Broker tips: Glencore, Anglo American, Capital
By Iain Gilbert
Date: Tuesday 11 Mar 2025
(Sharecast News) - Berenberg initiated coverage of Glencore on Tuesday with a 'buy' rating and 380.0p price target, offering 21% upside, as it said self-help can drive improved returns and a better rating.
The German bank noted that Glencore shares have lagged peers since 2023 despite being a consensus long.
"This is likely due partly to the market overhang of it being a large producer of thermal coal, which is not a pure energy-transition commodity (albeit it helps facilitate the energy transition), while the company's poor governance history (although now being addressed) also has not been helpful for sentiment," the bank said.
"However, at 0.84x NAV and 3.4x EBITDA, we think the valuation is compelling, and we believe that Glencore has a number of self-help levers that it can pull to create value for shareholders and drive the rating higher, without having to consider moving its primary listing away from London, which it has stated that it is considering; but it is important for management to execute on the strategy to drive the rerate."
Berenberg reckons that Glencore should sell the Kazzinc asset in Kazakhstan while gold prices are helping to drive better returns, it also thinks Glencore should explore the sale of a minority stake in its marketing business to showcase value, and should use its internal cash flows and funds from the sale of assets to continue to return funds to shareholders in the form of dividends and buybacks and fund lower-risk growth.
Citi has renewed its coverage of Anglo American with a 'neutral' rating, saying that the mining giant's portfolio restructuring is progressing well but appears priced into the stock.
Nevertheless, the bank sees some upside with a target price of 2,600p, compared with Monday's closing price of 2,257.5p, despite a decent performance over the past year as the company continues to "optimise" its business through demergers and disposals of certain divisions.
"AAL has made decent progress on its portfolio optimization with coal and nickel business disposals already sealed, while PGM demerger is on track. Diamond remains the last piece in the pack of non-core assets," Citi said in a research note.
"This marked shift in the investment case has led to a c30% share price outperformance since the announcement in May'24, implying a sharp re-rating of the remainco business."
The stock's current valuation puts it trading at 6.1 times 2025 estimated EBITDA, which is a premium to others in the diversified mining sector. However, further upside could be seen in a potential rally in commodity prices or renewed M&A interest from global peers, Citi said.
Analysts at Canaccord Genuity slashed their target price on mining services firm Capital from 130.0p to 60.0p on Tuesday and dropped the stock from 'buy' to 'hold' following disappointing FY25 revenue guidance.
Capital announced FY25 revenue guidance of $300.0-320.0m, weighted to H2, implying an 8-14% decrease versus. Canaccord noted the revenue decline could be attributed to lower mining revenues, while MSALABS growth has also been slower than anticipated and not enough to offset the broader decline.
Canaccord stated that when it initially formed its thesis, a key component was the company's ability to operate in a difficult jurisdiction, where the competition was more fractured and margins were higher, which led to higher capital efficiency than drilling peers.
Since then, however, the company has pivoted towards lower margin businesses, and the US, which has required a significant increase in capital investment.
The Canadian bank also noted that the company's NGM drilling contract has seen delays, which has negatively impacted group margins. Similarly, Capital has also consistently missed its revenue guidance for the MSALABS business since 2022, with the latest FY25 guidance of $50.0-60.0m significantly lower than the $80.0m previously targeted.
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