reports
- Mathew Hodge
Raising Our FVE to GBX 1,120 per Share on Currency and Commodity Price...
We raise our fair value estimate for no-moat Anglo American by 8% to GBX 1,120 per share. About half of the increase reflects depreciation in the British pound/U.S. dollar exchange rate; the rest is due to minor increases in near- to medium-term commodity price assumptions. The thermal coal price has outperformed expectations with strong demand from Asia and supply constraints. Supply has been weaker, mainly on restrictions on domestic production in China. Domestic supply in India has also been ...
- Mathew Hodge
Raising Our Anglo American FVE to GBX 1040 with Higher Prices
We raise our fair value estimate for no-moat rated Anglo American to GBX 1040 per share from GBX 950 previously. The increase reflects stronger near-term commodity prices, particularly for coal and copper. In addition, the spot price of nickel has also risen. Loss of a few months' iron ore production from Brazil, due to a pipeline outage, will see Anglo American's output decline by about three million tonnes or 5%. It's a mild negative given the favourable iron ore price but is more than offset ...
- Mathew Hodge
Significant platinum and diamond exposure makes Anglo American unique ...
We raise our fair value estimate for no-moat-rated Anglo American to GBX 950 per share from GBX 480 per share previously. The increase is primarily driven by higher commodity prices. We have factored in higher spot prices for several commodities, including nickel, platinum, palladium, and manganese. Our nickel price assumption rises 24% to USD 5.71 per pound, platinum by 3% to USD 960 per ounce, and palladium 26% to USD 1,090 per ounce. In addition, we have raised our near-term forecasts for the...
- Mathew Hodge
China’s Belt and Road Initiative Unlikely to Slow Commodity Demand H...
Much has been written about China’s Belt and Road Initiative, or BRI--formerly known as the One Belt and One Road Initiative--but we think much of the overwhelmingly positive commentary lacks context and is wide of the mark. Major iron ore miners such as BHP Billiton, Rio Tinto, and Fortescue all expect BRI to drive further growth in steel demand in China, and in turn support growing demand for iron ore. BHP expects China’s steel demand to continue to grow at about 1% per year until the midd...
- Mathew Hodge
Gold Forecast Update: Near-Record ETF Inflows Have Propped Up Otherwis...
Breaking a long trend, demand for gold jewelry in China and India has plummeted in recent years, dragging global demand to its lowest level in seven years. But despite this massive decline in the largest single source of gold demand, prices have proved resilient, largely due to strong investor demand. In the face of ongoing interest-rate hikes by the U.S. Federal Reserve, ETF holdings have risen to levels last seen in 2013, a period defined by much higher gold prices. Prevailing prices of nearl...
- Mathew Hodge
Copper Forecast Update: Prices Should Fall as Supply Rebounds and Chin...
We’ve raised our 2017 and 2018 copper price forecasts amid short-term supply constraints and stimulus-related demand growth in China. We now expect prices to average $2.65 per pound in 2017 (previously $2.40) and $2.40 in 2018 (previously $2.05). Our Anglo American fair value estimate rises to GBX 480 per share from GBX 460. We expect copper prices, which have surged in recent weeks to $2.90 per pound, to fall in the remainder of 2017 and into 2018. As the impact of Chinese credit stimulus fad...
- Mathew Hodge
Raising our Anglo American FVE to GBX 460 but Shares Still Overvalued
We raise our fair value estimate for no-moat-rated Anglo American to GBX 460 from GBX 430 per share. The increase primarily reflects small reductions in expected capital and operating costs for Anglo, given the current focus on efficiency and productivity, and the time value of money. Despite the increase, we still think Anglo American is overvalued. Current commodity prices are elevated reflecting the cyclical upturn in global growth as well as the benefit from China’s stimulus in 2016. The e...
- Mathew Hodge
Significant platinum and diamond exposure makes Anglo American unique ...
Anglo American reported decent first-quarter 2017 production results, with copper equivalent production increasing 9% year on year. Production growth in diamonds, iron ore, met coal, and thermal coal were partly offset by declines in copper and nickel. We continue to contend Anglo American shares are significantly overvalued and will sell off with lower iron ore and met coal prices. We do not plan to make any changes to our GBX 430 per share fair value estimate. Iron ore prices have already beg...
- David Wang
- CFA
Anglo American Shows 1Q Production Growth but Shares Remain Overvalued
Anglo American reported decent first-quarter 2017 production results, with copper equivalent production increasing 9% year on year. Production growth in diamonds, iron ore, met coal, and thermal coal were partly offset by declines in copper and nickel. We continue to contend Anglo American shares are significantly overvalued and will sell off with lower iron ore and met coal prices. We do not plan to make any changes to our GBX 430 per share fair value estimate. Iron ore prices have already beg...
- David Wang
- CFA
False Dawn: The Bulk Commodity Mining Rally Will Prove Short-Lived
Bulk commodity miners are overvalued. Shares of iron ore and met coal miners have rallied to levels not seen since 2014, when Chinese steel demand peaked. In effect, the market appears to be extrapolating the 2016 Chinese demand growth trajectory far into the future. We’ve updated our forecasts to account for greater supply disruptions, lower Chinese supply, and higher freight and maintenance capital costs, but we expect roughly 50% downside from recent iron ore prices around USD 80 per tonne ...
- David Wang
- CFA
Significant platinum and diamond exposure makes Anglo American unique ...
Driven by strong cost cutting, Anglo American reported significantly improved results in 2016, with EBITDA increasing 25% to $6.1 billion. Pricing gains in coal and iron ore were largely offset by pricing declines in platinum and diamonds. That said, the elevated pricing going into 2017 suggests stronger short-term results. Longer term, we expect the end of Chinese stimulus and a supply response by miners to drive down coal and iron ore pricing. We maintain our GBX 400 fair value estimate and vi...
- David Wang
- CFA
Cost Cutting Boosts Anglo's 2016 Results, but Lower Commodity Prices C...
Driven by strong cost cutting, Anglo American reported significantly improved results in 2016, with EBITDA increasing 25% to $6.1 billion. Pricing gains in coal and iron ore were largely offset by pricing declines in platinum and diamonds. That said, the elevated pricing going into 2017 suggests stronger short-term results. Longer term, we expect the end of Chinese stimulus and a supply response by miners to drive down coal and iron ore pricing. We maintain our GBX 400 fair value estimate and vi...
- David Wang
- CFA
Cost Cutting Boosts Anglo's 2016 Results, but Lower Commodity Prices C...
Driven by strong cost cutting, Anglo American reported significantly improved results in 2016, with EBITDA increasing 25% to $6.1 billion. Pricing gains in coal and iron ore were largely offset by pricing declines in platinum and diamonds. That said, the elevated pricing going into 2017 suggests stronger short-term results. Longer term, we expect the end of Chinese stimulus and a supply response by miners to drive down coal and iron ore pricing. We maintain our GBX 400 fair value estimate and vi...
- David Wang
Raising Near-Term Copper Forecast, but Long-Term Outlook Intact; Coppe...
We've raised our near-term copper price forecast to better reflect the recent run up in pricing to about $2.70 per pound from $2.10 just six weeks ago. However, we think the price rapid price increase is largely unsupported by fundamentals and will be short lived. In 2016, copper demand, particularly in China, has been stronger than we were expecting but so has supply--enough so that the recent copper price spike is surprising. Although we've raised our near-term price estimates, our long-term p...
- David Wang
Significant platinum and diamond exposure makes Anglo American unique ...
After an initial tantrum, the market is now upbeat at the prospect of a Trump presidency, particularly for commodities and commodity producers. Trump says he will boost U.S. economic growth to 3.5% per annum, cut taxes and regulation, lift restrictions on energy investment--particularly for fossil fuels--and end offshoring. There are some left-field ideas too, particularly around trade and protectionism. The most important policy for commodity producers is the promise to invest $1 trillion on in...
- David Wang
U.S. Steel Makers to Benefit From Trump Stimulus but Market Draws Long...
After an initial tantrum, the market is now upbeat at the prospect of a Trump presidency, particularly for commodities and commodity producers. Trump says he will boost U.S. economic growth to 3.5% per annum, cut taxes and regulation, lift restrictions on energy investment--particularly for fossil fuels--and end offshoring. There are some left-field ideas too, particularly around trade and protectionism. The most important policy for commodity producers is the promise to invest $1 trillion on in...
- David Wang
Raising Anglo American's Fair Value Estimate on Higher Met Coal Prices...
Anglo American reported decent production figures in third-quarter 2016, with year-on-year growth across all commodities except copper and thermal coal. We are increasing our fair value estimate for Anglo American slightly to GBX 320 per share from GBX 310 previously, based on higher near-term metallurgical coal prices. However, with shares trading above GBX 1000 per share currently, we view Anglo American shares as significantly overvalued. Overall production, expressed in copper equivalent te...
- David Wang
Raising Anglo American's Fair Value Estimate on Higher Met Coal Prices...
Anglo American reported decent production figures in third-quarter 2016, with year-on-year growth across all commodities except copper and thermal coal. We are increasing our fair value estimate for Anglo American slightly to GBX 320 per share from GBX 310 previously, based on higher near-term metallurgical coal prices. However, with shares trading above GBX 1000 per share currently, we view Anglo American shares as significantly overvalued. Overall production, expressed in copper equivalent te...
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