On Thursday, Berenberg downgraded shares of Anglo American (JO:AGLJ) Plc (AAL:LN) (OTC: NGLOY) from a "Hold" to a "Sell" rating, while also significantly reducing the price target from £30.00 to £20.00. The move comes after the mining giant rejected multiple acquisition attempts by BHP, including a final offer priced at £31.11 per share. Anglo American's decision to turn down the bids has placed increased pressure on the company to successfully implement its new strategy, which analysts at Berenberg view with skepticism.
The company's share price closed on Tuesday at £25.28, representing a 19% discount to BHP's last bid. This price gap indicates market concerns about Anglo American's ability to deliver value that would be comparable to what BHP's proposal might have offered. The analyst firm believes that while BHP's bid had its complications, it presented a viable path to value creation that now seems challenging for Anglo American to achieve independently.
Anglo American's stance against the extension of the put up or shut up (PUSU) deadline on May 29, which led to BHP withdrawing its bid, has set the stage for the mining company to prove its worth through its own strategic plan. The market's reaction to the shares not rallying towards the final bid price is seen as a reflection of the skepticism surrounding the company's ability to meet these high expectations.
The downgrade by Berenberg suggests that the firm anticipates the company's efforts to execute its new strategy may fall short of market expectations. With the backdrop of a rejected takeover bid and a challenging road ahead, Anglo American's current position has prompted the revised outlook from the financial services company.
Berenberg's revised price target and rating reflect a cautious stance on Anglo American's future performance, as the company embarks on a critical phase of implementing its strategic initiatives without the support of a merger with BHP.
In other recent news, Anglo American Plc has been the focus of significant developments. The mining giant has seen a variety of stock rating changes from different firms. Exane BNP Paribas (OTC:BNPQY) upgraded the stock from Neutral to Outperform, citing expectations of substantial restructuring within the company. Anglo American also received an upgrade from Bernstein SocGen Group, which highlighted potential cost savings. However, UBS downgraded the company's stock from Buy to Neutral, primarily due to the company's restructuring plans.
The restructuring, projected to generate USD 800 million in cost savings by the end of 2025, involves a strategic shift to focus more heavily on copper and iron ore. This includes plans to sell its coal assets and exit from platinum group metals, De Beers, metallurgical coal, and nickel sectors. The company also confirmed receipt of a preliminary and conditional takeover proposal from BHP Group (NYSE:BHP) Limited, valuing the company at GBP31 billion.
In addition to these changes, CFRA maintained a Hold rating on the Anglo American stock and raised the price target, reflecting a valuation based on an EV/EBITDA multiple of 5.5x.
InvestingPro Insights
In light of Berenberg's downgrade of Anglo American, current data from InvestingPro provides additional context on the company's financial health and market performance. Anglo American Plc (OTC: NGLOY) is trading at a high earnings multiple with a P/E ratio of 58.92, which is indicative of investor expectations for future earnings growth. Despite recent skepticism from analysts, NGLOY's net income is expected to grow this year, according to one of the InvestingPro Tips. This aligns with the company's strategy to enhance value independently after rejecting BHP's acquisition attempts.
The company has also demonstrated a strong return over the last three months, with a 29.92% price total return, and a large price uptick over the last six months, showing a 28.55% increase. These figures suggest that despite the market's initial reaction to the PUSU deadline and BHP's withdrawal, NGLOY has had notable market performance. Additionally, with a dividend yield of 3.95%, the company remains attractive to income-focused investors.
Investors considering Anglo American as a potential addition to their portfolio can find more InvestingPro Tips that delve deeper into the company's prospects. For those interested, there are six additional tips available on the InvestingPro platform. To gain full access to these insights, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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