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Brokers: Anglo American, Rio Tinto, Kingfisher ..

Mining analysts are still reeling from Anglo American’s massive retrenchment yesterday,

BHP-Billiton-Newman_opt.jpg
Anglo American still deep in the brown stuff say scribes

Mining analysts are still reeling from Anglo American’s (LON:AAL) massive retrenchment yesterday, but despite a dividend cut and 85,000 job losses has the shrinking miner done enough they ask.

No, according to Credit Suisse, which says it was an underwhelming programme

“The dividend was cut (expected), capex was reduced (but only in line with consensus) and the divestment plan expanded (limited new details).

“Further details on asset sales and closures will emerge in February, but without a more structural shift in the portfolio the balance sheet and cash flow concerns will persist.”

According to CS, the De Beer’s owner has a 12 month window to execute on sales and improve cash flows; otherwise pressure on debt levels and raising equity will increase further.

Jefferies says it sympathises with Anglo’s management [and possibly the thousands of people losing their jobs] as “very few people in the industry, including us, expected commodity prices to fall as much as they have.

“All of the major diversified miners are struggling (Rio's and BHP's dividends are the next concern), and fundamentals are unlikely to improve in the near term.”

The US broker downgrades to ‘underperform’ and says a reassuring equity raise now might be a good idea giving the balance sheet strain.

Its price target tumbles to 275p from 633p.

But there is some good news for the sector. Deutsche Bank has edged up its price target for Rio Tinto (LON:RIO) to 3,544p due to the potential of its aluminium division, for which there was a market day yesterday.

“Their aluminium business is the best in class in our view, by far.

“We expect the division to report underlying earnings [EBITDA] of around US$3bn (30% margin) in 2015 and beyond mostly due to lower  Bauxite (over US$1.3b at spot and aluminium cost  reductions (margins US15c/lb at spot and improving).

Rio is also the clear sector leader with its strong balance sheet and affordable dividend. Buy says the German broker.

Away from mining, Numis has trimmed its forecasts for B&Q owner Kingfisher (LON:KGF) after the recent third quarter update.

The shares have closely tracked the sector over the past twelve months and are trading at a modest PE ratio discount, which is appropriate says the broker.

The profit forecast for the year to January has been lowered by 2% to £660mln, implying 3% constant growth. ‘Neutral’ is the rating.

Deutsche Bank has stuck its red pen deeper into former FT owner Pearson (LON:PSON)., where its ‘sell’ rating has been maintained.

Estimates are set to fall further with risks to the downside, said the broker,  after lowering its earnings estimate by 5% and target price by 19% to 770p.

“With risk of further weak trading in college, low adoption year in school books and the possibility of a significant round of restructuring in 2016, Pearson’s problems are structural, with cyclical pressures exacerbating them. “

Moneysupermarket.com (LON:MONY) has been upgraded by Jefferies with a target price of 440p as the broker likes online marketplaces.

Moneysupermarket is starting to leverage its unique data assets and while there is still much to do, particularly around communication, the online comparison site is a ‘buy’ for the broker.

 

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