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JP Morgan prefers precious metals over bulks

JP Morgan prefers precious metals over bulks
Across the sector, JP Morgan forecasts average year-on-year EBITDA declines of around 25%

Heavyweight JP Morgan Cazenove becomes the latest house to paint a gloomy picture for mining stocks in 2016 but says it prefers precious metals to bulk commodities in a note on Monday.

"Even before recent gyrations caused by China, 2016 was shaping up as tough for metals & mining," said the broker - hardly putting itself up for any prizes for original thought.

Across the sector, it forecasts average year-on-year EBITDA declines of around 25%, with over 80% of the sector expected to record negative bottom-line earnings in 2016.

"The exception is precious, where we forecast only slight EBITDA declines due to supportive prices," said analyst Fraser Jamieson, adding he sees precious metals rising i the second half.

"We retain a preference for stocks that offer safety from the storm, even if only on a “least bad” basis, or those that offer a clear line of sight on catalysts to improve perceptions."

JP Morgan has upgraded copper titan Antofagasta (LON:ANTO) to 'overweight' from 'neutral', but lowered the target price to 380p from 530p, and repeats an 'overweight' stance on Glencore (LON:GLEN) but lowers the price target to 130p from 160p.

Anglo American (LON:AAL) is rated 'underweight' and the target downgraded to 210p from 265p.

Elsewhere, Deutsche is upbeat on drugs firm GlaxoSmithKline (LON:GSK) today, upping the target price to 1540p from 1500p  and repeating a 'buy' rating, ahead of 2015 results which are due out on February 3l, where it reckons guidance is likely to be beaten.

"We expect management to reiterate its 2016 targets (double digit EPS growth) although it may conservatively adjust for a likely higher base given our belief 2015 guidance will be exceeded. We continue to see GSK’s shares as modestly undervalued and see room for a near-term rally as management delivers on near term earnings and margin targets," says Deutsche.

Also today, HSBC has upgraded television broadcaster ITV (LON:ITV) to 'buy' from 'hold'.

Investec has repeated a 'sell' on High Street bookie William Hill (LON:WMH) after last week's fourth quarter update, where it said it would post full-year operating profits of about £290mln; online sales rising 4% to £550.7mln but retail sales sliding 2%.

Investec kept its forecasts broadly unchanged but lifted the target price to 346p from 323p due to lower risk from the the group's digital overhaul Trafalgar project since the transition of the internet operating system was now complete.

Meanwhile, in small caps, Hummingbird Resources (LON:HUM) issued today the findings of a new definitive feasibility study for the Yanfolila gold project in Mali, which improved the economics of the open pit operation.

Using a gold price of US$1,250 per ounce, the net present value (NPV) is US$142mln -  almost double that of the optimisation study last March - of US$72mln.

Asa Bridle, at broker Cantor, said: “…the key question remains; when is the financing for the project going to be secured? Hopefully completion of this study will go some way to dealing with this, and the project can move forward.”

The broker repeated a ‘buy’ but keeps its target price under review.

Ambrian repeats a ‘buy’ stance and targets 45p a share.

Elsewhere, analysts were positive on Horizon Discovery's (LON:HZD) 2015 trading update today, with Panmure saying the firm was "tracking well", with the business positioned solidly in terms of operational momentum.

The broker has a target price of 270p - more than double the current price of 131p. N+1 Singer said trading performance was in line with its estimates and slightly ahead of consensus, driven as expected by a strong performance of the products business.

It repeated a 'buy' stance and 194p target price.

Tissue Regenix (LON:TRX) today ticked another box, completing the 20 patient enrolment process for its OrthoPure XM clinical trial. OrthoPure XM provides a biological repair for damaged menisci, a condition that can lead to the early onset of osteo-arthritis, and an injury for which treatments are currently limited.
The news attracted the attention of heavyweight US broker Jefferies, which rates the shares a 'buy', targeting 36p, and noted: "To secure CE Mark approval, the company must provide 6 months of follow-up data (final operation 12th Jan) and hence remains well on-track for securing approval by end-FY16/17. 
"OrthoPure XM is TRX's first orthopedic product and we expect it to provide the next leg of growth as DermaPure (wound) momentum accelerates through FY16/17. Enrolment for OrthoPure XT (ACL) commenced in Dec-15."

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