Las Bambas a 'key catalyst' for Glencore Xstrata, says Investec

19th Feb 2014 10:02

Investec has raised its recommendation for commodities producer and marketer Glencore Xstrata from 'sell' to 'reduce' after updating its forecasts and valuation model following the group's recent 2013 production report.The target price for the stock has been raised from 308p to 328p, mainly due to higher sector multiples after the recent strong performance by many of its peers.The broker said that the shares have been "reasonably range bound" since the middle of last year and appear close to fairly priced at current levels.Looking ahead, the developments surrounding the potential sale of the Las Bambas copper project in Peru are expected to be a "key catalyst" for the stock, Investec explained to clients. The broker explained that investors are focused on what management will do with the proceeds if a deal is completed, including a potential rebasing of the dividend or funds for a new major transaction."While we feel a sale price over $5bn would be a positive for the stock, we recognise that, at a price below $4bn, shareholders may be better off if it is retained," Investec added."Should the sale of the asset not succeed by the deadlines stipulated by the Chinese regulatory authorities (September 30th) then Glencore Xstrata may have to develop the asset itself (it could potentially look to bring in another partner if necessary), but this would likely impact on the company's ability to undertake additional major transactions and delay the rebasing of the dividend."The stock was 0.75% higher at 348p by 10:01 on Wednesday.BC