UBS ups Rio Tinto to 'buy' with an unchanged price target

11th Sep 2015 08:57

(ShareCast News) - Rio Tinto got a boost on Friday after UBS upgraded the stock to 'buy' from 'neutral' with an unchanged price target of 2,850p.The bank said the risk/reward scenario is improving following recent weakness in the share price, with Rio starting to show some discipline in iron ore and prices holding up surprisingly well in a seasonally weaker period.It said Rio offers the most attractive valuation of the UK diversified miners at spot, trading at 7% free cash flow yield, and 11x price-to-earnings, with a dividend yield of 6%.UBS said that if spot prices hold, the dividend looks well covered by cash and the balance sheet robust with 'net fearing' to fall to around 20%."Rio also has the highest near-term growth profile, a strong management team, and some further restructuring potential."At 0905 BST, Rio shares were up 2.1% at 2,418.50p.