Mining giant Glencore PLC (LON:GLEN) is now the “second cheapest” diversified miner in London, according to JP Morgan.
Analyst Fraser Jamieson and his team said in a note to clients that Glencore is now only behind Anglo American PLC (LON:AAL) in terms of value versus its peers, based on free cash flow yields and its forward spot price-earnings ratio.
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Jamieson adds that the valuation is “even more compelling once the marketing division is backed out”.
“Furthermore, it is the “cleanest” exposure to a structural enterprise value trend vs. EMEA peers and has a well-articulated strategy of capital allocation over the medium-term which could result in above-consensus shareholder returns,” read the note on Monday.
As for Anglo American, the analyst notes that there is scope for it to exceed expectations in terms of operational improvements, while risks in South Africa – Robert Mugabe’s forced resignation – “appear to be receding”.
Both Anglo and Glencore remain JP Morgan’s “preferred diversified exposures”, with Jamieson maintaining his ‘overweight’ rating on the stocks.
Mining stocks were down across the board on Monday morning, with lower commodity prices and geopolitical issues all weighing.
At midday, Anglo American was down 1.9% to £15.87, while Glencore shares were off 3.1% to 340p.