Broker snap: Nomura downgrades Anglo American to reduce

4th Mar 2013 12:01

Markets seem to be getting ahead of themselves with regards to Anglo American, analysts at Nomura write this morning.In particular, optimism regarding the incoming new Chief Executive Officer, Mark Cutifani, on April 3rd, has seen the shares rise to the point where investors are now paying approximately 14 times the company's estimated earnings for this coming year, versus 13 times for rival BHP Billiton or 9 times for Rio Tinto. Investors believe that Cutifani will unbundle some of the outfit's businesses so as to unlock 'hidden value.' That, however, is speculation. As well, the broker believes that the valuation upside from 'unbundling' works out to approximately between 15% and 20%, so then why should investors pay a premium of between 25% and 50%?Then there is the fact that current year consensus earnings are too high in their opinion. "The market is still too optimistic in its expectations for the copper business (cost and volume), and also for the diamonds business (price and volume)," these analysts explain. The other negative factors include the weak track record on delivery, the continuing operational issues at key assets and the South Africa risk.For all of the above reasons Nomura lowers its price on Anglo American to 1,700p from 1,800p and downgrades to reduce from neutral.AB