Proactive Investors - Run By Investors For Investors

Lower pound means chemical cos are quids in

picture of laboratory
Cheer up, profits are soaring say brokers

Is it really that simple that a falling pound means UK-based chemical companies make shed loads more money?

Er yes, well at least yes according to a couple of brokers today.

Analysts at Liberum have crunched the numbers on Croda (LON:CRDA), Victrex (LON:VCT) and platinum specialist Johnson Matthey  (LON:JMAT) and worked out that pound’s fall to a 31 year low will potentially boost profits by 12%, 34% and 15% respectively.

Brexit may well have its costs in terms of higher trading tariffs, more paperwork and lower UK inward investment but all three chemcos are major beneficiaries of weaker pound, said the broker.

Its ratings are ‘buy’ Victrex with a £21 target, while Croda (TP £35) and Johnson Matthey (TP £31) are ‘holds’.

Croda gets a more in-depth review from UBS, which has upgraded to 'buy' due to the pound’s decline but more importantly the move into bioethanol in the US.

This is by far the largest organic investment for the company and will take the proportion of the natural raw materials it uses to 75%.

On a best case, UBS sees the move lifting the shares by 24% to 4350p/share, while Croda can return a special dividend of 3% a year and still have the cash capacity for more bolt-on acquisitions.

Weak sterling presents a competitive opportunity Croda exports around 10% of its sales from the UK, adds the broker.

Elsewhere, Liberum has kept it 'buy' rating and target price of 360p on ITV PLC (LON:ITV)  after meeting with the chief financial officer Ian Griffiths.

Current advertising trends may not be pretty said the broker but ITV can still make selective deals and grow its dividends sUBStantially.

Down a couple of divisions, resources specialist SP Angel has trotted off to Colombia and worked out a value of 0.72p per share for copper and gold explorer Metminco (LON:MNC), or around four times the current market price (0.16p).

The Colombian gold assets alone are worth over £18m - approximately three times the current market value of Metminco, while the residual interest in the LosCalatos copper deposit in Peru is worth a further £11.7mln.

Finncap, meanwhile, has run its rule over Firestone Diamonds (LON:FDI) and come up with a new target of 63p per share compared to 52p previously.

“Construction of its Liqhobong diamond mine in Lesotho is now essentially complete. Mining has started with ore being stockpiled while the plant commissioning is completed.

“First diamonds from the commissioning phase are expected to be recovered later this month”

Because of that the risk discount has been dropped to 15% from 30% by finncap.


Register here to be notified of future CRDA Company articles

No investment advice: The Company is a publisher and is not registered with or authorised by the Financial Services Authority (FSA). You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use