?

Bank shares are trading on stubbornly cheap-looking valuations yet business performance in the sector is broadly robust. Should our writer…

Read more »