Credit Suisse ups Anglo American to 'outperform'

17th Feb 2014 11:47

New management's efforts to restructure Anglo American are starting to bear fruit.Thus, there are indications of improved operational performance at the company and a major restructuring of management is underway throughout the organisation, analysts at Credit Suisse wrote on Monday. As a result, the above analysts now had greater confidence in the company's targets for returns. They also saw an increased possibility for major divestments. Following its latest full-year results and more specifically the second half figures, they believed that the company's 15% target for 2016's return on capital employed (ROCE), while ambitious, was achievable.In fact, over the three years to the end of 2016 they estimated that earnings before interest and taxes (EBIT) would expand by 36%, with an 'upside' case of 58% if management delivered just half of the targeted $2.5bn in efficiencies. Platinum and De Beers remained the most obvious candidates for divestment, albeit most likely towards 2015 rather than next year. For all of the above reasons the Swiss broker raised its recommendation on the shares to 'outperform' from 'neutral' and their price target to 1,900p from 1,650p. The latter was the average of their forecast for the company's 2016 price-to-earnings multiple, of 20, and their sum-of-the-parts valuation of £20 per share.AB