RBC has upgraded its recommendation on shares of Anglo American PLC (LSE:AAL), shifting it from 'underperform' to 'sector perform'.
The Canadian investment bank acknowledged that Anglo's restructuring has gone better than expected, with key asset sales and strategic moves helping to stabilise the business.
One of the biggest changes coming up is the planned spin-out of Anglo Platinum in June, which will see the company become even more focused on copper.
RBC has adjusted its valuation model to reflect this shift, raising its price target from 2,200p to 2,310p.
Initially, RBC had concerns that Anglo still had some tough challenges ahead, particularly with its diamond business, De Beers, and the ambitious Woodsmith fertiliser project.
However, recent developments have eased some of these worries. The company managed to sell its nickel assets for a solid price, struck a marketing deal with Botswana for diamonds, and secured a joint venture with Chilean copper giant Codelco.
On the diamond front, while the market has been weak, prices appear to have stabilised, with no new lows since January.
That said, RBC doesn't see a major turnaround just yet. Meanwhile, Anglo’s long-term bet on the Woodsmith project could get a boost if it secures a partner, which RBC now sees as increasingly likely.
Despite all this, RBC isn’t convinced that Anglo is an attractive takeover target at current levels. It believes that, for now, the company is too expensive to tempt a buyer, particularly given uncertainty around commodity prices and the broader economy.
In late morning trading, the stock was up 1.6% at 2,382p.