Deutsche Bank has upgraded its rating for Anglo American PLC (LON:AAL) to ‘buy from ‘hold’, calling the miner the “cheapest global major with strong growth prospects”.
The German bank also raised its price target for the FTSE 100-listed group to 2,400p from 2,000p, with the shares currently trading at 2,107.50p, up 0.3% on Monday’s close.
READ: Anglo American boss focuses on employee safety as miner reports solid 2018 results
In a note to clients, Deutsche Bank’s analysts said they estimate a 12-month total return of around 25% from the stock, while over the medium term, based on a 2022 exit rate, they see a blue-sky scenario of 3,000p, about 50% upside potential from the current share price.
The analysts said they see three drivers to their upgrade, firstly, improving data from China and supply disruptions, which should keep commodity prices and earnings resilient in 2019.
Secondly, they added, Anglo American has the “best and clearest growth strategy from the majors”, as “while all of the large caps are positioned to deliver strong cash flows in 2019, Anglo has a wide range of value-accretive growth options and is set to deliver peer-leading growth over the next 3-4 years.”
And thirdly, the analysts said, the stock has a short- and medium-term re-rating potential, with Anglo American the cheapest large-cap, trading at a blended 25% multiple discount to blue-chip peers Rio Tinto PLC (LON:RIO) and BHP PLC (LON:BHP) - based on P/E and EV/EBITDA - despite delivering commensurate returns in 2018.
The analysts pointed out that consensus upgrade risk to underlying earnings (EBITDA) is 25% and 43% respectively in 2019 and 2020.