On Tuesday, RBC Capital marked a positive shift in its perspective on Sims Metal (OTC:SMSMY) Management Limited (SGM:AU) (OTC: SMSMY), raising its stock rating from Underperform to Sector Perform. The firm also increased its price target for the company's shares to AUD12.50, up from the previous target of AUD10.75.
The upgrade comes in the wake of Sims Metal's recent announcement of two significant divestitures. The company has sold its UK Metals business for approximately AUD385 million and its remaining interest in Municipal Recycling for around AUD50 million. Both deals are expected to be finalized in the first quarter of 2025.
Proceeds from these transactions, which are estimated to net around AUD435 million, are intended for multiple strategic uses. Sims plans to initially use the funds to strengthen its balance sheet. Additionally, the capital will provide the flexibility needed to grow the refocused business and to deliver returns to shareholders.
RBC Capital's decision to adjust the price target upwards by 16% reflects the additional value unlocked by these sales. The analyst noted that they had previously valued the businesses at approximately AUD75 million; hence, the transactions represent about AUD360 million in unrecognised value.
The timing of this upgrade is notable as Sims Metal Management is preparing to release its full-year 2024 results next week, on August 20. Investors and market watchers are likely to closely monitor the company's performance and strategic direction following the completion of these sales.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.