Broker snap: UBS upgrades Ferrexpo to buy

14th Oct 2011 12:20

Ferrexpo, which produces iron ore pellets used for making steel, was one of the high risers on the FTSE 250 at midday after the firm was upgraded from neutral to buy by UBS.The broker notes that the stock - while being up 34% from the 52-week low of 238.7p on 4 October on the back of M&A speculation - is still down 35% from the high of 499p in July."Our commodity team remains positive on iron ore, expecting prices to remain high on continued supply constraints from India, with upside risk emerging in November when China's spot trade typically lifts seasonally," UBS said.On the back of higher realised iron ore prices, the broker has raised its 2012 and 2013 earnings estimates by 5% and 7%, respectively.However, the target comes down from 500p to 440p, which is calculated using a 12% discount rate to net present value ("up from 11% to reflect higher political risk").By 12:04, shares were up 5.9% at 334.50p.BC