Broker snap: Credit Suisse sees 'compelling' investment case at Rio Tinto

5th Nov 2013 10:22

Credit Suisse has reiterated its 'outperform' rating and 3,900p target price for mining giant Rio Tinto, saying that the stock remains a 'compelling investment case' despite recent strength.The Swiss bank said: "With valuation, gearing and the corporate strategy generally heading in the right direction investors need only worry about future iron ore price expectations. If investors can convince themselves that a collapse in the price is not imminent then there need be no reason not to hold Rio Tinto shares into the future."Credit Suisse admitted that iron ore prices probably won't be able to maintain current "lofty heights" with spot prices trading around $130 a tonne. However, it said: "As long as prices remain above $100/tonne, removing volatility in price expectation is the key to share price support in our view."Even on the bank's near-bottom-of-consensus iron ore forecasts, it still sees the stock trading at below 10 times earnings and at a near-30% discount to net present value."Any near-term iron ore price weakness and resultant share price pressure should be viewed as a buying opportunity in anticipation of increased shareholder returns - both near term (upside to year-end dividend) and medium term (potential buybacks in years ahead)."The share price was up 1.85% at 3,350.5p by 11:12 on Tuesday.BC