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On Wednesday, Citi analysts, led by Ephrem Ravi, reinstated coverage of Anglo American (JO:AGLJ) Plc (AAL:LN) (OTC: NGLOY) with a Neutral rating, setting a price target of £26.00. The analysts highlighted the company’s progress in streamlining its asset portfolio, noting the completion of coal and nickel business disposals and the ongoing demerger of its platinum group metals (PGM) operations. The diamond business remains the final non-core asset yet to be addressed. According to InvestingPro data, Anglo American maintains a solid financial position with a current ratio of 2.13, indicating strong liquidity to support its restructuring initiatives.
Anglo American’s strategic moves have led to a roughly 30% outperformance in share price since the initial announcement in May 2024. This significant rise reflects a re-evaluation of the remaining company’s business. However, Citi analysts now see limited potential for further stock price growth, with a sum-of-the-parts valuation reaching approximately £27 per share. InvestingPro analysis suggests the stock is currently fairly valued, with additional insights available through their comprehensive Fair Value model.
The valuation of Anglo American’s stock is currently at a premium compared to its global diversified mining peers, trading at 6.1 times its estimated 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA). The analysts’ assessment suggests that the current share price has largely factored in the positive developments within the company.
While the analysts recognize the potential for commodity prices to rally or for renewed merger and acquisition interest from global miners, they consider these factors as key risks that could lead to further upside for the stock. As such, the Citi team has issued a cautious outlook on the valuation of Anglo American shares moving forward.
In other recent news, Anglo American has reported mixed financial results, with a 15% decline in underlying EBITDA for 2024 and a 1 percentage point drop in margin to 30%, primarily due to lower iron ore prices. This was somewhat offset by rising copper prices and cost-saving measures. The company also faced a significant challenge with a USD2.9 billion write-down for its diamond unit, De Beers, following a previous USD1.6 billion write-down in 2023. Despite these setbacks, Anglo American is on track to achieve a USD1.3 billion run rate in cost savings for 2024, with an additional USD0.5 billion expected by the end of 2025.
CFRA has adjusted its earnings per share estimate for 2025 downward to USD1.63 from USD2.32 and introduced a 2026 EPS estimate of USD2.00. In other developments, Bernstein has raised its price target for Anglo American to GBP26.00 from GBP24.00, citing a positive outlook on Platinum Group Metals (PGMs) and reaffirming an Outperform rating. Anglo American Platinum, a subsidiary, is expected to contribute significantly to the company’s financial performance, accounting for 15% of the estimated attributable EBITDA for 2024. Bernstein noted the potential spin-off of Amplats could be strategically timed with the current market cycle, benefiting Anglo American.
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