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Fresnillo twinkles after upgrade from HSBC

Published: 10:41 29 Sep 2016 BST

Fresnillo's Saucito mine

Mexican silver and gold miner Fresnillo Plc (LON:FRES) was gleaming on Thursday after a broker took a shine to it.

The stock lifted 50p, or 2.8%, to 1827p after HSBC upgraded Fresnillo to ‘buy’ from ‘hold’ and increased its price target to 2200p from 1990p.

The broker noted that the shares have come off their five-year June highs, driven by profit-taking and declining gold and silver prices.

But HSBC said the pull-back had created an opportunity for investors to buy the stock of a company it branded as “a precious metal sector leader”.

HSBC analysts Botir Sharipov and Jonathan Brandt said Fresnillo had strong assets, particularly its Juanicipio silver-gold mine, the world-class potential of which had not been fully appreciated by the market.

“We often hear from investors that Fresnillo’s stock is expensive,” they said in a note.

“There’s no arguing that the stock trades at multiples higher than most precious metal miners.

“However, we also believe that with Fresnillo, one gets what one pays for; that is, strong management team, high quality assets, long average mine life, growth, and a very strong balance sheet, amongst other qualities investors tend to seek out and are generally willing to pay a premium for.”

Meanwhile, Deutsche Bank downgraded credit checking group Experian plc (LON:EXPN) to ‘hold’ from ‘buy’ citing increased risks of a US macro-economic slowdown which were not reflected in the valuation.

“As such, we see better times to be buyers,” the German investment bank said.

“We view Experian as one of the highest quality companies we cover. The company has enviable market positions, is innovative and creates new markets and importantly generates cash.

“However, we suspect the growth and positive operational gearing in the core US credit services business is peaking and that any slowdown in this division will disproportionately affect the multiple.”

Elsewhere, ASOS plc (LON:ASC) was in fashion with Jefferies International, which upgraded its price target on the online retailer to 5000p from 3600p.

“Looking ahead to FY16 on October 18, ASC has momentum and remains operationally excellent under chief executive Nick Beighton,” the broker said.

“Yet, the long view of an admittedly defensible, niche competitive offering for the 20-something demographic appears increasingly expensive to serve. Nudge numbers and PT up, Hold, 5000p.”

Liberum Capital upped its price target on WS Atkins PLC (LON:ATK) to 1720p from 1480p after Atkins forecast an overall first-half performance, including positive currency effects, in line with expectations and voiced confidence about the second half.

Deutsche Bank increased its price target on Croda International Plc (LON:CRDA) to 3600p from 3400p, saying it expected the chemical group to reiterate its guidance of continued progress in the second half.

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