JP Morgan Cazenove lifts target on Glencore

Two heavyweights came together on Monday, with JP Morgan Cazenove posting a note on much-in-the news miner and trader Glencore.

Glencore - back in the frame with an analyst note from JP Morgan Cazenove

Two heavyweights came together on Monday, with JP Morgan Cazenove posting a note on much-in-the news miner and trader Glencore (LON:GLEN).

It pre-dates today's news of plans to sell two copper mines, but JP is relatively upbeat on the stock and lifted the target price on Glencore to 160p from 150p.

The rating remains as 'neutral'.

The broker notes Friday's news that the firm would curtail 500,000 tonnes of zinc production, equivalent of 32% of GLEN mine production and 4% of global mine supply estimated for 2016.

"The impact on earnings is small (group EBITDA 3% lower in 2016) but the stemming of forecast cash losses results in a 10% increase in our NPV," noted analyst Dominic O'Kane.

"The outcome of targeted disposals is the key near term catalyst, in our view," the broker added.

On Monday, GLEN said it was selling copper mines as prices of the industrial metal fall - the wholly-owned Cobar copper mine in Australia and Lomas Bayas copper mine in Chile are the ones in question.

It comes after it is already cutting 400,000 tonnes of copper production at African mines in the Democratic Republic of Congo and Zambia.

Liberum rates the shares 'hold. It reckons the two mines could raise US$750mln and would further help reduce Glencore debt burden.

But it added: "A sale of copper assets runs contra to what management have been saying in terms of balance sheet not being stressed and that copper will be significantly higher in the near future.

"Cobar produces 50ktpa of copper concentrate in Australia and Lomas Bayas 75ktpa of copper cathode in Chile. Glencore produces roughly 1.5mt of copper per annum."

Speaking of miners, another one gets an  upgrade today from Deutsche Bank.

Vedanta (LON:VED)  has its price target moved to 500p from 450p and the rating  is kept at 'hold' following second quarter numbers, which showed strong aluminium results and copper production.

Deutsche says the recent recovery in the oil price and bounce in zinc due to the announced supply cuts by Glencore should provide a boost to FCF (free cash flow), mitigating some of the market's refinancing concerns.

Also in analyst world, Tesco (LON:TSCO) which put out results last week, get its target price clipped back to 190p from 210p from Japanese broker Nomura. The rating is 'neutral'.

Lonmin (LON:LMI) has a haircut on its target price from Goldman Sachs, which cuts it to 30p from 96p a share.

GlaxoSmithKline (LON:GSK)  has its target downgraded by US broker Jefferies to 1350p from 1400p, while the rating is a repeated 'hold'.

In small caps, low cost airline Fastjet (LON:FJET) is rated 'buy' by Liberum, which has a target of 230p, a long flight away from the current price of 87p.

Today, the group was granted an Air Service Licence (ASL) by the Kenya Civil Aviation Authority, a major step towards starting flights within the country.
Fastjet Kenya will now start the application process for an Air Operator Certificate (AOC), which is required to run  domestic flights within Kenya.  
"We would expect this process to take a number of months, and we would not anticipate it being concluded this year. Nonetheless, it is encouraging to see this process start, with the implied progress towards the group’s eventual goal of forming a Kenyan subsidiary and launching a new base in that country," said the broker.
Medtech firm Rex Bionics (LON:RXB) is making commercial progress, it said updaing on progress, having sold three of its Rex robots in the six months to September, compared to none in the same period last year.
Broker Stifel rates the shares a 'buy', noting  "We are encouraged by progress made which includes first half sales of three REX units, with higher sales expected in the second half," it said. The broker targets 150p for the shares, which is three times the current price of 50p.
Rex Bionics currently has £3.7mln in cash and expects to announce results for the six months to end September in December this year.
Elsewhere, a US$580mln takeover of Adheron Therapeutics, a partner of Abzena (LON:ABZA), highlights that shares in the latter are significantly undervalued, says City broker Cenkos.
Elsewher, Swiss drugmaker Roche struck the deal to buy Adheron last week, and it was the third time a company developing drugs based on Abzena’s technology had been acquired.
Cenkos analyst Navid Malik highlights that the deal also means that four major drug companies are now using developing these ‘clinical assets’ - a fact that bodes well for Abzena which retains royalties over future drug sales.


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