Those Holding ABY may be interested with the following information recently released via some researches:
The update on operations next week for this stock is expected to be on track and plays a large role in its target. However, on current pricing, the stock is
looking very cheap with a healthy divided forecast to be around 10%.
This is a more risky stock leveraged to copper prices and high costs in
the mining industry, however, I can see substantial upside if operations
are on track and it may be worth having a few in your portfolio.
Event: Copper price raised together with higher A$...
Copper prices have outperformed our expectations in the first half of
2007, averaging US$3.08/lb on the LME. Strong Chinese imports following
a significant 2006 de-stocking event have been a key driver. Copper
imports into China for the first five months were higher than total 2006
imports. We have raised our 2007 full year forecast by 8% from
US$3.00/lb to US$3.24/lb and 08 by 9% to US$3.00/lb.
Impact: EPS upgraded...
The increase in copper price has been somewhat offset by the higher A$
forecast, with earnings down 2% in FY 08e, and up 3% in FY 09e. We have
also taken the opportunity to raise costs due to rising freight rates
and higher energy, consumable and labour costs so as to be conservative
in our estimates.
Action: Buy 2. Target raised to $3.85. Update next week is key...
On a number of measures, whether it is yield, PE or free cash flow, ABY
looks to be one of the cheapest metal stocks under coverage by UBS. We
have raised our price target from $3.30 to $3.85 reflecting our
increased confidence in the operation. Our price target is based on 6x
08E earnings. ABY should release its June quarter report next week,
which if it confirms steady performance at Nifty should see a further
re-rating of the stock in our view.
Valuation: $1.90 (DCF, 10% d.r)
Our valuation is $1.90 with a new price target of $3.85 - a discount to
peer multiples at 6x 08E PE.