UPDATE – WITH A SHARP REBOUND IN COPPER OVERNIGHT, AND ENRC SCRATCHING 300P WITH TALK OF A 350P OFFER, THE NONSENSE THAT IS KAZ’S SHARE PRICE REMAINS… THANKS FOR THE OPPORTUNITY AGAIN “MR MARKET”.
Nice to see UBS can also read a balance sheet and have slapped a 490p Buy recomm on them today.
The headline says it all really. Our blog here spells the buy case – http://www.spreadbetmagazine.com/blog/back-from-hols-refreshed-and-ready-to-do-battle-starting-wit.html
Thank you “Mr Market” for the opportunity to get back in at a ludicrous level again today.
We highlight the following comment from Credit Suisse today which largely concurs with our assessment in the blog detailed here –
“Although Kazakhmys’ power assets are high growth, the ownership structure is a 50:50 joint venture with the government and a key challenge for Kazakhmys is monetising its stake and being able to use the cash flows to develop its controlled mines where capital expenditure requirements are high,” noted analysts at Credit Suisse.
“If an eventual sale is close to the suggested price, although negative for earnings, we would view this as a positive given the beneficial impact on the balance sheet and cash flows.”
Although net debt is forecast to rise to approximately $4 billion by the end of 2014 due to the above-mentioned projects’ capital expenditure, the sale of the power station would result in net debt being closer to $2 billion by the end of 2014.
Compelling valuation
Credit Suisse estimates the ENRC stake is worth $1.5 billion to Kazakhmys at current prices.
“Stripping out the ENRC stake and the power assets ($1.5 billion), the current implied valuation of Kazakhmys’ remaining copper business is c. $700 million against our forecast 2013 copper EBITDA of $693 million, [or an enterprise value/EBITDA ratio of one times],” the broker noted.
“If ENRC is valued at £4 [per share], Kazakhmys’ copper assets are being valued at close to zero.”